Những người tham gia hệ thống thu thập bảng Anh từ các công nhân ở London, và lời hứa để cung cấp rupee cho các gia đình của họ tại Thành phố Hồ Chí Minh. Rupee của những người mong muốn nhận được tiền của Pakistan được sử dụng để thanh toán các gia đình, và đồng bảng Anh thu thập ở London trở thành có sẵn cho họ cho bất cứ điều gì sử dụng họ thích. | 16 - Adjustment with fixed rates 353 very little ability to manage its own monetary affairs. Although they were not followed precisely 2 the formal system is based on two rules 1 National currencies are to be backed rigidly by gold that is the stock of base money is determined solely by the stock of gold held by the government or the central bank. The central bank therefore has no monetary policy discretion it must create a money supply that is based on its holdings of gold. 2 Gold is to be the only foreign exchange reserve asset that is payments deficits cause a parallel loss of gold and vice versa. These two rules mean that the domestic money supply is determined by the balance of payments and by the gold-mining industry . A payments surplus causes an inflow of gold and a parallel increase in the stock of base money. A deficit causes gold to flow out and the money supply must fall proportionally. This is analogous to the monetarist world described in the previous chapter except that sterilization cannot occur. The money supply must be allowed to fall when a country has a payments deficit and to rise in the case of a surplus. These changes in the money supply produce payments adjustment through three linkages. In the case of a payments deficit the resulting decline in the money supply 1 raises domestic interest rates which attracts capital inflows thereby improving the capital account of the balance of payments 2 puts downward pressure on the price level thereby improving price competitiveness. Exports should rise and imports fall improving the current account 3 puts downward pressure on economic activity and on real incomes. Imports should fall by the marginal propensity to import times the decline in domestic incomes. A reduction in the money supply is recessionary and discourages imports thereby improving the current account. The first two of these linkages are not particularly difficult or painful the third however is unpleasant or worse for deficit countries.
