Modern monetary systems

Bibliographic data

Monograph

Identifikator:: 1762969653

URN:: urn:nbn:de:zbw-retromon-142432

Document type:: Monograph

Title:: Banking standards under the federal reserve system

Place of publication:: Chicago

Publisher:: A. W. Shaw Company

Year of publication:: 1928

Scope:: xxxviii, 420 Seiten

Digitisation:: 2021

Collection:: Economics Books

Usage license:: Get license information via the feedback formular.

Chapter

Document type:: Monograph

Structure type:: Chapter

Title:: Part II. Norms and trends in individual series for all Member Banks, by districts

Collection:: Economics Books

THE THEORY OF EXCHANGE 137 the loss on exchange to the internal depreciation as it exists in our day and as measured by purchasing power over goods and services. The decline in the purchasing power of assignats was less than the premium of specie with regard to them. But this premium also appears not only in foreign exchange transactions but also in certain internal transactions—for many contracts were still fixed in specie ; internal depreciation could therefore not be as clearly dis- tinguished from external depreciation at that time as at present. On the other hand, the premium on metal was closely connected with the increase of the paper currency 1 and coin, viz., the exportable currency which it was more and more expensive to acquire had not entirely disappeared and was still available for use. It therefore seems as though in the case of the assignats the loss on exchange and the internal depreciation proceeded from some cause common to both, i.e., the expansion of paper currency. But most modern examples show that an exchange crisis does not proceed from the increasing difficulty in procuring coin, due to inflation, but to a fundamental alteration in the conditions of the exchange market, due to the complete impossibility of obtaining exportable currency caused by the introduction of forced currency and the prohibition to export gold. And so whether this disap- pearance is merely accompanied by abnormal issues or more or less prepared and caused by them, it is now estab- lished (1) that the mere disappearance of the gold point is likely, even without inflation, to bring about an exchange crisis and (2) that inflation will not by itself bring about an exchange crisis so long as the gold point remains. In general, therefore, we need only remember, in order to see the origin of an exchange crisis, that it arises with the impossibility of obtaining without loss an exportable currency, 7.e.,—in practice and in most cases at the present time—with the inconvertibility of notes which prevents the specie holdings of the bank of issue from being used and with an export prohibition which even prevents coin from being taken out of circulation for export. 1 See p. 105 above.

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