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.

Supply of Silver Coin.

On account of the absurd misapprehensions recently existing as to the scarcity of silver money, and the supposed right of private individuals to demand the coinage of silver, it may be well to describe exactly how the supply of silver coin is legally regulated and practically carried out. There is no law, statute, or common, which gives any private person, company, or institution, the right to take silver to the mint, and demand coin in exchange. Thus it is left in the hands of the Treasury and the mint to issue so much and such denominations of silver coins as they may think needful for the public service. This state of the law is perfectly right; because, as the silver coins are tokens, they cannot be got rid of by melting or exportation at their nominal values. If individuals were free to demand as much silver coin as they liked, a surplus might be thrown into circulation in years of brisk trade, which in a subsequent year of depressed trade would lie upon people's hands.

Practically speaking, the mint is guided in the supply of silver coin by the Bank of England, not because this bank has by law any special powers, privileges, or duties in the matter, but because, in acting as the bank of banks, and the bank of government departments, it has the best opportunities of judging when more coin is wanted. Not only do all the London bankers draw silver coin from the Bank of England when they need it, but the same is done directly or indirectly by all the other bankers in the kingdom. A deficiency of silver coin in any county is shown by the stock of the local bankers running down. They replenish their stocks either from the nearest branch of the Bank of England or from their London agents, who again draw from the Bank of England. At other times or places, the bankers tend to accumulate a surplus of silver coin. Some banks in a large town may happen to have accounts with many shopkeepers, butchers, brewers, cattle-dealers, or dealers of one kind or another, who deposit silver coin in large quantities. Other banks may be largely drawn upon by manufacturers for the payment of wages, and may suffer from a deficiency of silver coin. It is a common practice, therefore, for bankers in any locality to assist each other by buying or selling superfluous silver coin as the case may require. If a superfluity of coin, however, cannot be got rid of in this way, it may be returned to the Bank of England or one of its branches. This bank indeed is in no way bound to provide or receive large sums in silver, and it therefore usually makes a small charge of about five shillings per hundred pounds to cover the trouble and risk. In consideration of this charge the bank bears the cost of transmission by railway, examines the coin for the detection of base pieces and the withdrawal of worn coin—which latter it sends to the mint for recoinage, and acts in general as the agent, of the mint.

Having the business so much in its hands, it is obvious that the department of the bank which manages the receipt and issue of silver coin can judge accurately when a fresh supply of coin is wanted. Before the stock runs too low notice is given to the mint, and money is usually advanced to the Master that he may purchase silver bullion for coinage. Under this system it is almost impossible for a deficiency of currency to arise without becoming known to the mint, and if, two or three years ago, the supply could not be made equal to the sudden demand, it was because the mint was not supplied by government with machinery adequate to the growing wants of the country. The existing system, in short, seems to be as nearly perfect as can be desired, provided that the mint be rebuilt and organized in such a manner as to enable it to meet any demand which the fluctuations of trade may occasion.