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The Real Meaning of the Real Bills Doctrine (revised Nov., 2018)

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  • Sproul, Michael

Abstract

The real bills doctrine asserts that money should be issued in exchange for short-term real bills of adequate value. Critics of this doctrine have thought of it as a means to make the money supply move in step with the production of goods, a task at which it supposedly fails. In this essay I explain that the real bills doctrine is actually a means to make the money supply move in step with the money-issuer’s assets. When viewed this way, I find that the real bills doctrine is an effective means to prevent inflation. More importantly, the real bills doctrine is a means to make the quantity of money grow and shrink with the needs of business, thus preventing money shortages and the resulting recessions.

Suggested Citation

  • Sproul, Michael, 2018. "The Real Meaning of the Real Bills Doctrine (revised Nov., 2018)," MPRA Paper 90012, University Library of Munich, Germany, revised 13 Nov 2018.
    • Handle: RePEc:pra:mprapa:90012
    as

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    References listed on IDEAS

    as
    1. Thomas J. Sargent, 1982. "The Ends of Four Big Inflations," NBER Chapters, in: Inflation: Causes and Effects, pages 41-98, National Bureau of Economic Research, Inc.
    2. Ball, Laurence & Mankiw, N. Gregory, 1994. "A sticky-price manifesto," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 127-151, December.
    3. Robert E. Hall, 1982. "Inflation: Causes and Effects," NBER Books, National Bureau of Economic Research, Inc, number hall82-1.
    4. Tooke, Thomas, 1844. "An Inquiry into the Currency Principle," History of Economic Thought Books, McMaster University Archive for the History of Economic Thought, number tooke1844.
    5. Michael Sproul, 1994. "The real Bills Doctrine," UCLA Economics Working Papers 712, UCLA Department of Economics.
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    More about this item

    Keywords

    real bills; backing; money; inflation; recession;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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