Study Guide to Man, Economy, and State with Power and Market

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Chapter 11: Money and Its Purchasing Power 143 money, but merely change its composition (between certificates and money proper). Under FRB, however, the deposit of money proper can lead to an increase in the overall supply of money. D. A Note on Some Criticisms of 100-Percent Reserve Under 100-percent reserve, banks could still earn an income by charging for their warehouse services (i.e., checking accounts). They could still operate as credit intermediaries by borrowing from individuals (i.e., savings accounts) and lending the funds to borrowers at a higher interest rate. This latter activity is consistent with 100-percent reserve banking because the deposited funds are not the lenders’ money for the duration of the loan; the depositor (into a savings account) has sold present money for future money. 7. Gains and Losses During a Change in the Money Relation New money always enters the economy at specific points; contrary to typical thought experiments, it is never the case that everyone’s cash balance suddenly increases by a certain percentage. Even in such an unrealistic scenario, money would still be “non-neutral”: Some people would spend their new money more quickly than others, and thus would experience a relative gain as the PPM adjusted to the new stock. 8. The Determination of Prices: The Goods Side and the Money Side The ultimate determinants of the PPM are: (1) the stock of all goods, (2) the reservation demand for money, (3) the stock
144 Study Guide to Man, Economy, and State with Power and Market of money, and (4) the reservation demand for goods. The first two determinants increase the PPM, while the latter two decrease it. 9. Interlocal Exchange A. Uniformity of the Geographic Purchasing Power of Money As with all goods, the money commodity will tend to have one price in the market. Some allege that the PPM of money can differ from region to region; is not the price of a movie higher in New York than in Boise? Yet a movie in New York is not the same good as one in Boise. B. Clearing in Interlocal Exchange The use of clearing houses greatly facilitates interregional trade. If French consumers had to ship gold to Russia every time they wished to buy a Russian good, and vice versa, then there would be a lower volume of trade. In contrast, with clearing only the net surplus of gold needs to be shipped from one country to the other. 10. Balances of Payments An individual’s “balance of payments” must always be in balance, so long as cash balances and credit transactions are included. In general an individual will always have huge “trade deficits” with the owners of retail shops and huge “trade surpluses” with his employer. The balance of payments for an entire nation is simply the aggregation of all the individual citizens’ balances of payments.
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CONTENTS INTRODUCTION . . . . . . .
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In June of 2004, I became convinced
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Introduction ix appropriate, I have
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Chapter Summary In a money economy,
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Chapter 4: Prices and Consumption 4
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Chapter 6: Production: The Rate of
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Chapter Summary This chapter explai
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Chapter Summary Society is composed
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Chapter 4: Binary Intervention: Tax
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Apriorism, 1, 9 Ability-to-pay prin
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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