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 II. The explanation of contemporary monetary phenomena and currency theory

Collection:: Economics Books

118 MODERN MONETARY SYSTEMS fact has little bargaining power; if a rise occurs and he is faced by the proposition ‘take it or leave it,” he can only show passive resistance and withhold his purchase; again, he is not really in so strong a position as is commonly supposed to stimulate rise in prices which, moreover, is against his interests ; for the money with which he is left after a fall in prices will be saved by him, and will only come back into circulation after many deviations, and not without having itself contributed, as we shall see presently, to an increase in production. In any case, events have themselves clearly falsified the forecasts which were made by Mr. Fisher in 1920. For, as we have seen above, the fall in prices occurred more or less all over the world before currency contraction took place and it went much further. It is quite impossible to understand the effect of infla- tion and deflation by making a crude comparison with the interplay of supply and demand oz a closed market ; the process is more complicated. The first effect of an increase in the circulations artificially produced on a grand scale when a State has recourse to excessive issue of paper money is to swell the working capital of certain heads of industry who have State contracts ; it then progressively increases their earnings and the earnings of those who work for them.! It is easy to understand how, especially in war-time when this increased economic activity will not result in an increase of the volume of consumable goods, the increase in earnings will stimulate expenditure and so a rise in prices. But the mechanism of deflation is different. The State borrows in order to reimburse the bank and the capital which it uses in order to replace the notes which it has obtained and cancelled is withdrawn from other uses. Thus cur- rency contraction has as its first effect a consraction of 1 The demand arising from these issues is added to the demand due to the previous available resources of purchasers; and so there occurs an increase in turnover, and of income, due either to an increase in the volume of goods sold or to an increase in their price. Thus an increase in volume of money put into circulation coincides with an increase in money incomes.

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