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The State Theory of Money: A New & Complete Translation of the Greatest Masterpiece of the 20th Century on Money
An Iconic Money Masterpiece from the 20th Influencing Keynes, Max Weber and Modern Monetary Theory (MMT). Knapp's State Theory of Money has had a profound impact on shaping modern perspectives on money and banking, notably influencing prominent figures such as John Maynard Keynes , Max Weber , neo-chartalism, Post Keynesian monetary theory, and Modern Monetary Theory (MMT) . It marks the foundation of various contemporary nominalist theories of money and is essential reading for economists and intellectually curious readers seeking to grasp the complexities of money and monetary phenomena. Knapp's ideas have gained significant attention as alternatives to neoclassical economic doctrines that propose the emergence of money from a barter economy (catallactic theory of money). Shortcomings of the 1924 English Incompleteness and Bias However, the English translation published in 1924 is incomplete , omitting the final chapter and presenting only abridged versions of the surviving chapters. Moreover, the translation fails to accurately convey the original meaning, resulting in the near absence of some essential concepts. German-speaking readers face the challenge of deciphering Fraktur, an old-style Gothic typeface, which renders the German edition illegible for modern readers. Consequently, there is an urgent need for a complete and precise translation that includes a detailed index and extensive glossaries of Knapp's neologisms. Without these resources, readers may struggle to navigate the abundance of neologisms and hinder their understanding.
Salient Features of this New Translation This new edition offers several advantages over the 1924 translation 1. Complete and unabridged translation. 2. Faithfulness to the original text, preserving its essence and nuances. 3. Greater consistency in translated terms. 4. Inclusion of an extensive Glossary of Knapp's neologisms and fundamental concepts. 5. Complete bibliography. 6. Comprehensive index, including original German terms. 7. Inclusion of page numbers from the 1924 English edition for cross-referencing.
Georg Friedrich Knapp (1842-1926) Knapp, a prominent figure in the German Historical School, held a significant position as a professor at the University of Straßburg. His expertise in German agricultural history transitioned into the writing of this book in 1905. Knapp founded the chartalist school of monetary theory, leaving a profound impact on John Maynard Keynes and post-Keynesian economics, including Modern Monetary Theory (MMT).
Hans DG Hyun With over 30 years of extensive banking industry experience, including regional leadership positions in renowned global banks, the translator also excels as a researcher in Post Keynesian economics. He has authored numerous articles in economics journals and published Abenomics and Enemies from Alice's Wonderland (2023), a book delving into the foundations of Abenomics. Additionally, he has translated various books on economic theories and economic sociology, including Bernhard Laum's Heliges Geld (1924) under the English title Sacred Money. He holds postgraduate degrees in economics from the London School of Economics and the University of Cambridge.
Salient Features of this New Translation This new edition offers several advantages over the 1924 translation 1. Complete and unabridged translation. 2. Faithfulness to the original text, preserving its essence and nuances. 3. Greater consistency in translated terms. 4. Inclusion of an extensive Glossary of Knapp's neologisms and fundamental concepts. 5. Complete bibliography. 6. Comprehensive index, including original German terms. 7. Inclusion of page numbers from the 1924 English edition for cross-referencing.
Georg Friedrich Knapp (1842-1926) Knapp, a prominent figure in the German Historical School, held a significant position as a professor at the University of Straßburg. His expertise in German agricultural history transitioned into the writing of this book in 1905. Knapp founded the chartalist school of monetary theory, leaving a profound impact on John Maynard Keynes and post-Keynesian economics, including Modern Monetary Theory (MMT).
Hans DG Hyun With over 30 years of extensive banking industry experience, including regional leadership positions in renowned global banks, the translator also excels as a researcher in Post Keynesian economics. He has authored numerous articles in economics journals and published Abenomics and Enemies from Alice's Wonderland (2023), a book delving into the foundations of Abenomics. Additionally, he has translated various books on economic theories and economic sociology, including Bernhard Laum's Heliges Geld (1924) under the English title Sacred Money. He holds postgraduate degrees in economics from the London School of Economics and the University of Cambridge.
504 pages, Hardcover
First published January 1, 1895
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Displaying 1 - 4 of 4 reviews
May 27, 2021
Ways in which this is a state theory of money: He defines "money proper" as whatever the state defines an exchange rate for and makes contracts payable in and makes payments in themselves.
Ways in which this is not a state theory of money: He suggests that "money proper" likely arose from the state forcing people to pay contracts which previously prescribed a commodity medium at a specified exchange rate with state-defined money.
The "origin" of money here is more or less the same as what the commodity theorists suggest. The only important difference is that he defines money as beginning once the state has something to say about it.
