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

THE THEORY OF EXCHANGE 139 influence the exchange market. But although the state of international indebtedness may—in view of the object for which bills are bought and sold on the market—appear to be logically the only factor likely to influence supply and de- mand, and therefore the rate at which they are negotiated, it is common knowledge that once an exchange is un- settled a number of other factors may affect the rate, such as the economic outlook, and in particular the supposed state of the fuzure balance of payments, the Budget situa- tion ; and even purely political or social events play a large part, and, as we have seen in studying the post-war ex- changes, may gradually acquire a decisive influence. The effect of such diverse factors is explained, in the first instance, by the influence of speculation. A section of the exchange market usually deals in drafts which fall due on some distant date. Again, countries with a depreciated currency have recourse in the absence of means of pay- ment to credit in order to get over periods in which the bills drawn on foreign countries are not sufficient to cover purchases abroad. And this credit may take different forms, such as bank advances, money owed by foreign countries and left on deposit, instead of being repatriated, and even the purchase by foreign countries of inconvert- ible bank-notes, which are hoarded in the hope of a rise in the rate, before they are returned to the country of origin in the form of payments. And so we see that the rate of exchange no longer de- pends solely on the indebtedness arising from previous commercial, financial or other transactions, but also on the comparative ease in obtaining credit which, once given, neutralises recoverable debts and, once withdrawn, swells the debit side of the account. Thus credit, and therefore speculation, are likely to have the effect of supporting the exchange and sending it up, if confidence abroad is main- tained, or on the contrary of precipitating a crash if there is a panic. Lastly, speculation is the medium through which all those factors, even the most imponderable, which influence dealers in foreign exchanges affect the rate. We have seen in a previous chapter the important part

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