The monetary veil theory believes that the essence of commodity circulation activities is the theoretical system of commodity exchange. The monetary veil theory believes that money itself has no value, but is only a medium for exchange. Therefore, the function of money can be attributed to the means of circulation. At the same time, the monetary economy does not have a substantive impact on the physical economy.
When the society believes that money itself has value, it will produce a certain monetary illusion, that is, it ignores the changes in the real purchasing power of money and the impact of inflation on the real purchasing power of money under monetary policy. The purpose of the monetary veil theory is to reflect that money itself does not have the power of economic change, but only changes with the change of the physical economy, To solve the problem of the society's wrong judgment of the value of money.
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What is the theory of monetary veil
The "monetary veil theory" was first advocated by Say Jean Baptiste, John Stuart mill, Gustav Cassel and others.
This theory holds that the exchange of money and goods is essentially the exchange of goods and goods, and money itself has no value. It is just a convenient means of exchange, which does not have any substantive impact on the economy. Money is like a veil covering the real economy. When people cannot see through the veil and think that money itself has value, they will have the illusion of money. Money only changes with the change of the real economy, and it is not the driving force of economic change itself. The activities of investigating economic power must remove the veil that covers the real economy - money.
Both classical economists and neoclassical economists believe that money has no substantive effect on the economy, that is, it does not affect the real output level. The "money veil theory" believes that money is like a veil on the face for the real economic process, and its changes will not cause changes in real economic sectors such as savings, investment, economic growth, etc., except for the impact on prices. If, under certain conditions, the money supply also has the effect of increasing real output in the short term, from a long-term perspective, the increase of money must cause currency depreciation when the actual purchasing power remains unchanged. When the price increases to a certain level, when the nominal purchasing power and the comfort of surplus money in circulation disappear, people's demand will disappear, The level of production supply will remain unchanged.
What is the core point of classical monetary quantity theory? What is the basic basis
The classical quantity theory of money is a theory that discusses the relationship between money demand and nominal national income. At the end of the 19th century and the beginning of the 20th century, the quantity theory of money was developed and perfected by classical economists such as I. Fisher, A. Marshall and A.C. Pigon.
This theory believes that money itself has no intrinsic value, but only acts as a medium of exchange. Money is just a veil covering the real economy and has no real impact on the economy. This is the famous "monetary veil theory".
Basic basis
Transaction equation: M * V=P * Y
T is the number of products or services traded in currency in a year
Income equation: M × V=P × Y
Where: M=quantity of money, V=velocity of money circulation, P=price level, Y=total output
Fisher believes that the velocity of money circulation is quite stable in the short term.
Since Y and V are considered to be constant in the short term, it is concluded that:
The change of price level only results from the change of money quantity
