The lack of a viable currency in colonial New England is apparent, as is the restriction of trade due to the lack of monies. While an abundant supply of specie could have remedied this problem it lacked the ability to create more money in the way that colonial paper bills did. Marx’s generalized system will be used to demonstrate the process in which this occurred.
Marx’s generalized system, which can be represented as m-m-c…p…c’-m’-m’’. The first portion (m-m) represents the loan from the institution to the industrialist, next (m-c), which represents the purchasing of commodities by the industrialist, which are used to produce commodities (c…p…c’) where (c’) represents the newly produced commodities with a higher value. These commodities are sold and the resulting output is (m’) however the loan plus interest (m’’) must be repaid to the loaner. If the industrialist is successful m’ will be larger than m’’ and he will receive m’-m’’ as his profits while the loaner will receive m’’. (Wray, 1990, pp.110-111). Therefore, the original m or the loaned amount has created a higher-level output or m’ which includes both m’ of the loaner and m’-m’’ in the hands of the industrialist.
Therefore, the paper money loaned not only served as a primary injection into the money supply but also created additional output in the form the …show more content…
A Massachusetts bill’s value was equal to that of Rhode Island, or Connecticut and vice versa. Hence the money supply was an aggregate of four colonies, and for one colony to control the money supply was nearly impossible. This was not the case in the middle colonies, and when Pennsylvania first issued their fiat money in 1723 a remarkably stable currency prevailed all the way up until the currency act of
Marx’s generalized system, which can be represented as m-m-c…p…c’-m’-m’’. The first portion (m-m) represents the loan from the institution to the industrialist, next (m-c), which represents the purchasing of commodities by the industrialist, which are used to produce commodities (c…p…c’) where (c’) represents the newly produced commodities with a higher value. These commodities are sold and the resulting output is (m’) however the loan plus interest (m’’) must be repaid to the loaner. If the industrialist is successful m’ will be larger than m’’ and he will receive m’-m’’ as his profits while the loaner will receive m’’. (Wray, 1990, pp.110-111). Therefore, the original m or the loaned amount has created a higher-level output or m’ which includes both m’ of the loaner and m’-m’’ in the hands of the industrialist.
Therefore, the paper money loaned not only served as a primary injection into the money supply but also created additional output in the form the …show more content…
A Massachusetts bill’s value was equal to that of Rhode Island, or Connecticut and vice versa. Hence the money supply was an aggregate of four colonies, and for one colony to control the money supply was nearly impossible. This was not the case in the middle colonies, and when Pennsylvania first issued their fiat money in 1723 a remarkably stable currency prevailed all the way up until the currency act of