Front Page Titles (by Subject) Cheque and Clearing System. - Money and the Mechanism of Exchange
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Cheque and Clearing System. - William Stanley Jevons, Money and the Mechanism of Exchange 
Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Cheque and Clearing System.
There is yet a more potent way of avoiding the actual use of a medium of exchange, without encountering any of the inconveniences of barter. Those who frequently traded with each other, both buying and selling, found that it was absurd to pay a sum of money for what was bought, and then receive it back for what was sold. It was sufficient to estimate in terms of money the values of the articles exchanged, and then pay the difference, if any, in actual cash. The practice having grown up of depositing the metallic money not immediately wanted with goldsmiths or bankers, for safe custody, it was gradually discovered that an order to pay money would serve instead of the money; and that, if two persons trade with the same banker, they need not in their mutual transactions handle the money at all. A transfer in the books of their common bankers will effect the payment of any balance of debt. Bankers can in like manner arrange their mutual accounts, and in this way there has been gradually developed in this country and in America a vast system, which I propose to denominate the Cheque and Clearing System, whereby all the larger internal transactions of the people are arranged by a mere settlement of accounts.
In this system London naturally becomes the monetary centre of the United Kingdom; but there is a further tendency to make London the banking of the world as regards all large and international transactions. It is found to be advantageous to deposit money in London, or to obtain credit and make bills payable there, rather than elsewhere. By such a concentration of banking operations, London tends to become the seat of a world-wide Clearing House. Such are the principal steps in the development of the mechanism of exchange, and we proceed to consider them In detail.
Although we now distinguish money according as it is metallic or paper money, because paper has in recent times been universally adopted as the material for representative money, yet it is well to remember that various other substances have been used for the purpose. We may pass, in fact, by gradual steps from the perfect standard coins, whose nominal value is coincident with their metallic value, to worthless bits of paper, which are yet allowed to stand for thousands, or even millions of pounds sterling.
Token money, which we considered in Chapter VIII. (p. 67), is in some degree representative money, because it derives its value, not so much from the metal it contains as from the standard coins for which it can be exchanged. There is no need that a promise should be always expressed by ink and paper. It may be still more durably recorded by a die upon a piece of metal. Accordingly, while the monarchs of England down to the end of Elizabeth's reign refused to debase their currency, as the notion seems to have been, by issuing such a poor metal as copper, the tradesmen supplied the want of pence by issuing tokens. These pieces were in the earlier centuries composed of lead, or latten, a kind of brass, or sometimes, it is believed, of leather. During the last century, again, they were issued in large quantities, chiefly in copper, and often bore an express statement that they served as promissory notes. Thus a well-executed piece, issued at Southampton in 1791, bears the inscription, "Halfpenny Promissory, payable at the Office of W. Taylor, R. V. Moody 8 Co." A token struck by the Flint lead works in 1813, states the promise in different terms, thus—"One Penny Token, One Pound Note for 240 Tokens." The variety of such promissory coins issued at one time or other is very great, and their study forms an important branch of numismatic science, as will be learnt by looking into such a work as Akerman's "London Tradesmen's Tokens." In quite recent years small money was found to be scarce in New South Wales, and some tradesmen issued copper or bronze tokens which circulated until the year 1870, when their further use was prohibited.
The ancients were well acquainted with the difference between a standard and a token currency. The iron money of the Lacedæmonians was probably standard legal tender, for it is described as being heavy and bulky, and yet of small value. The iron money of the Byzantines, on the contrary, was token representative money. We shall find in the following section that pieces of money of the same nature as bank-notes were also employed by several ancient nations.