The goal of this paper is to rescue the critique of Marx of the Currency Principle from its current oblivion. The ideas of Marx are extraordinarily interesting both from a theoretical and from a practical standpoint, as the theory of the Currency Principle remains right up today the theoretical basis of the restrictive monetary policies periodically applied by central banks in order to “stabilize the economy”, “contain inflation” and correct “excessive money creation”. The core of the Currency Principle was the principle that the central bank had to contract the circulation of banknotes “pari passu” with the contractions of the gold reserve. Marx contends, in agreement with the Banking School, that such a principle rests on a defective monetary theory and that it creates an artificial scarcity of means of payment; this drives up the interest rate to a level that is higher than that naturally required to liquidate the periodic overproduction brought about by the capitalist system.
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Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number
200937.
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Find related papers by JEL classification: B11 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Preclassical (Ancient, Medieval, Mercantilist, Physiocratic) E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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