Front Page Titles (by Subject) Reasons for the Use of Representative Money. - Money and the Mechanism of Exchange
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Reasons for the Use of Representative Money. - 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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Reasons for the Use of Representative Money.
It is well to analyse and state exactly the reasons which may be given for the introduction of pieces of representative money. Several motives may be detected, and they have been of different weight in different cases. The origin of the European system of bank-notes is to be found in the deposit banks established in Italy from four to seven centuries ago. In those days the circulating medium consisted of a mixture of coins of many denominations, variously clipped or depreciated. In receiving money, the merchant had to weigh and estimate the fineness of each coin, and much trouble, loss of time, and risk of fraud thus arose. It became, therefore, the custom in the mercantile republics of Italy to deposit such money in a bank, where its value was accurately estimated, once for all, and placed to the credit of the depositor.
The banks of Amsterdam and Hamburg were subsequently established on a similar system, and a full account of them will be found in Adam Smith's "Wealth of Nations," Book IV., Chapter III., and in Hewitt's "Treatise upon Money" (p. 121). The money placed to the credit of individuals in these banks was called bank-money, and commanded an agio or premium corresponding to the average depreciation of the coins. Payments were made by the merchants attending at the bank at a particular hour, and ordering transfers to be made in the bank books. The money paid was thus always of full value, and all trouble in counting and valuing it was avoided. The regulations of these banks were, however, in many respects complicated, and it is difficult to understand their purpose.