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 145 cile their belief that the volume of circulation affects the exchange with a more accurate analysis of the facts usually represent this influence as making itself felt through the balance of payments. An artificial increase of purchasing power by stimulating purchases in general also stimulates the purchase of imported commodities ; but, more than this, it sends up internal prices and so diminishes the bar- rier which the loss on exchange might set up against im- ports and the profit which exporters derive from the sale of bills. In a country, for instance, where the exchange has already fallen 259, below par, as long as internal prices have not risen to the same extent the difference between the exchange and par will restrict imports and stimulate exports. But if a new issue takes place which provokes a rise in prices, the increase in the cost of production may coun- terbalance the profits which exporters were making on the exchange and operate in favour of imports, which will ultimately cost less than home products. And so the ex- pansion of the fiduciary currency in altering the internal purchasing power and consequently the ratio between its internal and external purchasing power tends to throw the balance of payments into disequilibrium and therefore to increase the loss on exchange. Currency contraction, on the other hand, tends to re-establish equilibrium in the balance of payments and restore the exchange. The significance of this explanation is bound up with that of the Quantity Theory. Having regard therefore to the analysis of this theory contained in a previous chapter we shall admit that it may be applicable to cases in which the creation of fresh purchasing power has brought about a corresponding increase in demand which 7s ous of all pro- portion to any possible increase in production, i.e., of supply ; hence we shall also admit that, on this assumption, infla- tion and the resulting rise in prices will restrict exports and stimulate imports so that the balance of payments will be thrown into disequilibrium and the loss on exchange in- creased—o the extent to which the rate of exchange is in- fluenced by the balance of payments. But still having regard to the above discussion of the Quantity Theory, we cannot adopt the view that

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