MMP Blog #14: IOUs Denominated in the National Currency: Government and Private
This week we return to our analysis of the operation of today’s monetary system, examining the denomination of IOUs in the state money of account.
This week we return to our analysis of the operation of today’s monetary system, examining the denomination of IOUs in the state money of account.
We will go through the details of keeping track of stocks and flows in the money of account. That will also lead us into a discussion of the relation between “money” and “spending”—how do we “pay for” things?
The best kind of payment is an obligatory one—one that must be made to stay out of prison, or to avoid death by thirst. An obligatory payment that must be made in the sovereign’s own currency will guarantee a demand for that currency.
In short, to avoid the penalties imposed for non-payment of taxes (that could include prison), the taxpayer needs to get hold of the government’s currency.