Fiat money is backed by men with guns
Only a quick post today unfortunately (I’ve been working on another looooooooooooong post over the last few days).
However, I thought I should mention at least two things.
Yesterday, Lawrence Summers published a piece in the Financial Times about his secular stagnation theory. Anything new? Nop. Like nothing had happened since he first mentioned the concept. Like if his original speech had never triggered a great debate among economists. So he obviously didn’t address any of the counter-arguments made by other people… Ivory towers anyone?…
About a week ago, Bob Murphy had a ‘funny’ post on Krugman. Remember when I said that fiat money wasn’t backed by the ‘productive capacity of the country’ and other meaningless abstract concepts like that? Krugman seems to agree… Well… sort of, as he believes that fiat money is backed by… men with guns!… which gives fiat money its value… Nice type of money, that’s for sure. I love the sense of liberty that some Keynesians have.
do you think there should be zero taxes?
No, I am not an anarchist, so I do believe that the state has a role. And this role has to be financed.
If your implied question is, so as long as the state has to tax, the situation will remain the same, I would reply: not necessarily. The institutional framework can be changed. Many cases in history also showed that, despite both legal tender laws and taxes raised in one particular currency, if people didn’t trust this currency anymore, it would stop circulating for private transactions.