There was a lot in here that really didn't seem controversial at all to a "Metallist" (as he calls them) such as myself. For example, I don't disagree at all that the state has the ability to totally separate money from its value in specie by outlawing redeemability in specie (see Nixon 1971) which he claims "is the point at which the Chartal theory most clearly differs from the Metallist theory". I also don't deny that the price of some specie is tied to how much a central authority will pay for it in some other money (specie or otherwise).
Overall, this was a very dense and difficult read. The categorization of money in the first chapter was difficult and in my humble opinion should have been done in existing German (and then translated to me in English) words to better remember the several classifications. The best thing in this book is the term "valuta" which just means 'that which money is ultimately redeemable in' (e.g. the valuta for U.S dollars was gold prior to 1971 and the valuta for digital checking accounts today are U.S. dollars). My amateur opinion is that "ultimately redeemable" (or the other many ways which people use this phrase) can be too confusing and we should revive 'valuta'.
Ways in which this is not a state theory of money: He suggests that "money proper" likely arose from the state forcing people to pay contracts which previously prescribed a commodity medium at a specified exchange rate with state-defined money.
The "origin" of money here is more or less the same as what the commodity theorists suggest. The only important difference is that he defines money as beginning once the state has something to say about it.
There was a lot in here that really didn't seem controversial at all to a "Metallist" (as he calls them) such as myself. For example, I don't disagree at all that the state has the ability to totally separate money from its value in specie by outlawing redeemability in specie (see Nixon 1971) which he claims "is the point at which the Chartal theory most clearly differs from the Metallist theory". I also don't deny that the price of some specie is tied to how much a central authority will pay for it in some other money (specie or otherwise).
Overall, this was a very dense and difficult read. The categorization of money in the first chapter was difficult and in my humble opinion should have been done in existing German (and then translated to me in English) words to better remember the several classifications. The best thing in this book is the term "valuta" which just means 'that which money is ultimately redeemable in' (e.g. the valuta for U.S dollars was gold prior to 1971 and the valuta for digital checking accounts today are U.S. dollars). My amateur opinion is that "ultimately redeemable" (or the other many ways which people use this phrase) can be too confusing and we should revive 'valuta'.
March 12, 2016
The State Theory of Money is one of the books to read if one desires to have a better understanding of money. Knapp uses complex expressions, neologisms of Greek origin, but once those are overcome, what we are left with is a theory that remains as valid today as it was at the time of its writing (1905). One of the things Knapp explains, for example, is how currency exchange rates float in relation to their relative demand and supply and not in direct relation to their gold or silver contents - this is obvious for us today, but not at the time.
Another proposition which wasn't obvious at the time and still isn't today is the argument that in the gold and silver standards money is not worth the amount of gold and silver the coins contain. Knapps calls our attention to the fact that setting a metallic standard puts a price on gold or silver, and hence we cannot affirm gold gives us the value of money. It's very simple actually - if the State says it shall accept X ounces of gold in exchange for 1 dollar, and that it shall exchange 1 dollar for X ounces of gold, the price of gold will not vary, for any seller will not sell for under 1 dollar per X ounces, and not one buyer will buy X ounces of gold for more than 1 dollar, attending to the fact they can both obtain the money or the gold they seek from the State at those prices.
Another proposition which wasn't obvious at the time and still isn't today is the argument that in the gold and silver standards money is not worth the amount of gold and silver the coins contain. Knapps calls our attention to the fact that setting a metallic standard puts a price on gold or silver, and hence we cannot affirm gold gives us the value of money. It's very simple actually - if the State says it shall accept X ounces of gold in exchange for 1 dollar, and that it shall exchange 1 dollar for X ounces of gold, the price of gold will not vary, for any seller will not sell for under 1 dollar per X ounces, and not one buyer will buy X ounces of gold for more than 1 dollar, attending to the fact they can both obtain the money or the gold they seek from the State at those prices.
September 8, 2025
(1905)
I wanted to like "State Theory of Money" after reading JM Keynes' and Richard Werner's glowing reviews of it.
However, by ch 4, not only had I failed to understand what was going on, but I also failed to understand what most of the words meant. I quickly realized I had neither the working memory nor the patience necessary to understand Mr Knapp. I googled a few of them, but it seems he found it perfectly reasonable to make up new words and expect people to know what he was talking about.
Example: on p.70 Knapp writes: "By far the most important kinds of money are specie money and autogenic paper money. Money must be first classified into hylogenic and autogenic. Then hylogenic money is classified into orthotypic and the reverse; then autogenic into metalloplatic and papyroplatic". What a knob.
