Until about 1900, leading economists demanded that a central bank may only put into circulation as much means of payment as its stock of precious metals. This rules out the possibility of adjusting the money supply, for example, to changes in the economic situation (business cycles; business cycles) or non-economic influences (such as natural disasters) by means of a corresponding central bank policy. – The currency theory is based on the view that the value of money depends primarily on the quantity or value of precious metals held by a central bank, i.e. prices are mainly determined by the amount of money in circulation. – See anti-Gresham’s law, banking theory, chrysocracy, chrysomania, one-third coverage, money, private, Peel’s bank act, currency, tied, Zettelbank, cyclicality.
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