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.

The Monetary Systems of the World.

On reviewing the changes which have recently taken place in the currencies of the principal nations, we notice an unmistakable tendency to the adoption of gold as the measure of value, and the sole principal medium of exchange. This system is now adopted throughout Great Britain and Ireland, the Australian colonies, and New Zealand, the African colonies, and many of the minor possessions of the British empire. It has existed for some time in Portugal, Turkey, Egypt, and in several of the South American States, such as Chili and Brazil. It has been established by recent legislation in the German empire, and also in the Scandinavian kingdoms of Denmark, Norway, and Sweden, where a gold currency, and principal legal tender, of twenty-kroner pieces, is now being issued. Even Japan has imitated European nations, and introduced a gold coinage of twenty, ten, five, two, and one-yen pieces, the yen, being only three per mille less in value than the American gold dollar. The new fractional money of Japan is to consist of fifty, twenty, ten, and five-sen pieces in silver, the sen corresponding to a cent, and forming a token money at the fineness of eight parts in ten.

The double standard is still theoreticallv maintained in France, Italy, Belgium, Switzerland. Spain, Greece, and Roumania have also in recent years reformed their currencies in imitation of the French system, and must, I suppose, be considered as having a double standard. In the New World, Peru, Ecuador, and New Granada, profess to have the same system.

A few years ago a very considerable part of Europe might have been classed as retaining the ancient system of a single silver standard, with gold coins circulating, if at all, at varying rates, as commercial money. The whole of Germany, north and south, together with Austria, the Scandinavian kingdoms, and Russia, belonged to this group. Owing to the changes already mentioned, only Austria and Russia now clearly represent the silver standard in Europe, and even Austria has begun, since 1870, to coin gold pieces of eight and four florins, the same in weight and fineness as the French gold twenty- and ten-franc pieces. By an imperial decree, dated Vienna, 12th July, 1873, it is ordered that the French, Belgian, Italian, and Swiss gold pieces of twenty, ten, and five francs shall be internationally accepted in the Austro-Hungarian empire in the ratio of eight gold florins to twenty francs of gold coin of the other nations. Nevertheless the silver standard practically prevails over a large part of the world. The vast populations of India and China, Cochin China, the East Indian Islands, portions of Africa and the West Indies, Central America and Mexico, have a currency mainly consisting of silver coins, either rupees as in India, sycee bars as in China, or silver dollars as in many other places.

The gold standard has thus made great progress, and it will probably continue to progress. When the United States return to specie payments, they will certainly adopt gold, and Canada, whose currency can hardly be classed at all at present, must do the same. The Latin nations, having once abandoned the double standard in practice, are not likely to return to it, and Austria must follow. An extensive monetary change is hardly to be expected in Russia, although it is very remarkable that in the province of Finland, a part of the empire highly distinguished for intelligence and good education, Russia has positively admitted the franc system and its decimal subdivisions, the Finnish marc or quarter-rouble having the precise silver weight and value of the franc, lira, and peseta. A great step towards a future international coinage is thus effected. Like changes are impossible among the poor, ignorant, conservative nations of India, China, and the tropics generally. Hence we arrive, as it seems to me, at a broad, deep distinction. The highly civilized and advancing nations of Western Europe and North America, including also the rising states of Australasia, and some of the better second-rate states, such as Egypt, Brazil, and Japan, will all have the gold standard. The silver standard, on the other hand, will probably long be maintained throughout the Russian empire, and most parts of the vast continent of Asia; also in some parts of Africa, and possibly in Mexico. Excluding, however, these minor and doubtful cases, Asia and Russia seem likely to uphold silver against the rest of the world adopting gold. In such a result there seems to be nothing to regret.

Chapter XIII

Technical Matters Relating to Coinage

In this chapter I propose to consider several minor points relating to the construction and regulation of metallic currency. Although the first principles of money are simple, it is surprising how many little details have to be considered before we can attain the maximum of convenience. We have already discussed the selection of metals to be employed, the modes in which they may be combined into a system, the regulations as to issue, etc. In this and the following chapters we still have to consider the character of the alloy which is best adapted for coining; the most convenient sizes for coins; the method of counting large numbers of coins; the cost at which the currency is maintained; the advantages and disadvantages of international currency of money; the difficulty of selecting a single standard unit; the best series of multiples and submultiples of the unit. At the, most I cannot in this work attempt to give more than a slight sketch of the complicated questions of detail which have to be considered before making any change in the currency.