The money of a country is that thing, whatever it may be, which is
commonly accepted in exchange for labor or property and in payment of
debts, whether so accepted by force of law, or by universal consent. Its
value does not arise from the intrinsic qualities which the material of
which it is made may possess, but depends entirely on the extrinsic
qualities which law, or general consent, may confer.
Money is of transcendent importance to civilization. It is the physical
agency to which society has assigned the function of measuring all
equities, and it is the sole agency upon which that incomparable
function has been conferred. It is in terms of money that society
computes the material value of all human sacrifice, alike the highest
effort of genius and the daily toil and sweat of the millions who labor.
In order to measure equitably the natural and inevitable mutations in
the value of other things, money should itself be of unchanging value.
That is to say, any given amount of money should, so far as human
foresight can regulate it, require at all times an equal amount of
sacrifice for its acquisition. Thus, in the case of a contract made
to-day, requiring the payment of a dollar twelve months hence, that
dollar when due should exact from the debtor precisely that amount of
sacrifice, and no more, which would be required had he paid the debt the
day after contracting it.
No one will deny that the most important quality that money can possess
is that it shall truthfully measure and state equities.
As I have shown by the figures heretofore cited, gold has risen in value
between 30 and 40 per cent. since the demonetization of silver. It is
not therefore so faithful a measure of value as is silver, which as
illustrated by a variety of examples, has maintained almost undisturbed
its relation to commodities.
THE VALUE OF MONEY, AS SUCH, NOT IN THE MATERIAL BUT IN THE STAMP. MONEY
IS AN ORDER FOR PROPERTY AND SERVICES.
The logic of the situation, and the reasoning of all the leading
authorities on money, lead irresistibly to the conclusion that its value
does not reside in the material, but in the stamp; in other words, on
the legal-tender function impressed on that material. It is an order for
property and services.
Aristotle, writing of money, says:
Money by itself * * * has value only by law, and not by nature;
so that a change of convention between those who use it is
sufficient to deprive it of all its value and power to satisfy
all our wants.
And again he says:
But with regard to a future exchange (if we want nothing at
present) money is, as it were, our security that it may take
place when we do want something.
John Locke, in "Considerations," etc., regarding money, published in
1691, says:
Mankind, having covenanted to put an imaginary value upon gold
and silver, by reason of their durableness scarcity, and not
being very liable to be counterfeited, have made them, by general
consent, the common pledges, whereby men are assured, in exchange
for them, to receive equally valuable things to those they parted
with, for any quantity of those metals; by which means it comes
to pass that the intrinsic value regard in those metals, made the
common barter, is nothing but the quantity which men give or
receive of them; they having, as money, no other value but as
pledges to procure what one wants or desires.
Baudeau, reputed one of the most eminent of an early school of French
economists, says:
Coined money in circulation is nothing, as I have said elsewhere,
but effective titles on the general mass of useful and agreeable
enjoyment which cause the well-being and propagation of the human
race.
It is a kind of a bill of exchange, or order payable at the will
of the bearer.
Adam Smith says:
A guinea may be considered as a bill for a certain quantity
of necessaries and conveniences upon all the tradesmen in the
neighborhood.
Jevons's "Money and Exchanges," chapter 8, says:
Those who use coins in ordinary business need never inquire how
much metal they contain. Probably not one person in two thousand
in this kingdom knows, or need know, that a sovereign should
contain 123.27447 grains of standard gold.
Money is made to go. People want coin, not to keep in their own
pockets, but to pass it off into their neighbors' pockets.
Henry Thornton, in his work on Paper Credit, says:
Money of every kind is an order for goods. It is so considered by
the laborer, when he receives it, and it is almost instantly
turned into money's worth. It is merely in instrument by which
the purchasable stock of the country is distributed with
convenience and advantage among the several members of the
community.
John Stuart Mill says:
The pounds or shillings which a person receives are a sort of
ticket or order which he can present for payment at any shop he
pleases, and which entitle him to receive a certain value of any
commodity that he makes choice.
