The Nominalistic Principle and Fiat Money: Law as a Crutch for the Monetary Swindle

by Stephan Kinsella on May 8, 2026

The Nominalistic Principle and Fiat Money: Law as a Crutch for the Monetary Swindle

Alessandro Fusillo¹

May 8, 2026

In matters of pecuniary obligations, the prevailing civil-law doctrine adheres to the principle of nominalism. In essence, the principle states that—beyond mechanisms protecting the creditor from the loss of purchasing power of money (agreed interest rates, indexation clauses tied to inflation, etc.)—the performance of an obligation follows the Roman-law principle of tantundem eiusdem generis: the obligation to pay 1,000 dollars on a given date is satisfied, and the debtor accordingly extinguishes the obligation, by paying the agreed amount on the agreed date, irrespective of the fact that, in the meantime, the value (purchasing power) of the sum in question may have been eroded and may no longer correspond to its original value.

Legal doctrine generally subscribes—rather uncritically—to the state-chartalist theory of money, well represented by the writings of Knapp, Mann and Ascarelli.² From this perspective, what confers the character of money on a given thing (metal, pieces of paper printed with colored designs, or anything else) is the command of the State. Money is such because there is a law that defines it as legal tender. The source of the monetary nature of a thing is therefore the legislative power of the State as the ultimate decision-maker. And this, in turn, also finds expression in monetary sovereignty.

The 1924 English translation of Knapp’s work was the route through which the German author entered the Anglo-Saxon world. It is significant that this translation was strongly promoted by John Maynard Keynes, who had read the German original as early as the 1910s and who regarded Knapp as one of his intellectual masters on the monetary question, so much so that in his Treatise on Money (1930) he expressly cites him as the founder of chartalism.³ The first chapter of Keynes’s Treatise opens, not by chance, with the statement: «Money of account […] is the primary concept of a theory of money», which is a direct conceptual translation of Knapp’s thesis. The red thread that starts with Knapp, runs through Keynes, and reaches the Modern Monetary Theory of Wray, Mosler and Kelton is precisely this, and it traverses the entire twentieth century.

Keynes proclaims, in a totalizing formulation that has had an enormous influence on all post-Keynesian monetary theory and on contemporary Modern Monetary Theory: «The State, therefore, comes in first of all as the authority of law which enforces the payment of the thing which corresponds to the name or description in the contract. But it comes in doubly when, in addition, it claims the right to determine and declare what thing corresponds to the name, and to vary its declaration from time to time—when, that is to say, it claims the right to re-edit the dictionary. This right is claimed by all modern States and has been so claimed for some four thousand years at least. It is when this stage in the evolution of Money has been reached that Knapp’s Chartalism—the doctrine that money is peculiarly a creation of the State—is fully realized. […] Today all civilized money is, beyond the possibility of dispute, chartalist.»⁴

The theory of the State as the creator of money has nineteenth-century roots in the German Historical School (Knapp was a pupil of the Jüngere historische Schule: Wagner, Schmoller, Bücher), and in a certain sense it is a derivative of the Methodenstreit of the late 1880s. The clash between Menger and Schmoller in 1883-1884 over the method of the social sciences is in fact also a clash between a catallactic theory of money—according to Menger, money arises spontaneously from exchange and predates law—and a historical-institutional theory of money—Schmoller, and then Knapp: money derives from authority, it comes into existence after the State. When Mises in 1912 wrote his Theorie des Geldes against Knapp—one of the most important controversies in the work, conducted in ch. III, sec. 5—he was not merely engaging in a theoretical dispute: he was continuing Menger’s Methodenstreit on new ground.⁵

The nominalistic principle, for instance, is enshrined in art. 1277 of the Italian Civil Code, which provides for the extinction of pecuniary obligations at the nominal value of the obligation contracted, and which refers to the value of the debt only in the case where the currency used to denominate the original obligation is no longer legal tender.

The legal treatment of the subject according to the nominalist theory prevents jurists from recognizing the market phenomenon that money represents and, above all, from taking into account the systematic manipulation of the purchasing power of money by fiat-money systems, in which the central bank, through its control over the issuance of the monetary base and the interest rates, is able to influence the quantity of money in circulation and, as a consequence, its value or purchasing power, and therefore the substance of contracts that specify a price expressed in monetary terms.

