tag:blogger.com,1999:blog-1141932539860553199.post1964159349220965734..comments2024-03-05T10:52:24.691+00:00Comments on Mark Wadsworth: ChartalismMark Wadsworthhttp://www.blogger.com/profile/07733511175178098449noreply@blogger.comBlogger31125tag:blogger.com,1999:blog-1141932539860553199.post-78537961749770849602015-09-19T14:26:52.206+01:002015-09-19T14:26:52.206+01:00Well, of course, nowadays the promise is much easi...Well, of course, nowadays the promise is much easier to keep, since the coin of the realm is no longer made from valuable metals and is intrinsically pretty worthless. Even the "copper" coinage is made from steel.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-76118448142388937002015-09-19T14:11:24.244+01:002015-09-19T14:11:24.244+01:00I don't know, Bayard. But it is just a promise...I don't know, Bayard. But it is just a promise. There is no guarantee the state will live up to the promise.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-64488353396984651772015-09-19T09:48:58.291+01:002015-09-19T09:48:58.291+01:00Mark, sorry, should have looked it up. Of course a...Mark, sorry, should have looked it up. Of course a currency "which derives its value from government regulation or law" (Wikipedia) cannot exist without a government, by definition. However a currency unbacked by anything of intrinsic value, which has value because it is said to have value, can. It was you that said Dinero was talking about a fiat currency, when in fact he wasn't, and put us all on the wrong scent.<br /><br />"It doesn't entitle you to anything. It is a promise convertible to gold."<br /><br />R, can you give a reference for that? I would think that the "sum of one pound" in the promise is much more likely to be one pound's worth of coin of the realm, in gold, silver or copper.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-2880166813060693822015-09-18T21:04:40.692+01:002015-09-18T21:04:40.692+01:00"turns out from the various comments to my re..."turns out from the various comments to my recent banking post that Modern Monetary Theory is just Chartalism repackaged."<br />MMT is sometimes referred to as neochartalism. It takes insights from other heterodox theories and intergrates bank lending into the model.<br />MMT is an econ theory about how the best achieve Full Employment and Price Stability.Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-37651338526937546182015-09-18T20:47:15.197+01:002015-09-18T20:47:15.197+01:00DBC, if I explain how a gun and a bullet works, th...DBC, if I explain how a gun and a bullet works, that does not mean i condone murder; if I explain how a car engine works, that does not mean I condone speeding. <br /><br />It is first important to understand splitting the zero. Then we realise, this can lead to better outcomes (encouraging investment and smoothing spending patterns) or for bad things (credit and land price bubbles, speculation generally).<br /><br />So as you say, absent land price bubbles and speculation thereon, the splitting the zero in isolation would lead to better outcomes.<br /><br />B, for these purposes, a "fiat currency" is exactly what the post explains. The £ issued by the government is not backed by anything but has value because you need it to pay taxes with. <br /><br />R, yes, if the gold vaults are robbed, your voucher becomes worthless. But as long as the government has the power to tax (i.e. the tacit acceptance by the population, however grudging) then the £ issued by the government will always have value. There are no vaults to rob, which means that the £ in your pocket always has value. In that sense it is safer than gold backed vouchers.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-56208550109750536992015-09-18T20:29:52.831+01:002015-09-18T20:29:52.831+01:00It doesn't entitle you to anything. It is a pr...It doesn't entitle you to anything. It is a promise convertible to gold.<br />If the gold vaults were robbed you would not be able to exchange for gold for instance.<br />Money is always IOUs. In the past it was convertable go gold? Yeah well so what?Randomhttps://www.blogger.com/profile/04445772572707818311noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-8465047587202800632015-09-18T19:56:53.071+01:002015-09-18T19:56:53.071+01:00"That's still not a fiat currency, it is ..."That's still not a fiat currency, it is a voucher entitled you to X amount of gold."<br /><br />WTF's a fiat currency then?Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-8875492141601663392015-09-18T11:15:59.801+01:002015-09-18T11:15:59.801+01:00@MW
