Monetary depreciation is in the political economy a process, with the money at value loses, thus the monetary value sinks. One calls this process also inflation. In modern national economies one cannot measure the monetary value however, because money serves as standard of value. Therefore the monetary value is usually measured by the purchasing power of the money. To it it is criticized that in such a way measured monetary value is not the market value of the money, which is determined like all market values by supply and demand.

Monetary value

For the determination of the monetary value one must differentiate first between a money system with a non-monetary wertmassstab and a money system with monetary value measure.

Monetary value with non-monetary wertmassstab

If the money not is wertmassstab, but serves it only as article of exchange, then one can measure the market value of the money as price expressed in the standard of value. Thus for example standard cattle served coins as wertmassstab, as article of exchange were used in the early Roman realm. Also in countries with high inflation one can observe that the money keeps its article of exchange function, but another property than wertmassstab is used. Thus for instance for a long time the US Dollar served as wertmassstab in Argentina, on which the restaurant units counted and planned, while with the peso further one paid. In Turkey also until a few years ago the US Dollar and the German Mark were regarded as standard of value, while the Turkish Lira was only used as article of exchange. The monetary value peso and the Lira could be based thus on the foreign exchange market over the dollar rate.

Monetary value with monetary wertmassstab

Usually money however serves as wertmassstab, therefore the monetary value in this case cannot be measured, on the contrary it is defined. In such an economy money illusion prevails. One makes do for the determination of the monetary value usually with the measurement of the purchasing power of the money, which one receives over the determination of the price level. In a currency if the monetary value is measured in such a way, then it concerns an index currency. The euro is therefore an index currency. In such a way determined monetary value is not however the market value of the money, which results from the demand for money and the money offer. The demand for money is the quantity of money, against which the restaurant units in a certain period flat sell goods. The money offer is the quantity of money, with which the restaurant units in one period flat to buy goods.

Currency stability

From the experiences of substantial monetary depreciations in hyperinflations and the negative consequences of a rising monetary value in deflations one drew the conclusion that the monetary value was to be kept as stable as possible. That results however already from it that money is to serve as unit, a unit is not not to change. That can make oneself clear one on the basis other units, for instance for the meter or the second. These were not defined once and to change itself thereafter no more. In an index currency the money applies as stable if its purchasing power does not change. After the Geldtheorie the monetary value is stable if the relationship of money offer and demand for money remains constant.

Causes of the monetary depreciation

To the Geldtheorie it comes to a monetary depreciation, if there is an offer in excess at money. Such an offer in excess can arise both from material-economical disturbances and as a result of disturbances in the money sector, what one can recognize in the quantity equation very well.

(\ mathrm {Handelsvolumen}) \ cdot (\ mathrm {price level}) = (\ mathrm {money supply}) \ cdot (\ mathrm {turnover rate})

Material-economical disturbances

If the overall economic demand for goods and thus the money supply, more exactly the money offer, rise without the Handelsvolumen, thus the material-economical goods offer, rises equally, then it comes to an offer in excess at money, the monetary value sinks. After the Second World War the goods offer and thus the demand for money were strongly in Germany by war destruction and disassembly. Since the money offer could be reduced not accordingly, it came again to an inflation thrust. Instead of the realm Marks the cigarette became the standard of value. Only with the currency reform of 1948 in the western zones the money offer in excess was terminated.

Disturbances in the money sector

If the money supply and thus the money offer are increased, without the demand for money rises, thus the offer at material goods in same extent, then the monetary value hyperinflations are frequent consequences of this mechanism sink. To the safety device of the claims for reparations against the German Reich 1923 occupied the Frenchmen the Ruhr district. The realm government called to the passive resistance and general strike. Therefore goods production sank. In order to remain further solvent, the government of the realm bank left increases notes to print, the money supply and money offer rose thus with reduced goods offer. Apart from the inflation also the foreign exchange rate of the realm Marks sank. Therefore had to be printed ever more moneys, in order to be able to carry out in gold currency to settling reparation payments. Finally a US Dollar cost 4.2 trillion realm Marks on the foreign exchange market.

Monetary policy for the fight of the monetary depreciation

After the dominant Geldtheorie it is the substantial task of the monetary policy to stabilize the monetary value. In an index currency like the euro above all the price level is to be stabilized. After the Geldtheorie however the stabilization of the price level cannot ensure in every case the currency stability. That can be clarified with simple examples:

In a national economy steige - e.g. by successful Kartellbildung - the acted value volume, whereby the quantity increase is under proportional. The demand for money rises. If the issuing bank pursues a policy of the price stability, it increases the money offer not accordingly and prevents so the higher sales volume, which sinks quantity of the removable goods, it comes to the recession. The monetary value - defines as market value of the money - rose, although the price level remained constant.

By a natural catastrophe decrease/go back the producible quantity, which production costs rise. The demand for money remains constant. It would come to price increases, which the issuing bank prevents however by decrease of the money supply, thus the money offer. Thus the monetary value rises. With stable monetary value the prices would have risen, which would not be removable quantity so strongly sunk, recession strengthened those.

Consequence: The price level can be stable also with not stable monetary value. The goal of price level stability makes adjusting monetary policy error-prone therefore, its use can the economic growth harm. The condition for currency stability is therefore not price level stability to compensate but changes of demand for money by appropriate changes of money offer.

Therefore try the issuing banks which money supply according to the economic growth to increase plus a however scientifically unfundierten "natural Teurungsrate", which amounts to in case of the EZB 2%. However as well known the prognoses of the economic growth are not always applicable. Therefore the central bank of the USA under Alan Greenspan did not pursue a strict goal of the price level stability, as it does the EZB, with which other goals such as economic growth only a Nebenrolle plays. The USA achieved a substantially higher economic growth than the euro zone. Also the Federal Bank had the task according to Federal Bank law still to secure "the currency ", while the EZB was to ensure price level stability after its statute as principal purpose.

Literature

Lechner, Hans's H.: Monetary policy: De Gruyter, 1988, ISBN 3-11-007412-5

Articles in category "Monetary depreciation"

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