ECON 001A Lecture Notes - Lecture 19: Money Supply, Centrality, Utopia
19 May 2020
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Document Summary
Polanyi saw the gold standard as an extraordinary intellectual achievement; an institutional innovation that put the theory of self-regulating markets into practice, had the power to make self-regulating markets appear to be natural. Market liberals wanted to a world with maximal opportunities to extend the scope of markets internationally; freely engage in transactions with each other based off of three simple rules for the perfect mechanism for global self-regulation. Each country would set the value of its currency in relation to a fixed amount of gold and would commit to buying and selling gold at that price. Each country would base its domestic money supply on the quantity of gold that it held in its reserves, its circulating currency would be backed by gold. Each country would endeavor to give its residents maximal freedom to engage in international economic transactions. Without the heavy hand of government, each nation"s international accounts would reach a balance.
