This paper examines the Chartalist approach to money, which can be traced from Adam Smith through Georg Friedrich Knapp to John Maynard Keynes and to Hyman Minsky. This has important policy implications.
Taxes create a demand for money, and government spending provides the supply.
Thus, the Chartalist view of money, if fully understood, would lead to a much different view of appropriate monetary and fiscal policy goals. And rather than trying to use monetary policy to achieve stable prices, monetary policy would recognize that its role is to establish the short term interest rate, while fiscal policy would be used to stabilize the value of the currency. Please take the time and register at our new service.