GRATITUDE TO:

My wife, children and grandchildren; with the hope that I may become more of a family man in the coming years.

The Belgian Suy family – Casibeans, especially Carlo and Caroline, for facilitating the evolution of my theoretical applied economic sciences into tangible, applied knowledge in international trade.

The Belgian Vanherpe Food Group, especially Erik and Karel Vanherpe, who provided me the opportunity to develop my skills internationally.

My gratitude also extends to the company Pumbo.nl, Zwaag, Netherlands, which provided me with exquisite support in drafting, printing and publishing of this work.

ABBREVIATED TABLE OF CONTENT -- MONEYED MONEY

FOREWORD

INTRODUCTION

PART I            THE CONCEPT OF MONEY

I-1A ‘SELECTED’ HISTORY OF MONEY

I-2THE ORIGIN OF MONEY: A CONCISE AUTHOR’S SELECTION

I-3AN ANTHOLOGY OF CONFLICTING DEFINITIONS OF MONEY

I-4A DEFINITION OF MONEY ACCORDING TO ‘MONEYED MONEY’

I-5CONCLUDING THOUGHTS ON THE CONCEPT OF MONEY

SUBDIVIDING MONEYED MONEY

PART II    COMMODITY, TOKEN AND METAL

II-1COMMODITY MONEY

II-2TOKEN MONEY

II-3METAL MONEY

II-4COPPER

II-5SILVER

II-6GOLD

II-7PERSPECTIVES OF (NON-) ACADEMICS ON SILVER AND GOLD

II-8‘METALLIC’ CONCLUSIONS

PART III   OTHER MEANS (TOOLS) FOR INDIRECT EXCHANGE

III-1PAPER MONEY - BANK NOTE

III-2COMPLEMENTARY MONEY

III-3REPRESENTATIVE MONEY

III-4FIAT MONEY

III-5FIDUCIARY MONEY

III-6OTHER TOOLS OF INDIRECT EXCHANGE: TANGIBLE

III-7OTHER TOOLS OF INDIRECT EXCHANGE : INTANGIBLE

III-8THE IMPORTANCE OF AN ACCURATE DEFINITION

PART IV   (NON -) ACADEMICS ON MONEY

IV-1ECONOMIC AND MONETARY SYSTEMS

IV-2TIMELINE OF KEY DATES AND REFERENCED WORKS

IV-317TH -- 18TH CENTURY AUTHORS

IV-419TH CENTURY PROFFESIONALS

IV-520TH CENTURY MONETARY EXPERTS

IV-6NON – ACADEMICAL’ CONCLUSIONS

PART V    TRUST AND CONFIDENCE

V-1THE CONCEPT OF TRUST AND CONFIDENCE

V-2DIRECT EXCHANGE (BARTER)

V-3CONFIDENCE IN MEANS (TOOLS) FOR INDIRECT EXCHANGE

V-4TRUST IN GOVERNMENTS (AUTHORITY - STATE)

V-5CONFIDENCE IN THE GLOBAL FINANCIAL SYSTEM

V-6CONFIDENCE IN THE (EXTENSIVE) FINANCIAL MARKETS

V-7CONFIDENCE IN THE INTERNET

V-8CONCLUDING THOUGHTS ON TRUST AND CONFIDENCE

PART VI   TOMORROW’S MONETARY REFORMS?

VI-1EFFORTS TO REFORM THE INTERNATIONAL MONETARY SYSTEM

VI-2DIVERSE THEORIES ON ‘FUTURES’ OF MONEY

VI-3SPECIAL DRAWING RIGHTS – (SDR)

VI-4MODERN MONETARY AND NEW (SOVEREIGN) CURRENCY THEORIES

VI-5PERSPECTIVES FROM THE 'AUSTRIAN SCHOOL'

VI-6CONCLUSION

PART VII  MONEYED MONEY

VII-1TRUST AND CONFIDENCE IN REVISED FACTORS

VII-2MONEYED MONEY’S TOOL FOR INDIRECT EXCHANGE

VII-3I.R.M.A.’S - TOOL …. GRADUAL EVOLVING IN THE WORLD

VII-4I.R.M.A.’S - TOOL …. DURING WORLD CRISIS AND WAR

VII-5THE EVALUATION OF MONEYED MONEY’S TOOL

VII-6A ‘MONEYED’ CONCLUSION

ABBREVIATED TABLE OF CONTENT -- MONEYED MONEY - ADDENDA

ADDENDUM 1   “FAUTEUIL” – ACADEMICS ON MONEY

ADD1-1‘BARREN’ DEFINITIONS AND DESCRIPTIONS OF MONEY

ADD1-2EDGEWORTH’S PARABLE

ADD1-3GRAEBER’S ‘UNCREDITWORTHY’ DEBT

ADD1-4CARL MENGER ON THE RACK

ADD1-5‘UNWINDING’ CONCLUSIONS

ADDENDUM 2   A MONETARY PITFALL CALLED…’VALUE’

ADD2-1THE CONCEPT OF VALUE

ADD2-2ACADEMIC PERSPECTIVES ON ‘VALUE’ AND ‘THE VALUE OF MONEY’

ADD2-3NOTABLE DETERMINANTS OF VALUE

ADD2-4THE STANDARD OF VALUE

ADD2-5LUDWIG VON MISES ON TERMINOLOGY OF VALUE

ADD2-6‘VALUABLE’ CONCLUSIONS

ADDENDUM 3   A ‘QUIXOTIC’ RELIC

ADD3-1THE SILVER STANDARD

ADD3-2THE GOLD STANDARD (S)

ADD3-3J.M. KEYNES’ BARBAROUS PERSPECTIVE ON A ‘QUIXOTIC’ RELIC

ADD3-4IS THERE STILL A FUTURE FOR A GOLD STANDARD?