And yet, at least in Italian civil-law doctrine, awareness of the fact that the nominalistic principle, under a regime of perpetual inflation, entails a systematic transfer of wealth from creditor to debtor, is widespread.⁶

Civil-law jurists, however, although they recognize the problem, treat it within a chartalist horizon and end up considering monetary devaluation not from the standpoint of manipulation but exclusively from that of protection against risk. The loss of purchasing power of money is taken as a datum external to law, from which one must start—without subjecting it to critical assessment—in order to devise legal solutions that take account of the unequal distribution of risk between creditor and debtor that nominalism entails.

The treatment offered by civil-law scholars completely fails to address the connected problem of the payment of public debt securities, which from a civil-law perspective are nothing else than bonds, albeit with the State as debtor.

The most recent and direct reference is that of a Brazilian-American jurist, Bruno Meyerhof Salama.⁷ The latter argues that legal nominalism is a risk-allocation mechanism that assigns the cost of monetary devaluation to the creditor, and thus allows the debtor (in particular the issuing State) to “shift its burden” onto creditors by eroding the real value of the obligation without formally violating the terms of payment. The formula used is suggestive: stealth default. According to Salama, «the legal system allows debtors to transfer their burden onto creditors through structures which, although formally compliant with the contract, erode its real value».

Levontin, in a monograph devoted to the nominalistic principle,⁸ identifies nominalism as an instrument of monetary policy of the State—not as a neutral rule of private law. Levontin documents that nominalism became established historically precisely because the State, an endemic debtor towards its own subjects, had an interest in being able to repay in depreciated currency loans received in sound currency. Its origin, according to Levontin, is therefore the State’s prerogative of controlling money.

Chartalist and nominalist principles have a significant impact on the question of contract. Starting from a libertarian and “Austrian” perspective, according to the title-transfer theory of contract (TTToC),⁹ the contract, in a legal-economic sense, is not a legally binding promise (as the mainstream Anglo-American promise theory would have it), but is a transfer of a title of ownership over a scarce good. The contract therefore finds its substance in the transfer of ownership, not in the obligation to keep one’s word.

Therefore:

(a) If the pecuniary contract is—as the TTToC maintains—a transfer of title over a determinate quantity of a specific scarce resource (money), and

(b) if the object of the contract is therefore a title of ownership over real resources mediated by the monetary unit, then

(c) the quantitative manipulation of money by a third party (the State that issues fiat money or the central bank that expands it) or by one of the parties (the State as issuer of public debt securities denominated in its own currency) empties the title transfer of substance: what the creditor will receive is no longer the quantity of real resources over which the title was transferred, but a nominally identical and substantially impoverished quantity, because the monetary unit has been diluted.

(d) If to this we add that—according to chartalist doctrine (Knapp, Keynes)—the State arrogates to itself the legal right to redefine unilaterally what money is («the right to re-edit the dictionary», Keynes 1930), then the modern fiat State performs the contradictory dual function of guarantor of contracts and manipulator of their substantive content.

This is a structural, not accidental, contradiction of the contemporary legal system: the State that is supposed to guarantee the substance of title transfers is precisely the agent that erodes their content through manipulation of the medium that conveys them. In the same way, the State that presents itself as the guarantor of fundamental rights (life, liberty and property) is the first and principal violator of those rights.

Now, if the pecuniary contract is a transfer of title over a determinate quantity of a specific scarce resource (money), and if this resource is subject to quantitative manipulation by the sovereign issuer, then the pecuniary contract is structurally incomplete in its very nature: the object of the transfer is subject to unilateral post-contractual definition by a third party (the State) which is also the guarantor of the contract itself.

In still more precise terms: the debt of one thousand euros contracted in 2010 is a transfer of title over a monetary unit (the 2010 euro) which, according to the chartalist doctrine accepted by the legal system, is the same thing as the monetary unit (the 2026 euro) with which the debt is extinguished. But this nominal identity is not substantive identity: the purchasing power of the 2026 euro is a fraction of that of the 2010 euro. The title-transfer theory of contract makes it possible to see clearly what the nominalistic principle conceals: that the State, through its chartalist monopoly over the definition of money, is authorizing an asymmetric title transfer in which what the creditor receives does not correspond to the title originally transferred.

The title-transfer theory of contract is therefore incompatible with chartalism, because chartalism postulates that the State has the right to redefine the object of the contract, whereas the TTToC postulates that the object of the contract is a determinate and immutable title over a scarce resource. Chartalism empties the TTToC; or, conversely, the TTToC is the legal refutation of chartalism.

