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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Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part I. Modern monetary systems and their operation

Collection:: Economics Books

THE MONETARY CRISIS 75 It would also be somewhat rash to attempt to establish too definitely a relation between British post-war monetary policy and the rise in sterling. For if exchange phenomena are particularly susceptible of scientific treatment when they can be explained by the existence, combination or disappear- ance of gold or silver points or by any other definitely ascertain- able condition for convertibility, it is, on the contrary, danger- ous to attempt to explain by reference to the theory fluctuations in the exchange rate of an inconvertible currency when it is exposed to all the risks and caprices of speculation. It is a piece of rather crude observation that the maximum fall in sterling happened at the end of 1920, when the note issue also reached its maximum, and that it began rising from that date onwards, while the note issue contracted, but at a faster rate. The improvement in sterling also coincides from 1921 onwards with an improvement in the Trade Balance, which, it is true, had shown its greatest deficit not in 1920 (373 million £) but in 1919 (669 million £). But the initial improvement in the Trade Balance and the exchange cannot be attributed to the fall in prices, supposed to have been the result of a process of deflation, which incidentally had not occurred at the time. Moreover, although the improvement in the exchange coincided with a fall in internal prices, its effect on the Trade Balance could only be to counteract the fall. For, with most European currencies continuing to depreciate, pur- chases in sterling became more and more burdensome for foreign buyers in spite of the fall in prices in Great Britain. It therefore seems very difficult to try to prove that there is a sort of physical relation of cause and effect between deflation, the fall in prices, the improvement in the Trade Balance and the improvement in the value of sterling in terms of dollars. In the first place, the events did not occur in the chronological order which is appropriate to the connection commonly supposed to exist between them, the improvement in the balance of trade preceding the fall in prices, and the latter having begun before deflation set in. Secondly, many other factors may explain the fall in prices, the improvement in the Trade Balance, a possible

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