ON MONEY AND CREDIT. 13 On MONEY and CREDIT. 10. In the primitive ages of the world we have abundant evidence that there was no such thing as Money. When persons traded, they exchanged the products directly with one another. Thus we have in Iliad, vii. 468: Hastened to purchase, some with brass, and some Cattle, or slaves." This exchange of products against products is termed BARTER, and the inconveniences of this mode of trading are palpable. What haggling and bargaining it would require to determine how much leather should be given for how much wine, how many oxen, or how many slaves! Some ingenious person would then discover that it would greatly facilitate traffic, if the things to be exchanged were referred to some common measure. There are several passages in the Iliad and Odyssey which show that even while traffic had not advanced beyond barter, such a standard of reference was used. We find that various things were frequently estimated as being worth so many oxen. Thus in Iliad, ii. 448, Pallas's shield, the Ægis, had 100 tassels, each of the value of 100 oxen. In Iliad vi. 234, Homer laughs at the folly of Glaucus, who exchanged his golden armour, worth 100 oxen, for the bronze armour of Diomede, worth nine oxen. In Iliad, xxiii. 703, Achilles offers as a prize to the conqueror in the funeral games in honour of Patroclus, a large tripod, which the Greeks valued among themselves at twelve oxen, and to the loser a female slave, which they valued at four oxen. But it must be observed that these oxen did not pass from hand to hand like Money. The state of barter still continued, as it is quite common at the present day when the precious metals are used as Money, to exchange goods according to their Value in Ay. Such a state of things in no way implied Money, or Currency, or Circulating Medium. cause. The necessity for Money arises from a somewhat different So long as the things exchanged were equal in value there would be no need for Money. If it happened that the exchanges of products or services among persons were equal, there would be an end of the matter. But it would often happen that when one person required some product or service from his neighbour, that neighbour would not require an equal amount of product or service at the same time, or, perhaps, even none at all. If then a transaction took place with such an unequal result, there would remain a certain amount or difference of product due from the one to the other, and this would constitute a DEBT —that is to say, a Right or Property would be created in the person of the creditor to demand this balance of product at some future time, and at the same time a Duty is created in the person of the debtor to pay the product, or perform the service, when required. Now among all nations who exchange, this result must inevitably happen: persons want something from others when those other persons want nothing from them. And it is easy to imagine the inconveniences which would arise if persons never could get anything they wanted, unless the persons who could supply these things wanted something in return at the same time. 11. In process of time all nations hit upon this plan; they fixed on some material substance which they agreed to make always exchangeable among themselves to represent the amount of Debt. That is, that if an unequal exchange took place among persons with a balance due from one to the other, then an amount of this universally exchangeable merchandise was given to make up the balance, so that the person to whom the balance was due might get an equivalent from some other person. Suppose a wine-dealer wants a quantity of bread from a baker; but the baker wants only one half the equivalent quantity of wine from the wine-dealer, or, perhaps, even none at all. NATURE OF MONEY. 15 The wine-dealer takes the bread from the baker and gives him in exchange as much wine as he wants, and makes up the balance by giving an amount of this generally exchangeable merchandise; or if he wants no wine at all the wine-dealer gives him the full Value or equivalent of the bread in this merchandise. The baker perhaps wants shoes and meat but not wine. Having received this merchandise from the wine-dealer, he goes to the shoemaker and butcher, and obtains the equivalent of the product he sold to the wine-dealer in the form of shoes and meat. Thus is seen the fundamental nature of Money, as this universally exchangeable merchandise is called: its especial and particular purpose is to represent the Debts that arise from unequal exchanges among men, and to enable persons to obtain the equivalent of the service they have done to one person from some one else. 12. Many species of merchandise have been used by different nations, but however different in their form, this is the universal want which they supplied. And the true nature of Money is to be a Right, or Title, to demand something from others. That this is the true nature of MONEY, has been seen by many writers; thus Aristotle says:— “But