Economics Dictionary of ArgumentsHome
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| Currency: In economics, currency refers to the physical form of money used in transactions within an economy. It includes coins, banknotes, and digital money. Currency serves as a medium of exchange, a unit of account, a store of value, and a standard of deferred payment. Its value is influenced by factors like inflation, interest rates, and economic stability. Currency also plays a critical role in international trade and finance. See also Trade, International trade, Exchange rates._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Murray N. Rothbard on Currency - Dictionary of Arguments
Rothbard II 230 Currency principle/currency/Rothbard: The prohibition of small notes, however, scarcely tackled the main problem. The first to go beyond this minor aspect of banking and go straight to the heart of the matter was a brilliant and influential thinker Who has remained as little known to historians as he was obscure in his own day. It is With justice that Lionel Robbins has wittily referred to James Pennington (1777—1862) as the 'Mycroft Holmes' of the later monetary controversy of the classical period. Rothbard II 231 (…) Pennington followed up his first memorandum with another, a year later (16 May 1827) on ‚Observations on the Coinage'.(1) After explaining the technical procedures of the gold standard, Pennington detailed the dangers to gold of the existence of a paper currency, and then added a tantalizing hint: 'It is possible to regulate an extensive paper circulation... to render its contraction and expansion... subject to the same Law as that which determines the expansion and contraction of a currency wholly and exclusively metallic'. Here was the first indication in Great Britain of the 'Currency Principle': that more than simple gold redeemability was needed to transform bank money into a mere surrogate of gold. Rothbard II 232 Pennington: If the Bank of England were the monopoly issuer of notes, Pennington prophetically counselled, it would be easy for it to control the total supply; in lieu of that, the private banks, London and country, could in some way be totally and immediately controlled by the bank. In either case, the bank could then be compelled to keep its securities (i.e. its earning assets) fixed in total amount; if so, its note issues would move in the same direction, and to the same extent, as its stock of gold. While the bank would not have 100 per cent gold reserves to its notes, the legally fixed gap between them would mean that bank notes (and by extension, the total money supply) would move in the same way and to the same extent as the gold supply - thus arriving at the equivalent of 100 per cent specie money for all further operations of the bank. Here was the seed of Peel's great Act of 1844, the embodiment of the currency principle. Rothbard II 234 Rothbard: It is still a mystery how men so keenly aware and critical of the cartellizing and inflationary role of the Bank of England should have proposed centralizing control into the hands of the very same bank, and all in the name of stopping inflation and tying the monetary system closely and one-to-one to gold. Rothbard II 249 Central Bank/Robert Peel/Rothbard: Robert Peel's proudest achievement, (…) was his banking reform, his Act of 1844. In essence, Peel's Act established the currency principle. It divided the Bank of England into an issue department, issuing bank notes, and a banking department, lending and issuing demand deposits. True to the rigid currency school separation ofnotes and deposits, deposits would be totally free and unregulated, while notes would be limited to a ceiling of E 14 million matched by assets of government securities (roughly the extent of existing note issue). Any further notes could only be issued on the basis of 100 per cent reserve in gold. The second main provision was to grant the Bank of England its long-sought monopoly of the note issue. This was not done immediately, but to be phased in over a period of time. Specifically: no new banks were to issue any bank notes, existing banks were to issue no further notes, and the Bank of England might contract With bankers to buy out their existing notes and replace them with the bank's own. 1. James Pennington. 1827. Observations on the Coinage. In: Economic writings of James Pennington 1826-1840 / edited with an essay on the life and work of James Pennington by R.S. Sayers. London: Routledge/Thoemmes, 1996. _____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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