backed currency remained in circulation occupied the efforts of inflationists . Governments at this point could use currency as an instrument of policy, printing paper currency such as the United States Greenback , to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed. Banknotes with a face value of 5000 of different currencies By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Private banks and governments across the world followed Gresham's Law : keeping gold and silver paid, but paying out in notes. This did not happen all around the world at the same time, but occurred sporadically, generally in times of war or financial crisis, beginning in the early part of the 20th century and continuing across the world until the late 20th century, when the regime of floating fiat currencies came into force. One of the last countries to break away from the gold standard was the United States in 1971. No country anywhere in the world today has an enforceable gold standard or silver standard currency system.
Traditional View point of Money: classical economists did not attach much significance to money as an independent variable capable of disturbing the functioning of the entire economy. For them money was simply a device or a mere convenience merely as the means of acquiring the goods & service which are the real object of there desire. In there view the total amount of employment, the volume of production, the types proportion of the various goods &services product and consumed, the exchange values of the various goods and service in the market and distribution of real wealth and income among the member of the community are normally the same in a money economy as the would be in a highly developed and efficient barter economy. According to Adam smith “ Highway which while it circulates and carries to market all the grass and corn of the country, produce itself not a single pile of either” According to John Stuart Mill “ It must be evident , hoverer, that the mere introduction of particular mode of exchanging things for one another by first , exchanging a things for money and the exchanging the money for something else, makes no difference in the essential character of transactions” Why did classical economists consider money as an insignificant factor in the functioning of an economy? The answer is that they tacitly assumed the stability of the value of the money. Their main interest lied in the long run. Guided by say s Law of market they believed that the supply of money would adjust itself to the demand for money in the long run. Although Mill had conceded that money‘‘ exerts a distinct and independent influence of its own rare. They assumed the existence of `equilibrium conditions` where are factor , output, cost and prices become so adjusted that there would no incentive for further change.
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- Winter '18
- Md. Hashibul Hassan