Re: Debtor Nation, another view

On Tue, 18 Oct 2005 08:20:44 -0700, William F Hummel
<wfhummel@xxxxxxxxxxx> wrote:

>On Mon, 17 Oct 2005 19:09:35 -0700, "The Trucker" <mikcob@xxxxxxxxxxx>
>wrote:
>
>>"William F Hummel" <wfhummel@xxxxxxxxxxx> wrote in message
>>news:2u45l1l7ge8ueu07rn5k3ld5246q48rais@xxxxxxxxxx
>
>>> So I'll repeat the challenge. Show how a government's fiat currency
>>> can retain value for long without taxes.
>>
>>That is not a difficult challenge, but Rue seems to be looking
>>the other way or something. The currency will retain its value
>>and it will actually increase in value if the government absolutely
>>prevents counterfeiting and if the government does not issue
>>any more money. This absolute control on the amount of money
>>in the system will satisfy the scarcity aspect while the "legal
>>tender" decree of government assures that this fiat money is
>>the medium of exchange. And this may, in fact, show us how
>>signorage can actually be used to fund government if the
>>economy is _actually_ expanding. i.e. it is possible to place
>>more money into the system without destroying the value
>>of the existing money if the system itself is expanding.
>>Government gets first use of the money as it spends it
>>into existence. But in this scenario there is no need for
>>any IOU's or any interest.
>>
>>Well, Hummel, you asked for a way to do it without
>>taxation and I gave it to you. I do not claim that this
>>is the best way to do things, but it is A WAY.
>
>You claim to know something about money and banking, but you don't
>show any evidence of it in this absurd proposal.

It is not absurd in the least. It has been done, by actual
governments, and it has worked as the Trucker describes.

>You imply that the
>Fed controls the money supply. In theory the Fed could control the
>amount of base money it issues, but that is only a small part of the
>money supply. What the private sector uses for money is almost
>entirely bank credit, not base money.

IMO conflating publicly created money and privately issued bank credit
is one of the fundamental epistemological errors in modern economics.

>The private sector determines the size of the money supply by its
>demand for credit and the willingness of banks to lend. I've
>elaborated on this at length in various posts on sci.econ, but you
>seem to have understood very little of it. Base money underlies the
>credit money system, but if the Fed stopped issuing base money in
>support that system, the economy would come to a screeching halt.

Nonsense. Of course, if such a change were implemented suddenly,
there would be a disruptive shock to the financial system. But there
is no reason to think a stable and workable private bank credit system
could not accommodate itself to such a monetary policy.

>In
>practice, the only thing any central bank can do is to control the
>overnight lending rate of base money, not the quantity of it. If you
>don't understand why that is so, then you have a lot to learn about
>money and banking.

It is not so, as obviously there were stable and useful money and
central banking systems before there was any such thing as an
overnight lending rate.

So you are just flat, outright wrong as a matter of objective fact.

-- Roy L
.

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