The Online Library of Liberty

A project of Liberty Fund, Inc.

• Preface
• Chapter I: Barter
• Want of Coincidence In Barter.
• Want of a Measure of Value.
• Want of Means of Subdivision.
• Chapter II: Exchange
• Utility and Value Are Not Intrinsic.
• Value Expresses Patio of Exchange.
• Chapter III: The Functions of Money
• A Standard of Value.
• A Store of Value.
• Separation of Functions.
• Chapter IV: Early History of Money
• Currency In the Hunting State.
• Currency In the Pastoral State.
• Articles of Ornament As Currency.
• Currency In the Agricultural State.
• Manufactured and Miscellaneous Articles As Currency.
• Chapter V: Qualities of the Material of Money
• 1. Utility and Value.
• 2. Portability.
• 3. Indestructibility.
• 4. Homogeneity.
• 5. Divisibility.
• 6. Stability of Value.
• 7. Cognizability.
• Chapter VI: The Metals As Money
• Iron.
• Lead.
• Tin.
• Copper.
• Silver.
• Gold.
• Platinum.
• Nickel.
• Other Metals.
• Alloys of Metals.
• Chapter VII: Coins
• The Invention of Coining.
• What Is a Coin?
• Various Forms of Coins.
• The Best Form For Coins.
• Coins As Works of Art.
• Historical Coins.
• The Royal Attribute of Coining.
• Chapter VIII: The Principles of Circulation
• The Standard Unit of Value.
• Coin, Money of Account, and Unit of Value.
• Standard and Token Money.
• Metallic and Nominal Values of Coins.
• Legal Tender.
• The Force of Habit In the Circulation of Money.
• Gresham's Law.
• Extension of Gresham's Law.
• Chapter IX: Systems of Metallic Money
• Currency By Weight.
• Unrestricted Currency By Tale.
• Single Legal Tender System.
• Multiple Legal Tender System.
• Composite Legal Tender.
• Chapter X: The English System of Metallic Currency
• English Gold Coin.
• English Silver Coin.
• English Bronze Coinage.
• Deficiency of Weight of the English Gold Coin.
• Withdrawal of Light Gold Coin.
• Supply of Gold Coin.
• Supply of Silver Coin.
• The Royal Mint.
• Chapter XI: Fractional Currency
• Billon Coin.
• Composite Coin.
• Bronze Coin.
• English Bronze Coin.
• Weight of the Currency.
• Nickel, Manganese, Aluminium, and Other Metals and Alloys.
• Chapter XII: The Battle of the Standards
• The Double Standard.
• Compensatory Action.
• The Demonetization of Silver.
• Disadvantages of the Double Standard.
• The Monetary Systems of the World.
• Chapter XIII: Technical Matters Relating to Coinage
• The Alloys In Coin.
• The Size of Coins.
• The Wear of Coin.
• Methods of Counting Coins.
• Cost of the Metallic Currency.
• Chapter XIV: International Money
• Advantages of International Money.
• Disadvantages of International Money.
• Conflict of Monetary Systems.
• International Monetary Negotiations.
• Decimalization of English Money.
• The Future American Dollar.
• German Monetary Reform.
• Systems of Fractional Money.
• Final Selection of the Unit of International Money.
• Chapter XV: The Mechanism of Exchange
• Progressive Development of the Methods of Exchange.
• Representative Money.
• Cheque and Clearing System.
• Chapter XVI: Representative Money
• Early History of Representative Money.
• Reasons For the Use of Representative Money.
• Inconvenience of Metallic Money.
• The Weight of Currency.
• Saving of Interest.
• Chapter XVII: The Nature and Varieties of Promissory Notes
• Specific Deposit Warrant.
• General Deposit Warrant.
• Difference Between a Special and a General Promise.
• Pecuniary Promissory Notes.
• Principles of the Circulation of Representative Money.
• Chapter XVIII: Methods of Regulating a Paper Currency
• 1. Simple Deposit.
• 2. Partial Deposit.
• 3. Minimum Reserve.
• 4. Proportional Reserve.
• 5. Maximum Issue.
• 6. Elastic Limit.
• 7. Documentary Reserve.
• 8. Real Property Reserve.
• 9. Regulation By the Foreign Exchanges.
• 10. Free Issue System.
• 11. The Gold Par Method.
• 12. Convertibility By Revenue Payments.
• 13. Deferred Convertibility.
• 14. Inconvertible Paper Money.
• Over Issue of Paper Money.
• Want of Elasticity of Paper Money.
• Chapter XIX: Credit Documents
• Measurement of Credit.
• Bank-notes.
• Cheques.
• Bills of Exchange.
• Interest-bearing Documents.
• Definition of Money.
• Chapter XX: Book Credit and the Banking System
• Single Bank System.
• System of Two Banks.
• Complex Bank System.
• Branch Bank System.
• Bank Agency System.
• London Agency System.
• Country Clearing System.
• Chapter XXI: The Clearing-house System
• Transaction of Business At the London Clearing House.
• Manchester Clearing House.
• New York Clearing House.
• Extension of the Clearing System.
• Advantages of the Cheque and Clearing System.
• Proportion of Cash Payments.
• Cases to Which the Clearing System Is Inapplicable.
• Chapter XXII: The Cheque Bank
• Relation of the Cheque Bank to Other Banks.
• The Cheque Bank As a Monetary Agent.
• Payment of Wages By Cheques.
• The Cheque Bank As a Savings Bank.
• Results of the Cheque Bank System.
• Chapter XXIII: Foreign Bills of Exchange
• Origin and Nature of Bills of Exchange.
• Trade In Foreign Bills.
• The World's Clearing House.
• Centralization of Financial Transactions In London.
• Representation of Foreign Bankers In London.
• Chapter XXIV: The Bank of England and the Money Market
• Expansion of Trade.
• Competition of Bankers.
• The Bank Charter Act of 1844.
• The Free-banking School.
• Possibility of Over-issue.
• The Right of Coining Bank Notes.
• Scotch and English Banking.
• Cash Reserves of Bankers.
• Remedy For the Sensitiveness of the Money Market.
• Chapter XXV: A Tabular Standard of Value
• Corn Rents.
• A Multiple Legal Tender.
• Lowe's Proposed Table of Reference.
• Poulett Scrope's Tabular Standard of Value.
• Difficulties of the Scheme.
• Chapter XXVI: The Quantity of Money Needed By a Nation
• Quantity of Work to Be Done By Money.
• Efficiency of the Currency.
• Effects of the Cheque and Clearing System.
• Conclusion.

