Read it at heteconomist
Ongoing Debate Over Currency Value
by Peter Cooper
My comments:
peterc, the way I understand the state theory argument as MMT economists put it, taxation is necessary and sufficient to give state money value. It is the sine qua non and the causal factor. Other factors come into play in determining how the state money is used and what its purchasing power is.
I also believe that the state money involved is the unit of account rather than the medium of exchange. For example, in the US use of barter or alternative currencies has to be converted into the unit of account for tax reporting. One cannot avoid taxation in terms of state money by avoiding its use as a medium of exchange, because it is the unit of account that is the criterion the government uses.
Perhaps one of the MMT economists can clarify this.
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The argument is not about money, it is about state money. As far as I know, no MMT economist has argued that taxes are required for money to have value. Their claim is that taxation is required to give state money value so that the state can transfer private resources to itself using currency it issues.
6 comments:
Cullen Roche is splitting hairs. There is no effective difference between legitimacy and the ability to enforce tax. In fact they go hand in hand.
The correctness of Tom's comment has also been confirmed by Scott Fullwiler. Thanks, Tom.
this is interesting what Peter writes here:
"The problem declining productivity causes for exchange rates will apply irrespective of the money in use within a nation. "
So this "declining productivity" may be what perhaps is called a 'relative value' issue... where the external nation is able to produce the same product but is so-called "more productive" because the corporate authorities in the external nation are able to squeeze more out of their workers in real terms.
Perhaps we should look at the recent focus on "Foxonn" where in the jurisdictions where Foxconn operates, authorities drive their workers to the point of suicide as an example here.
Productivity being measured as product produced divided by local cost of labor put in.
So "productivity" has both a numerator and denominator. So we here in the US can get some substantial "productivity" increases thru innovation, and have this completely blown away by foreign authorities "cracking the whip" harder and reducing their input costs in local real terms....
I guess Peter is surmising that this would have effects on the exchange rate of the two currencies in the jurisdictions involved and if I am correct would make the "slave driver" country's currency weaken against the currency of the country that is not as demanding of it's labor force.... which makes imports from the "slave driver" country seem cheaper to buyers in the "higher cost" jurisdiction...
If I am correct??
Resp,
Matt, the problem is that a host a factors are involved in determining fx, including cb interventions. If it were a simple independent-dependent variable relationship, profitable fx trading would be simple. It is not.
Right Tom,
Like Japan's currency seems to be wanting to get stronger, then the BoJ intervenes to knock it back down.
But since the underlying trend of the JPY is to strengthen, that implies working conditions (for workers) must be improving over there relative to historic/past conditions....
Resp,
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