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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Document type:: Monograph

Structure type:: Chapter

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

Collection:: Economics Books

RECOVERY OF THE EXCHANGES 43 given by the definition of the monetary unit 1s the primary cause in preventing the value of drafts on foreign countries from rising above par or above the fixed parity beyond the cost of exporting the gold, i.e., the export gold point.} Conversely, gold coin, once it is imported from abroad, can only represent a given number of monetary units, and consequently the selling price of drafts on foreign coun- tries, quoted in the national currency, cannot fall below a rate given by the ratio between the value of the weight of gold imported and that of the monetary units of home currency which it represents, less the costs of import (import gold point).2 Thus, so long as the Conversion 1 A distinction is commonly made between the idea of par, 7.e., the ratio between the values of two currencies of the same metal, exactly equivalent to the ratio between the weights of their respective contents in fine metal, and parity, a legal exchange ratio between currencies different in kind, such as gold and silver, or gold and paper. Parity is an arbitrary relation, whereas par is the necessary result of the respective weights of fine metal, given the definition of the monetary units involved. But this definition is itself quite arbitrary. Similarly, it is always arbitrary to make a piece of paper represent directly or indirectly a certain weight of gold; for instance, the United States exchange remains stable in relation to other countries with a gold currency within the limits of the gold points which rise above or fall below the value of the dollar at par. The exact meaning of this statement is that the notes with a face value in dollars, which form the bulk of the United States currency, are convertible into a constant weight of gold, this gold in turn representing by definition a constant number of the monetary units of different countries, so long as conversion is actually possible. Similarly, when the paper peso of the Argentine was fixed at 44 gold centavos, it represented a certain weight in gold, and this weight in gold, although it doubtless corresponded only to 4’ of the former weight of the peso, was none the less strictly defined, and also corresponded to a fixed number of the monetary units of various countries. The fact that a paper monetary unit does not correspond in nominal value to the former gold monetary unit implies no essential change in the system. It is true that in making the paper peso equal to 44 gold centavos the foreign exchanges were reconsti- tuted below the former par, but a new par was set up with the new peso, representing 4%; of the weight of gold in the old one. 2 Here again the difference in procedure between countries with a gold currency and those on a gold reserve is superficial; in the former a fall in the rate quoted in home currency is limited by the fact that if drafts on foreign countries were offered at too high a price, gold would be imported, recoined, and put into circulation in the form of coin representing a number

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