Charles Francis Bastable

“ The supply of money is so large compared with the annual production, that any change can operate but slowly on its value. The total stoppage of fresh supplies from the mines would not be felt for some years in the increased value; and an increased amount of production, though more rapid in its operation, takes some time to produce an effect. “Hence the effects of all changes in the conditions of production of the precious metals are at first, and continue to be for many years, questions of quantity only, with little reference to cost of production.” ”

“ The examination of the forms of currency, both metallic and non-metallic, in which we have been engaged leads to certain definite conclusions as to the course which the evolution of currency is pursuing. It appears (1) that the metals tend to supersede all other forms of money among progressive peoples, and (2) that certain metals tend to supersede the others. From this we are led to consider the qualities which are desirable in the material of money, and to conclude that the presence or absence of those qualities is the reason of the adoption or rejection of any given substance. ”

“ The threat of some bimetallists, that all nations will be driven to adopt a gold standard, and thus produce a crisis in the English money market by the resulting gold drain, is of no weight; any drain of English gold will have to be paid for at a high price, and the simple expedient of raising the bank-rate will restore as much bullion as is needed in England. The interests of other countries cannot be so clearly determined. A state like Germany, holding a large store of depreciated silver, may desire other states to become bimetallic, but will hardly desire to do so herself. ”

“ The wide area of the Latin Union, and the perfect decimal division of its coinage, are arguments in favour of the franc; the greater value of the pound, and the immense extent of the English colonies and English trade, are in favour of the British unit of value; while the dollar, from its convenient size and the prospect of the future growth of the United States, has claims to be considered in the discussion. The most probable conclusion, however, seems to be that the future unit will not be any of these coins, but the result of a compromise, which will lead to a new system being established. ”

“ The fact of different nations possessing different currencies, as the prevalence of gold in England and of silver in France during the 18th century, is to be otherwise accounted for. The great mass of a population, it is true, take and give money without particularly observing it. It is enough if the coin conforms to the usual type. There exists, however, in all mercantile communities a class of dealers in money [88] who make a profit by selecting the best coins for exportation, or, if two metals are in concurrent use, the coins of that metal which is undervalued in the proportion fixed. ”

“ They saw, moreover, that this was not feasible without some object which all would be willing to accept for their peculiar products, for otherwise, the difficulty of getting those together whose wants were reciprocal would be a complete hindrance to the development of exchange, which alone made division of labour possible. A second function hardly inferior in importance to the one just mentioned is that of affording a ready means of estimating the comparative value of different commodities, Without some common commodity as a standard of comparison this would be almost impossible. ”

“ One advantage which undoubtedly results from a charge on coinage is that it checks the tendency to melt coin when exported, for where a seigniorage is imposed coins are more valuable than the uncoined metal by the amount of the seigniorage. It therefore becomes the interest of the holder not to melt down the coins, as in doing so he loses the extra value given by the coining. Another factor in the expense of currency is the loss which arises from the wear and tear which money undergoes, and the consequent cost of replacing the light or missing pieces. ”

“ At present, it is quite impossible for an ordinary trader to understand a set of foreign price-lists, each perhaps expressed in terms of a different currency from the others,—a difficulty which is enhanced by the variations of gold and silver values, not to add the case of an inconvertible paper currency. The existence of a common monetary language would remove these difficulties, and the premium on gold could be allowed for in the case of depreciated paper. A much wider development of smaller trading transactions would become possible, and would add to the world's wealth. ”

“ The exportation of metallic money when an over-issue of inconvertible paper takes place is another case of the theorem. By means of this principle we can easily explain the tendency of currency to depreciation, for when once, either by wear or by the issue of inferior coins, a currency has become debased, no reformation is possible unless the debased coins are removed from circulation, as otherwise they will be preferred for payments by dealers, and will not be melted down or exported. All demands for foreign trade will be met from the best part of the coinage. ”

“ In the 14th century the value of gold rose remarkably, and the gradual movement has ever since been towards an appreciation of gold relatively to silver. Another point, previously noticed, is the tendency, as wealth increases, to adopt a more valuable form of currency. Greece, Rome, and England all afford illustrations of this movement. The experience of the evils of a mixed currency led the earlier writers on coinage in England to regard a single standard system as the best, and silver as the most suitable metal for the standard. Locke, Petty, and Harris all advocated this view. ”

“ Indeed it may be reasonably maintained that the idea of general value could not be formed without the existence of money, and all that is known of savage races tends to bear out this view. [4] The adoption of some one commodity renders the comparison of values easy. “The chosen commodity becomes a common denominator or common measure of value in terms of which we estimate the values of all other goods,” [5] and thus money, which in its primary function renders exchanges possible by acting as an intermediate term in each exchange, also makes exchanges easier by making them definite. ”

“ The final argument is that a universal currency is desirable, and that, a single gold currency being by general consent practically impossible, this advantageous reform can be realized in no other way than by adopting a plan which permits the concurrent circulation of two metals. Most of these positions are contested by the monometallists, and even where any concession is made the value of the advantage to be reaped is estimated at a much smaller amount. ”

“ Every currency system must be based on a standard unit of value which consists of a “fixed quantity of some concrete substance defined by reference to the units of weight or space.” Thus the English unit is the pound, which consists of a definite quantity of gold (123·27447 grs. standard fineness) , while the French unit is the franc (composed of 5 grammes of silver ths fine) . It is not, however, necessary that the standard unit shall be a coin. All that is needful is that the current coins shall be multiples or submultiples of the unit, or at all events easily reducible to it. ”