See the footnote below for the INDEX OF TECHNICAL TERMS**,
I didn't feel like learning a new language not called Dothraki, so I asked chatGPT for a spoiler. From what It told me, it seems that Knapp almost stumbled upon the fruitful "Fiscal Theory of the Price Level" (Cochrane, Sargent & Wallace). However, that theory is only a subset of the real bills doctrine, like mammals are a subset of vertebrates*
Asset backing (mostly collateralized IOUs) gives cheque and base money its value. Just like asset backing (including PP&E, Cash, A/R, Inventory, Investments and the unrecorded NPV of the future operatring cash flows) gives Coca Cola stock certificates their value. And asset backing (including Taxes Receivable, submarines, fighter jets, land, prisons, and prisoners) give the government's TBond its value.
When the issuer of liabilities run out of assets (as governments are doing now by giving them away), the value of the liabilities fall. When an entity (such as a central bank) holds those govt liabilities as its assets then it's liabilities (paper dollars) fall in value too. Then you get inflationary feedback since the banks' money is denominated in dollars, just like TBonds.. Why does everyone get this wrong? It's easy. Read Sage Sproul's "No Such Thing As Fiat Money".
Footnotes:
*You'll glean much more about this issue from reading Andrew McFarland Davis' 1907 book on American Colonial Currency.
Law (1705), Steuart (1767) Bosanquet (1810), MacLeod (1850s), Tooke (1845) and Fullarton (1845) had all this figured out (and much more) years before Knapp was even born. "Modern" Monetary Theory indeed, only inferior to what Law wrote 300 years ago. I need to re-read the part of Theory of Money and Credit' book (1912, "prime Mises") where he attacks poor Knapp for a good 10 pages, like he'd laced Mises' sister's Slivovitz. I can't remember what for.
ich befürchtete, dass dies die Schundarbeit eines Lutherbrut Proll sein würde, und ich hatte Recht
https://archive.org/details/in.ernet....
I wanted to like "State Theory of Money" after reading JM Keynes' and Richard Werner's glowing reviews of it.
However, by ch 4, not only had I failed to understand what was going on, but I also failed to understand what most of the words meant. I quickly realized I had neither the working memory nor the patience necessary to understand Mr Knapp. I googled a few of them, but it seems he found it perfectly reasonable to make up new words and expect people to know what he was talking about.
Example: on p.70 Knapp writes: "By far the most important kinds of money are specie money and autogenic paper money. Money must be first classified into hylogenic and autogenic. Then hylogenic money is classified into orthotypic and the reverse; then autogenic into metalloplatic and papyroplatic". What a knob.
See the footnote below for the INDEX OF TECHNICAL TERMS**,
I didn't feel like learning a new language not called Dothraki, so I asked chatGPT for a spoiler. From what It told me, it seems that Knapp almost stumbled upon the fruitful "Fiscal Theory of the Price Level" (Cochrane, Sargent & Wallace). However, that theory is only a subset of the real bills doctrine, like mammals are a subset of vertebrates*
Asset backing (mostly collateralized IOUs) gives cheque and base money its value. Just like asset backing (including PP&E, Cash, A/R, Inventory, Investments and the unrecorded NPV of the future operatring cash flows) gives Coca Cola stock certificates their value. And asset backing (including Taxes Receivable, submarines, fighter jets, land, prisons, and prisoners) give the government's TBond its value.
When the issuer of liabilities run out of assets (as governments are doing now by giving them away), the value of the liabilities fall. When an entity (such as a central bank) holds those govt liabilities as its assets then it's liabilities (paper dollars) fall in value too. Then you get inflationary feedback since the banks' money is denominated in dollars, just like TBonds.. Why does everyone get this wrong? It's easy. Read Sage Sproul's "No Such Thing As Fiat Money".
Footnotes:
*You'll glean much more about this issue from reading Andrew McFarland Davis' 1907 book on American Colonial Currency.
Law (1705), Steuart (1767) Bosanquet (1810), MacLeod (1850s), Tooke (1845) and Fullarton (1845) had all this figured out (and much more) years before Knapp was even born. "Modern" Monetary Theory indeed, only inferior to what Law wrote 300 years ago. I need to re-read the part of Theory of Money and Credit' book (1912, "prime Mises") where he attacks poor Knapp for a good 10 pages, like he'd laced Mises' sister's Slivovitz. I can't remember what for.
ich befürchtete, dass dies die Schundarbeit eines Lutherbrut Proll sein würde, und ich hatte Recht
https://archive.org/details/in.ernet....
September 1, 2013
This book analyzes a period of European history, when governments switched between gold, silver and paper as their currencies. This would be an enlightening read for believers in gold as money, as history shows very similar problems for both fiat and precious metal based currencies (and even more so when international trade is taken into account). The book walks through various practicalities like, will the Treasury mint coins from gold delivered to them by private persons, are worn coins taken out of circulation, how to deal with trade balances between countries, how to prevent debasement by the current government, and others. As soon as you make gold/silver a currency by law, it acquires many of the same problems we happen to associate with the fiat currencies of today.
Displaying 1 - 4 of 4 reviews