Re: Commodity Money vs Fiat Money

On 29 Jan 2006 14:50:07 -0800, w_b_ryan@xxxxxxxxx wrote:

>"When the State declares what kind of
>asset it accepts in payment of taxes, it
>assumes a liability equal to the
>outstanding stock of those assets."
>-----------------------------
>--------------------------
>No, because the "assets" do not derive
>exclusively from government spending, but
>represent bank credit extended to not
>only government, but also to private
>enterprise and to consumers.

Nonsense. The assets derive exclusively from what the Fed creates by
monetizing the debt. The State does not accept bank credit in
payments to it. Banks cannot cover their payments with IOUs. They
must surrender their reserves on deposit at the Fed.
>
>"The State sets the face value of the
>tokens, and accepts them in payment of
>taxes at that value."
>-----------------------------
>--------------------------
>No, there are no "tokens" issued by
>government in the United States of
>America, or any of the Western
>democracies.

Money is simply a token representing a generalized credit. That is
true whether issued by the Fed or by a private bank.

>The governments of the
>United States and the Western democracies
>accept bank credit in the form of
>deposits in payment of taxes.

More nonsense. Bank credit is never accepted as final payment of
taxes. Any such payment is settled by debiting the bank's reserves at
the Fed. The IRS accepts checks only conditionally, meaning the
taxpayer's check must clear. And the check will not clear unless the
bank surrenders that much in reserves to the Treasury.

>"The difference between the face value
>and the material value of a token is
>normally positive, and known as the
>seigniorage gap."
>-----------------------------
>--------------------------
>This would be true only if government
>printed and spent into circulation notes
>at face value. It does not. What it
>spends it has either collected through
>taxation, or borrowed from banks.
>-
No. This is true, period. The State does not discount from the face
value of its tokens. The seigniorage gap is simply the difference
between the face value of the token and its value as a commodity.
What the State does with its seigniorage is a different subject.
.

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