• Choose a category
• All
• Classic-Fiction

By Root 1201 0

been said on the nature of money and fiduciary media, there can hardly be very much doubt as to the aim of the discount policy of the banks. Every credit-issuing bank is obliged to fix the rate of interest it charges for loans in a certain conformity with that of the other credit-issuing banks. The rate cannot be allowed to sink below this level, for if it did, the sums of money needed by the bank's rapidly extending clientele for making payments to customers of other banks would increase in such a fashion that the bank's solvency would be imperiled. It is by raising the rate of discount that the bank safeguards its own capacity to pay. This end is certainly not attained by protecting the redemption fund, the small insignificance of which for maintaining the value of the fiduciary media has already been demonstrated, but by avoiding the artificial extension of the circulation of fiduciary media that would result from asking less interest than the other banks, and so also avoiding an increase in the demands for the redemption of the fiduciary media. The banks would still have to have a discount policy even if there were no legislative regulation of the note cover.

In Germany there has been a controversy as to whether certain measures of the Reichsbank are dictated by regard to the circumstances of the domestic money market or to those of the international. In the form in which it is usually put, the question is meaningless. The mobility of capital goods, which nowadays is but little restricted by legislative provisions such as customs duties, or by other obstacles, has led to the formation of a homogeneous world capital market. In the loan markets of the countries that take part in international trade, the net rate of interest is no longer determined according to national, but according to international, considerations. Its level is settled, not by the natural rate of interest in the country, but by the natural rate of interest anywhere. Just as the exchange ratio between money and other economic goods is the same in all places, so also the ratio between the prices of goods of the first order and those of goods of higher orders is the same everywhere. The whole system of modern international trade would be completely changed if the mobility of capital goods were to be restricted. In Germany there are many who demand such a prohibition or at least a considerable restriction of the investment of capital abroad. It is not our task to demonstrate what a small prospect of success a policy like this would have, or to show that the time is now past for a nation to decide whether or not it will take part in international trade. So long and insofar, however, as a nation participates in international trade, its market is only a part of the world market; prices are determined not nationally but internationally. The fact that the rate of interest in Germany may rise, not because any change has occurred in its determinants within the Reich but because there have been changes, say, in the United States, should not seem any more remarkable than, say, a rise in the price of corn that is due to the state of foreign harvests.

It has not been easy to reconcile policy with the extension and combination of national markets into a world market. Stronger than the resistance encountered centuries ago by the development of the town economy into the national economy is that which the nineteenth and twentieth centuries have opposed to the further stage of development into a world economy. Nowadays there is nothing like the feeling of homogeneity which previously overcame regional interests; the pronounced emphasis upon national antagonisms which sets the keynote of modern policy would perhaps stand in the way of attempts at economic unification even if there were no interests to which these attempts might prove injurious. From the point of view of the producer, low prices seem to be the greatest of all evils, and in every state those producers who are unable to meet competition strive with all the means at their disposal to keep the cheap commodities