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Real Bills, The Gold Standard, and Central Bank Policy

Published online by Cambridge University Press:  11 June 2012

Robert Craig West
Robert Craig West
Affiliation:
Assistant Professor of Economics, University of Maryland
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Abstract

Students of the origins and accomplishments of government regulation of economic activity have open suspected that the laws on which regulation is based were addressed to problems and conditions of the past that no longer prevailed, or — what is worse — assumptions about the “real world” that are highly unrealistic. This is Professor West's main conclusion about the Federal Reserve Act of 1913, especially as regards its discount rate and international exchange policies.

Type
Articles
Information
Business History Review , Volume 50 , Issue 4 , Winter 1976 , pp. 503 - 513
Copyright
Copyright © The President and Fellows of Harvard College 1976

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References

1 This thesis is discussed in detail in West, Robert Craig, “Banking Reform and the Federal Reserve,” a MS to be published as a book by Cornell University Press, Ithaca, N.Y. in 1977.Google Scholar

2 In a time when demand deposits were rapidly becoming the largest part of the medium of exchange, writers were often not clear on whether it was the amount of currency they wished to regulate or the amount of credit.

3 One example is Warburton, Clark, “Monetary Control Under the Federal Reserve Act,” Political Science Quarterly, 61 (December, 1946)CrossRefGoogle Scholar and “Coordination of Monetary, Bank Supervisory and Loan Agencies of the Federal Government,’ Journal of Finance, 5 (June, 1950). For a complete discussion of the theoretical aspects of the real bills doctrine, see West, “Banking Reform,” Chapter 7.

4 Klein, Joseph J., “Commercial Importance of Single Name Paper,” Annalist, 3 (March 23, 1914), 361.Google Scholar

5 See Myers, Margaret, New York Money Market (New York, 1931) Chapter 15Google Scholar; Greef, Albert O., The Commercial Paper House in the United States (Cambridge, Mass., 1938), Chapter 2Google Scholar; Phillips, Chester A., Bank Credit (New York, 1921), Chapter 7Google Scholar; and Laughlin, J. L., “The Aldrich-Vreeland Act,” Journal of Political Economy, 16 (October, 1908), 489–513.CrossRefGoogle Scholar All of the above writers except Phillips agree that the cash discount system began with the Civil War. Phillips places it slightly later, around 1880.

6 Hughes, J. R. T., Fluctuations in Trade, Industry and Finance (Oxford, 1960), 256–274.Google Scholar

7 For an idea of some of these difficulties, see Sayers, R. S., Bank of England Operations, 1890–1914 (London, 1936).Google Scholar

8 Gregory, T. E., ed., Select Statutes, Documents and Reports Relating to British Banking, 1832–1928 (Oxford, 1929), vol. II, 336.Google Scholar

9 United States National Monetary Commission, Interviews on the Banking and Currency System of England, Scotland, France, Germany, Switzerland, and Italy (Washington, D.C.: GPO, 1910), 23.Google Scholar

10 Ibid., 29.

11 The gold points were the range within which the price of gold could fluctuate without causing gold to flow in or out. This range was primarily determined by transportation costs.

12 In an unpublished essay, J. R. T. Hughes has shown that these violations occurred even more often than Morgenstern thought.

13 United States National Monetary Commission, Interviews, 29.

14 Sayers, Bank of England, 119.

15 Economist, February 14, 1885, p. 186.

16 Willis, Henry Parker, The Federal Reserve (New York, 1915), 254.Google Scholar

17 See the Commercial and Financial Chronicle for April 30, 1932, pp. 3143–3144 and September 3, 1932, p. 1548.

18 Bloomfield, Arthur, Monetary Policy Under the Gold Standard, 1880–1914 (New York, 1959).Google Scholar

19 Keynes, John Maynard, A Tract on Monetary Reform (London, 1971 [1923]), 155.CrossRefGoogle Scholar