Chartalist Theory

States such as El Salvador, Zimbabwe and Ecuador do not use their own currency and use dollars from the United States (US) for their everyday transactions. This fact leads to the assumption that something must have gone wrong in their financial institutions, and in fact neither of those three countries exemplify stability in the international sphere; but this leads to the question what is money? And why is it important for countries to use their own currency? What causes them to stop? This paper will examine the Chartalist theory of money to attempt to answer the question of what money is and represents within a state; then it will briefly analyze the political situation of Somalia, as a very unstable country that maintains its currency, but

In contrast, the Chartalist school is not convinced by this origin story. In “Debt: The First 5000 years”, David Graeber explains that barter requires a “double coincidence of wants”, and that this is very rare, instead “the most frequent solution is to adopt some sort of credit system” (2011). Assuming that barter is not the precise origin of money, leads to the question of what money actually is. The first part of a quote from “Lombard Street” may provide this answer “the peculiar essence of our financial system is an unprecedented trust between man and man” (qtd. in Plender, 2017). If we observe the nature of credit, it is essentially based on the trust that the other will be able to pay later. As Mervyn King underlines “a market economy cannot flourish in a world of anarchy in which we suspect that everyone else will cheat” (2006). This is why we need financial institutions, property rights, etc. They represent ways to ensure that we trust one another, after all, “human frailty implies that trust can be placed more easily when it is supported by institutions” (King 2006). The body that controls these institutions is the state. As King finally points out “the value of money depends on trust” therefore, currencies and transactions in such

DolarToday is only fulfilling the role that the institution was not able to fulfill in Venezuela. And it is alive because it has the trust of the people. The amount of bureaucracy, the attraction of dollars, and finally the loss of credibility of the Venezuelan government have made DolarToday the most reliable source for Venezuelans for their exchange rates. What this means at a global level regarding recessions and discontent with government authority is yet to be