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 149 pound sterling. On the other hand, an Englishman would have difficulty in buying in France at a rate lower than go francs; and at a higher rate a Frenchman would find it burdensome to make his purchases in England. And so the purchasing power parity would determine the rate of exchange at which international trade remains feasible on an equal basis for the two parties. Mr. Cassel goes even further ; he believes that the rate of exchange cannot move far away from the purchasing power parity because an importer would refuse to buy the currency at a higher rate than that which corresponds to this parity. Mr. Cassels theory which at first sight is plausible enough 1s not based on premises which square with the actual facts. It implies that the purchaser of a foreign commodity can choose freely between the foreign and home markets and that he will therefore not be willing to purchase the drafts required for his payments at a price which makes the foreign commodity more expensive than if he had bought it in the home market. But this notion contains a double error. In the first place, it is better to admit at once that goods are chiefly bought abroad which cannot be obtained at all, or cannot be obtained in sufficient quantities, on the home market. Hence it is not possible to rely on the prices ruling in the home market in order to refuse to purchase the instrument of payment at a rate which would raise the cost price of the commodity bought in a foreign market to too high a level. For instance, when our wheat harvest is insufficient we are forced to suffer the price and the rate of exchange of countries from which we draw our supply, with the result that by this very process the price of wheat is sent up on the French market; we cannot argue that we can procure wheat more cheaply in France since we are compelled to supplement our own harvest. Again, it is attributing much too great a bargaining power to the purchaser of foreign bills, and much too great an influence over prices, to suppose that he could refuse to purchase bills on a foreign country at a higher rate than purchasing power parity, An importer who has

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