I suppose I feel, quite reasonably all things ...@MW<br />I suppose I feel, quite reasonably all things considered, that a system where banks create money and all of kinds of Tory wankers run round saying Where's the money coming from? all the time is not something you can be "value neutral" about.<br />"Splitting the zero" is a value neutral way of saying that banks create sums of money which they split into two accounts .So that's supposed to neutralise the Rothbard accusations?<br />Do bear in mind that I think that action on land price inflation could do a great deal to sort out problems with the channelling of newly created money before resort to monetary reform. DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-87100056569605033392015-09-18T10:34:35.820+01:002015-09-18T10:34:35.820+01:00DBC, what the private banks do is not fiat currenc...DBC, what the private banks do is not fiat currency, originally it was gold backed and nowadays it is splitting the zero, and the transition was very gradual.<br /><br /><i>"You suggested that government action was dreaded when you said that governments only create fiat arrangements."</i><br /><br />You are quite tiresome. <br /><br />In this post, i merely explained how and why fiat currencies actually work in practice. I think I made it abundantly clear that I see this neither as a good thing nor a bad thing, the post is entirely value neutral. <br /><br />When i explain how banks split the zero - in a similarly value neutral fashion - people like you and Robin 'madman' Smith accuse me of justifying their behaviour.<br /><br />So please stop accusing me of saying things I never said, that is behaviour for little girls' and Home-Owner-ists, not serious chaps who like discussing stuff.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-71952723253339831922015-09-18T09:49:27.808+01:002015-09-18T09:49:27.808+01:00@MW
I am also explaining how things worked and the...@MW<br />I am also explaining how things worked and the fact is we ended up with a fiat currency after the banks started issuing more notes/ vouchers than they had gold (Fraud! Swindle! Counterfeiting! squeals Rothbard this time quite correctly); the convention then persisted that you could exchange your notes for gold if you wished; as soon as the Banking system created too much money and the bubbles in share and other asset values collapsed big time circa 1931, they cancelled the voucher agreement leaving the fiat system as now.Very little government imposition; very much the banks suiting themselves.<br />You suggested that government action was dreaded when you said that governments only create fiat arrangements.<br />You also jib at the government resuming the right to create money which would solve the other half of the money/land nexus.You have constructed a viable Citizens Dividend around land taxation when the original National Dividend simply created new money (rather than the banks) to pay for the economy working at full capacity by distributing it to people equally.( A Gesellian stamp money system might ensure it was immediately spent.)<br />I agree that action simply to control land price inflation should be tried first.On the face of it, it should work on its own which would save an awful lot of bovver.DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-64218226840577489472015-09-18T07:42:36.843+01:002015-09-18T07:42:36.843+01:00DBC, who said government action was "dreaded&...DBC, who said government action was "dreaded" or that banking is not "sleight of hand"? I was just explaining how things work without any sort of judgmental overtone. <br /><br />Fact is, bank notes were originally a voucher for gold. You said yourself (17 Sept 10.01) that you could only exchange these vouchers at their "banker's brother's". Not my fault if banks started trusting each other and then other businesses started trusted banks. That's still not a fiat currency, it is a voucher entitled you to X amount of gold.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-69274649847288951742015-09-17T20:16:42.911+01:002015-09-17T20:16:42.911+01:00DBCR, I have always thought that bank notes are si...DBCR, I have always thought that bank notes are simply that, notes from a bank (as they still are in Scotland) and the promise to pay was a promise to exchange these notes for coinage, which is the property of and only issued by the state. Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-26698977206356454012015-09-17T17:45:29.647+01:002015-09-17T17:45:29.647+01:00Richard Lipsey says 1931 was the date that notes w...Richard Lipsey says 1931 was the date that notes were no longer redeemable at banks in gold (or silver?).Wonder what was the significance of that date?DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-26218149156232878882015-09-17T17:37:49.955+01:002015-09-17T17:37:49.955+01:00To be "current" you would have to be ab...To be "current" you would have to be able to go into any shop and use a John Lewis voucher there. Please video yourself getting what "you think you can get" for one in a tobacconist, as I obviously live a very restricted life in Northampton. You might also go into a bank and present a £20 note and ask them to make good on the "promise to pay the bearer £20" whereupon they will hand the same note back saying " Piss off, that only applied when this was a commodity based currency:it changed into a fiat currency when the promise to pay was repudiated" When was that BTW?My contention is that this was the moment when commodity voucher money became fiat not through the dreaded government action but financial sleight of hand or bona fide laissez faire/laissez passer.DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-43549026066470328872015-09-17T14:04:18.351+01:002015-09-17T14:04:18.351+01:00Things move very quickly here,I still need to than...Things move very quickly here,I still need to thank Lola, Derek and DBC Reed for the heads up about Gesell from the previous thread. He is now on my reading list with the Keynes essays.<br /><br />DBC I agree with the idea that Bankers exchange notes internationally. Isn't this why the Rothschild family/dynasty did so well after 1800? They could be trusted to honour each brothers notes no matter the country.So I take it this is what you mean by organic 'market' growth in currency notes.<br />How about this for state growth. I am thinking of Wellington's army in the Peninsular War in the first instance. While the French military gave the local folks no choice, they simply plundered the villages and took want they needed, an age old strategy.Wellington resisted plunder and issued notes to exchange supplies for goods at his magazines. So cattle, wheat, women and men in exchange for whisky, rum, opium, blankets and guns. This is stage 1. Stage two, general point. After a war a state says that it will exchange back the magazine notes for whatever, pounds, Dollars, Francs the winner has. It also now tells the locals who survived the conflict they are part of Empire A or B and that they will also have to pay in these currencies a tax on the huts/hovels/ homes that they thought they once owned. They had better get working in the fields or they they face the full might of the law (as Ricky suggests above)!<br />MMT accounts for the first issuing of paper by the military authorities for goods and services in the model above.So Wellington (the state) and the Rothschild's (the bank) hand in hand?MikeWhttps://www.blogger.com/profile/15455583313857077618noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-80503933349211754472015-09-17T12:41:06.718+01:002015-09-17T12:41:06.718+01:00Ricky, exactly. Either the goverent gets them back...Ricky, exactly. Either the goverent gets them back by making threats (taxation) or it gets them back with user charges (land value tax).Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-17821293894322023872015-09-17T12:35:53.861+01:002015-09-17T12:35:53.861+01:00The plastic token analogy in which the worthless t...The plastic token analogy in which the worthless tokens are valuable only depends on the fact that the children can be evicted or go hungry.<br />In which case the tokens are only valuable via the fact that force can be used if the tokens aren't returned to the issuer. <br />Another comparison would be the tokens used in POW camps which were used by prisoners to exchange for small items such as shoe polish, razor blades etc) <br />We in modern society use the camp money equivalent (apart from commodity-trading on a small scale which is against the rules and called "crime") but - outside the camp - those who actually run it are trading in gold or some other material of intrinsic value. <br />As you say they can print it at will then lend it to us but the catch is that they confiscate tangible assets if we fail to return it. Rickyhttps://www.blogger.com/profile/04063678525596514169noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-14641303756638319012015-09-17T10:51:37.696+01:002015-09-17T10:51:37.696+01:00DBC, that is like a John Lewis voucher. Its value...DBC, that is like a John Lewis voucher. Its value is derived from what you (think) you can get for it. The gold or goods have to be there first before people will pay for it. It is not s fiat currency.