The Moral Content of Monetary History

The Moral Content of Monetary History

Copyright: © 2014 |Pages: 35
DOI: 10.4018/978-1-4666-4643-8.ch003
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Abstract

The previous chapters are carried forth with a greater emphasis on money and the real economy with the financial bridge between these systems. The argument of the gold-backed monetary system is explained from both the historical and contemporary viewpoints. The phenomenological model of unity of knowledge is applied to the case of monetary and real economy systems with the financial connection. The open economy case of trade in the absence of interest rate is examined. The analytical method of circular causation in this regard is pointed out as a functional approach that is taken up profusely throughout this work.
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Present Days' Semblances Of Barter

In some sense the idea of barter remains until today in the context of factor price equalization. The theorem on factor price equalization states (Samuelson, 1949): If there was free trade in goods and services between countries, free technology transfer and no transaction costs (transportation as example) in perfectly competitive world markets for goods and services, then the relative factor prices between the trading countries will equalize completely. So also the relative prices of the goods and services will equalize. Production paths will change from a state of autarky to trade, and finally into autarky again after equilibrium between two countries erodes competitive advantage.

A simple problem will prove that the world is still in some sense in the grips of barter or deeply in the problems of inequality of value and distribution of due property rights to all engaged in the partnership of growth and development. This happens when barter or something like barter impedes correct valuation of prices and assets, and thus due ownership.

The conceptual caveat of the barter-type problem arises when in the pure theory of international trade (Kenen, 1985) the trade triangle points out the equality of volumes of exports to imports. That is, the volume of export of a particular good by a country equals the volume of import of the same for the trading partner. The reverse trade of another good in the same way between the two countries is the barter return in the total world trade with two trading partners. That is, X11 = M12; X22 = M21; Thus total world trade of the two countries combined together is X11 + X22 = M12 + M21 identically. Here Xij denotes the export of good i by country j. Mij denotes the import of good i by country j; i,j = 1,2; i ≠ j. Trade-flows here are measured in volumes of commodity units according to the specific commodities traded.

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