with regard to a future exchange (if we want nothing at present, that it may take place when we do want something) MONEY is, as it were, our SECURITY. For it is necessary that he who brings it should be able to get what he wants.” So an old pamphleteer in 1710 saw the same truth. He says:-"Trade found itself unsufferably straightened and perplexed for want of a general specie of a complete intrinsic worth as the medium to supply the defect of exchanging, and to make good the balance, where a nation, or a market, or a merchant demands of another a greater quantity of goods than either the buyer had goods to answer, or the seller had occasion to take back." So Baudeau, one of the most eminent of the Physiocrates, or first school of Economists, says : : "This coined Money in circulation is nothing, as I have said elsewhere, but effective Titles on the general mass of useful and agreeable enjoyments 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. "Instead of taking his share in kind of all matters of subsistence, and all raw produce annually growing, the sovereign demands it in Money, the effective Title, the Order, the Bill of Exchange." So Smith says:." A guinea may be considered as a Bill for a certain quantity of necessaries and conveniences upon all the tradesmen in the neighbourhood." So Henry Thornton says:-" Money of every kind is an Order for goods. It is so considered by the labourer when he receives it, and is almost instantly turned into money's worth. It is merely the instrument by which the purchaseable stock of the country is distributed with convenience and advantage among the several members of the community." This great fundamental truth was also very clearly expounded by Bastiat; he says—“ "This is now the time to analyse the true function of Money, leaving out of consideration the miners and importation. "You have a crown piece. What does it mean in your hands? It is, as it were, the witness and the proof, that you have at some time done some work which instead of profiting by, you have allowed society to enjoy, in the person of your client. This crown piece witnesses that you have rendered a service to society, and moreover states the Value of it. It witnesses besides that you have not received back from society a real equivalent service as was your right. To put it in your power to exercise this Right when and how you please, society by the hands of your client has given you an ACKNOWLEDGMENT, a TITLE, an ORDER of the state, a TOKEN, a CROWN-PIECE, in short, which does not differ from TITLES of CREDIT, except that it carries its Value in itself (?) and if you can read with the eye of the mind, the inscription it bears you can distinctly see these words, Pay to the bearer a service equivalent to that which he has rendered to society. Value received and stated, proved and measured by that which is on me. Either it is "After that you cede your Crown piece to me. a present, or it is in exchange for something else. If you give it to me as the price of a service, see what follows: your account as regards the real satisfaction with society is satisfied, balanced, closed. You rendered it a service in exchange for a Crown piece, you now restore it the Crown piece in exchange for a service: so far as regards you the account is settled. But I am now just in the position you were before. It is I now who have done a service to society in your person. It is I who have become its Creditor for the value of the work which I have done for you, and which I could devote to myself. It is into my hands, therefore, that this TITLE OF CREDIT should pass, the witness and the proof of this social Debt." "It is enough for a man to have rendered services, and so to have the Right to draw upon society by the means of an exchange for equivalent services. That which I call the means of exchange is MONEY, BILLS OF EXCHANGE, BANK NOTES, and also Bankers. Whoever has rendered a service, and has not received an equal satisfaction is the bearer of a WARRANT, either possessed of Value, like Money, or of CREDIT, like Bank Notes, which gives him the Right to draw from society when he likes, where he likes, and under what form he will, an equivalent service." So Mill says "The pounds or shillings which a person receives weekly, or yearly, are not what constitute his income; they 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 of. The farmer pays his labourers, and the landlord in these TICKETS as the most convenient plan for himself." Thus all these writers are absolutely agreed as to the fundamental nature of MONEY: and this may be stated as the fundamental axiom of Monetary Science-The Quantity of money in any country represents the amount of DEBT which there would be if there was no MONEY; and consequently WHERE THERE IS NO DEBT THERE CAN BE NO MONEY. We have shown elsewhere that the greatest monetary disasters the world ever saw have been produced by violating these fundamental axioms. 13. Different nations have adopted different substances to |