Chartalism

Chartalism is a heterodox theory of money holding that money is fundamentally a creature of the state rather than a commodity that emerged spontaneously from barter, a position the German economist Georg Friedrich Knapp set out in his 1905 book The State Theory of Money. On this view, a currency acquires value because the state imposes tax obligations payable only in that currency and accepts it at public pay offices, creating demand for the state's own money regardless of any backing in gold or other commodities. Chartalism stood opposed to metallism, the then-dominant view that money's value derives from the value of the metal it is made of or redeemable for, and it provided an early theoretical basis for understanding pure fiat currencies not backed by any commodity. The theory drew relatively little attention for most of the twentieth century but was revived from the 1990s onward by economists including Warren Mosler, L. Randall Wray, Stephanie Kelton and Bill Mitchell, who developed its claims about state money and taxation into Modern Monetary Theory. Its central contribution, that a sovereign currency issuer creates money by spending it into existence and withdraws it through taxation, remains the theoretical foundation on which that later school builds. This description is adapted from Wikipedia contributors under CC BY-SA 4.0; changes were made. https://creativecommons.org/licenses/by-sa/4.0/