Monetary policy in the twenty-first century in the light of the debate between Chartalism and Monetarism

Since Aristotle’s time, as Schumpeter (1954:288) noted, there have been two views regarding the nature of money in a money-using market oriented entrepreneurial economy: the Chartalist view and the Monetarist (or Metallist) view. The latter assumes that the institution of money evolved from barter relationships where producible goods always traded for other producible goods. Ultimately, in this Monetarist view one commodity (normally a metal) became the embodiment of the other goods traded for any specific good. Thus, behind the Monetarist conceptualization of money is the idea that money merely represents the trading of one specific producible commodity for all other producible commodities. From this there develops the idea that the use of such a (producible) commodity-based money is more efficient than direct barter for it avoids what Glower called “the double coincidence of wants.”