In the case of public debt securities the problem is even more radical. When the State issues a public debt security denominated in its own currency, it is simultaneously a contracting party (debtor) and the legal authority that defines the object of the contract (the sovereign issuer of the currency in which the debt is expressed). It is a situation of self-contracting or structural conflict of interest: the debtor State can unilaterally reduce the burden of its own debt by redefining the object of the contract, that is, by inflating its own currency. There is no need for a formal default: inflation suffices.

The diagnosis is not confined to the State and its central bank. The same nominalist–chartalist legal framework that licenses the public “monetary swindle” also sustains, downstream, the entire pyramid of fiduciary media—uncovered banknotes and demand deposits—issued by private banks under the regime of fractional-reserve banking. The point was already implicit in the Roman-law distinction, carefully reconstructed by Huerta de Soto, between depositum regulare (custodial deposit of a specific thing, in which ownership is retained by the depositor and the depositary is bound to safekeeping at 100% reserve) and depositum irregulare or mutuum (loan of fungibles, in which ownership passes to the borrower against an obligation of future restitution of tantundem eiusdem generis).¹⁰ The deliberate confusion of these two contracts—that is, the legal treatment of demand deposits as if they were loans, and the issuance of redeemable money substitutes in excess of the base money actually held—is exactly the operation that the TTToC unmasks as impossible.(( The Italian Civil Code offers an interesting point of view on fractional reserve banking: according to art. 1834 expressly states as follows: “In deposits of a sum of money with a bank, the bank acquires ownership thereof and is obligated to return it in the same monetary specie at the expiration of the agreed term or upon the depositor’s request, with observance of the notice period established by the parties or by usage.” Curiously enough this legal text failed to trigger the attention of Italian jurists. The only author that critically assessed the problem of irregular deposit is Pasquale Coppa-Zuccari, Il deposito irregolare, Modena 1901 and La natura giuridica del deposito irregolare, Modena 1902, quoted by Jesús Huerta de Soto, Money, Bank Credit, and Economic Cycles cit., pp. 7, 8, 16, 28, 68, 140, 144; Coppa Zuccari highlights that the obligation to return the deposited money obliges the bank to keep a 100% reserve and hence to insure the monies deposited. )) As Hoppe, Hülsmann and Block put it, “two individuals cannot be the exclusive owner of one and the same thing at the same time”: the issuance of a fiduciary note is, objectively, the contractual creation of two incompatible titles of ownership over a single existing quantity of base money, that is, a “property-less title in search of property.”¹¹ The “free-banking” defense (Selgin, White, Horwitz)—that an IOU redeemable on demand can lawfully serve as a money substitute, and that the elasticity so produced “solves” a market failure of sticky prices—rests on precisely the category error this article identifies in chartalism: the conflation of a legal claim with the economic thing claimed, and thus the treatment of a promise to pay money as equivalent in substance to the money itself. Just as the chartalist State “re-edits the dictionary” of money in order to dilute the substance of public debt, the nominalist civil-law regime “re-edits” the line between regular and irregular deposit in order to license a parallel dilution in the private sphere; in both cases, the law functions as a crutch for an asymmetric title transfer that the unaided logic of the TTToC would refuse to recognize as a contract at all.¹²

Ironically, the free-banking defense of fractional reserve banking—that purportedly solves the problem of a lack of elasticity of the money supply—echoes the equally flawed argument by the exponents of the Modern Monetary Theory (MMT) that State intervention in the creation of money is necessary in order to put “idle resources” to work.¹³ In one case—the free bankers—fiat money is described as a free-market response to the problem of the money supply’s supposed lack of elasticity, in the other—the adherents of MMT—the creation of money out of thin air is aimed at rescuing idle resources from their condition of idleness.¹⁴ In one case as in the other the monetary intervention infringes directly on property rights and therefore is in contradiction with the TTToC.

Within this framework, the Austrian critique of the fiat system is not a rear-guard metallist battle, but reveals itself instead to be a radically libertarian position in the philosophy of contract: the defense of the substantive integrity of title transfer against its chartalist erosion. Bitcoin, whose supply is mathematically immutable in its limitation, and gold or silver, whose supply is physically immutable in its limitation, possess this specific virtue: their legal-contractual status is consistent with their ontological structure, because no third party can unilaterally redefine the object of the title transfer that concerns them. A non-manipulable currency is the condition of possibility of a properly so-called pecuniary contract; and it is—conversely—the medium that restores the integrity of the title-transfer theory of contract in the contemporary monetary world.