ADD3-5A ‘BARBAROUS’ CONCLUSION

ADDENDUM 4   JOHN MAYNARD KEYNES – LOCKE(D)

ADD4-1MATHEMATICS, EUGENICS, SPECULATION…ECONOMICS?

ADD4-2KEYNES’ UNACCOUNTABLE ‘TREATISE’ - MONEY

ADD4-3KEYNES’ ‘ DEFLATED’ INFLATION

ADD4-4EXPLORING A CONSPIRACY THEORY

ADD4-5NO ‘KEYNESIAN RATIONALE’ CONCLUSION

ADDENDUM 5   LOWNDES-LOCKE CONTROVERSY IN THE 21TH CENTURY

ADD5-1CITATIONS FROM LOWNDES AND LOCKE

ADD5-2NON-) ACADEMICS ON THIS CONTROVERSY

ADD5-3THE LOWNDES – LOCKE EPILOGUE

ADD5-4RESOLVING LOCKE’S FRUSTRATIONS: A 21TH CENTURY PERSPECTIVE

ADDENDUM 6   GOLDEN GOVERNMENTS

ADD6-1ROOSEVELT’S GOLD RESERVE ACT 1934

ADD6-2NIXON’S SHOCK 1971

ADD6-3BROWN’S BOTTOM 1999-2002

ADD6-4THE GOLDEN GOVERNMENT’S CONCLUSION

ADDENDUM 7   DECEITFUL BANKING DOCTRINES

ADD7-1THE REAL BILLS DOCTRINE

ADD7-2(NON-) GUARANTEED DEPOSITS

ADDENDUM 8   A CHRONOLOGY OF MONETARY EVOLUTION

ADD8-1THE EVOLUTION OF GOLD: FROM DISCOVERY TO MONETARY EXCHANGE

ADD8-2THE DYNAMIC MONETARY HISTORY OF THE LOW COUNTRIES

ADD8-3A YELLOW SHADED ROAD TO THE GLOBAL FINANCIAL SYSTEM

BIBLIOGRAPHY

MONEYED MONEY

HOW TO EXCHANGE THE LEAST

EXPENSIVE PRODUCT

FOR PURE

GOLD

FOREWORD

...puesto que todos los hombres comparten la misma naturaleza también comparten los mismos derechos como el de igualdad o de libertad.

La Escuela de Salamanca, el concept de Derecho natural, Gabriel Vàzquez (1549-1604)

The concept of the natural law drawn up by the School of Salamanca.

Today this could be expressed as:

Every human being, regardless of race, colour, sex, religion, orientation, social class, community or any other apparent difference, has the same rights and duties.

We have become accustomed to thinking in terms of 'rights'. Man also has duties. One of the most important duties is the unbiased respect of human rights, as laid down in the Universal Declaration of Human Rights.

INTRODUCTION

Graduated in economics, the international trade in agricultural products was one of the main activities in my professional career. The organizational structure of the trading company dictated a streamlined approach, maintaining a minimalistic organizational setup. Consequently, the roles of commercial actors extended beyond mere trading activities to encompass virtually all facets associated with the content of commercial contracts.

Each component of a commercial contract carries inherent significance; the absence or inadequate specification of any element can potentially disrupt the entire contract execution. This necessitated an expanding expertise in various domains, including products, quality, packaging, transport modalities, and the legal and financial aspects of contracts. Proficiency in both written and verbal language use was imperative. Additionally, familiarity with the logic and psychology of interactions with suppliers, customers, shippers, carriers, insurers, and others became a prerequisite. The issue of currency was a daily consideration, determining the preferable currency for entering into purchase and sales contracts. The objective was to utilize the same currency for both transactions whenever possible, aiming to circumvent the complexities of currency hedging. However, this posed considerable hazards, especially in the period preceding the Euro, where European buyers predominantly sought to conclude contracts in their national currency.

My economic studies had left me discontented regarding matters pertaining to the phenomenon of money. That is why I have spent the last decade studying, substantive and historical, the origin and concept of money. Despite the ubiquity of the term 'money' in the daily discourse of the ordinary individual, its interpretation varied among different people.

1977     RANGOON (YANGON), BURMA (MYANMAR).

The Antwerp Suy company, in 1977 international trader and producer of rice, pulses and grains, assigned me the task of overseeing the loading of 10,000 tonnes of broken rice (broken grains of dry rice) in bulk onto a ship. Recollections of the sweltering heat in Rangoon linger vividly in my memory. An umbrella was provided to shield me from the intense sun. The loading process, undertaken by multiple teams working day and night, involved young men barefoot and bare-barked on the quay. They loaded 50-kilogram jute bags onto suspension slings, which were then hoisted into the ship's hold. Subsequently, another team of young men opened the bags at the 'head' with knives, allowing the broken rice to flow freely into the hold. The challenging conditions below deck, bereft of any breeze and with the sun bearing down on the workers, made it difficult to gauge the temperature.

The jute bags, filled with broken rice from the inland, were sealed with strings. In Europe, I was tasked with ensuring that these strings did not become entangled with the broken rice. During unloading in Europe, issues arose with the machines forcefully extracting the rice from the ship's holds into silos. Excessive strings mixed with the broken rice led to machine jams, necessitating time-consuming interventions and incurring additional costs. Despite witnessing these problems, I found it ethically challenging to instruct the workers to separate the ropes and place them in empty jute bags. Consequently, pieces of rope ended up in the broken rice between their bare feet. Ultimately, the broken rice found its purpose in the production of European beer.

