Why did they make subjects pay taxes at all?

State Theory helps us solve one of the mysteries of the fiscal policy of early kingdoms: Why did they make subjects pay taxes at all?

If Adam Smith were right, and gold and silver naturally became money because free markets wanted them, then why wouldn’t the king just grab control of the gold and silver mines and become powerful that way?

Lots of early kings DID do that. But then what was the point of extracting the gold, stamping a picture on it, circulating it, and then demanding that people give it back again?

But if money and markets DON’T emerge naturally, it makes sense. That’s how you create a market.

If you want to support a standing army of 50,000 men, feeding them is really hard. But if you just give them coins and then demand that everyone in the whole kingdom pay you some of those coins, you turn your whole economy into a big machine to feed soldiers, because now everyone in the kingdom has to find a way to help feed soldiers so they can get the coins they need to pay you.

pg 49-50

Cryptocurrency and Credit Theory

The system of IOUs Graeber described when explaining Credit Theory, with Henry’s IOUs circulating all over the place, got me thinking.

He says something to the effect of “Of course Henry would have to be fabulously rich to have all transactions be carried out using tokens of his promise to pay a debt, which is why it’s usually the king who backs all that shit.”

Bitcoin/cryptocurrencies claim to be decentralized and thus revolutionary, but one of my big problems with them has always been that there’s no power backing them. It’s like they took the fiat idea of “all that matters is people’s faith in the currency’s value” to the extreme, totally ignoring the fact that people have faith in fiat currencies because they have faith in the entity that backs them’s power. Like, the dollar doesn’t just have value because people believe it does, the dollar has value cause the US will probably kill you if you say it doesn’t. At the very least it will be more inclined to let you live if you say it does.

What if, instead of mining and doing ledger work and all that, you earned bitcoin by putting up some property or service, some thing of value as backing for that coin? Loooots of regulating and enforcing has to go into this now, but of course the other huge problem with cryptocurrencies is their ridiculous game of make-believe about how they can run a power structure with no regulation or enforcement.

I don’t really know how this would work in practice, but the idea of a decentralized currency backed by the wealth and power of a great range of people instead of the wealth and power of a single entity is very appealing. Will have to flesh out further.

OK, so after reading the next paragraph of Debt I want to flesh this out a little further. Modern currency is backed by debt of the state, right? State sells bonds to banks which creates the debt that the banks then circulate. So what we’re talking about is the same thing, except letting people play the role that banks currently play. The Central Bank of our new system will take loans from people and give them currency in return.

State Theory of Money

So the big issue with Credit Theory is that whoever is writing all these IOUs that a money supply is based on has to be obscenely wealthy, which is why it’s usually The King or whoever who does it.

“The real impetus for the Chartalist position, in fact, came out of what came to be known as the ‘German Historical School,’ whose most famous exponent was the historian G.F. Knapp, whose State Theory of Money first appeared in 1905.”

Emperors and kings had always handled units of measure, so it makes sense they’d handle money too, under the chartalist model.

Monetary systems of measurement are remarkably stable. Under Henry II from 1154-1189, almost everyone in Europe was still using Charlemagne’s system from about 350 years earlier, even though some of the coins in his system never even existed, almost none of his coins were still around, and the ones that were were wildly variable in size/quality.

Actually Charlemagne’s system stayed in place for over 800 years, coming to be referred to as “imaginary money,” and derniers and livres were only abandoned as units of account around the time of the French Revolution.

But according to State Theory, what the money is made of (Silver or leather or fish or paper) doesn’t matter, as long as the state takes payment for taxes in it, because that becomes currency.

Actual modern banknotes are kind of the opposite though. They’re not backed by debts OF The King’s, they’re backed by debts TO the king. The Bank of England was founded in 1694 with a loan made by a consortium of bankers worth about 1.2 million Pounds. In return, they got a royal monopoly on issuing banknotes, basically that they could circulate IOUs from the king to them for that loan. (King owes bankers money for that loan, King writes a million IOUs, bankers give those IOUs to people to use as currency).

pg 47-8

Free Speech

Discussed on Twitch

The fundamental misconception of economics

“For there to even be a discipline called ‘economics,’ a discipline that concerns itself first and foremost with how individuals seek the most advantageous arrangement for the exchange of shoes for potatoes, or cloth for spears, it must assume that the exchange of such goods need have nothing to do with war, passion, adventure, mystery, sex, or death.”

“Economics assumes a division between different spheres of human behavior that, among people like the Gunwinngu and the Nambikwara, simply does not exist. These divisions in turn are made possible by very specific institutional arrangements– the existence of lawyers, prisons, and police– to ensure that even people who don’t like each other very much, who have no interest in developing any kind of ongoing relationship, but are simply intersted in getting their hands on as much of the others’ possessions as possible, will nonetheless refrain from the most obvious expedient (theft).”

pg 32-33

The King’s Language

“After all, to argue with the king, one has to use the king’s language, whether or not the initial premises make sense.”

pg 8