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Home -> Orville Marcellus Powers -> Commerce and Finance -> Chapter XIV

Commerce and Finance - Chapter XIV

1. Chapter I

2. Chapter II

3. Chapter III

4. Chapter IV

5. Chapter V

6. Chapter VI

7. Chapter VII

8. Chapter VIII

9. Chapter IX

10. Chapter X

11. Chapter XI

12. Chapter XII

13. Chapter XIII

14. Chapter XIV

15. Chapter XV

16. Chapter XVI

17. Chapter XVII

18. Chapter XVIII

19. Chapter XIX

20. Chapter XX

21. Chapter XXI

22. Chapter XXII

23. Chapter XXIII

24. Chapter XXIV

25. Chapter XXV

26. Chapter XXVI

27. Chapter XXVII

28. Chapter XXVIII

29. Chapter XXIX

30. Chapter XXX

31. Chapter XXXI

32. Chapter XXXII

33. Chapter XXXIII

34. Chapter XXXIV

35. Chapter XXXV

36. Chapter XXXVI

37. Chapter XXXVII

38. Chapter XXXVIII

39. Chapter XXXIX

40. Chapter XL

41. Chapter XLI

42. Chapter XLII

43. Chapter XLIII

44. Chapter XLIV

45. Chapter XLV

46. Chapter XLVI

47. Chapter XLVII

48. Chapter XLVIII

49. Chapter XLVIX

50. Chapter L

51. Chapter LI

52. Chapter LII



Having traced briefly the history of the commerce of dif-
ferent nations and times, we shall now proceed to consider the
nature and uses of one of the most important instruments of
commerce,, viz., money.

Under a republican form of government, where every citizen
is interested as a factor in making the laws, either directly or
indirectly, it is of prime importance that the subject of money
importance of should be understood. Under a clever play of
an understand- W ords, politicians of ten deceive the masses and lead
subject them into dangerous fallacies upon this subject,

the result of which may be financial legislation of the most
serious and perhaps disastrous character. Nothing which Con-
gress can do will so directly and vitally affect the interests of the
people for their welfare and happiness, or their discouragement
and misery, as legislation upon this point, and likewise when
questions of monetary policy arise in the executive branch of
our government, the policy pursued by the president is of vital
importance to the people. If, for instance, owing to changes in
our financial policy there is a general rise in prices, debtors will
gain at the expense of creditors; a tenant with a long lease at
a fixed rental will gain at the expense of the landlord, and vice
versa. Thus one class will receive greater benefit and advantage
from the general wealth and prosperity of the country than


148 MONEY.

The immense power for evil which may be caused by a gov-
ernment changing the currency is aptly described by Lord
Effects of Macaulay when he refers to the condition of af-

Changesinthe fairs in England at the close of the 16th century,

when the currency was debased by Henry VIII and
Edward VI. He says: "It may be doubted whether all the
misery which has been inflicted on the nation in a quarter of a
century by bad kings, bad parliaments and bad judges was equal
to the misery caused in a single year by bad crowns and bad
shillings. The evil was felt daily and almost hourly in almost
every place and by almost every class." A similar state of affairs
existed in France after the Kevolution, when the constitutional
government flooded the country with irredeemable paper money.
"What the bigotry of Louis XIV and the shiftlessness of Louis
XV could not do in nearly a century was accomplished by thus
tampering with the currency in a few months. Commerce was
dead betting took its place." Thus we see the importance of
universal enlightenment upon this subject of money, if we would
protect ourselves from the evils which result from ignorance.

Man in his primitive and barbarous condition lived upon the
spontaneous production of the ground. Advancing a little in
Man in the ^ ne sca ^ e ^ civilization, he made a few rude im-
Lowest plements such as a bow and arrow, a spear and

fish-hook by which he was able to better supply
his wants. Thus far his individual needs were supplied by his
own efforts or those of other members of his family or tribe, but
as he advances a little higher in the scale of intelligence and
his wants increase he learns that it is an advantage to exchange
the products of his labor for those products of the labor of

others which he does not possess. The hunter
saner exchanges a carcass of meat or a skin, the product

of the chase, for a bag of corn; the herdsman ex-
changes with the carpenter, the tailor with the fisherman, etc.
This is called barter. This is the beginning of commerce.


Here is the commencement of "division of labor/' that principle
which has produced such a high degree of efficiency in the arts
and sciences of our time. But observe the disadvantage of the
system. The herdsman may have sheep to exchange for a coat,
but the tailor may not need sheep, while the carpenter may need
sheep, but the herdsman may not require the services of the car-
penter, and thus the difficulty would always be to find a person
willing to make the desired exchange. In the early stages of
society when wants are few and simple the difficulties may be
overcome, but as man progresses and his wants multiply, it
becomes increasingly difficult for the members of the community
to make satisfactory exchanges.