Alessandro Fusillo is a libertarian attorney based in Italy, Spain, and Germany. [↩]
F. A. Mann, The Legal Aspect of Money, Clarendon Press, Oxford, 1st ed. 1938 (now Ch. Proctor, Mann and Proctor on the Legal Aspect of Money, Oxford University Press, 8th ed. 2022), which devotes the chapter Monetary Obligations, Liquidated Sums, and the Principle of Nominalism to the historical reconstruction of the principle; Georg Friedrich Knapp, Staatliche Theorie des Geldes, Duncker & Humblot, Munich-Leipzig, 1st ed. 1905, 4th expanded ed. 1923, chapter I, opening: «Das Geld ist ein Geschöpf der Rechtsordnung» («money is a creature of the legal order»), and shortly thereafter: «Eine Theorie des Geldes kann daher nur rechtsgeschichtlich sein» («a theory of money can therefore only be legal-historical»); abridged English translation by H. M. Lucas and J. Bonar, The State Theory of Money, Macmillan, London 1924, published at the initiative of the Royal Economic Society with the personal support of J. M. Keynes. [↩]
J. M. Keynes, A Treatise on Money, vol. I, The Pure Theory of Money, Macmillan, London 1930, p. 3; Geoffrey Ingham, In Defence of the Nominalist Ontology of Money, in «Journal of Post Keynesian Economics», vol. 44, no. 3, 2021, p. 492. [↩]
Keynes, op. loc. cit. pp. 4 ff.; Stephanie Bell, The Hierarchy of Money, Levy Economics Institute Working Paper No. 231, 1998, pp. 6-7 (open access at https://www.levyinstitute.org/pubs/wp/231.pdf); Dirk Ehnts, Knapp’s «State Theory of Money» and its Reception in German Academic Discourse, IPE Working Paper 115/2019, Berlin School of Economics and Law, Institute for International Political Economy, 2019. [↩]
L. von Mises, Theorie des Geldes und der Umlaufsmittel, Duncker & Humblot, Munich-Leipzig 1912, Part Two, chs. VI and VII; English version The Theory of Money and Credit (Auburn, Ala.: Mises Institute 2009 [1953, 1934]). [↩]
Cesare Massimo Bianca, Diritto civile, vol. IV, L’obbligazione, Giuffrè, Milan 1990, and subsequent editions: treatment of the nominalistic principle in ch. III. Bianca expressly recognises that the nominalistic principle «places upon the creditor the risk of monetary devaluation»; Adolfo Di Majo, Le obbligazioni pecuniarie, Giappichelli, Turin 1996: explicit treatment of the problem of erosion of purchasing power as an effect of nominalism; Bruno Inzitari, Profili del diritto delle obbligazioni, Cedam, Padua 2000, and Delle obbligazioni pecuniarie. Artt. 1277-1284, in Commentario Scialoja-Branca, Zanichelli, Bologna-Rome 2011: Inzitari is, among all of them, the Italian author who most consciously discusses the relationship between the nominalistic principle and devaluation, clearly noting that the principle constitutes «a systematic risk for the creditor in the presence of perpetual inflation»; Tommaso Dalla Massara, Obbligazioni pecuniarie. Struttura e disciplina dei debiti di valuta, Cedam, Padua 2012; Mario Trimarchi, Svalutazione monetaria e ritardo nell’adempimento di obbligazioni pecuniarie, Giuffrè, Milan 1983: a monograph entirely devoted to this theme, documenting how Italian doctrine and case-law, between the 1970s and 1980s—under the pressure of double-digit inflation—developed a complex system of corrective measures (automatic revaluation of debts of value, art. 1224 paragraph 2, ISTAT clauses, scala mobile) to curb the perverse effects of nominalism. [↩]
Bruno Meyerhof Salama, America’s Implicit Defaults, in «Law & Liberty», May 2025. [↩]
Avner H. Levontin, The Nominalistic Principle. A Legal Approach to Inflation, Deflation, Devaluation and Revaluation, Mishpatim, Jerusalem 1971. [↩]
Murray N. Rothbard, Justice and Property Rights, in S. L. Blumenfeld (ed.), Property in a Humane Economy, Open Court, La Salle (Ill.) 1974, pp. 101-122, reprinted in Egalitarianism as a Revolt Against Nature and Other Essays, Libertarian Review Press, Washington 1974, and in Economic Controversies (Auburn, Ala.: Mises Institute, Edward Elgar, 2011); idem, The Ethics of Liberty, Humanities Press, Atlantic Highlands (NJ) 1982; ed. New York University Press, New York 1998 (with foreword by Hans-Hermann Hoppe), chapter XIX, Property Rights and the Theory of Contracts, pp. 133-148. Italian transl. L’etica della libertà, Italian edition edited by Luigi Marco Bassani, Liberilibri, Macerata 1996, and subsequent editions; Williamson M. Evers, Toward a Reformulation of the Law of Contracts, in «Journal of Libertarian Studies», vol. 1, no. 1, 1977, pp. 3-13; Stephan Kinsella, “Justice and Property Rights: Rothbard on Scarcity, Property, Contracts…,” StephanKinsella.com (Nov. 19, 2010); idem, “A Libertarian Theory of Contract: Title Transfer, Binding Promises, and Inalienability,” in Legal Foundations of a Free Society, Papinian Press, Houston 2023, chapter IX; idem, “The Title-Transfer Theory of Contract,” in D. Howden (ed.), Palgrave Handbook of Misesian Austrian Economics, Palgrave Macmillan, London-New York (forthcoming 2026). [↩]
