The rate of interest independent of the rate of profit: a review of Matthew Smith’s Tooke

19/06/2013 § Leave a comment

If a significant monetary theory is a theory in which money can exert a non-transient influence on both the level and the distribution of the social product, the classical theory, unlike marginalism, can make room for a significant theory of money. The extent to which classical authors have exploited, more or less consistently, this opportunity is the constructive content of classical monetary theory, and marks the main differences between the individual authors of that school. pdf


Flawed currency areas and viable currency areas: external imbalances and public finance in the time of the Euro

19/06/2013 § Leave a comment

The main problem discussed in this paper is whether a balance of payments constraint exists within the Euro area. It is argued that the question of a member state’s foreign position is still relevant, at difference from what happens in successful currency areas like the USA, where persistent imbalances in the payments from one district to another are acceptable and are made sustainable by financial transfers revolving around the system of taxes and transfers and the public debt. A currency area is an area where the price of a deposit with the banking system is the same wherever the deposit is held (i.e. there is uniformity in the value of commercial bank money). Persistent imbalances in payments between regions within the area are to be settled in either the common currency or (which is basically the same thing) the public debt. But while this is acceptable in the USA, it is far from acceptable in the Euro area, where creditor countries (Germany being by far the most important) clamour for a settlement in ‘hard assets’, like, e.g. state-owned real estate, if not gold. This means that a balance of payments constraint still binds state members of the Euro area, and is a serious threat to its survival. pdf

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