Page:EB1911 - Volume 18.djvu/728

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698
MONEY

capable of being divided without loss of value, and, if needed, of being reunited. Most of the articles used in primitive societies—such as eggs, skins and cattle—fail in this quality. Money should also be durable, a requirement which leads to the exclusion of all animal and most vegetable substances from the class of suitable currency materials. To be easily recognized is another very desirable quality in money, and moreover to be recognized as of a given value. Articles otherwise well fitted for money—use, e.g. precious stones, suffer through the difficulty of estimating their value. Finally, it results from the function of money as a standard of value that it should alter in its own value as little as possible. Complete fixity of value is from the nature of things unattainable; but the nearest approximation that can be secured is desirable. In early societies this quality is not of great importance; for future obligations are few and inconsiderable. With the growth of industry and commerce and the expansion of the system of contracts, covering a distant future, the evil effects of a shifting standard of value attract attention, and lead to the suggestion of ingenious devices to correct fluctuations. These belong to the later history of money and currency movements. It is enough for the ordinary purposes of money that it shall not alter within short periods, which is a characteristic of the more valuable metals, and particularly of silver and gold, while in contrast such an article as corn changes considerably in value from year to year.

From the foregoing examination of the requisites desirable in the material of money it is easy to deduce the empirical laws which the history of money discloses, since metals, as compared with non-metallic substances, evidently possess those requisites in a great degree. They are all durable, homogeneous, divisible and recognizable, and in virtue of these superior advantages they are the only substances now used for money by advanced nations. Nor is the case different when the decision has to be made between the different metals. Iron has been rejected because of its low value and its liability to rust, lead from its extreme softness, and tin from its tendency to break. All these metals, as well as copper, are unsuitable from their low value, which hinders their speedy transmission so as to adjust inequalities of local prices.

The elimination of the cheaper metals leaves silver and gold as the only suitable materials for forming the principal currency. Of late years there has been a very decided movement towards the adoption of the latter as the sole monetary standard, silver being regarded as suitable only for a subsidiary coinage. The special features of gold and silver which render them the most suitable materials for currency may here be noted. “The value of these metals changes only by slow degrees; they are readily divisible into any number of parts which may be reunited by means of fusion without loss; they do not deteriorate by being kept; their firm and compact texture makes them difficult to wear; their cost of production, especially of gold, is so considerable that they possess great value in small bulk, and can of course be transported with comparative facility; and their identity is perfect.” The possession by both these metals of all the qualities needed in money is more briefly but forcibly put by Cantillon when he says that “gold and silver alone are of small volume, of equal goodness, easy of transport, divisible without loss, easily guarded, beautiful and brilliant and durable almost to eternity.” This view has even been pushed to an extreme form in the proposition of Turgot, that they became universal money by the nature and force of things, independently of all convention and law, from which the deduction has been drawn that to proscribe silver by law from being used as money is a violation of the nature of things.

5. The Introduction and Development of Coinage. The State and Money.—The earliest metallic currencies passed by weight; they were, in fact, commodities, though used in a special way. The Hebrew records, as well as the Greek writers, bear witness to the prevalence of this primitive system. Thus, Aristotle, after explaining the circumstances that led to the invention of money, points out how it was at first defined simply by size and weight, although finally men went further and set a stamp on every coin to relieve them from the trouble of weighing it. (Pol. i. 9, 8.) Coinage systems have had a long period of growth, in which two distinct stages can be noted. In the first only the quality or fineness of the metal is denoted by the stamp, no attempt being made to fix the weight. The stamp, so to speak, acts as a kind of hallmark. The cubes of gold employed by the Chinese may have been the earliest coins. Modern authorities accept the view of Herodotus that gold and silver coins were first used by the Lydians; the same author mentions that the first Greek coinage was at Aegina by Pheidon of Argos. In order to complete the invention it became necessary to certify the weight of metal in the coin as well as its fineness. A further result was the establishment of a regular shape for the purpose of preventing any tampering with the coin after its manufacture. Though various experiments in form were made, by the production of hexagonal and octagonal coins, the universally accepted shape came to be that of a flat circle, each side of which is stamped, as also in many cases the edge. The great number of the Greek city states afforded ample opportunities for experiment and competition, and rapid progress in the direction of securing good currencies was made. The improvement in the Greek coinages may be regarded as the consequence, and in some degree a cause, of their growing commerce. From Greece the art of coining was introduced into Italy by the Hellenic settlers and traders, and became one of the essential features of a civilized society. Progress, however, did not stop with the establishment of the institution of coined money. A number of practical questions had to be decided respecting the best way of overcoming the difficulties that certain technical problems presented. In spite of early experience, it has at times been suggested that the circular form might be replaced by some other, e.g. the square or oblong. Practice has confirmed the wisdom of the old-established shape. Another question was in respect to the limits of size that were most suitable for coins. Here the lower limit is prescribed by the convenience of the users. Coins that are easily lost, or picked up with trouble, such as the British threepenny piece and the American gold dollar, ought not to be issued. The determination of the upper limit presents greater difficulties. Very large pieces are hard to coin, and they give facilities for improper treatment by drilling holes and filling them up with cheaper metal, or even for the entire removal of the interior, the faces being preserved. The attractive appearance of large gold coins is no compensation for this danger. The English sovereign and, in silver, the half-crown seem to come near the upper limit of safe issue. The comparative wear of coins of different sizes must be considered. A long series of experiments, supported by ordinary experience, goes to show that the smaller coins wear more rapidly. The English mint in 1833 estimated the loss per cent. per annum at 2s. 6d. on half-crowns, 4s. on shillings, and 7s. 6d. on sixpences. There are accordingly reasons for adopting a medium size in preference to large or small coins. The actual coins issued have, of course, to be adapted to the requirements of the particular community. Even prejudices must be taken into due account. The designs employed in connexion with coinage have proved a fruitful field for the student of Numismatics (q.v.). From the monetary standpoint the aim of the design is to prevent either counterfeiting or the abstraction of any portion of the metal. For the former purpose careful execution in designing and the use of powerful machinery are the really effective safeguards. The latter is best obviated by protecting the edges by the process of milling, to which a raised inscription has sometimes been added. Great advances have been made in the organization of the modern Mint (q.v.) by the use of new appliances and scientific methods. The question of the proper alloy in coins has received a great deal of attention. As gold and silver are both by nature soft, some other metal, such as copper or tin, has to be added, in order to secure the necessary hardness. The English gold coins have an alloy of one-twelfth; the silver coins one of three-fortieths. Far more general is the alloy of one-tenth, which is probably due to the sentiment in favour of a decimal system; but at any rate is simple for calculations. There does not appear to be any strong technical reason for preferring either of these alloys to the other. The French mint authorities are in favour of their one-tenth; while the English ones adhere to the alloy of one-twelfth. There is agreement only on the point that a very small amount of alloy, e.g. that of one in seventy-two, as used in the Austrian ducat, does not give the requisite hardness.

A question of far more importance, both politically and economically, is that of the issue of money, and the power of the state in regard to it. In the ruder societies, where money was not sharply distinguished from commodities, no difficulty presented itself. Skins, shells or cattle were money—so to speak—by the force of things; and the same condition persisted as long as crude metals were employed. But with the introduction of coinage the idea of a regulating authority came into being. The necessity of enforcing contracts and the parallel system of penalties made it incumbent on the ruler and judges to provide due standards of payment. The combined effect of these influences was reinforced by the establishment of the rudimentary forms of state revenue, which made it a matter of interest to the ruler to provide a good medium of payment. Accordingly, with the origin of the organized state, we find the coinage as a special prerogative of the king, though