“ A more pressing case than the foregoing, and one where more justification exists, is that of a severe social crisis, when large numbers of the community are burdened with debt, and a depreciation of the monetary standard seems the simplest mode of escaping from so critical a situation. ”

“ The abolition even of the local currencies of Germany and Italy, and their replacement by uniform national systems, has been a great boon to tourists, but an arrangement which would obviate the necessity for procuring any different money whatever would be a still greater advance. In the interests of peace, which is greatly promoted by extended international communication, it is very desirable to remove any obstacle which retards increased intercourse among persons of different countries. ”

“ Thus, if silver be undervalued in a double-standard system, a drain sets in to other countries where it is more valuable. The quantity of silver is thus reduced and its value raised, while gold is imported, its quantity increased, and its value lowered. ”

“ To the contention that bimetallism is the necessary condition for a universal coinage system the answer is, that the idea of universal coinage is premature, and that the gradual introduction of the gold standard is desirable as preparing the way for a future universal coinage based on gold monometallism. On the practical question as to the actual introduction of the system, the monometallists deny the possibility of forming a universal bimetallic league which would not be liable to be broken up by war, or impaired by some of the states which composed it issuing inconvertible paper. ”

“ The last condition which appears desirable for the money material is, that its value shall be steady. This, however, is of but slight importance in early societies, and it is only as deferred payments become a prominent feature of industrial life that this requisite is much needed. It is enough for the other purposes of money that it shall not vary within short periods, which is found to be a feature of metals, and especially of silver and gold, while corn especially varies widely in value from season to season. ”

“ Another function of money comes into being with the progress of society. One of the most distinctive features of advancing civilization is the increasing tendency of people to trust each other. Thus there is a continual increase in relations of contract, as may be seen by examining the development of any legal system. Now a contract implies something to be done in the future, and for estimating the value of that future act a standard is required ”

“ Each country possessing any claim to enlightenment has directed its attention to its own monetary arrangements, and compared them with those of others, while the effect which the currency system of any nation exercises on its neighbours leads to the exciting of a lively interest in its monetary legislation. The principal problems may be summed up under three heads: (1) The proper standard to use, the discussion of which in practice turns on the comparative merits of a single standard of gold or silver and of a double standard of gold and silver at a fixed ratio ”

“ They have to receive masses of depreciated silver and to give commodities in exchange, while their purchasing power is reduced owing to the greater relative value of gold to silver. It would therefore be clearly advantageous for silver-using countries that a system should be adopted which would raise the value of their money, and save them from the necessity of importing large quantities of silver to produce a proper adjustment. The ultimate consequences of the complete demonetization of silver as regards silver-using countries are not so clear. ”

“ When strangers visit a tribe they are received at a friendly gathering or corrobboree, and presents are given on both sides. No doubt there is a general sense that the gifts are to be fair exchanges, and if either side is not satisfied there will be grumbling and quarrelling; but in this roughest kind of barter we do not yet find that clear notion of a unit of value which is the great step in trading.” [15] This vivid description of what is going on at present among lower races enables us to realize the way in which money came into existence. ”

“ It is only the standard coinage which possesses this property, or rather the standard coinage is that which does possess it.
In discussing monetary questions it is also important to remember that a metallic currency has to circulate among the most diverse classes of society, and must be suited to the wants, and even to the prejudices, of the population using it. Many curious instances of the preference of a community for some particular coin could be given. The Austrian Maria Theresa dollar is a special favourite on the coast of Africa, and is still coined exactly as it was in 1780. ”

“ The next metal which comes into notice is silver, which up to the last few years was the principal form of money, and even still is able to dispute the field with its most formidable rival. It formed the main basis of Greek coins, and was introduced at Rome in 269 B.C. The mediæval money was principally composed of silver, and its position in recent times will have to be subsequently noticed more at length. Gold, which is the most valuable of the metals widely used for monetary purposes, has been steadily gaining ground with the growth of commerce. ”

“ The functions which money discharges in the social organism are—at least in the opinion of all writers worth noticing here—clearly manifest. The most important is that of facilitating exchanges. It is not necessary to dwell on the great importance of this office. The mere consideration of industrial organization shows that it is based on the division of employments; but the earliest economic writers saw clearly that division of employments was rendered possible only by the use of a medium of exchange. ”

“ At present it is quite natural to assume that the materials of money are distributed by means of international trade, and tend to keep at an equal level all the world over, an assumption which is in general well grounded, though an important exception exists. ”

“ Money must also be durable. This at once removes from the articles suitable for money all animal and many vegetable substances. Eggs or oil will not keep, and consequently soon lose their value. Iron, too, is liable to rust, which, combined with its low value, is a reason for its disuse as currency. (6) Money should be easily distinguishable, and there should be no trouble in ascertaining its value. This condition is one of the reasons why precious stones have never been much used as money, their value being hard to estimate. ”

“ When any commodity becomes an object of desire, not merely from its use to the persons desiring it, but from their wanting it as being readily exchangeable for other things, then that article may be regarded as rudimentary money. ”

“ The older English advocates of the gold standard have found their best representatives in Lord Liverpool and Tooke. The former of these adopted the argument used by Petty, Locke, and Harris, that only one metal can be the standard of value at a given time, but he held that the advance of England in wealth rendered gold a more suitable material than silver for the principal money. ”