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With the money supply thus varying in accordance with the state of the balance of payments, currency overissue would be totally suppressed and domestic prices would vary in lockstep with world prices.
An influential group of classicals known as the strict bullionists arose to attribute these inflationary phenomena solely to the redundancy of money and to accuse the Bank of taking advantage of the absence of a convertibility constraint to overissue the currency.
In other words, a monetary overissue occurs as "the market borrows unduly much from the bank and becomes too abundantly supplied with means of payment" (517).
How well does the banking industry foster economic growth, intermediate efficiently between lenders and borrowers, maintain stability of prices or exchange rates, avoid problems of fraud and counterfeiting, prevent the overissue of credit, and discourage bank runs and panics?
Then the next issue would again be whether such a system--with competing private money providers instead of a central authority--would be immune to this problem and also the temptation for private suppliers to overissue.
In short, inflationary overissue is impossible provided money is issued on loans made to finance real, rather than speculative, transactions.
And, while preventing external drains by avoiding persistent inflationary overissue of paper money that cause them, the LLR had to hold a large enough gold reserve to withstand those temporary and self-reversing external drains caused by real shocks to the balance of payments.
Consisting of at least seven propositions, the mercantilists' contra-quantity theory held that (1) money stimulates trade, (2) real cost-push forces determine the price level and the inflation rate, (3) the interest rate is a purely monetary variable whose level, high or low, is proof of the scarcity or abundance of money, (4) idle hoards absorb any cash not employed in driving trade, (5) causality runs from prices and real activity to money such that the money stock passively adapts to the needs of trade, (6) overissue is impossible when the money stock is backed by the nominal value of real property, and (7) discretion outperforms rules in the conduct of monetary policy.
The Bank, they said, had simply taken advantage of the suspension of convertibility to generate an inflationary overissue of the currency.
In making the case for the checks and balances of a federal form of government, James Madison and others pointed to the overissue of paper money as an example of abuse of unrestrained government power.
Party strategists believe Labour will be able to exploit differences between Mr Cameron and his newpeer overissues such asmaking allowances for drug addicts conditional on them undergoing rehabilitation and a requirement for lone parents of children aged under five to prepare for work, which Sir David has backed.
51: 17) pointed out, "borrowers will always exist, so that there can be no limit to their overissues.
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