PART III. THE VALUE OF MONEY

PART III. THE VALUE OF MONEY

CHAPTER XX RECAPITULATION OF POSITIVE DOCTRINE

Recapitulation of constructive theses of Parts I and II, and program of Parts III and IV387-396

CHAPTER XXI THE ORIGIN OF MONEY, AND THE VALUE OF GOLD

Problem stated397-401

Value vs. saleability: degrees of saleability; theory of saleability; "buying price" vs. "selling price"; indirect exchange in barter economy; development of commodity of superior saleability into money401-406

Money never unique406-407

Origin of gold money: ornament; store of value; social prestige of prodigality and of ornament; love of approbation, sex-impulse, and competitive display; elastic value-curve of gold; industrial employments of gold407-413

Distribution of wealth and power, and value of gold413-416

CHAPTER XXII THE FUNCTIONS OF MONEY AND THE VALUE OF MONEY

Classification417-418

Measure of values (standard of value) distinguished from medium of exchange; former does not add value to money metal, latter does418-424

Reserve function424

Money as "bearer of options"; distinguished from store of value; the dynamic function of money par excellence; explanation of low rates on call loans, and short loans, and low yield of high grade bonds, which share "bearer of options" function; "pure rate" of interest vs. "money rates": Austria; the New York money market424-432

Legal tender; the Staatliche Theorie432-436

Standard of deferred payments; which functions add to value of money metal?436

Relation of money rates to capital value of money436-442

Agio when coinage is restricted: India vs. Western World442-450

Equilibrium of gold in arts and gold as money: difficulties of marginal analysis; the money-market phenomena450-458

CHAPTER XXIII CREDIT

Analysis rather than definition: "futurity" not essence of credit; credit part of general value system; stocks as credit instruments; juridical and accounting phases459-462

Confidence; involved in general value phenomena as well as credit; social psychology of confidence; contagions; influence of centers of prestige; nothing unique in credit; selling vs. borrowing462-469

Definition of credit; credit vs. credit transaction; credit and exchange; bulk of credit grows out of dynamic conditions469-474

Functions of credit; increasing saleability of non-pecuniary wealth; corporate organization; limits of credit expansion475-478

Consideration of objections: that personal loans do not rest on wealth; public loans; that value behind loan would not exist if loan were not made478-484

Schumpeter's "heresies"; his view of the function of the banker: "dynamic credit"; America vs. Continental Europe484-488

Peculiarities and functions of bank credit; technique of banking: capital; assets; reserves; "liquidity"; money market488-496

CHAPTER XXIV CREDIT—BANK ASSETS AND BANK RESERVES

Traditional view that liquid commercial loans normal and dominant type of bank asset disproved; cannot exceed 11½ per cent of assets of American banks; analysis of bank assets: "other loans and discounts"; stock collateral loans; loans on "other collateral security"; stocks and bonds held by banks; classes of banks; various combinations; excluding real estate loans, more than half of credit extended by State and national banks and trust companies is to stock market; rapid development of stock collateral loans: New York; Europe498-512

Activity of different types of loans: banking assets get liquidity chiefly from stock market, and from produce speculators512-516

Credit extended to Wall Street not at expense of ordinary commerce; country banks and Wall Street516-518

Federal Reserve Banks should rediscount stock collateral loans; "Money Trust" a trust in financing corporations, not ordinary commerce; panics and Federal Reserve System520

Quantity theory, putting all exchanges on a par, grotesque: volume of trade and prices in the stock market520-523

Direct and indirect financing of corporations by banks; "margin dealer" as "banker"523-526

Adam Smith's view of banker's functions, and of safe bank loans526

Correct on basis of facts of his day, but corporate organization and organized stock market have made smelting house as liquid as consumers' goods527

Division of labor in banking: America vs. Germany527-528

Agriculture in money market528-529

Reserve problem: special case of problem of liquid assets; many flexible substitutes for cash529-532

Causal relation runs from deposits to reserves; gold production and reserve-ratio532-535

No static law or "normal ratio" possible; reserve function entirely dynamic function; reserve not needed in "static state"; illustrated by London money market; "ideal credit economy"536-544