4 - Supervising Monetary Balance

Summary

While the previous two chapters have focused on the demand for money (both subjective and aggregate), this chapter will look at the supply of money, or better, of money and credit, obviously from Del Vecchio's perspective, which in this case, too, does not lack originality.

We must start from two main simplifications that Del Vecchio attributed to the then most widespread monetary theories. The first was that theorists analysed a pure monetary regime without considering credit:

A perfect monetary regime without credit is not only an unreal system, but it admits a hypothesis that is not useful for building an economic theory of circulation … An economy without credit is not a first approximation, but it is an absolute falsification of real monetary facts.

It goes against history and experience to deny the role of credit, which does not follow monetary institutions but appears simultaneously with them. By means of credit, banks can sell monetary services even when money is unavailable. In other words, credit provides the same services as money.

Second, monetary theories at that time were static, with no concession made to time:

The fundamental error of pure monetary theory is to represent the monetary phenomenon as a scheme implying an instant and a unique act. On the contrary, the extension through time of the monetary phenomena is intrinsic to them and it cannot be disowned.