The argument for the institution of a world currency - Essay Example

The people who developed the theory believe barter trade being replaced by money exchange is not sufficient to determine a good monetary economy. However, barter trade is considered to be slow and cumbersome, features that are ease by money exchange system. Furthermore, the money system has changed the general functioning economic system; it has also changed the economy parties’ responsibilities. Money system has also enabled easy and fast financial analysis to certain whether the business is in a profit or loss trend.

The monetary theory is known to have emerged from critics of the high class businesses evaluation, the reason being that the neo-classical interpretation mode did not consider the small business owners also called the macro-groups. The distribution theory is not well appreciated and instead a theory which recognizes banks as they provide the best payment means as well as the firms’ power since it determines the best locations of important resources. France has got two major groups namely: Dijon school, headed by Bernard Schmitt together with Alvaro cencini.

The main problem associated with this group is re –examination of Keynesian based economy as well as international payment analysis. The other group is headed by Alain Parguez Paris based and Francois Poulon heads the Bordeaux branch. This group faces analysis difficulties related to its levels of activities, unemployment as well policies stabilizations. The general equilibrium theory is rejected by the author of this article as its more of the barter trade theory which is considered to be technical means of exchange.

The current macro-economics is also rejected due to the exogenous nature of the money stock. Origin and money nature is not well specified in the theory. The theory does not portray the banks and firms relationships instead rely on the unconvincing income distribution notion. The authors reveal further the difficulty in assessing the relationships between the circuit and the Post-Keynesian School. The limitations is associated with government deficits, the stock of money is either increased or reduced due to the transactions between the Central bank as well as Commercial banks.

The circuit theory is more of the Wicksellian theory considered to be credit economy based. Circuit theory tends to replace the monetory economy due the latter inconsistency in money commodity. Money commodity can be generally defined as the kind of money which can be created by any producer for himself. Commodity money resembles the slow and cumbersome barter trade hence token money informs of paper currency has gained preference. However it is worth noting that paper currency itself is not enough to define or determine monetary based economy.

For instance delivering goods to a customer who would pay later makes the buyer the debtor and you as the seller the creditor, such transaction is not monetary based but credit economy. There are three major vital conditions required for money based economy to exist. Money should be in token currency to limit chances of barter trade. Money should also be accepted by all parties i.e. the sellers and the buyer as a means of payment, this limits credit transactions. Agents making payments; the buyers should not be given privilege of seignorage when making payments in other words they should not lengthen their promises to pay for the goods they had earlier received.

The above named conditions can only be met if payments are made as promises of an extra party apart from the buyer and seller. Banks is the third party in the modern world. For