Observing these conditions prompted me to contemplate the daily earnings and payment structure for such workers. The paramount concern for labourers, then as now, remains the satisfaction of their families' basic needs. Reflecting on the situation in 1977 or assessing the current state, it is evident that the monetary challenges faced by these individuals have persistently endured. Since 1962, Burma has been mostly under a military regime that swiftly quashes any population protests. The official currency, then and now, is the Kyat (MMK). Workers were likely paid in MMK, perhaps just enough for subsistence. If employed by a rice grower, there might have been a possibility of receiving partial or full payment in the form of rice. In circumstances where workers could save some of their earnings, the choice between MMK and other currencies, particularly the actively traded US Dollars (USD) on the black market, becomes pivotal. What features of money are most crucial for a worker? If one saves in MMK, as an indirect means of exchange, what choices can enhance future security? On 3 November 1985, the sudden demonetization of the 50- and 100-Kyat notes occurred without prior notice. Only a limited time frame allowed for the exchange of old notes for new ones. Two years later, the 25-, 35-, and 75-Kyat notes were rendered worthless without compensation, erasing the savings of millions.

During my visit in 1977, the exchange rate was 1 MMK to 0.1414 USD. In 2018, this rate plummeted to 0.000735 USD for 1 MMK. While the USD had a 'degree of strength' against other currencies in 1977, its purchasing power significantly diminished by 2018. Consequently, the real worth of MMK in 2018 was markedly lower compared to the worth relative to a 1977 - USD. Examining the survival rationale of a Burmese worker becomes imperative. There's an undeniable possibility that our sheltered western world may, at some point, experience a situation akin to Burma, where basic needs overshadow leisure and luxury. In such a scenario, we may find ourselves compelled to adopt the line of thinking prevalent among these workers. Thus, it behoves everyone to proactively assess the most viable escape routes under such circumstances.

ESSENCE

Countless books and publications have delved into the intricate subject of money. The decision to contribute yet another work to this extensive body of literature may seem audacious. In PART I of this work, dedicated to the concept of money, I compile an 'anthology' of definitions, offering insight into the divergent perspectives that continue to drive the perennial exploration of this fundamental topic. The recurrent examination of this acorn subject can be attributed, in part, to the multifaceted nature of the discourse. The challenge lies not only in the terminology surrounding 'money' but also in the propensity for its misapplication to related subjects such as 'debt,' 'credit,' and 'value,' thereby amplifying confusion.

J.P. Morgan, a prominent figure, testified before Congress in 1912, asserting that “Money is gold, nothing else.” While this definition is subject to criticism, it encapsulates a core aspect of the matter at hand. It wouldn't be surprising if other members of the 'superrich' took issue with Morgan, cautioning against the public endorsement of such a straightforward definition, particularly for those already immersed in a 'Morgan state of affairs.' In 1913, the subsequent creation of the 'Federal Reserve of the United States' marked a pivotal moment. Bankers convened to deliberate and agree on how certain 'essences' of money could be established for the long term. Similarly, the statement, “Give me control of a nation's money and I care not who makes the laws,” often attributed to Mayer Amschel Rothschild, lacks definitive proof. Its enduring significance underscores the idea that control over a nation's finances can wield considerable influence over its governance.

STRUCTURE OF ‘MONEYED MONEY’

PART I is called the concept of money, in which, at the end, I try to put forward ‘a’ Moneyed Money definition of money.

SUBDIVING MONEYED MONEY: This definition is the foundation for the extension of the work and on this basis the remaining six parts can be subdivided.

PART II, Commodity, Token and Metal….with an emphasis on gold.

PART III, Other Means (Tools) For indirect exchange…Being a more technical expose of innovative options.

PART IV, (Non-) Academics on Money…A 'money' philosophy from the 17th to the 20th century.

PART V, Trust and Confidence in tools, governments, financial system, markets and the internet.

PART VI, Tomorrow’s Monetary Reform?....no solid reform to be found in the near future?

PART VII, Moneyed Money… a fair solution for most individuals, but probably unacceptable for an elite.

ADDENDA

Throughout the course of my research for this work, I encountered certain intriguing phenomena that, while significant for the development of specific reflections, possessed histories intricate enough to warrant inclusion in an addendum.

Mindful of the intricate nature of these phenomena, I have chosen to assign them addendum titles imbued with a hint of sarcasm. This choice is motivated, in part, by the actions of certain institutions and authors who, whether due to a lack of comprehensive understanding of the concept of money or a desire to manipulate specific theories to their advantage, have inspired a tone of irony in the titles.

- ADD1 – ‘FAUTEUIL’ – ACADEMICS ON MONEY -

- ADD2 – A MONETARY PITFALL CALLED… VALUE -

- ADD3 – A ‘QUIXOTIC’ RELIC -

- ADD4 – JOHN MAYNARD KEYNES - LOCKE(D) -

- ADD5 – LOWNDES - LOCKE CONTROVERSY IN THE 21TH C. -

- ADD6 – GOLDEN GOVERNMENTS -

- ADD7 – DECEITFUL BANKING DOCTRINES -

- ADD8 – A CHRONOLOGY OF MONETARY EVOLUTION -

ABUNDANT    CITATIONS

MONEYED MONEY is overflowing of quotations. PART I to PART VI could be described as a ‘CITATIONS - BOOK’ of academics and also of non-academics whom I let speak and to which I add in some instances my own opinions. I employed a total of more than 1,000 selected citations from authors, international organisations and encyclopaedias to endorse certain theses or undermine others. One could refer to the entire work Moneyed Money as “Interpretive Annotations” : A Scholarly Exploration of Quoted Sources”.

