Chartalism
Chartalism (from Latin: charta = German: document , document , charter ) is a heterodox macroeconomic monetary theory that assumes that money is created by the state by declaring it as legal tender , and that the currency receives its value by that the state's power has taxes to raise to be applied in this currency. So it is a monetary theory that emphasizes the influence of government policies and activities on the value of money and defines money as a unit of account with a value determined by what the government accepts as payment for tax obligations. Chartalism means that money has no intrinsic value, but is valued by the government.
history
Georg Friedrich Knapp is considered to be the founder of the Chartalist monetary theory , who laid out the positive legal justification of money in 1905 in his work State Theory of Money . Although translated into English at the instigation of John Maynard Keynes in 1924 , it was forgotten. It was not until the turn of the millennium that chartalism was taken up again by post-Keynesian modern monetary theory (MMT).
Content and meaning
As Knapp noted, money is “a creature of the legal order. It has appeared in a variety of forms throughout history. A theory of money can therefore only be of legal history. ”With his nominalistic view he consciously set himself in opposition to the monetary theory of metallism , which was evident in the times of paper money - at the latest since Richard Nixon abolished the gold standard for the US dollar in 1971 is obsolete. The value of money in Chartalism is based on its social acceptance, regardless of its material value.
Already Adam Smith had written in 1776 that money as "the great wheel of circulation" is something else than the goods that it is moving; that the value of money is not derived from its value of goods, but from its function for the economy.
Neo-Chartalists like Matthew Forstater point out that chartalist conceptions can also be found in earlier works of classical economists like Jean-Baptiste Say , John Stuart Mill , Karl Marx and William Stanley Jevons . Keynes also mentions Knapp and Chartalism in 1930 and it seems that this influenced his view of the role of the state in the economy. Abba P. Lerner wrote in his 1947 article "Money as a Creature of the State" that economists had largely abandoned the idea of determining the value of money through gold. He suggested that the responsibility for avoiding inflation and depression rests with the state because of its ability to create and tax money.
In the 21st century
Modern economists such as Warren Mosler , L. Randall Wray , Stephanie Kelton, and Bill Mitchell have revived chartalism as the explanation for money creation . Mitchell finally coined the term Modern Monetary Theory (MMT) for modern neo-Chartalism , which became widely accepted. Scott Fullwiler contributed a detailed technical analysis of the banking and monetary system. Rodger Malcolm Mitchell's book Free Money explains the essence of Chartalism in plain language.
Coins and banknotes are legal tender guaranteed by the state and the state has a monopoly on them. Because the state - and only it - can create money and thus influence economic activity. With the creation of the EURO that competence has been true to the ECB transferred, but behind this are the euro countries as a whole, raise taxes in this currency.
The value of money comes about through the state and its laws and is based on its social acceptance. Whatever people accept to pay off each other's debts becomes money. The importance of markets and scarcity is therefore weighted less by Chartalists than neoclassical, the importance of integrated societies and state sovereignty much more. Advanced societies have always developed payment systems that could pay off social debts. The state is particularly important here because it demands taxes from its citizens. The currency with which the tax liability is to be paid is prescribed by the state, which is why this currency is becoming the general standard.
In Germany, Knapp's Chartalist monetary theory is represented by the Pufendorf Society for Political Economy eV, founded in 2014 and based in Berlin.
criticism
But don't the banks create book money by creating deposit money ? If state money is deposited in the commercial banks as a reserve, these can grant loans. If, from a chartalist point of view, state money is exogenous and bank money is a multiple thereof, the chartalists need the metalists' money creation multiplier for the analogous calculation.
This is why there is also talk of a monetary dualism: Money is both private (deposit money from commercial banks) and state nature. In everyday life, we citizens deal with both equally. The difference only becomes clear when - as happened in the financial crisis, for example - banks can no longer pay their debts. The central bank, as the bank of the state, can in principle never become illiquid. It can always create money by granting the state a loan, and the state can generate income through taxes and levies to service this loan.
To refute Chartalism, it is also used that the digital crypto currency Bitcoin was not created by any state.
literature
- Knapp, Georg Friedrich: '' State Theory of Money. Duncker & Humblot, Munich / Leipzig 1905, 1918, 1921, 1923. (Attempt to establish a positive legal justification for money). (Digitized 2nd edition. 1918 under: urn : nbn: de: s2w-6471 ). English edition from 1924 as PDF
- Sergio Rossi: Money and Payments in Theory and Practice. Routledge , London 2015.
Individual evidence
- ↑ [1]
- ↑ Gerald Braunberger: What's new about the Modern Monetary Theory? A reminder of Knapp's "State Theory of Money" (1). In: Frankfurter Allgemeine Zeitung . January 18, 2012, accessed July 15, 2017 .
- ↑ Modern Macroeconomics [2]
- ↑ Modern Monetary Macroeconomics, March 2010: [3]
- ↑ Forstater, Mathew (2004): Tax-Driven Money: Additional Evidence from the History of Thought, Economic History, and Economic Policy (PDF)
- ^ Keynes, John Maynard: A Treatise on Money , 1930, pp. 4 and 6
- ^ Lerner, Money as a Creature of the State in The American Economic Review , Vol. 37/2 May 1947
- ↑ The Economist, December 31, 2011, "Marginal revolutionaries" neo-chartalism, sometimes called "Modern Monetary Theory"
- ↑ http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=444041
- ^ Mitchell, Rodger Malcolm: Free Money - Plan for Prosperity , PGM International, Inc., paperback 2005.
- ↑ Modern Macroeconomics [4]
- ↑ Samuel Pufendorf Society for Political Economy eV Accessed on March 24, 2018 (English).
- ↑ Modern Monetary Macroeconomics, March 2010: [5]
- ↑ https://zins Fehler.com/2019/01/23/warum-konnen-wir-unser-geldsystem-nicht-richtig-verhaben/
- ↑ Jon Matonis: Bitcoin Obliterates 'The State Theory Of Money' . In: Forbes , April 3, 2013. Retrieved April 12, 2020.