Further Reading

Desan, Christine. “The Market as a Matter of Money: Denaturalizing Economic Currency in American Constitutional History.” Law and Social Inquiry30, no. 1 (2005): 1-60. doi:10.1086/430359.


Hoppe, Hans-Hermann. “How is fiat money possible?—or, the devolution of money and credit.” The Review of Austrian Economics 7, no. 2 (1994): 49-74.


Rojer, Rebecca. “The World According to Modern Monetary Theory.” The New Inquiry. April 11, 2014. https://thenewinquiry.com/the-world-according-to-modern-monetary-theory/.


Selgin, George. “On ensuring the acceptability of a new fiat money.” Journal of Money, Credit and Banking 26, no. 4 (1994): 808-826.

“Histories of the early American political economy present that world in fractured form, dividing political & constitutional dimensions from economic aspects. The fragmented approach reflects an old, oft-denigrated, but still powerful imagery, one that naturalizes economic activity as a set of myriad spontaneous & individuated exchanges, conducted with a conventional medium, money, & predictably composing a market sphere. The motif & its underlying assumptions in turn dissuade exploration of money & markets as territories of public decision, insulating by neglect the structural power of determinations made there. This essay traces the naturalization motif through a historiography of macroeconomic models of money. It then considers how money, recognized as a dynamics of value, would look if the law structuring it were approached as a complex set of relations that expressed, reiterated, & revised the distribution of authority in society. The early American political economy appears in a different light: money becomes a matter of value & governance at once, & therefore a crucial area of constitutional debate. Through that medium, the political economy of early America is transformed not once but repeatedly, from a mercantilist to a domestic paper to a liberal capitalist form.”


Febrero, Eladio. “Three Difficulties with Neo-Chartalism.” Journal of Post Keynesian Economics31, no. 3 (2009): 523-41. doi:10.2753/pke0160-3477310308.

“Neo-chartalists have made three assertions that deserve qualification: (1) money has value because the state accepts it for the payment of taxes, (2) the state has the ability to determine its value, and (3) private bank money can be understood as a “leverage” of fiat money. Conversely, we believe that money is accepted in the last instance because it is useful for cancelling bank debt; the power of the state to determine its purchasing power is limited, and bank deposits are not a leverage of fiat money. These criticisms do not challenge the validity of the whole approach but aim to make it clearer.”


Goldberg, Dror. “The Tax-foundation Theory of Fiat Money.” Economic Theory50, no. 2 (2010): 489-97. doi:10.1007/s00199-010-0564-8.

“Throughout modern history governments have tried to promote the general acceptance of their unbacked paper currencies. One of the most common devices has been legal tender laws that have assured the acceptance of these currencies as tax payments. Economic theory has largely ignored this mechanism, except for the static models of Starr (Econometrica 42: 45-54, 1974; Econ Theory 21: 455-474, 2003). I provide the first dynamic model of this mechanism, thus showing explicitly the medium of exchange role of money, accounting for expectations about the government’s survival, and enabling more realistic taxation systems. I show that a stable government can promote its currency by refusing to accept other objects in tax payments. While this mechanism has similarities to convertibility, it differs from it on a critical aspect: with this mechanism the government can often keep its favorite money in circulation even while increasing its quantity and thus causing it to decrease in value. This opens the door for a successful inflationary policy.”


Grubb, Farley. “Is Paper Money Just Paper Money? Experimentation and Variation in the Paper Monies Issued by the American Colonies from 1690 to 1775.” Working Paper, 2012. doi:10.3386/w17997.

“The British North American colonies were the first western economies to rely on legislative-issued fiat paper monies as their principal internal media of exchange. This system arose piecemeal. It was monetary experimentation on a grand scale. In the absence of banks and treasuries that exchanged local fiat monies at fixed rates for specie monies (outside monies) on demand, colonial governments experimented with other ways to anchor their fiat monies to real values in the economy. These mechanisms included tax-redemption, interest-bearing notes, land-backed mortgage loans, sinking funds, and legal tender laws. The structure and performance of these mechanisms are explained.”


Michener, Ronald, and Robert E. Wright. “Development of the US Monetary Union.” Financial History Review13, no. 01 (2006): 19. doi:10.1017/s0968565006000047.

“The US monetary union has undergone four distinct phases of development. From the early colonial period through the Revolution and Confederation, the unit of account differed in each region of British North America. Soon after the Constitution went into effect in 1789, the country shared a single specie-based unit of account and standard of deferred payment, but exchange media were numerous. After the Civil War, the trend was towards the use of fewer media of exchange. Over the course of the twentieth century, the current system, characterised by a common medium of exchange denominated in a single unit of account divorced from specie, evolved.”


Sylla, Richard. “The Transition to a Monetary Union in the United States, 1787–1795.” Financial History Review13, no. 01 (2006): 73. doi:10.1017/s0968565006000060.

“A convertible US-dollar monetary union was the least controversial component of the US financial revolution of the early 1790s. Although the fiat paper currencies of the colonies before 1776 sometimes worked reasonably well, the founders had good reasons for the constitutional ban on their continuance by US states. The ban, a surrender of states’ sovereignty over money, at the time proved to be relatively uncontroversial for two reasons. One is that the financial revolution lightened the fiscal burdens of states by assuming their debts and making them part of the national debt. The other is that states quickly learned that chartering banks could accomplish virtually all of the legitimate purposes of state fiat money issues, and possessed additional economic and political advantages.”


Sylla, Richard. “Political Economy of Supplying Money to a Growing Economy: Monetary Regimes and the Search for an Anchor to Stabilize the Value of Money.” Theoretical Inquiries in Law11, no. 1 (2010): 1-27. doi:10.2202/1565-3404.1234.

 “Money performs its economic functions best when its value remains stable over time. This Article explores how that desideratum was achieved, or not achieved, under five identifiable monetary regimes in economic history. Transitions from one regime to another resulted from the demands of economic growth, which some regimes met better than others. The modern fiat money regime is optimal in most economic respects. Whatever amount of money needed to accommodate growth can be supplied at minimal costs. But political control over money creation can be used to increase the short-term control over economic resources of those in power and their constituents. When such debasements of money have occurred, the political economy of every regime interfered with achieving optimal long-term economic outcomes by unleashing inflation. How might the modern fiat money regime avoid that result?”


Wright, Robert E. The First Wall Street: Chestnut Street, Philadelphia, and the Birth of American Finance. Chicago: Univ. of Chicago Press, 2005.

These papers (and book) should provide the reader with a better understanding of the theory of Fiat Money.