Somehow [Krugman] also seems to think the idea behind [MMT] is new and originates from economic cranks....
This is what [Knut] Wicksell wrote in 1898 on “pure credit systems” in Interest and Prices (Geldzins und Güterpreise), 1936 (1898), p. 68f:
It is possible to go even further. There is no real need for any money at all if a payment between two customers can be accomplished by simply transferring the appropriate sum of money in the books of the bank …
A pure credit system has not yet … been completely developed in this form. But here and there it is to be found in the somewhat different guise of the banknote system …
We intend therefor, as a basis for the following discussion, to imagine a state of affairs in which money does not actually circulate at all, neither in the form of coin … nor in the form of notes, but where all domestic payments are effected by means of the Giro system and bookkeeping transfers. A thorough analysis of this purely imaginary case seems to me to be worth while, for it provides a precise antithesis to the equally imaginary case of a pure cash system, in which credit plays no part whatever [the exact equivalent of Krugman's often used model assumption of "cash in advance"- LPS] …
For the sake of simplicity, let us then assume that the whole monetary system of a country is in the hands of a single credit institution, provided with an adequate number of branches, at which each independent economic individual keeps an account on which he can draw cheques.
Read it at Lars P. Syll's Blog | Docendo discimus
Krugman on Modern Monetary Theory
Krugman on Modern Monetary Theory
by Lars P. Syll | Professor, Malmo University
(h/t Anonymous in the comments)
3 comments:
For 1898 that is science fiction. Great prediction.
“We intend therefor . . . to imagine a state of affairs in which money does not actually circulate at all. . . . but where all domestic payments are effected by means of the Giro system and bookkeeping transfers.”
What’s this fellow on about? Money is anything widely accepted in payment for goods and services. If I have a credit balance at the “Giro system” that does “bookkeeping transfers” then I am in possession of money!!!!!
Ralph, it seems clear to me that "circulate" means cash circulation. In the Giro system he is hypothesizing, all transactions are through crediting accounts within the system. No cash.
Post a Comment