To distinguish between my own text and the quotes, I have put all citations in italics.

WHY ABUNDANT?

I am aware that this exercise will not be uncritically accepted by some readers. Quotes can indeed have a deceiving effect if taken out of context.

On the other hand, who am I to interpret the words of a writer, I have never met or spoken to? Many of the quotations are sufficiently self-explanatory and some are both prophetic and relevant to the present situation, even more than a century after the writing.

The arguments in favour of the use of quotations are:

- To let the author himself speak, without giving one’s own interpretation.

- In many cases, the translations are not always satisfactory and can thus misinterpret the author's thoughts.

- In some cases, the quotes are misunderstood by some authors and put the unsuspecting reader on a false footing.

- If the reader is thoroughly interested in the author's view, it is conceivable that he will consult or rediscover the author's work to check whether the quote was indeed taken out of context.

COMMENTS ON THE CITATIONS

In most of the citations, some sentences or part of sentences were underlined with a dotted line. Below the quote, I then give my own interpretation and observations about the content of the quote, in full or limited to the underlined part of it, or just comments about its author.

EXAMPLE

To illustrate the importance of using the original citation, I worked out an example in the addendum 1, in the section 1 - 2 Edgeworth’s Parable. In - SMITHIN, John, What is Money ?, I read an essay called, ‘Babylonian Madness’: on the historical and sociological origins of money, written by Geoffrey Ingham. The full story can be read in the relevant addendum.

BOOKMARK

I open each PART of this work with the text below, which should be regarded as a kind of bookmark for the reasoning of 'moneyed money'. I also use this bookmark, wholly or in part, in other passages of this work, where I believe it is appropriate.

“4 billion | People still don’t have internet access.” (World Economic Forum, 2016)
“2 billion: | Number of Adults Worldwide Without Access to Formal Financial Services.”
(World Bank, March, 2016)
000.000.003 | individuals have more wealth than
750.000.000 | poorest people in the world. (Wikipedia/Distribution of Wealth-19/04/2019)

If the claim is true that 3 individuals have amassed a wealth or assets greater than the total wealth of 750,000,000 poorest people, then this means that these 3 individuals and their ancestors have indeed grasped the 'essence' and also have an asocial brainwave superior to other people. In their minds, perhaps the rationale is to just let those 750 million people disappear so that the earth becomes a little more liveable for the remaining people. On the other hand, it is also conceivable that a liquidation is under way on the other side, so that 750 million poor people are currently sharpening the 'guillotine' knives.

If people were allowed individual freedom, with in their hands a sound means of indirect exchange, it would rather be an aspiration to create a 'humane' capitalist system for the more than 8 billion people.

Isn't it time that just about all people get the chance to go to the 'essence' in time, so that they can decide about their own future? "Moneyed Money" endeavours to introduce a cosmopolitan's suitable tool of indirect exchange, one that could potentially avert centuries of conflict, failure, and deception.

(NON-) ACADEMICS

I got my data from historical writings, books and the internet. In some cases it was very clear that this data came from economists, philosophers, anthropologists, philanthropists, mathematicians, metaphysicians, bankers or other background. Nevertheless, in most cases it was not so clear to attach a name to the author's background, since some academics have multiple schooling.

To solve this problem, I have used the term (non-) academics in most cases; with which I tried not to ignore any specific background with this collective name.

PART I      THE CONCEPT OF MONEY

“4 billion | People still don’t have internet access.”
“2 billion: | Number of Adults Worldwide Without Access to Formal Financial Services.”
000.000.003 | Individuals have more wealth than
750.000.000 | Poorest people in the world.

ABSTRACT

The concept of money, a subject explored for centuries by academics, banking professionals, and individuals from diverse backgrounds, remains enmeshed in a complex web of conflicting theories and entrenched beliefs. Moneyed Money, while acknowledging the multitude of perspectives that have contributed to the discourse, refrains from asserting absolute correctness.

This essay endeavours to let historical thinkers articulate their viewpoints on the most crucial aspects of money. It recognizes the diversity of ideas that have shaped the discourse over time. Nevertheless, as an author, a position must be taken amidst the myriad historical stages, selecting those deemed pivotal for the trajectory of monetary history. Delving into potential origins of money is undertaken, emphasizing the importance of establishing a well-founded definition of money to underpin subsequent steps in monetary reasoning.

Moneyed Money does not claim singular authority but seeks to contribute to an ongoing conversation, encouraging readers to engage critically with the historical context and definitions presented. By acknowledging the rich tapestry of thought surrounding money, this work invites readers to navigate the complexities of monetary history with a nuanced understanding, fostering ongoing dialogue and exploration.

PART I THE CONCEPT OF MONEY

CONTENT

I-1A ‘SELECTED’ HISTORY OF MONEY

I-1-1FIRST THERE WAS DEBT AND THAN THERE WAS MONEY?

I-1-2HISTORICAL NAMES FOR MONEY

I-1-3THE HISTORY OF MONEY

I-1-4THE SEVENTEENTH CENTURY

I-1-4-1WHY TO FOCUS ON THE 17TH CENTURY?