Withdrawal of Light Gold Coin.

Some steps must soon be taken to remedy the increasing deficiency of weight of the gold coinage described above. The withdrawal may no doubt be effected in several ways. One method would be for the Queen to issue a proclamation calling in and prohibiting the circulation of all gold coins more than twenty or twenty-five years old, as it is mostly the older coins which are deficient in weight. Another method would be to oblige all revenue officers, postmasters, and others, under the control of government, to weigh all sovereigns presented to them. If necessary, the bankers of the kingdom generally might be obliged to weigh coin. But it is obvious that great trouble and inconvenience would arise from such measures. The progress of the post-office savings banks would be imperilled if every depositor of a pound were liable to be charged 2 per cent. for lightness. Considerable excitement and trouble followed the issue of the last proclamation of June, 1842, calling in light gold. To make the last holder of a coin pay for the whole cost of its circulation during thirty or forty years past, leads in many cases to gross injustice. The present law tends to throw the loss upon the poor, who have usually only one or two sovereigns at a time to pay, whereas rich people, having many, can avoid paying light gold at offices where it will be weighed.

I hold that the only thorough remedy is for the government to bear the loss occasioned by the wear of the gold, as it already bears that of the silver currency. The Bank of England should be authorized to receive all sovereigns showing no marks of intentional damage or unfair treatment at their full nominal value, on behalf of the mint, which should recoin the light ones at the public expense. No one would then have any reason for keeping the light gold away from the bank; the currency would soon be purged of the illegally light coins, and would thenceforth be kept up strictly to the standard weight; all loss of time and trouble would be saved to individuals, a consideration which we should not lose sight of; and, lastly, no injustice would be done, as at present, to the last holder of a light sovereign.

In opposition to such a proposal it is usually urged, that encouragement would be given to the criminal practice of sweating or otherwise diminishing the weight of the currency. I answer that, on the contrary, it is the present state of things which gives the best opportunity for illegal practices, because it renders the population perfectly accustomed to handling old and worn coins. No one now actually refuses any gold money in retail business, so that the sweater, if he exists at all, has all the opportunities he can desire. I have met with sovereigns deficient to the extent of four to five grains, or 8d. to 10d., but they nevertheless circulate. If under a better system the gold currency consisted entirely of full-weight, fresh coins, with sharp, new, perfect impressions, attention would quickly be drawn to any coin which appeared to be worn or ill-treated in any degree. As the currency, too, would be constantly passing through the automaton weighing-machines of the Bank of England, without previously undergoing the operation of garbling by bullion brokers, sweated coins, if they existed at all, would soon be detected; whereas, according to the present system, the bank authorities have no opportunity of examining the whole coinage. It is the present state of things, then, which gives the best opportunity for tampering with the currency, though there is no evidence to show that fraudulent practices are carried on to any appreciable extent. Under the proposed new system such practices would be rendered almost impossible.