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On Tue, 11 Jan 2000, C. J. Arthur wrote:
> It is clear that at a time of hyper-inflation (a permanent
> possibility with inconvertible paper - and NB only for
> paper) non-commodity money fails in one of its most
> essential functions, namely to serve as means of payment.
Hyperinflations occur when the state's finances get completely
out of control -- when it is completely unable to tax to a
sufficient extent to retire the currency it is putting into
circulation. This is entirely consistent with the State Theory
of Money. Notice also that under hyperinflationary conditions
in the modern world there is a tendency to substitute, not
cigarettes or gold, but the fiat currency of another state whose
finances are relatively sound (e.g. the US dollar) as unit of
account and possibly even means of payment, for the domestic
currency that is in free fall.
Allin Cottrell.
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