I-1-4-2CHRONOLOGY OF HOLLAND - ENGLAND

I-1-4-3ECONOMIC EXPANSION AND POPULATION GROWTH

I-1-4-4WAR FINANCE AND SOVEREIGN DEBT

I-1-4-5BULLIONISM

I-1-4-6THE ENGLISH INDIVIDUAL IN A TURBULENT 17TH CENTURY

I-2THE ORIGIN OF MONEY: A CONCISE AUTHOR’S SELECTION

I-3AN ANTHOLOGY OF CONFLICTING DEFINITIONS OF MONEY

I-3-1DEFINITIONS INCORPORATING MOST IMAGINABLE VARIATIONS

I-3-2CONFUSING ‘CLARIFYING’ ADJECTIVES

I-3-3HOW TO EXPLORE THIS CONFUSION ?

I-3-4INDIVIDUALS

I-4A DEFINITION OF MONEY ACCORDING TO ‘MONEYED MONEY’

I-4-1DENOMINATION

I-4-2MEANS / TOOLS

I-4-2-1SEVERAL MEANS / TOOLS

I-4-2-2QUALIFICATION OF THE MEANS / MEDIA / TOOLS

I-4-2-3PROPERTIES OF MONEY

I-4-3EVENTUAL INTENTION TO BE USED

I-4-3-1LIQUIDITY - PREFERENCE

I-4-3-2HOARDING

I-4-3-3MONEYED MONEY’S INDIVIDUALS

I-4-4AGREEMENTS / CONTRACTS

I-4-5INDIRECT EXCHANGE

I-4-5-1FUNCTIONS OF MONEY

I-4-5-2DIFFERENT KIND OF EXCHANGES

I-4-5-3DEFINITION OF ‘INDIRECT EXCHANGE’

I-4-5-4MEANS OF INDIRECT EXCHANGE THE FUNCTION OF MONEY

I-5CONCLUDING THOUGHTS ON THE CONCEPT OF MONEY

PART I THE CONCEPT OF MONEY

I-1A ‘SELECTED’ HISTORY OF MONEY

I-1-1FIRST THERE WAS DEBT AND THAN THERE WAS MONEY?

Anthropologist David Graeber presents a stunning reversal of conventional wisdom, showing that before there was money, there was debt. For more than 5,000 years, since the arising of the first agrarian empires, humans have used elaborate credit systems to buy and sell goods; that is, long before the invention of coins or cash. It is in this era, Graeber argues, that we also first encounter a society divided into debtors and creditors.

The search for the emergence of money leads to an 'its own truth' - logic. I do not think it makes sense to adhere to one side or the other. Whether one accepts the thesis that credit, rather than direct exchange, was the source of the creation of money is of little relevance. It is safe to say that the phenomenon of money existed and still exists. But it is important how the term 'money' is defined.

I-1-2HISTORICAL NAMES FOR MONEY

English | Money | (means weight)
Dutch | Geld |
German | Geld |
French | Monnaie |
Spanish | moneda |
Babylonian | mene |
Hebrew | maneh |
Latin | moneta |
Greek | mnà |

Not everyone agrees with the origin of ‘money’s designation.

Le mot de monnaie, dans son sens propre, originaire et primitif, qui répond exactement au latin moneta, signifie une pièce de métal d'un poids et d'un titre déterminés et garantis par l'empreinte qu'y a fait apposer l'autorité publique. …. Le mot de monnaie, en ce sens, ne doit jamais se traduire par le mot latin moneta, mais par celui de pecunia, auquel il correspond très exactement.

TURGOT, Anne Robert Jacques, Valeurs et Monnaie, 1769, PDF

Goods which had thus become generally acceptable media of exchange were called by the Germans Geld, from gelten, i.e. to pay, to perform, while other nations derived their designation for money mainly from the substance used, the shape of the coin, or even from certain kinds of coins. (V- Concerning the Causes of the Different Degrees of Saleableness in Commodities E- book, 6/7)

MENGER, Carl, On the Origin of Money, 1892, The Great Library Collection By R.P. Pryne…

I-1-3THE HISTORY OF MONEY

The economic history of money, even in its simplest and most concrete form of coinage, is still not an exact study, despite its recent scientific accoutrements. (2: from primitive and ancient money to the invention of coinage - P.24)

DAVIES, Glyn, A History of Money,

However, history is made not only of what materialised but also of what was sought, even if the search eventually failed. For example, future historians cannot understand the truth of the present-day world without seriously examining our consecutive hopeless trials. (Introduction. P. 5)

SEIICHIRO, Ito, English Economic Thought in the Seventeenth Century: 9 Nov. 2020,

There is no point in retracing the history of money when so many good and interesting books have been written on the subject. It is sufficient to refer to the following works in the Moneyed Money’s bibliography.

BLANC, Jérôme et DESMEDT Ludovic, sous la direction de, Les Pensées monétaires dans l’histoire, l’Europe, 1517-1776, Classiques Garnier, Paris, 2014.

CHOWN, John, A History of Money, from AD 800, Routledge Taylor & Francis Group, London and New York.

DAVIES, Glyn, A History of Money, University of Wales Press, 10 Columbus Walk, Brigantine Place, Cardiff CF104UP, 2002, First edition 1994,

DEL MAR, Alexander, History of Monetary Systems, London; Effingham Wilson, Royal Exchange. 1895.

FERGUSON, Niall, The Ascent of Money, A Financial History of the World, Penguin Random House UK, first published by Allen Lane, 2008, published with updates in Penguin Books 2009.

KINDLEBERGER, Charles P., A Financial History of Western Europe, Routledge, Taylor & Francis Group, 1984,

ROTHBARD, Murray N., An Austrian Perspective of the History of Economic Thought, Ludwig Von Mises Institute, E-book

THORNTON, Mike, History of Money : Financial History : From Barter to Bitcoin

WEATHERFORD, Jack, The History of Money, From Sandstone to Cyberspace, Three Rivers Press, New York, 1997,

My focus is on the economic and monetary events of the 17th century, and I elaborate on this subject in the following section.