Jesús Huerta de Soto, Money, Bank Credit and Economic Cycles, trans. Melinda A. Stroup, 4th ed., Ludwig von Mises Institute, Auburn (Ala.) 2020, chs. 1–2, on the strict separation in Roman and medieval civil law between the depositum regulare (in which the depositary has only custodia and the depositor retains ownership and the right to instant restitution) and the mutuum or depositum irregulare (in which ownership of the fungible passes to the borrower against an obligation to return tantundem eiusdem generis at a specified future date), and on the historical treatment of any blurring of the two as fraudulent. The point is that the tantundem eiusdem generis rule that today, under nominalism, governs the extinction of pecuniary obligations (and to which art. 1277 of the Italian Civil Code refers) is the same rule that classically distinguished the mutuum from the regular deposit—a distinction which fractional-reserve banking systematically obliterates. [↩]
Hans-Hermann Hoppe, “How is Fiat Money Possible?—or, The Devolution of Money and Credit,” The Review of Austrian Economics vol. 7, no. 2, 1994, pp. 49–74 (reprinted as ch. 6 of H.-H. Hoppe, The Economics and Ethics of Private Property, 2nd ed., Ludwig von Mises Institute, Auburn (Ala.) 2006); Hans-Hermann Hoppe, with Jörg Guido Hülsmann and Walter Block, “Against Fiduciary Media,” The Quarterly Journal of Austrian Economics vol. 1, no. 1, 1998, pp. 19–50 (reprinted as ch. 7 of the same volume). Hoppe formulates the principle that “two individuals cannot be the exclusive owner of one and the same thing at the same time” (Hoppe 1994, p. 67); Hoppe, Hülsmann and Block develop it expressly against the title-transfer theory of contract, observing that fiduciary media are “property-less titles in search of property” and that “the issue and acceptance of a fiduciary note … is the contractual creation of additional titles and claims to the same existing quantity of property” (Hoppe, Hülsmann and Block 1998, pp. 21–23). For collateral references see also Murray N. Rothbard, The Mystery of Banking, Richardson & Snyder, New York 1983, and The Case for a 100 Percent Gold Dollar, Ludwig von Mises Institute, Auburn (Ala.) 1991. [↩]
For the opposing free-banking position, see Lawrence H. White, Competition and Currency, New York University Press, New York 1989, and George A. Selgin, The Theory of Free Banking. Money Supply under Competitive Note Issue, Rowman & Littlefield, Totowa (NJ) 1988, who defend fractional-reserve banking on the ground that an “option clause” attached to redeemable notes brings the practice within the principle of freedom of contract, and that the issuance of fiduciary media is welfare-enhancing because it accommodates increases in the demand for money that would otherwise produce a “short-run monetary disequilibrium.” Both arguments are answered in Hoppe, Hülsmann and Block, Against Fiduciary Media, cit., pp. 27–34 (on freedom of contract: a contract that purports to create two simultaneous titles to one existing thing is not a permissible exercise of the principle but a denial of its presupposition, since “the range of possible (valid) contracts is limited and restricted by the existing quantity (stock) of property and the nature of things, rather than the other way around”) and pp. 41–46 (on monetary disequilibrium: an increased demand for money is satisfied immediately and without any need for “accommodation,” through a fall in money prices and a corresponding rise in the purchasing power of the existing stock of money; the issue of fiduciary credit in response to such a demand merely falsifies the social rate of time preference and sets in motion an Austrian boom-bust cycle). For an overview of the contemporary debate, see Stephan Kinsella, “The Great Fractional Reserve/Free-banking Debate,” StephanKinsella.com (Jan. 29, 2016), which collects the principal contributions on both sides. On the automatic adjustment of the demand for money see Detlev Schlichter, Paper money collapse: the folly of elastic money, 2014 p. 40:

If people have a higher demand for money, they will sell goods and services or reduce money outlays on goods and services. If many people do this, it will put downward pressure on the prices of goods and services, and this will cause the purchasing power of the monetary unit to rise. But the rise in money’s purchasing power is precisely what will satisfy the additional demand for money. [↩]
Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy, PublicAffairs, New York 2020—esp. ch. 2 (“Think of Inflation”), where Kelton argues that “the limits are not in [the] government’s ability to spend money, or in the deficit, but in inflationary pressures and resources within the real economy” and that, when “slack” exists in the form of unemployed workers and idle capacity, government spending financed by money creation “can put these resources to productive use without causing inflation.”; L. Randall Wray, Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems, 2nd ed., Palgrave Macmillan, Basingstoke 2015; Warren Mosler, Soft Currency Economics II, US Virgin Islands 2012 (1st ed. 1996); William Mitchell, L. Randall Wray and Martin Watts, Macroeconomics, Red Globe Press / Macmillan, London 2019—the MMT macroeconomics textbook, which formalizes the “real resource constraint” argument; Pavlina R. Tcherneva, The Case for a Job Guarantee, Polity Press, Cambridge 2020—the MMT-based proposal for absorbing idle labour through public spending without generating inflation; Abba P. Lerner, Functional Finance and the Federal Debt, in «Social Research», vol. 10, no. 1, 1943, pp. 38–51. The idea of putting idle resources (especially unemployed workers) to work, no matter how stupid the task assigned to them (as digging out old bottles filled with banknotes buried at suitable depths obviously comes by none other than Lord Keynes himself: J.M. Keynes, The General Theory of Employment, Interest and Money, Macmillan, London, 1936, Book III (“The Propensity to Consume”), Chapter 10 (“The Marginal Propensity to Consume and the Multiplier”), Section VI, p. 129. Austrian and mainstream replies: Robert P. Murphy, A Review of Stephanie Kelton’s “The Deficit Myth”, in «Quarterly Journal of Austrian Economics», vol. 24, no. 1, 2021, pp. 167–198—focuses precisely on the “slack/idle resources” claim and its Austrian refutation; Jonathan Newman (ed.), Modern Monetary Theory: An Austrian Critique, Mises Institute, Auburn (Ala.) 2024; John H. Cochrane, Magical Monetary Theory, in «The Wall Street Journal», 5 June 2020 (longer “full review” on Cochrane’s Grumpy Economist blog, 16 June 2020)—argues that the “idle resources” criterion provides no operational guidance; Thomas I. Palley, Money, Fiscal Policy, and Interest Rates: A Critique of Modern Monetary Theory, in «Review of Political Economy», vol. 27, no. 1, 2015, pp. 1–23—a Post-Keynesian critique that nonetheless concedes the analytical centrality of the “idle resources” argument; the Austrian critique connects directly to the TTToC framework: as Murphy observes, even when “slack” exists, money creation does not put idle resources to work neutrally—it shifts real resources from late receivers of the new money to early receivers (the Cantillon effect). [↩]
The classic book on idle resources is W. H. Hutt, The Theory of Idle Resources. A Study in Definition, Jonathan Cape, London 1939; 2nd revised ed., Liberty Press, Indianapolis 1977—a sustained early critique of the Keynesian General Theory (1936) that denies the existence of “involuntarily idle” resources in the Keynesian sense and dismantles the doctrine that an injection of new money is needed to mobilize them. [↩]