Token money

“ Their defects are their weight, their intrinsic value as commodities.”—Social Science and National Economy, by R. E. Thompson, Philadelphia, 1875.
“The moment it is perceived that money is nothing but a token, it becomes evident that any token currently accepted in exchange of useful services and products of labor will perform the proper functions of money without regard to the material of which it is made; and that the less costly the material out of which money is made, the better for the community that uses it.”—Money, Currency, and Banking, by Charles Moran, New York, 1875, p. ”

“ While gold coin apparently represents the value of commodities only in so far as that value is itself estimated in gold or is expressed in price, the token of value seems to represent directly the value of commodities. It is, therefore, clear why students who examined one-sidedly the phenomena of circulation of money by confining their observations to the circulation of legal tender paper money, should have failed to grasp the intrinsic laws governing the circulation of money. ”

“ Various substances have been utilized for the manufacture of token coinage—silver at a lower degree of fineness, copper in different alloys, and nickel. The French term monnaie divisionnaire has much the same meaning; so has the German Scheidemünze. A currency, restricted in amount, but with full legal tender power—such as the Indian rupees and the French 5-franc pieces—is midway between token and standard money. Representative money also bears some analogy to token coinage. ”

“ Debts of 4 cents can be legally paid in one-cent pieces, of 60 cents in three-cent pieces, of 100 cents in five-cent pieces, of 500 cents in subsidiary silver, and of any amount in gold coins or in silver dollars.
12. A money inferior in general value will, so long as it circulates locally, drive a superior money out of the circulation. This proposition is a fundamental and universal one in monetary Science. The only exception to it is found in token-coins, and in subsidiary silver so far as that has the token-quality, that is, so far as its nominal is above its bullion Value. ”

“ The adjustment of the monetary circulation to the needs of trade has given rise to composite money systems, in which, whatever may be the standard, gold, silver, and paper are usually combined. Under a single gold standard paper is generally used for larger payments, while silver is used for the smaller. Both are representative money in such cases. Silver is issued as token coinage. A token coin is one whose bullion value is less than its face value and whose legal power to pay debts is limited. ”

“ The token or obligation must be for a less sum than a dollar. 2. It must be intended to circulate as money, or in lieu of the money of the United States. Here the note is for 'goods,' to be paid at the store of the Furnace Company. It is not payable in money, but in goods, and in goods only. No money could be demanded upon it. ”

“ At first the thought of the great stake for which she was playing in terms of currency, with the head of Jim’s father on every note, was much with her. The amazing nature of the offer of five millions of dollars stimulated her imagination, roused her; gold coins are counters in the game of success, signs and tokens. Money alone could not have lured her ”

“ That in the exchange value between commodity money and all other property, credit money does not add anything—it facilitates—makes convenient the transaction of business. Just as your wheat certificates add nothing to the exchange value of wheat, or the things for which wheat are exchanged; yet they facilitate its exchange.
"This commodity money is the measure of values. Its quantity becomes the measure, and each dollar is a part of that measure. Credit money adds nothing to its value, it only facilitates the transaction of business based on that measure of values. ”

“ The process is already so far advanced that few people besides travelers and sports now-a-days carry upon their persons or in their homes the equivalent of more than five to ten dollars in money. What is to be the outcome? Will all coinage ultimately degenerate to a mere matter of tokens? Will all other kinds of money disappear between the covers of a check book? Will bank vaults become in the end the only place where one can get a sight of one hundred dollars in coin at a time? ”

“ The answer is not difficult when it is considered that the benefit of the medium of exchange accrues to those who use it. They should contribute, as near as possible, in the proportion in which their handling wears the tokens, for in the long run the cost of production will virtually resolve itself into the cost of replacement. Not the borrowers, then, who as members of the mutual banks would be obliged to do so, but the people at large, in whose hands the money circulates, are in equity under the obligation of this expense. ”

“ It would simplify this matter very much if all would agree to call coin, or money having value as merchandise, money, and paper, or representative money, currency, or notes. It is plain that the representative money is that which must be and is principally used in this country and in all commercial countries. Coin money derives its real value in exchange, and as a measure for the exchangeable value of other products, from the fact that it costs labor to produce it; and, although government laws may foolishly try to make it pass for more than its cost value, they never succeed in doing so. ”

“ I define money to be a commodity or representative of a commodity, accepted by or forced upon the common consent, as an invariable ratio and medium of exchange. Now, since the price of all things else is variable and subject to extreme fluctuations, the dollar in exchange, and especially where the exchange is suspended as in borrowing, or buying on credit, becomes, as friend Pink suggests, a "war club" rather than a tool or instrument of commerce. ”

“ Wages and prices, rising together, call perpetually for more money, or at least more tokens and symbols, more paper credit in the form of checks and deposits, with a value that is no longer based on the rock-bottom of redemption into hard coin, but that floats upon the mere atmosphere of expectation. ”

“ I entirely sympathize with your disposal of the Evening Post's attempt to belittle the function of money as a medium of exchange; but do you go far enough when you content yourself with saying that a standard of value is highly desirable? Is it not absolutely necessary? Is money posible without it? If no standard is definitely adopted, and then if paper money is issued, does not the first commodity that the first note is exchanged for immediately become a standard of value? Is not the second holder of the note governed in making his next purchase by what he parted with in his previous sale? ”

