Re: Putting Chartalism In Its Place?

[Ted Winslow <egwinslow@xxxxxxxxxx>]

Mat Forstater wrote:

> No one (I know of) is arguing that ALL monies in history are
> 'tax-driven'.  Just that some (even many, and many more than we once
> thought) are, and it is one (important ) mechanism for establishing a
> currency, under certain conditions.  So of course there are many
> examples of many different kinds of money in history etc.
>
> The important point is that it serves as a guide as an important manner
> in which a monetary economy may be organized, with certain important
> policy implications.

But the essential feature of Keynes's monetary theory - the idea that
an irrational "instinct of Avarice" dominates motivation is capitalism
- is missing.

As I've pointed out before, it's this that underpins the policy
implications he draws from "chartalism."

The chief of these is the possibility it creates for limiting the
damage irrational liquidity preference does to "enterprise."  Though he
changed his view of how this was to be done, it is the central feature
of all his writing on the topic - from his endorsement of Solon's
monetary reforms to his anticipation in the GT of the euthanasia of the
rentier.

"When first the use of money supplants barter, a coin is no more than a
quantity of bullion, of which the stamp may certify the quality and
indicate the quantity, but which will not circulate except for its
bullion value.  In this elementary stage the expedient of debasement is
not available.  It cannot appear, until with the development of
contract the conception of a money of account has emerged, and the
coins issued by a state have acquired the character of legal tender and
enjoy a cours forcé as the legal discharge of obligations calculated in
this money of account.  It is at this stage that money, in the sense in
which we understand it, makes its entry into human institutions.
	"For this reason the History of Money begins with Solon, the first
statesman whom history records as employing the force of law to fit a
new standard coin to an existing money of account. The scarcity in
Greece of the precious metals must have caused in his age an
appreciation of the standard, that is to say a tendency of prices to
fall, which was intolerably oppressive to that indispensable class in
ancient, as in modern, society, which carries on the business of
agriculture with borrowed money.
	"As in all later ages, the appreciation of the standard called for the
remedy of debasement.  Solon, perceiving in his wisdom, that in such
circumstances the interests of society required that the weight of
capitalism and the dead hand upon the active workers should be
lightened, so became the first of the long line of statesmen, of whom
the latest is Lenin, who, throughout the ages of private capitalism,
have employed debasement wisely to diminish its weight or rashly to sap
its foundations.  The sage who first debased the currency for the
social good of the citizens was suitably selected by legend to admonish
Croesus of the vanity of hoarded riches.  Solon represents the genius
of Europe, as permanently as Midas depicts the bullionist propensities
of Asia." (XXVIII, p. 266)

This point is also made in the Tract.

"There is no record of a prolonged war or a great social upheaval which
has not been accompanied by a change in the legal tender, but an almost
unbroken chronicle in every country which has a history, back to the
earliest dawn of economic record, of a progressive deterioration in the
real value of the successive legal tenders which have represented money.
	"Moreover, this progressive deterioration in the value of money
through history is not an accident, and has had behind it two great
driving forces - the impecuniosity of governments and the superior
political influence of the debtor class." (IV, p. 8)

Inflation brought about in this way has "armed enterprise against
accumulation," "benefited and active and constructive elements in the
economic scheme," "benefited new wealth at the expense of old." (IV, p.
9)

Ted