I-1-4THE SEVENTEENTH CENTURY

I-1-4-1WHY TO FOCUS ON THE 17TH CENTURY?

To grasp the monetary challenges of the 21st century, it is crucial to examine European events in the 17th century. During this period, there was a notable transition in the focal points of monetary affairs. Prior to and during the 17th century, we witnessed a gradual shift from Italy, through Antwerp, and eventually to Amsterdam, with London emerging as the preeminent financial hub of Europe. These shifts occurred through various mechanisms, including changes in the nature of European credit markets and their interconnected networks.

My project uses quotations of exchange rates in cities across Europe to reconstruct the European credit network in the seventeenth century. Linking cities together through exchange quotations reveals a surprisingly multilateral credit system. It also demonstrates how the seventeenth century witnessed a reorientation of the network away from Italy and towards north-western Europe.

LING-FAN, Li, The Geography of International Credit in 17th Century Europe, October 21st 2022,

The British Empire began to take shape during the early 17th century, with the English settlement of North America and the smaller islands of the Caribbean. Conflicts with Spain, Holland and France over trade and power, resulted finally in Britain’s gaining the empire-war. This success was largely due to Britain's innovative navigational techniques. The financial milestone was set by the formation of the Bank of England. Further key elements can be found in the next section.

I-1-4-2CHRONOLOGY OF HOLLAND - ENGLAND

1600 | Foundation of The East India Company.
1602 | The VOC (Vereenigde Oost-Indische Compagnie) became the largest joint-stock company in the world. It would maintain its monopoly of Dutch trade with Asia for nearly two centuries.
1603 | James I king of England.
1607 | Foundation of Jamestown, first successful British colony in North America.
1609 | The launch of the modern world’s first recognizable stock exchange (VOC-shares). The establishment of the ‘Wisselbank’: The Bank of Amsterdam.
1609 – 1610 | The first documented “bear” operation, forward selling of VOC-shares.
1618 – 1648 | Thirty Years War.
1625 | Charles I becomes king.
1629 - 1640 | The Eleven Years Tyranny, Charles I rules without parliament.
1633 – 1672 | The rise of goldsmith-banker.
1634 – 1637 | “Tulip-mania”: One of the most publicized speculative bubbles in history.
1640 | The seizure of the mint by Charles I.
1642 – 1651 | The English Civil War between king and parliament.
1648 | The Treaty of Westphalia.
1652 – 1654 | The first Anglo – Dutch war is fought.
1653 | Oliver Cromwell becomes Lord Protector of England.
1660 | Charles II becomes king.
1665 – 1667 | The second Anglo – Dutch war is fought.
1666 | The Great Fire in London.
1672 - 1674 | The third Anglo – Dutch war is fought.
1672 | Stop of the Exchequer. The issue of a copper coinage appeared from the Tower mint, bearing the famous Britannia insignia which has appeared on British coins for over 300 years.
1679 | James II becomes king.
1687 | Isaac Newton publishes ‘Principia Mathematica’.
1688 | The ‘Glorious, Bloodless Revolution’. William of Orange and Mary become the new monarchs.
1689 | The Bill of Rights is passed.
1691 | LOCKE John, Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money, Letter sent to a Member of Parliament.
1694 | Foundation of The Bank of England.
1695 | Establishment of the Bank of Scotland. LOWNDES, William, A Report containing an Essay for the Amendment of the Silver Coins. LOCKE John, Further Considerations concerning raising the Value of Money.
1696 | The Great recoinage.
1698 | Thomas Savery invents the first steam engine.

I-1-4-3ECONOMIC EXPANSION AND POPULATION GROWTH

England experienced economic expansion during the 17th century after the end of the Anglo-Spanish wars. This expansion created a need for additional financing, which the existing private banks could not provide. The Asian trade, that benefited Portugal, was now being opened up to other countries. As the economy expanded and new challenges and opportunities opened up with trade, the population in the cities grew especially in London. This led to an increase in the demand for goods and services, conjoined with a growing demand for money and credit.

V.O.C. AND THE BANK OF AMSTERDAM

In the 16th century, the ‘Habsburg Holland towns’ had imitated the financial innovations of other cities by issuing long-term annuities. The perpetual annuities were heritable, transferable, and therefore suitable for re-sale. A large part of the annuities were sold to foreigners. This opening of the capital market to foreigners was a step beyond what had been initiated by the Italian city-states.

In the Northern Netherlands, after 1595, several port cities took the initiative to establish individual ventures, selling shares to investors. Many citizens invested in the construction of the ships and the recruitment of the crew. When the ships returned from their voyage from Asia and the goods were sold, only then were the investors able to enjoy the profits.

In 1602 the V.O.C. (Vereenigde Oost-Indische Companie) was founded. The control of the Company was done by the directors, appointed by various towns, and therefore the control was not in the shareholders' hands. In contrast to the activities of the 'Voorcompagnien', the financing of the ships' equipment was undertaken by issuing medium-term debt, being one of the reasons that led to the downfall of the V.O.C..

In 1609 the directors of the V.O.C. declared the capital non-refundable, so that many shareholders attempted to sell their shares to someone else. This marked the beginning of the modern stock exchange. The original Charter expired in 1629. From then onwards the V.O.C. recompensed a generous dividend every two years. The V.O.C.- directors met daily in the official Exchange building where futures (‘tijd handel’) contracts, options and repos were concluded. The contracts were settled in cash or via transfers to the various accounts of the ‘Wisselbank’, Exchange Bank of Amsterdam, which was set up in 1609.

