Modern monetary systems

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Monograph

Identifikator:: 1753210836

URN:: urn:nbn:de:zbw-retromon-128414

Document type:: Monograph

Author:: Nogaro, Bertrand http://d-nb.info/gnd/117039713

Title:: Modern monetary systems

Place of publication:: London

Publisher:: King

Year of publication:: 1927

Scope:: XII, 236 S.

Digitisation:: 2021

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Part II. The explanation of contemporary monetary phenomena and currency theory

Collection:: Economics Books

CHAPTER III THE THEORY OF EXCHANGE AND ITS COROLLARIES § 1. The theory of exchange and the idea of depreciation. THE theory of exchange has long seemed—and still seems to many people—to be a mere application of the Quantity Theory. For exchange phenomena hardly engage the attention of economists, and above all of the public, except when the exchange is abnormal, 7.e., when the rate is subject to violent fluctuations and falls consider- ably below par, or official parity.! Thus, for instance, the French exchange aroused very little attention before 1914 ; it arouses attention, and serious attention, at the present time; for the dollar, which is equivalent at metallic par to 5-18, has been quoted at 10, 12, 15, 20 and 25 francs, and more, the value of the franc in relation to the dollar having dropped progressively in the course of its fluctuations. 1 The expression “par” applies to the normal exchange ratio between two currencies of the same metal. This exchange ratio is in no way arbitrary once given the definition of both monetary units: for it is exactly equal to the ratio between the content of each monetary unit in fine metal. Thus the statement that the par of exchange between the franc and sterling is 25221 francs is equivalent to stating that under the monetary legislation fixing the content of the pound sterling and of the franc in fine gold, there is as much fine gold in one pound sterling as there is in 25221 francs. Parity, on the other hand, is an exchange ratio between two currencies, which differ in kind, e.g., between the pound sterling or gold sovereign and the silver rupee, or between the United States dollar, which is at present gold or convertible into gold, and the French franc which is at present a paper franc. Parity is arbitrary, but may be fixed by law or international agreement and may, in fact, remain constant, if the convertibility of one currency into another continues to be secured. On the other hand, for a country which no longer possesses a sufficient stock of metal to make its foreign payments on a par basis, by resorting of necessity to shipments of bullion, par is nothing but past history and the conversion of its silver or paper currency into gold is no less arbitrary, if effected at a parity corre- sponding to the former par, than if it is effected at a new parity. 125

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