McLeod, Elements of Banking, Chapter I, says:
When persons take a piece of money in exchange for services, or
products, they can neither eat it, nor drink it, nor clothe
themselves with it. The only reason why they take it is, because
they believe they can exchange it away whenever they please for
other things which they require.
On that view of money McLeod feels justified in styling it credit, and
he quotes in support of such a use of the term credit, Burke's
description of gold and silver as "the two great recognized species that
represent the lasting conventional credit of mankind."
Prof. Francis A. Walker, Money, Trade, etc., page 25, speaking of carved
pebbles, glass beads, shells and red feathers, used as money in certain
countries at certain times, says:
They were good money, though serving no purpose but ornament and
decoration. They were desired by the community in general; men
would give for them the fruits of their labor, knowing that with
them they could obtain most conveniently in time, in form, and in
amount, the fruits of the labor of others.
On page 30 he says:
Men take money with the expectation of parting with it; this is
the use to which they mean to put it.
Again, Mr. Walker says:
Money is that which passes freely from hand to hand throughout
the community, in final discharge of debts and full payment for
commodities, being accepted equally without reference to the
character or credit of the person who offers it, and without the
intention of the person who receives it to consume it, or enjoy
it, or apply it to any other use than, in turn, to tender it to
others in discharge of debts or payment for commodities.
Even Bonamy Price, who is wedded to the gold standard, in his Principles
of Currency, says:
Gold, in the form of money or coin, is not sought for its own
sake, as an article of consumption. It must never be regarded as
valuable except for the work it performs, so long as it remains
in the state of coin. It can be converted at pleasure into an
end, into an article of consumption, by being sold; till then it
is a mere tool.
How many people ever so "convert" it that earn it?
The great philosopher, Bishop Berkeley, one of the most acute reasoners,
in my judgment, that modern times have produced, in the "Querist,"
published in 1710, propounds the following pertinent and suggestive
questions:
Whether the terms "crown," "livre," "pound sterling," etc., are
not to be considered as exponents, or denominations? And whether
gold, silver, and paper are not tickets or counters for
reckoning, recording, or transferring such denominations?
Whether, the denominations being retained, although the bullion
were gone, things might not nevertheless be rated, bought, and
sold, industry promoted and a circulation of commerce obtained?
Dugald Stewart, professor of moral philosophy in the University of
Edinburgh, in his Lectures on Political Economy (Part I, Book II), said:
When gold is converted into coin, its possessor never thinks of
anything but its exchangeable value, or supposes a coffer of
guineas to be more valuable because they are capable of being
transferred into a service of plate for his own use. Why then
should we suppose that, if the intrinsic value of gold and silver
were completely annihilated, they might not still perform, as
well as now, all the functions of money, supposing them to retain
all those recommendations (durability, divisibility, etc.)
formerly stated, which give them so decided a superiority over
everything else which could be employed for the same purpose.
Supposing the supply of the precious metals at present afforded
by the mines to fail entirely the world over, there can be little
doubt that all the plate now in existence would be gradually
converted into money, and gold and silver would soon cease to be
employed in the ornamental arts. In this case a few years would
obliterate entirely all trace of the intrinsic value of these
metals, while their value would be understood to arise from those
characteristical qualities (divisibility, durability, etc.) which
recommend them as media of exchange. I see no reason why gold and
silver should not have maintained their value as money, if they
had been applicable to no other purposes than to serve as money.
I am therefore disposed to think, with Bishop Berkeley, whether
the true idea of money, as such, be not altogether that of a
ticket or counter.
Appleton's Cyclopedia, defining money, says:
Anything which freely circulates from hand to hand, as a common
acceptable medium of exchange in any country, is in such country
money, even though it ceases to be such, or to possess any value
in passing into another country. In a word, an article is
determined to be money by reason of the performance by it of
certain functions, without regard to its form or substance.