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The Continental Bait-and-Switchmises.org/mises-wire/continental-bait-and-switch
393 sats \ 4 comments \ @Undisciplined 14h econ

By Joshua Mawhorter

The Continentals and other paper monies only temporarily retained some value largely because of an initial promise of future redemption in gold and silver—a monetary “bait-and-switch.”
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69 sats \ 3 replies \ @Scoresby 13h
Rather than demonstrating chartalism or a state’s ability to impose money on a people via a combination of legal tender laws and acceptance of their tokens in tax settlement, it demonstrates that the Continentals were only perceived as valuable because they were linked to gold and silver and carried explicit promises of future redemption

I'm no lover of MMT, but couldn't it have been the case that nobody believed articles of confederation era govt was capable of extracting taxes from its citizens?

(And therefore the value imputed to money may still be possible via accepting it in payment of taxes as long as the state is able to back that up by a credible threat of violence?)

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102 sats \ 2 replies \ @Undisciplined OP 13h

The problem with the value-from-taxes argument is that it only assures a positive value but doesn't imply any particular amount of purchasing power to the monetary unit.

Gold and silver each have their own relative exchange rates with all other goods, so redemption promises imply a specific amount of purchasing power to the money.

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69 sats \ 1 reply \ @optimism 13h

Wait... what (commodities) market uses gold as the quote currency? That's interesting because it means one could trade without USD exposure.

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100 sats \ 0 replies \ @Undisciplined OP 13h

I didn't say there are markets that use gold as the quote currency. Relative exchange ratios is a concept of non/pre-monetary economies.

In a barter economy there would be prevailing rates of exchange between every pair of goods: i.e. 25 bananas for one chicken. So, if an ounce of gold can typically be exchanged for a nice suit, then a paper note that's redeemable for an ounce of gold should be able to purchase a nice suit.

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