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