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-32852036116997556832015-09-17T10:01:13.066+01:002015-09-17T10:01:13.066+01:00I would have thought that fiat currencies develope...I would have thought that fiat currencies developed in a laissez faire manner or "naturally" as that grand Romantic Adam Smith is always saying about everything he approves of.You know: Lombard Banks sold promissory notes to travelling merchants to pick up the same amount of gold from the bankers' brothers in other city states to guard against banditti, shipwreck etc Then these notes started changing hands at full face value as the bankers kept less and less gold in reserve. The same old story.I cannot see any place for government edict: Italy didn't have an National Government till the nineteenth century. Governments only appear to have given approval when they started "borrowing" off the banks.e.g. William of Orange and Dutch banking.DBC Reedhttps://www.blogger.com/profile/17891849727783879145noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-32003394704700592022015-09-17T00:15:52.068+01:002015-09-17T00:15:52.068+01:00Yep,
I read that a company in the USA makes a goo...Yep,<br /><br />I read that a company in the USA makes a good living turning tax dollars into house insulation material.<br />MMT, as I understand it is a factual explanation of how a fiat system works despite what our leaders may say about tax and budgets. It is not an ideology as MW explains. It, MMT, stands in contrast to a state that is on a gold standard or currency peg. For example, it does not help to explain Greece or any other Euro zone country can or cannot do in a crisis. It does however, explain what we, the USA and Denmark can do.So I think that counts as real policy stuff in anyone's book! Greece is/was in the same boat as me, Lola, your company and your local council and the county council. We are all constrained by the fact we cannot create currency that will pay tax or bank debt, bonds etc. We have to go out and work, or steal for it.But our government is not.All budget ceilings in the end are purely self imposed or imposed by the fear of real inflationMikeWhttps://www.blogger.com/profile/15455583313857077618noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-69667675475058280192015-09-16T23:03:48.559+01:002015-09-16T23:03:48.559+01:00B, and many shops still sell "gift vouchers&q...B, and many shops still sell "gift vouchers" which is the same sort of thing. That is not a fiat currency. That is payment in advance.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-5038209587996661362015-09-16T21:34:28.046+01:002015-09-16T21:34:28.046+01:00Lola, it's the Bible, Psalm 146:3
"why w...Lola, it's the Bible, Psalm 146:3<br /><br />"why would there be a fiat currency system in the absence of a government? It has never happened."<br /><br />ISTR there being generated a lot of column-inches talking about C18th/19th companies creating their own fiat currencies in the form of tokens a few posts ago.Bayardhttps://www.blogger.com/profile/15211150959757982948noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-18392104175241227702015-09-16T19:53:07.973+01:002015-09-16T19:53:07.973+01:00Din, why would there be a fiat currency system in ...Din, why would there be a fiat currency system in the absence of a government? It has never happened. But as per usual I am wasting my time and I give in.<br /><br />L, chartalism is not an -ism like Communism or Environmentalism or Home-Owner-Ism. It is just a way of explaining why fiat currencies "work". Like "capitalism" is not a belief system, it is just a word for something that pre-exists, like the weather. <br /><br />And as as long as govt spending and taxation is denominated in the same thing and there are no big surpluses or deficits, it works fine, be that gold or bits of paper or entries in a government electronic ledger.<br /><br />But clearly no, don't put your trust in princes. They are politicians, rent seekers, criminals and Home-Owner-ists.Mark Wadsworthhttps://www.blogger.com/profile/07733511175178098449noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-17305863535861549112015-09-16T19:39:24.373+01:002015-09-16T19:39:24.373+01:00Hmm. The Bard. "put not your trust in Princes...Hmm. The Bard. "put not your trust in Princes". Ditto Lola end of MMT/chartism. Lolahttps://www.blogger.com/profile/04586735342675041312noreply@blogger.comtag:blogger.com,1999:blog-1141932539860553199.post-68007100322501285182015-09-16T18:43:52.281+01:002015-09-16T18:43:52.281+01:00What you are saying is certainly not "how it ...What you are saying is certainly not "how it works in practice" as you say , because as I illustrated the government doesn't create the money.<br /><br />20 % of 1 Billion = 200 million<br />20 % of 2 Billion= 400 million<br /><br />And bank deposits have an intrinsic value because the borrower who creates them has an obligation and commitment to supply economic resources in the future in the course of repaying the loan that created the deposit.Dinerohttps://www.blogger.com/profile/14632385731642361211noreply@blogger.com