why can't money be created without the simultaneous creation of debt? nathan tankus wrote: > commodities are > just assets. they are physical constructs that can exist without any > liability.
Exactly. If we dig gold out of the ground (and it's hard to get out of the ground), it's an asset that can be used as money. But there's no debt created when the gold is dug up, except a debt to Nature, which is not legally binding. (strictly speaking, there's no pure commodity money. Even when gold dust is used, the weights and measures must be regulated by the state. The state must prevent the mixing of other metals with the gold, etc. Individuals can use standard measures and chemical tests to avoid cheating, but there's an incentive for each of them to cheat. If people start fighting over the true weights and measures, either the use of the gold freezes up or the state intervenes to impose rules.) > chartalists argue that money is not given value by > commodities even when money is made of commodities or is "backed" (see > pegged) to commodities. Paper money that's backed by gold is not given value by the gold alone, since the power of the state is required to successfully peg the paper money to gold. The amount of paper money in circulation has to be restricted. If the power of the state collapses (as for a state at the losing end of a civil war) so that the government can't restrict the amount of paper money in circulation (because it has to pay the bills and to avoid losing the civil war), even money backed by gold loses value. Usually the state is forced to abandon the pegging first. Besides pure commodity money, pure fiat money doesn't involve the creation of debt. The state simply uses its power to restrict the production of paper money, keeping it scarce. I guess you could say that the state "owes a debt" to the people it dominates, but that's stretching it. It's not a legally enforceable debt. -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
