Tribune. In 1842, the British politician William Gladstone (1809-1898), then Member of Parliament, observed that “Love itself has not made more people lose their heads than ruminations on the essence of money”. Over the centuries, the theories of money have certainly become more and more sophisticated, but the fact remains that the same debates around “good” and “bad” money, the respective roles of money. The state or the market, its “active” influence, or on the contrary its neutrality, on prices or employment, come back again and again.
From the XIVe century, the philosopher Nicole Oresme (circa 1320-1382) protested against the manipulation of currencies and affirmed the need for stability and confidence in their value. A thesis taken up in the XVIe century by Jean Malestroit (1566), who attributes the rise in prices to these manipulations, while Jean Bodin (around 1529-1596) answers him in 1568, in what will be called (already!) “The currency controversy”, that it is the influx of precious metals that is responsible, laying the foundations for what will later be called the quantitative theory of money.
In the following century the theses of the mercantilists triumphed, for whom a surplus trade balance of a country, by accumulating money there, had positive consequences on employment and on the low level of interest rates, which encouraged activity. Money would therefore have an “active” role, but it only becomes so if it is invested, including by being re-exported in order, for example, to acquire raw materials, and not hoarded in State coffers.
In the XVIIIe century, authors like Richard Cantillon (1680-1734) and David Hume (1711-1776) are still divided between quantitativism, explaining that in the long term the doubling of the quantity of money makes the prices double, and an active vision of money encouraging short-term growth and employment.
Triumph of quantitativism
But for Adam Smith (1723-1790), money is used above all for exchanges, it is “The big wheel of circulation” and therefore cannot be too abundant: it is favorable to the moderate boom in banknotes (banknotes), which spared metallic currencies and favored expansion, but feared excess issuance, the cause of banking crises.
During the wars of the French Revolution, the suspension of the convertibility of banknotes is the occasion of a controversy between the partisans, quantitativists, of the “Currency principle” like David Ricardo (1772-1823) or Henry Thornton (1760-1815), and those of “Banking principle” (Thomas Tooke, 1774-1858) for whom, following Adam Smith, there can be neither lasting inflation nor deflation if the banking system is allowed to adapt freely to “Business needs”.
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