The role of the state and the hierarchy of money

This paper uses Minsky’s definition of money as a two-sided balance sheet phenomenon to challenge many common positions on the nature, evolution and role of money. His definition is applied to two opposing theories in the history of monetary debates, and it is shown that the Chartalists (as opposed to the Metallists) developed a general theory of money that can be applied equally convincingly to the entire era of state money. This theory is then used to show that the state’s power to make and enforce tax laws renders its money the most acceptable form of debt within what can be considered a “hierarchy” of monies. This leads to some important policy implications as well as a strengthening of the endogenous money position.