One of the reasons for the establishment of the ‘Wisselbank’ in 1609 was the need to find a solution to the war finance. Each of the fourteen mints in the Netherlands pursued its own policy regarding the timing and size of successive debasements of the coins. In 1610 the moneychangers in Amsterdam had to manage almost 1,000 different gold and silver coins. It was therefore proposed that each ‘trading’ town should set up its own exchange bank. Such a bank would give merchants the certainty that they would be paid in one reliably valued currency, instead of in a jumble of debased coins of uncertain origin. Since the other provinces did not agree with the Amsterdam's proposal, the latter set up its own exchange bank, being the Bank of Amsterdam.

DUTCH FINANCIAL ASPECTS IMITATED BY ENGLAND

Some of the aspects, pointed to England's then lagging behind the Dutch organisation and ingenuity, were written in a pamphlet of Sir Josiah Child’s “Brief Observations Concerning Trade and Interest of Money.”

-Theoretical and practical knowledge of merchants.

-Stimulating the inventors of new manufacturing.

-Discovering of new trade.

-Shipbuilding for low-cost sailing.

-Employment of the poor and the education of children.

-Public registers of lands and houses.

-Low interest rates.

The Society that seventeenth-century English people aimed to emulate was that of the Dutch. The English projectors insisted that their society should imitate the advantages of the Dutch economy, which typically consisted of fisheries, low interest rates, banking and the registration of estates. Thus, seventeenth-century English economic writers discovered their utopia in Holland. (Introduction. P. 3)

SEIICHIRO, Ito, English Economic Thought in the Seventeenth Century: 9 Nov. 2020,

FISHERIES AND INDUSTRIOUSNESS

In the 17th century, herring was a very important resource for the North Sea countries. Salted herring was one of the main commodities in European trade. During that period, Holland was the most important European trading nation. At that time, the Dutch herring industry used up a lot of capital and employed almost as many people and ships as the entire merchant fleet. The English experienced in the second half of the 17th century that it was not suitable to imitate the Dutch. Some English authors assumed that the English were lazy and idle and that the Dutch were diligent and frugal. Economic writers recognized that they needed a well-organized institutional foundation and above all a secure credit system in order to be the engine of trade.

BANKING

Banks and other lenders had to be able to rely on collateral, with the public registration of estates serving as an important security source of credit.

INTEREST RATES

…I might hope to give you a very perfect and clear Account of the Consequences of a Law, to reduce Interest to Four per Cent…The first thing to be consider’d, is, Whether the Price of the Hire of Money can be regulated by Law. And to that I think, generally speaking, one may say, ‘tis manifest it cannot….(the want of Money being that alone which regulates its Price)… (P. 2-3/26) An infallible sign of your decay of Wealth is the falling of Rents, and the raising of them would be worth the Nations Care: For in that, and not in the falling of Interest lies the true advantage of the Landedman, and with him of the Publick. (Part 4 – 1/23)

LOCKE, John, Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money. 1691.

This was a clear response aimed at those who wanted to copy the use of low interest rates in Holland. Perhaps also a clear message from a 17th century scientist addressed to our academically educated economists in the 21st century.

CREDIT AND REGISTRATION OF ESTATES

Every Man must have at least so much Money, or so timely Recruits, as may in hand, or in a short distance of time, satisfie his Creditor, who supplies him with the necessaries of Life, or of his Trade. For no body has any longer these necessary Supplies, than he has Money, or Credit, which is nothing else but an Assurance of Money in some short time. (P. 13/26)

LOCKE, John, Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money. 1691.

It was assumed that the basis for a reliable and secure credit system depended mainly not on types of guarantees and promises, but on land and real estate. Therefore, it was a priority that the estates could be registered publicly in Great Britain.

ENGLAND’S INTERNATIONAL MONETARY DOMINANCE

From 1609 onwards, the English empire expanded to include colonies such as North America, Bermuda, Jamaica and the Bahamas. The growth in these colonies led to a significant expansion of trade, in addition to further growth in India and other areas of Asia. The 17th century financial systems can roughly be described as bank-oriented in Amsterdam and market-oriented in London. The First of the Navigation Acts, which appeared in 1651, defined British shipping and commercial policy for the next 200 years.

The first Anglo-Dutch war (1652-1654) ended by the transfer of 1200 merchant ships from Holland to England. As a result Holland lost about 8% of their ships. On the other hand, England doubled its fleet and thereafter maintained its supremacy in naval power. Sephardic Jews, mostly from the Netherlands, were allowed to immigrate to England. These people brought substantial funds to the English kingdom.

England developed a centralized market in company shares. Most sectors and a wide range of individuals had experience with the equity market, which resulted in the development of centralized brokers dealing in company shares. In the last decade of the seventeenth century, this market grew exponentially.

LONDON CAPITAL OF INTERNATIONAL FINANCE

These exciting entrepreneurial initiatives had by the end of the seventeenth century led to the position where the supply of bank credit in Britain was an essential and growing supplement to the stock of coins, so that by the time Adam Smith’s Wealth of Nations was published in 1776, bank money clearly exceeded metallic money, a milestone in world monetary history…. Coins and tokens remained the only currency handled by the vast majority of the population. (6: The Birth and early growth of British Banking, 2-3/70)

DAVIES, Glyn, A History of Money.

In the second half of the 17th century the three dominant trading powers in Europe were: France, ruled by an absolute monarch and pursuing a nationally independent monetary policy, The Netherlands, which adhered to a fixed exchange rate for silver and The British Isles, which adhered to the international mobility of capital.

