Economics Dictionary of ArgumentsHome
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| Money supply: Money supply refers to the total amount of money in circulation within an economy at a given time. It includes physical currency, such as coins and notes, along with demand deposits and other liquid assets. Central banks regulate money supply to influence economic conditions and manage inflation. See also Money, Monetarism, Demand for money, Inflation, Central bank._____________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. – Dictionary of Arguments. | |||
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John Wheatley on Money Supply - Dictionary of Arguments
Rothbard II 187 Money supply/price/Wheatley/Rothbard: To Wheatley, all export or import of gold was exclusively determined by its demand and price, i.e. by monetary factors, and bullion prices and exchange rates were solely determined by monetary considerations. Real factors Play no role in these matters even temporarily or in the short run. Hence the effect of the supply of money on price levels or exchange rates is strictly and precisely proportionate. Overall prices move, not only proportionately, but also uniformly in 'levels', With no changes occurring in relative prices. Thus Wheatley: „The increase of currency by paper must cause the same reduction in the value of money, in proportion to the activity of its circulation as an increase of currency by specie. But... if paper depreciate money, it must advance in similar proportion the price of articles of subsistence and luxury”.(1) Rothbard II 188 Rothbard: From these principles, it was easy for Wheatley to deduce that it was impossible for an expansion of the money supply ever to stimulate the economy, since by definition, 'the wages of labour are augmented only in porportion to the increase [of currency]'. And since wages rise proportionately to the money supply and to all other prices, they can 'purchase no greater quantity of products after the addition than before it', and therefore 'no greater stimulus can in reality exist, and therefore no greater effect is likely to be produced by the deception...'. RothbardVsWheatley: A heroic conclusion, no doubt, and surely true in the long run; but such blithely dogmatic statements omit the whole point of monetary inflation and its short-run stimulus: e.g. making prices rise faster than wage rates. Moreover, since Wheatley had an exclusively long-run, and therefore monetary, theory of exchange rates under inconvertibility, he again blithely assumed that the value of any given money was always and everywhere equal, i.e. in the long-run equilibrium, and that fiat money exchange rates always trade at precisely their purchasingpower-parities to their respective monetary purchasing powers. Hence, for Wheatley, not only was a depreciated exchange rate and a premium on specie bullion, an 'unmistakable system' of currency depreciation; it also provided an exact 'measure' of that depreciation. In contrast, King and Boyd, let alone Thornton, only saw currency depreciation when such phenomena existed for 'any considerable time' (Boyd) or were 'long continued' (King). >Henry Thornton, >Walter Boyd, >Bullionism. And neither of the latter claimed that such premia or discounted exchange rates provide a precise measure of depreciation. Rothbard II 189 Monetarism: John Wheatley's exclusive emphasis on the money supply and unitary price levels foreshadowed the modern severe monetarist and macroeconomic split between the monetary and real realms. More pointedly, his mechanistic emphasis on the price level also foreshadowed the unfortunate Fisherine, Chicagoite and later monetarist preoccupation with stabilizing the ‘price level’ and with fanatically opposing any and all changes in such ‘levels’. 1. John Wheatley. 1803. Remarks on Currency and Commerce. London: Cadell and Davies._____________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. "Vs" indicates differences in content, not necessarily the chronological progression of a controversy. If a German edition is specified, the page numbers refer to this edition. |
Wheatley I John Wheatley Remarks on Currency and Commerce London 1803 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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