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.

International Monetary Negotiations.

It is quite impossible that I should in this brief work give any sufficient sketch of the long series of discussions, meetings, congresses, associations, negotiations, and conventions which resulted in the actual establishment of an international money among the nations of western continental Europe. I must refer the reader, desirous of more information, to the excellent pamphlet of the eminent actuary, Mr. Frederick Hendriks, which first made the subject well known in England. It is called "Decimal Coinage; a Plan for its immediate Extension in England in connection with the International Coinage of France and other Countries," and was privately printed in 1866. Mr. Seyd's "Treatise on Bullion and the Foreign Exchanges" may also be consulted, and the Journal des Economistes is full of information on the subject.

The International Association for obtaining a Uniform Decimal System of Measures, Weights, and Coins, was founded in Paris in 1855, and the English branch carried on active operations. In 1858 the United States made proposals towards the assimilation of currencies. In 1860 and 1863 important international congresses were held in London and Berlin, and, at the latter one especially, important resolutions were adopted which we shall have to consider. It was, however, the close contiguity of the countries, Belgium, France, Switzerland, and Italy, and the fact that French gold, and even silver coin, could not be prevented from passing the frontiers, which forced the question forwards, and led in December, 1865, to an actual Convention for International Currency.

The report of the Congress of 1863 concerning currency is a highly important document. It point out the superior convenience of a gold standard, with a subsidiary coinage of silver and bronze; advocates uniform fineness of nine parts in ten for all standard coins; suggests a definition of weights of coins, on the metric system; and, finally, propounds a scheme by which the existing monetary units could be brought into simple relations with each other.

In 1870, a short time previous to the declaration of war with Germany, France summoned a fresh Imperial Commission, presided over by the Minister of Commerce and the Minister President of the Council of State (M. de Parieu), to take evidence from all sides on the various questions connected with the standard and its bearing upon international coinage. No less than thirty-seven witnesses were examined, and the results of the inquiry, printed by the French government in two very large volumes in 1872, show that the majority of the witnesses and of the Commissioners were decidedly in favour of a single gold standard.

Owing to a purely accidental coincidence, the principal monetary units already closely approximate to simple multiples of the franc. The following table shows the present relative values of these units and the multiples to which it is proposed to make them exactly conform.

It is only requisite to raise the florin 1.21 per cent., and to lower the dollar and pound sterling respectively 3.5 and 0.88 per cent., to establish very simple ratios between them. Thus, without any appreciable change of monetary systems, it would be possible to reduce statements from one mode of expression into another; moreover, the coins might themselves have international currency, the pound sterling serving as a twenty-five franc piece in France, and as a five-dollar piece in America, the American gold dollar reciprocally circulating as an écru in France, and a four-shilling piece in England.

The congress abstained from recommending any one unit for universal adoption, but urged that every nation, not possessing one of the four units named, should select that which pleased them best. Had this scheme been accepted by all nations in an intelligent and liberal spirit, we should ere now have probably seen our way clearly to the selection of the best unit. Since 1865, unfortunately, both the German empire and the Scandinavian kingdoms have made alterations not in accordance with these principles. A great assimilation of moneys has taken place, but it is in the direction of groups of national, rather than of international currencies, although, as has been demonstrated by Mr. Hendriks in several articles in the Economist, the new coins have many fresh and important points of contact and of agreement with the metrical and decimal systems, so that some real progress has actually been accomplished.