Chartalism

Georg Friedrich Knapp, a German economist, invented the term "chartalism" in his State Theory of Money, which was published in German in 1905 and translated into English in 1924. The name derives from the Latin charta, in the sense of a token or ticket. Knapp argued that "money is a creature of law" rather than a commodity. Knapp contrasted his state theory of money with "metallism", as embodied at the time in the gold standard, where the value of a unit of currency depended on the quantity of precious metal it contained or could be exchanged for. He argued the state could create pure paper money and make it exchangeable by recognising it as legal tender, with the criterion for the money of a state being "that which is accepted at the public pay offices". for instance Adam Smith, who observed in The Wealth of Nations: Forstater also finds support for the concept of tax-driven money, under certain institutional conditions, in the work of Jean-Baptiste Say, John Stuart Mill, Karl Marx and William Stanley Jevons. Innes argued: Knapp and "Chartalism" were referenced by John Maynard Keynes in the opening pages of his 1930 Treatise on Money and appear to have influenced Keynesian ideas on the role of the state in the economy. Historian Constantina Katsari sees principles from both metallism and chartalism reflected in the monetary system introduced by Augustus to the eastern provinces of the Roman Empire, from the early 1st century to the late 3rd century AD. ==Modern proponents==

Economists Warren Mosler, L. Randall Wray, Stephanie Kelton, and Bill Mitchell are largely responsible for reviving chartalism as an explanation of money creation; Wray refers to this revived formulation as Neo-Chartalism. Mitchell, founder of the Centre of Full Employment and Equity or CofFEE at the University of Newcastle in Australia, coined the term Modern Monetary Theory to describe modern Neo-Chartalism, and that term is now widely used. Scott Fullwiler has added detailed technical analysis of the banking and monetary systems. Rodger Malcolm Mitchell's book Free Money describes in layman's terms the essence of chartalism. Some contemporary proponents, such as Wray, situate chartalism within post-Keynesian economics, while chartalism has been proposed as an alternative or complementary theory to monetary circuit theory, both being forms of endogenous money, i.e., money created within the economy, as by government deficit spending or bank lending, rather than from outside, as by gold. In the complementary view, chartalism explains the "vertical" (government-to-private and vice versa) interactions, while circuit theory is a model of the "horizontal" (private-to-private) interactions. Hyman Minsky seemed to incorporate a Chartalist approach to money creation in his 2008 book Stabilizing an Unstable Economy, while Basil Moore, in his 1988 book Horizontalists and Verticalists, delineates the differences between bank money and state money. James K. Galbraith supports chartalism and wrote the foreword for Mosler's book Seven Deadly Innocent Frauds of Economic Policy in 2010. == See also ==