tailieunhanh - History of Economic Analysis part 74

History of Economic Analysis part 74. At the time of his death in 1950, Joseph Schumpeter-one of the major figures in economics during the first half of the 20th century-was working on his monumental History of Economic Analysis. A complete history of humankind's theoretical efforts to understand economic phenomena from ancient Greece to the present, this book is an important contribution to the history of ideas as well as to economics. | History of economic analysis 692 currency pro-vided by bankers is all issued in the way of loans Principles Book III ch. 23 4 the lending by banks qua creation of currency acts upon prices and not on the interest rate. The recognition of the currency-creating power of banks which Tooke denied in the Inquiry is as interesting as the recognition of the relation so strongly emphasized in the United States between lending and repaying on the one hand and expansion and contraction of the circulating medium on the other in which relation some of the more naive American currency doctors saw perhaps see the source of all sorts of evil. made nothing of all this as will presently be pointed out again. Still nothing of it escaped his attention or should have escaped the attention of his readers. Second Thornton knew of course perfectly well that the inflationary process he described presupposes an uncompensated expansion of lending. If the increase in loans is compensated for example by saving it will not start that process. But preoccupied as he was with the operation of paper credit in wartime he did not bother about this and so he failed to state explicitly the condition for stable equilibrium in the market for loanable funds which reads in Wicksell s formulation of 1898 that loans should equal people s voluntary savings. To some extent at least this lacuna was filled by Joplin 15 though he got still less credit for it than he got for having anticipated the principles of banking policy that so far as the notes of the Bank of England are concerned were carried into effect by Peel s Act. Like Ricardo he strongly disapproved of the power of banks to create by their lending net additions to the total stock of means of payments but he did not deny its existence this was done by others and pointed out that if it were done away with and if banks were accordingly prevented from increasing the total of their loans beyond the amount of the public s current savings then a .