Discussion — Lecture 13: Chartallism, Metallism, and Key Currencies

This session covers Lecture 13: Chartallism, Metallism, and Key Currencies

In the first half of the course, we focused on two prices of money: par and interest rates. With the next four lectures, we explore a third price of money: foreign exchange. This allows us to revisit fundamental questions about the nature of money. How can we understand the nature of money in the context of a global economy with many different currencies interacting with each other?

Note: Mehrling uses the term "forward interest parity" in this lecture to describe what he calls "covered interest parity" elsewhere, including lecture 8, *and in the notes for this lecture. He usually uses "covered interest parity" to describe the relationship between interest rates and exchange rates, and "forward interest parity" in the context of forward rate agreements (FRAs) and the term structure of interest rates.*

This week's lecture examines the nature of the base money that sits at the top of a domestic money-credit hierarchy. Chartalism holds that the value of base money comes from the state and its laws and institutions. Metallism holds that the value of base money comes from the intrinsic value of the underlying metal. Which one is right? Both? Neither?

Lecture Notes

Lecture 13 Discussion Thread