Monetary standard = criterion or reference point guiding these social arrangements and constituting the ultimate asset combining the twin functions of standard of value and means of payment.
Monetary systems (p.28)
- Independent standards
- Fiat Money
- Single commodity based standards -->
- goods/monetary unit=goods/standard commodity x standard commodity/monetary unit
- big (unintended innovation) reducing the resource costs of commodity money was the use of fiduciary money to make the ratio of gold deposits/money much smaller.
- Gold specie standard
- Gold bullion standard
- Gold exchange standard
- Limping gold standard (half independent standard)
- Multi commodity based standards
- Composite commodity reserve standard
- Currency standards
- Exchange standard
- Currency basket
- Balance of payments standard (half index standard)
- Index standards
- Tabular standard
- Goods standard
- Earnings standard
- Labour standard
History of Monetary standards:
- Early antiquity - only commodity money with occasional credit transactions.
- Classic antiquity Europe to 18th - Metallic money, bills of exchange & money lenders
- France & Russia early 19th - Central Bank
- Medieval Italian cities 13th onwards - Deposit banks but no central and no paper money
- US to 1913 & Scotland first half of 19th - Multiple note-issuing and deposit banks
- Colonies at Independence - central bank, modern deposit banks, & money lenders
- Western Europe from mid-19th to WWI - Central Bank, deposit banks and other financial institutions
- USA from 1970s, Europe from 1980s - All modern financial institutions.
Monetary regimes (p.40)
- Gold standard 1879-1914
- Gold Exchange Standards 1925-31
- Bretton Woods 1945-68
- Dollar Standard 1968-71
- The 'Non-System 1972-
- ERM 1979-98
- EMU 1999-
- Gold-standard brought a remarkable degree of exchange rate stability with arbitration keeping exchange rates around the gold standard (within the bands of transport costs).
- 4 desirables are inconsistent : 1. fixed exchange rates 2. free trade, 3. monetary autonomy 4. free capital movements. At best only 3/4 can be achieved
- Under gold-standard monetary autonomy was sacrificed.
- Under gold-exchange standard in the interwar years fixed exchange rates were sacrificed.
- Bretton Woods sacrificed freedom of capital flows
- Fiat money sacrifices fixed exchange rates.