“ Each time that a state makes a recoinage, it becomes momentarily the depositary of all the money called in, belonging to the subjects of that state. His bank was to effect the same purpose; that is to say, to receive in deposit all the coin of the kingdom, but to give in exchange its bills, which, being of an invariable value, bearing an interest, and being payable on demand, would not only supply the place of coin, but prove a better and more profitable currency.
The regent caught with avidity at the scheme. ”

“ It is this proffered and immediate convertibility into coin that enables the promissory notes of a bank to circulate as money, while the notes of other corporations and individuals equally solid and solvent do not circulate as money. ”

“ This is done in a very convenient manner by lending their own promissory notes payable to bearer on demand—the borrower being willing to accept these as so much money, because the credit of the lender makes other people willingly receive them on the same footing, in purchases or other payments. These notes, therefore, perform all the functions of currency, and render an equivalent amount of money, which was previously in circulation, unnecessary. ”

“ The only way by which moneys of different kinds and intrinsic values can be maintained in circulation at par with each other is by the ability, when one kind is in excess, to readily exchange it for the other. This principle is applicable to coin as well as to paper money. ”

“ Without the right of issue a bank must, at every one of its offices, hold the whole of its balance of cash in the shape of coin, or of notes of other banks, which, as far as it is concerned, are as unprofitable as coin. Such balances entail a complete loss of interest which can only be borne where the amount of business is of considerable extent. ”

“ But in the present situation of the Bank, intrusted as it is with the function of supplying the public with that paper currency which forms the basis of our circulation, and at the same time not subjected to the liability of converting the paper into specie, every advance which it makes of capital to the merchants in the shape of discount, becomes an addition also to the mass of circulating medium. ”

“ A constant but unperceived rise in the value of the dollar with which those payments must be made, baffles all plans, thwarts all calculation, and destroys all equities between debtor and creditor. If we can not intelligently regulate our money volume so as to maintain unchanging the value of the money unit, if we can not preserve our people from the blighting effects which an increase in the measuring power of the money unit entails upon all industry, to what purpose is our boasted civilization? ”

“ The Sources of Currency Supply.—It is, then, clear that the larger part of the circulating medium of society is not money; that not all of the money that there is is bullion money; and that not even all of the bullion money need be ultimate money—redemption money of the highest rank. The sources of currency in society are various—some of it bullion, with a cost of production limit upon its supply, some of it government paper, substantially free of cost, some of it banking credit with certain peculiar and appropriate costs attending its issue. ”

“ The addition of $2,400,000,000 to the currency of the country will unquestionably largely increase all values. It will at the same time encourage—nay, almost compel—capital to seek investment in active industries rather than in dormant funds. For the present it will supply those who can use money to advantage with a sure and convenient method of obtaining it at a cheap rate of interest, while its ultimate tendency must be to eliminate interest on money from the world’s transactions, and bring money to what I conceive to be its true function—a measurer of values only. ”

“ It has uniformly recognized in its fiscal affairs the distinction in value between paper currency and coin. Some of its loans are made payable specifically in coin, whilst others are payable generally in lawful money. It goes frequently into the money market, and at one time buys coin with currency, and at another time sells coin for currency. In its transactions it every day issues its checks, bills, and obligations, some of which are payable in gold, while others are payable simply in dollars. And it keeps its accounts of coin and currency distinct and separate. ”

“ By limiting tokens, silver, and paper money, to the amount needed for business, and promptly receiving or redeeming all that might at any time be in excess, all these forms of money could be kept in circulation, in large amounts, at par with gold. ”

“ Intrinsically, a dollar bill is just a piece of paper, deposits merely book entries. Coins do have some intrinsic value as metal, but generally far less than their face value.
What, then, makes these instruments — checks, paper money, and coins — acceptable at face value in payment of all debts and for other monetary uses? Mainly, it is the confidence people have that they will be able to exchange such money for other financial assets and for real goods and services whenever they choose to do so.
Money, like anything else, derives its value from its scarcity in relation to its usefulness. ”

“ If the exchange were not made, in certain cases, the borrower would have no future income to which he could give rights. The entrepreneur with a big idea cannot actualize that big idea unless he can bring it into conjunction with land, labor, capital, and a market for the products. The exchange of rights to the value of the products for the banker's deposit-currency, or the private lender's money is merely one of many necessary exchanges required to bring about the combination which will create the products. ”

“ Hence it is that loans on call are preferred, and a higher rate of interest is demanded by lenders to cover the gambling risk, under the influence exercised by an irredeemable currency, which, by its fluctuations, renders the value of the money invested in a loan insecure. ”

“ If all prices were altered in like proportion [Pg 24] as soon as money varied in value, no one would lose or gain, except as regards the coin which he happened to have in his pocket, safe, or bank balance. But, practically speaking, as we have seen, people do employ money as a standard of value for long contracts, and they often maintain payments at the same variable rate, by custom or law, even when the real value of the payment is much altered. Hence every change in the value of money does some injury to society. ”

“ And similarly, if all property were to be admitted to competition with gold in the matter of representation in the currency, it is possible that the same amount of gold would still be used as money, but its value would decrease notably,—would fall, that is to say, from its abnormal, artificial, government-created value, to its normal, natural, open-market value. ”