We live now in a time of symbolic
money,but it was not always like this. Today money is represented by pieces
of paper as non-redeemable official bills whose quantity can be increased
without any effort by the monetary authorities of the country.
Until the beginning of the twentieth century the most popular and universal
medium of exchange was gold and silver coins. Currency was considered
to be as free as any other merchandise. People responding to their own
particular needs demanded the coins and also offered them, thus their
market value was established daily.
The symbolic money originated from private contracts or promises of payments
issued by goldsmiths and later by banks which became common among businessmen.
The private contract issued in favour of a particular person to be paid
at a particular time became increasingly more abstract until it reached
today's non-redeemable note. The private contract became payable to the
bearer rather than to a particular person, then it became payable on demand
rather than at a particular time.
The next evolutionary jump took place as more governments moved in support
of their national bank's notes as national currency. This resulted in
more people becoming used to it as a 'substitute' for gold and silver.
Then,in periods of emergency, the government could suspend the obligation
to redeem the notes, effectively making them the unique money in circulation.
The final stage took place when the governments discovered the potential
of the artificial currency to cover their own financial deficit. That
was achieved through a special legislation that made their notes 'legal
money' and it obliged people to accept them as payment of all official
debts. After many decades, the governments eliminated all the merchandise
currencies- gold and silver coins - from circulation. Thus the non-redeemable
promise of payment of the government became the only available medium
of exchange. A purely symbolic and artificial money had been created.
On this issue of money many people have fought before. Paper-money was
defended by the usurers and the economists, who maintained that money
could be substituted by symbols which were the property of the state.
It was attacked by the defenders of freedom who maintained that money
was not the monopoly of the state and therefore was a commodity like any
other one. Here follow some of the arguments.
The Economists
It was a maxim of Roman Law that the value of
money was fixed by Imperial decree. It was expressly forbidden to treat
money as a commodity. "However, it shall not be lawful for anyone to buy
money, for, as it was created for public use, it is not permissible for
it to be a commodity."
(Codex Theodosianus, lib. 9, tit. 23)
Nicholas Barbon deduced the right of the state "to raise money", i.e.
to give to the quantity of silver called a shilling the name of a greater
quantity, such as crown, and so to pay back shillings to creditors instead
of crowns. "Money does wear and grow lighter by often telling over...
It is the denomination and currency of the money that men regard in bargaining,
and not the quantity of silver... 'Tis the public authority upon the metal
that makes it money."
(Barbon, Nicholas, A Discourse on Coining the New Money Lighter. In
Answer to Mr. Locke's Considerations etc., London, 1696, p.25, 29,
30)
"That, as far as concerns our domestic exchanges, all the monetary functions
which are usually performed by gold and silver coins, may be performed
as effectually by a circulation of inconvertible notes having no value
but that fictitious and conventional value... that they derive from the
law, is a fact which admits, I conceive, of no denial." (Fullarton, John,
On the Regulations of Currencies, 2nd edn., London, 1848, p. 21)
"Money is their (the commodities) symbol."
(Forbonnais, François-Véron de, Élémens
du commerce, new edn., Leyden, 1776, Vol. 2, p. 143)
"Money is a symbol of a thing and represents it."
(Montesquieu, Charles-Louis de, Esprit des lois (1748), in Oeuvres,
London, 1767, Vol. 2, p. 3)
"The fact that the circulation of money itself splits the nominal content
of coins away form their real content, dividing their metallic existence
from their functional existence, this fact implies the latent possibility
of replacing metallic money with tokens made of some other material, i.e.,
symbols which would perform the function of coins."
(Marx, Carl, Capital (1867), ed. Penguin, London, 1976, Vol. 1,
pp. 222-3)
The Freedom Guardians
"Money is not a mere symbol, for it is itself
wealth; it does not represent the values, it is their equivalent." (Le
Trosne, Guillaume-François, De l'intérêt social
par rapport à la valeur, à la circulation, à l'industrie,
et au commerce intérieur et exterieur [1777], in Physiocrates,
ed. Daire, part 2, Paris, 1846, p. 910)
"Whether one of these two values is money, or whether they are both ordinary
commodities, is in itself a matter of complete indifference." (Mercier
de la Rivière, Paul Pierre le, L'Ordre naturel et essentiel
des sociétés politiques [1767], in Physiocrates,
ed. E. Daire, Part 2, Paris, 1846)
"Money is the universal commodity."
(Verri, Pietro, Meditazioni sulla economia politica [1771], in
Scrittori Classici italiani di economia politica, Parte moderna,
ed. Custodi, Vol. 15, Milan, 1804, p. 16)
"Silver and gold, coined or uncoined, tho' they are used for a measure
of all other things, are no less a commodity than wine, oil, tobacco,
cloth or stuffs."
(Child, Josiah, A Discourse Concerning Trade, and That in Particular
of the East-Indies etc., London, 1689, p. 2)
"Gold and silver have value as metals before they are money."
"The coins which today have a merely ideal denomination are in all nations
the oldest; once upon a time they were all real, and because they were
real people reckoned with them."
(Galiani, Ferdinando, Della Moneta, p. 72, 153, Vol. 3 of Custodi's collection
entitled Scrittori classici italiani di economia politica, Parte moderna,
Milan, 1803)
"The false definitions of money may be divided in two main groups: those
which make it more, and those which make it less, than a commodity."
(Wilhelm Roscher, Die Grundlagen der Nationalökonomie, 3rd.
edn, Stuttgart, 1858, pp. 207)
Go
to Chapter 6
The Return of
the Gold Dinar
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