From the foregoing we see that exchange is a necessity of
civilized life and in order to effect exchanges to any considerable
extent a "medium of exchange" (money) is necessary. The
earliest form of money was probably the skins of fur bearing
animals, and these are still used as a medium of
exchange among the Indians in the far northern
part of North America. Dried fish, shells and
beads were used as money by other Indian tribes. The early
Greeks and Romans used cattle and wine as money. Our own
history in colonial times furnishes numerous examples of various
articles having been used as money, among which may be men-
tioned tobacco in Virginia and Maryland and corn in Massa-
chusetts. The Pilgrim fathers found the aborigines using
wampum as both an article of adornment and a medium of ex-
change throughout New England. It was a kind of bead made
from a species of shell found in sea water. These beads were of
different sizes and colors, and their value was correspondingly
different. This species of money was an important factor in
the early civilization of New England. It brought the furs from
the north and west to the Massachusetts colonists and they in
turn exchanged these for sugar, tools and other commodities
with the English and Dutch traders. During the early settle-

150 MONEY.

ment of California by the gold seekers of '49, gold dust by
weight was used as a medium of exchange.

Rising higher in the scale of civilization, we see the im-
portance of having a better medium of exchange. It must be a
Precious commodity with great value in small compass. It

Metais as must be something in universal demand, so that

it will circulate widely; it must be something
that is durable and will not surfer from decay or rust when
stored or from wear when in use; it must be something that is
divisible so that a great variety of denominations may be made
for use in the multitude of exchanges large and small. All of
these qualities point at once to the precious metals as the most
suitable articles to constitute the money of civilized man. Gold
and silver are sufficiently rare to embrace great value in small
space; they are distributed over the entire globe, like the human
race, and their quality is always the same wherever found.
Besides, they are metals which can -be readily used for other
purposes than for coinage, in case there should be a temporary
overproduction of them, so that their purchasing power may
be said to be more uniform and universal than that of any other
commodity. They are practically indestructible, being capable
of resisting rust, and when combined with an alloy of harder
metal, suffer little from abrasion. Gold may be refined, and al-
loyed, united and divided, with absolutely no loss whatever of
the pure metal. Silver suffers a very slight loss under such
treatment. It was soon discovered, too, that to reduce the wear
and tear to the minimum the most convenient form in which
the metals could be coined for use as money was round with
flat sides to receive the inscription or stamp of value and milled
edges to prevent clipping.

As previously stated, gold and silver are used extensively
for articles of adornment and as jewelry, tableware, etc., and
it is probable that their general usefulness as commodities first
suggested their use as money. The fact must not be lost sight


of by the student of this subject that real money is a commodity,

and the selling of corn for gold is an act of barter. The word

barter is commonly used to signify the exchange

of one article for another without the use of


money, but it must be remembered that all
trade is barter when the precious metals are employed as equiva-
lents, since these are commodities. This important fact forms
the basis for a correct understanding of the entire science of

It will thus be apparent that the coinage of a precious metal,
while it changes its form, does not destroy its character as a
commodity, and the exchange of the substance,
convenience whether coined or in its crude state, is an act of
barter. In fact it is not necessary that the metal
or other substance used as money should be coined at all. Gold
and silver were used as money before they were coined. They
were then measured by weight, and to avoid this inconvenience
the stamp was put upon them indicating the weight, which,
says Aristotle, was afterwards taken to indicate value also. All
that coinage does is to save the trouble of innumerable weigh-
ings and assayings which would hamper trade and prove so
troublesome and inconvenient as to largely destroy the usefulness
of money as a measure of value. Another advantage in coins of
the precious metals, early recognized, was their durability. There
was serious shrinkage and deterioration in fish or tobacco, as
money, and hides were not divisible, while all of these articles
were not easily transferred or transported from place to place.

All writers agree that the essentials of a good kind of money
are durability, portability, divisibility, homogeneity and uniform-
ity in value. These qualities seem to exist in gold
an ^ s il ver to a greater extent than is embodied in
any other two metals. Gold and silver, being com-
modities, are of course subject to some fluctuations in value,
and silver especially has shown a marked change in value in

152 MONEY.

recent years, but on the whole these metals are nearest uniform
in value fluctuate less than .other commodities. Divisibility is
the quality which permits a metal to be divided without loss
of value. When a $20 gold piece is cut into a number of small
parts, the sum of these will be $20 less, of course, the few atoms
lost in the operation of cutting, which are very insignificant.
All parts of metallic money should be homogeneous, that is, of
the same quality, so that equal weights will have exactly the
same value. There may be different qualities of steel or iron,
but of pure gold or silver there is only one quality.

As an instrument of commerce and an aid to the progress
and welfare of man, money is indispensable. Without it divis-
ion of labor to any considerable extent would be
impossible; there would be little inducement to
work when the products of one's labor could not
be disposed of without finding persons who happened to want
such commodities and have others to give in return that he
himself would desire. The fact that there is in universal circula-
tion a commodity, the holders of which are ready to exchange
for the services of the farmer, mechanic, artist and inventor,
is a stimulus to effort and industry, and brings thousands of
products to market which could otherwise never have come into
existence. The use of money tends to bring mankind into
closer relations of inter-dependence, thus broadening the mind
and character, and teaching indirectly the doctrine of the
universal brotherhood of man. By distributing the products
of labor over the earth's surface where and when they are
needed, it is the means of banishing famine, while on the other
hand the absence of money tends to isolate man. Isolation
breeds suspicion and jealousy and these lead to strife, war, slav-
ery and famine.

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