by A government with the authority to tax can ensure acceptance of a particular currency. By nominating a currency in which income and wealth are to be assessed, and imposing taxes that can only be paid in the nominated currency, the government establishes a demand for the currency.This is true whether the government issues its own currency or instead adopts a currency issued by some other entity.But a government that adopts somebody else’s currency is reduced to the status of mere currency user and, as a consequence, faces financial constraints similar to those that bind private households and firms....Succinct statement of fiscal power arising from currency user holding currency monopoly and exercising it for public purpose. As long as government stays within the bounds of available real
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A government with the authority to tax can ensure acceptance of a particular currency. By nominating a currency in which income and wealth are to be assessed, and imposing taxes that can only be paid in the nominated currency, the government establishes a demand for the currency.This is true whether the government issues its own currency or instead adopts a currency issued by some other entity.
But a government that adopts somebody else’s currency is reduced to the status of mere currency user and, as a consequence, faces financial constraints similar to those that bind private households and firms....
Succinct statement of fiscal power arising from currency user holding currency monopoly and exercising it for public purpose. As long as government stays within the bounds of available real resources and doesn't generate price pressure, price stability would not become an issue.
This understanding could be the basis for national policy such the American School developed by Alexander Hamilton and later Friedrich List, for example. However, the world no longer being on a metals standard, the need for tariffs would be simply for protection of national assets, e.g, national self-sufficiency in vital areas or developing sectors.
The US could undertake a managed industrial policy explicitly, although it already does to an extent, for example, through military spending that flows to private firms and then on into the economy. Then, there is also DARPA.
For example, the US could take advantage of the economic truism that imports are real benefits at full employment by picking up the slack in employment owing to importing embedded labor through employment creation programs including a universal employment guarantee to mop up residual unemployment and provide work during transition.
China is now using a modification of this economic policy that America used during its developmental stage. However, China does not let its currency float freely but rather manages its value relative to the dollar, which limits Chinese economic policy to some extent.
Russia, on the other hand, floated the ruble when it initially came under attack by the US to influence its behavior. As a result, US economic warfare was not effective in changing Russian behavior.