Critical comments on the views of Austrian School on paper money (in Persian)

Hossein Doroodian () and Hassan Sobhani ()
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Hossein Doroodian: Iran
Hassan Sobhani: Iran

The Journal of Planning and Budgeting (٠صلنامه برنامه ریزی و بودجه), 2015, vol. 20, issue 1, 137-160

Abstract: Relinquishing precious metal coins and replacing it with paper money is an Historical development in modern economies. Some liberal monetary theorists (Austrian school) rejecting paper money have emphasized the need to return to a metallic currency (or gold standard) and the rule of market in money production. The main vice of paper money is that it is not consequence of the spontaneous market (rational maximizing benefits by individuals) and government has played a major role in its development. rejecting paper money from the perspective of moral and distributional concerns, They argue that paper money is not better than metallic ones in terms of utilitarianism because Every certain amount of money is applicable to any level of production through adjustment of price level. In our assessment, We have shown argumentative mistakes of critics of paper money. First, The market origins of the precious metals to become money is doubtful. Second, government is the only entity able to meet the informational challenges of precious metals (in terms of grade and purity). Third, If the supply of money is assigned to the market, negative distributional effects will be felt in other ways. Fourth, In all systems, both paper money and metallic money, accepting Common currency is rooted in " Reliance on public acceptability " rather than the intrinsic value. Fifth, The precious metal coins is possible to be debased as well. Sixth, fixed number of money and deflation leaves recessional impacts on a growing economy. The result is that government has the vital and inevitable role in stability of the monetary system. Thus The government must engage in responsible management of money to organize its productional and distributional implications in the best way possible.

Keywords: Paper Money; Inflation; Gold; Market; State; Austrian School (search for similar items in EconPapers)
Date: 2015
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