krebscycle

From Mike Beggs review of Graeber’s book on Debt (with my bold on the key passage):

Joseph Schumpeter captures the basic reason for chartalism’s unpopularity in his discussion of the “tempest in a teacup” surrounding the original reception of Knapp’s famous book:

Had Knapp merely asserted that the state may declare an object or warrant or token (bearing a sign) to be lawful money and that a proclamation to this effect that a certain pay-token or ticket will be accepted in discharge of taxes must go a long way toward imparting some value to that pay-token or ticket, he would have asserted a truth but a platitudinous one. Had he asserted that such action of the state will determine the value of that pay-token or ticket, he would have asserted an interesting but false proposition. [History of Economic Analysis, 1954]

In other words, chartalism is either obvious and right or interesting and wrong. Modern states are clearly crucial to the reproduction of money and the system in which it circulates. But their power over money is quite limited – and Schumpeter puts his finger exactly on the point where the limits are clearest: in determining the value of money.

The mint can print any numbers on its bills and coins, but cannot decide what those numbers refer to. That is determined by countless price-setting decisions by mainly private firms, reacting strategically to the structure of costs and demand they face, in competition with other firms.

The argument here is “Ok, Ok, I concede your crank point, but it is irrelevant to any serious work”. Value is still “determined by countless price-setting decisions” etc. etc.  Consider the price of the most important commodity of our age: oil. The governments of most of the key oil exporters in the middle east have been installed or protected or contained by the US military since the 1950s. The cost of US military presence in the middle east is enormous – trillions of dollars.  The US Navy keeps the Persian gulf open and  protects shipping in the Arabian Sea.  Not only that, but the US government (like other governments) has decided to impose the environmental costs of oil refining, shipping, and distribution on the general public and those unfortunate enough to live in the neighborhood. The Keystone Pipeline project is seizing private land under eminent domain as we speak, the environmental cleanup costs of pipeline spills are bounded by explicit and precedential laws, the Koch brothers (along with many others) have been permitted to dump highly poisonous chemicals into rivers and seas and so reduce their production cost  and so on. Oil production has received special tax benefits in the US for 100 years.  And yet, we’re supposed to believe that the primary driver of the cost of oil and the value of the dollar in relation to oil is  countless price setting decisions of private firms!