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 Alloys in Coin.

Although we commonly speak of money as consisting of gold or silver, the coins actually used contain alloys either of silver and copper, or of gold and copper, or of gold, silver, and copper. Money struck in nearly pure gold has indeed been issued both in early and recent times, and among such gold coin may be mentioned the ancient bezant, the recent Austrian ducat, containing 986 parts of gold in 1000, the six-ducat piece of Naples, containing 996 parts, or the Tuscan sequin, which is said to be almost pure gold, namely, 999 parts in 1000. Pure gold and silver are, however, soft metals, so that even if they were found naturally in the pure state, it would be desirable to add copper, which communicates hardness and reduces very much the abrasion of the coins. The proportion of copper to be adopted has been a matter of frequent discussion, and is determined partly on historical, partly on scientific grounds.

The exact alloy employed in England appears to have been decided by the system of weights used. Silver was weighed by the troy pound of 12 ounces, of which 11 oz. 2 dwts. were to be pure silver, and 18 dwts. copper. This proportion, which, even in 1357, was called the "old right standard of England," has, in spite of temporary depreciations, been maintained to the present day, and corresponds to the proportion of 925 parts in 1000. Gold having been weighed by the ancient and curious system of carat weights, said to be derived from the seeds of an Abyssinion plant, the unit weight of gold was 21 carats, of which 22 were to be of pure gold and two of alloy. This ratio, which has existed for many centuries, is decimally expressed by 916.66 parts in 1000.

The degrees of fineness employed in one country or another at different times are infinitely various. Silver has been coined of only 200 or even 150 parts in 1000, and gold of 750 or 700 parts; and coins exist of almost every fineness from these limits up to nearly pure metal. The only standards of fineness which it is needful to discuss in the present day are those of 900 and 835 which are proposed for general adoption in international money. A few years ago, indeed, the Berlin government contemplated the adoption of a standard German crown, consisting of ten grams of pure gold and one grain of alloy, which would give a fineness of 10/11 or 909.09. This scheme had no apparent advantages, and was fortunately abandoned in favour of the present German coinage, which is, both as regards gold and silver, of the fineness of 900 parts in 1000. This simple decimal proportion was adopted by the French in the time of the Revolution; it has been extended over the countries belonging to the Monetary Convention of 1865, and over Spain, Greece, and other countries which have more or less imitated the French system. It was long ago adopted by the United States, and has been recently introduced into the gold currency of the Scandinavian kingdoms. The German government, having now decided to accept it, the simple decimal fineness is established in all the more advanced countries, excepting England and some of her colonies, and a few nations, such as Russia, Portugal, and Turkey, which have imitated the English currency and coined gold at 916.66.

In a chemical and mechanical point of view the exact degree of fineness is not a matter of importance. The difference between 11/12 and 9/10 is only 1/60, and though the often-quoted experiments of Hatchett were said to show that our standard was slightly better than that of the French, the difference is so slight and questionable as to afford no ground for preference. The late Master of the Mint, Professor Graham, was quite willing to accept the standard of 900, both for gold and silver, and there are really no reasons, except prejudice and traditional usage, why we should not do so as soon as we make any change at all. Uniformity in the practice of nations is desirable in this and many other points, and the French economists lay great stress upon this question of fineness. It appears to me, however, that the exact degree of fineness is altogether a matter of secondary importance. If we were now to make our sovereign nine-tenths fine, we should have to raise its weight from 123.274 grains to 125.557 grains, and the mixture of old and new coins would entirely frustrate the method of counting gold money by the scales adopted in all banks. We must certainly, therefore, postpone a change of fineness in gold until we make a more considerable monetary reform. I see no reason, on the other hand, why the mint should not at once be authorized to coin silver of the decimal fineness of nine-tenths. This would merely involve an imperceptible increase in the thickness of the coins, which would, in the case of the smaller ones, be advantageous.

The fineness of 835 parts in 1000 was adopted by France, as already stated (p. 76), in order to reduce the two-franc and smaller pieces to the rank of tokens, without making any change in their weight and appearance. There is no special objection to this alloy, which is perfectly coinable and of good colour; but it is not likely that it will be adopted by the English government, instead of the present fineness of 925 parts in 1000 of our silver coinage; and does not. need further discussion. It may be added that, in former years, the alloy contained in gold coins consisted in part of silver, which is always present in a greater or less quantity in native gold wherever it is found. The yellow appearance of guineas, and also of many Australian sovereigns, was due to this silver alloy; but all such silvery gold coins are rapidly withdrawn now by gold refiners, who can profitably separate the silver. The very remarkable invention of Mr. F. B. Miller, of the new Melbourne mint, enables this separation to be effected with great ease, and at small cost, almost on the gold fields. It is only requisite to melt the silvery gold, and pass a current of chlorine gas into it, to obtain the silver in the state of chloride, which is readily separated from the gold and reduced to the metallic state. It is a further advantage of this simple process that all gold so treated is freed from accidental impurities, and rendered perfectly malleable and fit for coining. One of the great difficulties of mint masters, the brittleness of gold, has thus been entirely overcome. A full description of the process, as employed at the English, Australian, American, Norwegian, and other mints, will be found in the First Annual Report of the Deputy Master of the English Mint (p. 93), and in the Second Report (p. 33), or in the specification as printed by the Patent Office.