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

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

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 129 dollar; but the process of purchase and sale actually centres round a bill of exchange or draft, drawn on a foreign country and payable in a foreign currency, which is purchased with the national currency. In transactions between two countries using the same metal which can be freely exported, imported and coined, a settlement could, if necessary, be effected by means of coin which would bz recoined, and therefore on the basis of metallic par plus the various expenses of transport and recoinage (gold points). For instance, before the war a Frenchman knew that there was as much fine gold in 25221 francs as in 1000 pounds sterling and that in any case it was open to him to pay 1000 pounds which he owed in London by sending fine metal of the same weight in the form of French coin, if he were prepared to have the specie recoined and pay the freight. Similarly, he knew that he could bring 1000 pounds from England in gold and by having them recoined at the Paris Mint, obtain 25221 francs after deducting the cost of freight and recoinage. Hence the rate of bills in Paris on London—and conversely—could only fluctuate between these two outside limits which corresponded to the costs of settling in specie. It could only deviate from metallic par in so far as it might be necessary to add the expenses of exporting (export gold point) or necessary to deduct the expenses of importing (import gold point) the precious metal. The rate of franc bills sold in London for sterling was governed by the same considerations and restricted within the same limits, the import gold point of sterling corresponding to the export gold point of the franc and conversely. In a theoretical inquiry we need not examine 1 Since also private individuals effected settlements through bills only in order to avoid the expense of shipping metal. 2 Moreover, the rates corresponding to the quotations of two similar currencies on two markets are always in harmony on account of the arbitra- tion granted by bankers. For if at any given moment sterling is quoted at 25-25 in Paris and at 25-22 in London, there will be persons ready to sell francs, 1.., bills on France in London, in order to obtain sterling at the rate of 25-22 and sell sterling, i.e., bills on London in Paris, at the rate of 25-25. This action by sending up falling and bringing down rising rates constantly keeps the exchange between two markets at the same level.

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