Last week we
finished off our look at what was meant in Modern Monetary Theory (MMT) by the
claim that money
is a creature of law rather than a commodity. We concluded that “creature of law” in MMT did
not mean consistent with the natural law and the legal definition of money as
anything that can be accepted in settlement of a debt. Rather, it meant that money is a special
creation by the government . . . which pretty much negates the real definition
of money.
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| John Maynard Keynes Funny Money |
As for money not
being a commodity in MMT, that is evidently just word games. Any time any authority tries to decide how
much money and credit there should be, money and credit (the same thing,
actually) is being treated as a commodity.
Money is a symbol, a means of exchanging what people produce, and is
utterly meaningless if it is disconnected from the reality of marketable goods
and services.
Which brings us
into the second principle of MMT, which is that the State can create “pure”
money by emitting bills of credit (issuing debt). The money can be “forced” on the public by
making it exchangeable by recognizing it as legal tender.
There are several
problems here, of which we will deal with the most minor issue first: legal
tender status. Monetary conspiracy
theorists especially assign a mystical significance to “legal tender.” This is probably due to the fact that there
is an element of coercion in something having legal tender status, defined in
law as,
. . . that kind of coin, money, or circulating medium which
the law compels a creditor to accept in payment of his debt, when tendered by
the debtor in the right amount. (“Tender,” Black’s Law Dictionary.)
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| You can run, but you cannot hide! |
In MMT,
government-issued bills of credit are the only legal tender, and thus the only
legal money — an understanding contradicted by the definition of legal tender
itself. In MMT, therefore, the
definition of money changes from “anything that can be accepted in settlement
of a debt,” to “an officially authorized medium that must be accepted in
settlement of a debt.”
Money thereby
changes from the medium of exchange,
to a medium of exchange — which makes
a big difference in the understanding of money.
It implicitly separates money from the goods and services that are being
exchanged by admitting the possibility of other media of exchange.
Limiting money to
being only one of many media of exchange means that it is possible to exchange marketable
goods and services without using money.
This is utter nonsense when money is defined as THE medium of exchange
and specified as “ALL things transferred in commerce.”
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| Ja, mein funny money ist everywhere, aber no one laughing is! |
At the same time,
limiting money to being one of a number of media of exchange also means that,
because marketable goods and services can be separated from money, claims or “purchasing
power” can be created by non-producers.
These claims can be forced on others if the non-producer has enough
power to do so.
Thus, MMT, by
separating money from marketable goods and services, and the creation of money
from the production of those goods and services, destroys the whole concept of
private property. Money is no longer the
means by which producers exchange amongst themselves the marketable goods and
services they produce, but a means by which non-producers with power steal the
productions of others by asserting property in that which others produce by
means of their labor, land, or technology.
Legal tender
status is therefore crucial to the success of a monetary system based on
MMT. It “legalizes” what would otherwise
instantly be recognized as theft on the part of the State.
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| Oo-la-la! I have taken over zee world! |
Incredibly, as we
noted, this is actually only a minor problem with MMT. Absent 100% surveillance of every act by
every person in an economy, people are going to use other media of exchange
than the official government-issued legal tender. No economy can function if only government
bills of exchange can be used to transact business. Even in the most rigidly controlled communist
society, “non-monetary exchanges” take place . . . with the caveat being that,
in reality, there is no such thing as a “non-monetary exchange.”
We already
covered another major problem, that MMT — despite its alleged principle —
treats money and credit as a commodity.
This turns the money supply, M, into the independent variable in the
Quantity Theory of Money equation, and V, P, and Q into dependent
variables. Mathematically, this is
nonsense, as you can’t solve an equation that has one independent variable and
three dependent variables.
The major
conceptual problem with MMT — with the whole of the Currency School, in fact — is
the idea that the State is or should be in complete control of the economy. This, presumably, will prevent private
interests from seizing control of the money and credit system and manipulating
it for their own advantage. It does not,
however, prevent private interests from seizing control of the government, and
manipulating it for their own advantage . . . which is all the easier to do
when the government controls money and credit. . . .
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| You have learned well, my son. |
This, in turn, is
all the easier to do with “pure money,” that is, money that stands for nothing
except the State’s power to take what others have, offering nothing in return,
thereby abolishing the whole concept of exchange and of contract, and thus the
whole notion of commutative justice.
This it does by emitting bills of credit and mandating that this “pure
money,” not diluted by being tied to actual marketable goods and services, is
the only legitimate money when the only thing legitimizing it is the pure force
of the State.
This is what
Georg Friedrich Knapp called “chartalism,” the “State Theory of Money.” By being “pure,” money is transformed from
the medium of exchange into a medium of control and coercion . . . explaining
why MMT found such ready acceptance as the new totalitarian governments began
spreading in the 1920s and 1930s following World War I.
From a means of
exercising private property, under MMT money became a way of destroying private
property.
This brings in
the third principle of MMT, that money is not a medium of exchange at all, but
a standard of deferred payment.
Government money is debt the government may reclaim through taxation.
This, of course,
is clearly implied by the concept of “pure money” that is completely divorced
from production. Since nothing is
exchanged in the creation of “pure money,” exchange itself is abolished, as are,
of course, private property and contract, as we will see in the next posting on
this subject.
#30#
