On the Value of Currency, and the Policies of the European Central Bank

On the Trading of Currencies as Commodities

The value of international currency is defined as the faith or speculation that the value of currency will increase. When the Western European countries maintained their own currency, usually indexing them to either a solid material, such as gold or silver, or to other currencies, their central banking policy was focused on domestic growth, as well as protecting against inflation and deflation. The consolidation of the various European currencies has resulted in the fate of one nation, such as France, becoming associated with that of a much poorer nation, such as Bulgaria.

            The recent economic crisis, beginning in 2007 and continuing through 2010, has been at least partially attributed to the values of currency. Jörg Bibow, in the article Europe’s Quest for Economic Stability, discusses key decision points of the European Central Bank (ECB). Bibow, writing in 2006, explains both strengths and weaknesses of the Eurozone banking model. The primary objective of the ECB, according to its founding charter, is to maintain price stability across the Eurozone.[1] Price stability, Bibow states, is “essentially a piece of Bundesbank nostalgia,” referring to the former German bank charged with maintaining price parity, and coordinating the now defunct erratic European Monetary System, from which the ECB’s framework is largely derived.[2]

As a matter of general policy, the ECB does not attempt any other ends aside from their primary mandate, only fostering interest in economic development and employment when the ECB views that engaging these ends will not interfere with price stability.[3]

On Adam Smith, the Inevitability of the Market Economy, and the Wealth of Nations

Eliyahu N Kassorla
Economic Principles of Adam Smith
W. Lesperance, Ph.D.

On Adam Smith, the Inevitability of the Market Economy, and the Wealth of Nations

Introduction
            Adam Smith, in Wealth of Nations, attempts to model ideal economic development using observations of history and European development.  Under the Wealth of Nations model, labor is an exchange for goods or services, which is then converted to currency as a proxy for direct barter. Smith further describes the progression from agricultural beginnings to market economies, and the resultant social organization that is causal to market forces – the differences between pastures and cities, wealth and poverty, and state and empire. The model of societal development that Smith advances is used to explain economic growth and trade relations. Smith, then, applies his findings of trade relations to those between the British Empire and the American colonies, leading him to the conclusion that overseas colonies are expensive, and are better served as independent nations. Smith’s works still have many vital lessons to teach both nations and international organizations, even after nearly two and a half centuries.

Final Grades for Fall 2010

Fall 2010 Final Grades

On Adam Smith, Natural Rights, and the Theory of Moral Sentiments

On Adam Smith, Natural Rights, and the Theory of Moral Sentiments

Eliyahu N Kassorla

Economic Principles of Adam Smith

W. Lesperance, Ph.D.        

Introduction

Liberal theory predicts that the outcomes of social development are increased rights of the individual, an advanced economy, and a system of justice that protects property and rights. John Locke explains how these rights are derived, while Adam Smith explains how these are inevitable consequence of human development. The works of John Locke and Adam Smith have created and shaped our modern definition of liberalism, and their works overlap in scope. The concept of natural rights, as explained by John Locke, was a new principle within the Scottish Enlightenment period. John Locke explains how individuals derive their basic rights, and these notions of liberalism would later influence Smith, who explains the relationship of society to the individual and the economy. Through the pairing of the Locke’s Two Treatises of Government and Smith’s Theory of Moral Sentiments, the reader is exposed to the idea that man creates his own rights, and the rights are a natural consequence of human development and economic advancement.