The agricultural output of England and Wales 1925

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Monograph

Identifikator:: 1757028552

URN:: urn:nbn:de:zbw-retromon-135495

Document type:: Monograph

Title:: The agricultural output of England and Wales 1925

Place of publication:: London

Publisher:: Stat. Off.

Year of publication:: 1927

Scope:: XV, 152 Seiten; graph. Darst., Kt.

Digitisation:: 2021

Collection:: Economics Books

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THE THEORY OF EXCHANGE 157 Certain modern economists, at the head of whom it is right to place Mr. Cassel, have tried to find the solution of this problem in the theory of the purchasing power parity. Starting with the idea that the exchange should settle at a rate such that the internal purchasing power of the currency in question and its external purchasing power, once it has been transformed into foreign currency, should be approximately equal, they try to find a method of supporting the internal purchasing power of the currency, and naturally discover it in the Quantity Theory. In the views of these authors, the secret of stabilising exchanges consists in regulating the circulation in such a way that a currency will have a given internal purchasing power in order to obtain a parity which will produce the required rate of exchange. Now this theory implies in the first place the adoption of the Quantity Theory in the form which we believe to be untenable, i.e. implying a continuous and consistent effect of the volume of currency on prices, however small the variations in volume may be. Again, it attributes a virtue to the maintenance of purchasing power parity which the preceding remarks will not allow us to admit. For we have observed that in certain cases—the very ones in which we are promised a favourable result— the exchange rate, far from being restricted by the purchas- ing power parity, modifies it by sending up internal prices; an event which cannot be forestalled by limiting the circulation, and which doubtless cannot afterwards be counteracted by contraction. In our opinion, nothing is more futile than to attempt to withhold the volume of currency required by a rise in prices, once the latter has occurred as the result of an exchange movement.3 The part of this Quantity Theory which, in our opinion, ought to be remembered is in the first place that when the time comes to return to a stable exchange it is impor- 1 See preceding chapter. 2 N.B. in particular the case of Czechoslovakia. 3 In such circumstances private individuals will have recourse to their capital in order to meet the lack of currency, and an increase in various clearing operations will be used in order to meet the shortage.

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