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Posted by Uwe Burkheiser (81.210.153.20) on 14:53:26 03/28/04
In Reply to: Re: National Review Online - Questions posted by Warren Mosler
Warren, the point is, no monetary system of State Money (and fiat money in particular) can be implemented without the threat of brute force. The American Independence from Britain is (among other things) can be viewed as the opposite: a case of brute tax evasion.
No Power - no tax no money. That is the succession of events we look at.
At issue here was the question of how to create (finance) the power to tax prior to having a state and money (as defined in the - legal tender - Section 392 of Title 31 of the United States Code). As this question, in my view, remains unanswered here is a glimpse:
As a minimum this requires the control of weapons and manpower. This in turn requires promises to pay later or the factual sharing of power (yielding control or future tax income = debt, formerly the loot) from the onset with those who actually help executing the power .
Later on the maintenance of the power to tax requires further yielding of power (future tax income) for buying votes at best. For some time the costs of maintaining power may even be externalized by submission of other peoples recourses (ancient Rome, Alexander the Great, Colonial Europe are obvious examples) .
But in the end all power (viable future tax income) is yielded.
We just need to look at the growth of GDP vs. government debt to realize that this cannot be a one way street (Japan, US, EU).
Government debt at maturity (leaving aside all the different avenues to new spending, prolongation and roll over) needs to be repaid by taxes because the government cannot (out of thin air) create tokens with zero maturity (MZM) unless it operates the printing machine directly usually with devastating consequences.
So the ability to extort taxes from the private sector will finally determine what debt level the government sector can bear. All chartalist assurances that there is no inherent limit on government spending and that deficits don t matter will not erase this simple truth as long as the government does not escape to create MZM without the Fed and the private banking system.
Chartalism is a great tool to explain the workings of a fiat money system as long as you don t look at the gruesome beginnings (which it cannot explain economically) and at the likely end (which it will not explain for good economic reasons).
Thanks for your patience!
Uwe
Here is some literature for those who are interested in the issues raised in this thread:
Paul C. Martin, Macht, der Staat und die Institution des Eigentums
(Power, the State and the Institution of Property)*
(Sorry, just the abstract is in English and the references cited there are worthwhile)
http://www.iksf.uni-bremen.de/symposium/downloads/Martin-Symp.pdf
John R. Commons, Legal Foundations of Capitalism (1924), Chapter IV, Transactions, p. 65 ff
Charles Tilly, Coercion, Capital and European States AD 990-1992, Malden, MA, (1992)
Charles Tilly, War Making and State Making as Organized Crime, in: Bringing the State Back, In: P.Evans, D. Rauschemeyer, T. Skocpol eds, Cambridge (1985), pp. 169-186. To be found here with proper access permit
https://www1.columbia.edu/sec/bboard/ 003/inaf6804-016/msg00044.html
Franz Oppenheimer, The State, Part I, Genesis of the State, Chapter: Political and Economic Means to be found here: http://www.opp.uni-wuppertal.de/oppenheimer/st/state1.htm
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