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One world money, then and now

  • Michael Bordo

    ()

  • Harold James

The case for monetary simplification and unification has been made since the middle of the nineteenth century. It rests on four principal arguments ;reduced transaction costs; establishing credibility; preventing bad policy in other states; political integration via money. In this paper we argue that the case for monetary integration is becoming increasingly less persuasive. In making our case we posit a different concept of money to the one that underlay the nineteenth century discussions which we term "Newtonian" since it was based on the assumption of a single reference external to the state reflected in the definition of value in terms of precious metals. In the twentieth century, views of money have shifted to a more " Einsteinian" or relativistic conception. Measures of value that move relative to each other are helpful in terms of dealing with large shifts in relative prices that affect different countries very differently. In the current age of globalization, "Einsteinian" money is capable of accommodating shifts that were politically destructive in the " Newtonian" world.

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File URL: http://hdl.handle.net/10.1007/s10368-006-0070-4
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Article provided by Springer in its journal International Economics and Economic Policy.

Volume (Year): 3 (2006)
Issue (Month): 3 (December)
Pages: 395-407

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Handle: RePEc:kap:iecepo:v:3:y:2006:i:3:p:395-407
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  1. Einaudi, Luca, 2001. "Money and Politics: European Monetary Unification and the International Gold Standard (1865-1873)," OUP Catalogue, Oxford University Press, number 9780199243662, March.
  2. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
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  4. Mundell, Robert, 2005. "The case for a world currency," Journal of Policy Modeling, Elsevier, vol. 27(4), pages 465-475, June.
  5. Michael D. Bordo & Lars Jonung, 1999. "The Future of EMU: What Does the History of Monetary Unions Tell Us?," NBER Working Papers 7365, National Bureau of Economic Research, Inc.
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  8. Tamim Bayoumi and Barry Eichengreen., 1992. "Shocking Aspects of European Monetary Unification," Economics Working Papers 92-187, University of California at Berkeley.
  9. Eichengreen, B., 1992. "Should the Maastricht Treaty be Saved?," Princeton Studies in International Economics 74, International Economics Section, Departement of Economics Princeton University,.
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  14. Goodhart, Charles A. E., 1998. "The two concepts of money: implications for the analysis of optimal currency areas," European Journal of Political Economy, Elsevier, vol. 14(3), pages 407-432, August.
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