The Real Meaning of the Real Bills Doctrine (revised Nov., 2018)

Michael Sproul

MPRA Paper from University Library of Munich, Germany

Abstract: The real bills doctrine asserts that money should be issued in exchange for short-term real bills of adequate value. Critics of this doctrine have thought of it as a means to make the money supply move in step with the production of goods, a task at which it supposedly fails. In this essay I explain that the real bills doctrine is actually a means to make the money supply move in step with the money-issuer’s assets. When viewed this way, I find that the real bills doctrine is an effective means to prevent inflation. More importantly, the real bills doctrine is a means to make the quantity of money grow and shrink with the needs of business, thus preventing money shortages and the resulting recessions.

Keywords: real bills; backing; money; inflation; recession (search for similar items in EconPapers)
JEL-codes: E5 E50 (search for similar items in EconPapers)
Date: 2018-11-13, Revised 2018-11-13
New Economics Papers: this item is included in nep-cba and nep-mac
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