The seventeenth century may be labelled as the emergence of international capitalism. Numerous financial innovations flowed from Antwerp to Amsterdam. In Amsterdam these highlights were refined and later on this performance finally made London the capital of international finance over the next two centuries. When William III came to power in 1688, joint-stock companies were established to assist in the financing of war.

FORMATION OF THE BANK OF ENGLAND – 1694

The basis for the Dutch payment system in the 17th century was the clearing through a public bank. The joint kingdoms of England, Wales and Scotland, had no public bank, wealthy merchants or ‘real’ bankers. Before 1688, England had no centralized banking system nor a market for long-term government debt.

European economies experienced a rapid inflow of gold from the New World. This led to rising inflation, which was particularly felt by the working class. The combination of this economic growth and the increasing inflation made it necessary to look for a stable, safe form of credit. The private banks, including the goldsmiths, country banks and merchant banks, could not provide this secure credit. It was therefore assumed that a national bank would be a match for the challenge. So the Bank of England was created in 1694 and the first issue of bank notes proceeded in the same year.

The bank of England was a joint-stock company, in the very same way as the E.I.C., (East India Company) not being created by merchants nor by the government. The raising of capital was generated by goldsmith bankers, small merchants and even a number of Dutch individuals. The court of directors was elected and not appointed, making the shareholders more receptive to the financial demands, in comparison to the bank of Amsterdam.

The Bank of England issued bank notes with a total redeemable value greater than the stock of gold and silver, in the vaults. This made it a fractional reserve bank, in contrast to the bank of Amsterdam. It discount bills of exchange, in competition with goldsmith bankers, scriveners and merchant banks. After 1720, The Bank of England outperformed the Bank of Amsterdam as a focal point for the international payments system of Europe. Further enabled the Bank multilateral clearing of international payments. The Bank of England concentrated the capital stock in London. This contrasts with the bank of Amsterdam where the capital was spread over several port cities. The Bank of England shares could be traded daily, unlike the V.O.C.-shares.

For the next sixty years of the eighteenth century the two mercantile powers had a financial symbiosis in government finance, one that sustained commercial expansion while allowing the remarkable rise of British national debt. (P. 6/48)

NEAL, Larry, A Concise History of International Finance.

Hereunder you find Niall Fergusons quote, including my rationale, which will not be universally supported.

From now on there would be no more regular defaulting (the ‘Stop of Exchequer’ of 1672, when, with the crown deep in debt, Charles II had suspended payment of his bills, was still fresh in the memories of London investors). There would be no more debasement of the coinage, particularly after the adoption of the gold standard in 1717. There would be parliamentary scrutiny of royal finances. (P. 76)

FERGUSON, Niall, The Ascent of Money.

From now on there would be no more regular defaulting

Fundamentally, one may state that no defaults on the Governments debts have occurred since 1694, but there is no denying that since the creation of the Bank of England and the accompanying creation of paper money, there has been a debasement of the currency up to the 21st century.

It is always interesting to note Friedrich August Hayek's views on the path of the Bank of England's evolution.

Ever since the British Government in 1694 sold the Bank of England a limited monopoly of the issue of bank notes, the chief concern of governments has been not to let slip from their hands the power over money, formerly based on the prerogative of coinage, to really independent banks. (P.35) … Some people apparently find it difficult to believe that a mere token money which did not give the holder a legal claim for redemption in terms of some object possessing an intrinsic value (equal to its current value) could ever be generally accepted for any length of time or preserve its value. They seem to forget that for the past 40 years in the whole Western World there has been no other money than such irredeemable tokens. The various paper currencies we have had to use have preserved a value which for some time was only slowly decreasing not because of any hope of ultimate redemption, but only because the monopolistic agencies authorised to issue the exclusive kind of currency of a particular country did in some inadequate degree restrict its amount. But the clause on a pound-note saying ‘I promise to pay to the bearer on demand the sum of one pound’, or whatever the figure be, signed for the Governor and Company of the Bank of England by their Chief Cashier, means of course no more than that they promise to exchange that piece of paper for other pieces of paper. (P.112)

HAYEK, Friedrich August (von), Denationalisation of Money, 1990,

I-1-4-4WAR FINANCE AND SOVEREIGN DEBT

There is nothing new under the sun with regard to recurring wars, the accumulation of government debt and the quest for ever more money or its manipulation… ‘how monetary, fiscal and constitutional matters were inextricably intertwined in the history of the mid-seventeenth century.. (Davies, 5/59)’.

The pressing demands for war finance dominated the political powers in both Britain (Civil War and Interregnum 1640-1660) and the Netherlands (Thirty Years War, 1618-1648) and led to financial innovations in government finance for both countries in the Seventeenth century. The difference in British and Dutch experiments in raising new sources of funds had consequences that made their respective paths to modernity diverge even farther. (The “Glorious” revolution – P. 10/39).

While war finance was the source of the continued growth of the stock exchange business and the prosperity and number of its professional middlemen, whether in London or Amsterdam, the interludes of peace during the eighteenth century allowed commerce among the Europeans to flourish. (The Financial Symbiosis of Amsterdam and London, P. 8/48)

NEAL, Larry, A Concise History of International Finance.

I-1-4-5BULLIONISM

Basically, bullionism was the belief that trade, financial and fiscal policies should be so coordinated as to attract into the country the largest possible supply of bullion, and conversely to minimize those factors which, if not checked, would lead to a drain of bullion away from the country. This was not of because of any naive, miserly or particularly misguided education of the precious metals themselves, but because in the circumstances of the time, an adequate supply of such metals was believed to be absolutely essential for a number of powerful reasons. Among these were the need for a plentiful supply of sound coinage, rather than the debased coinage resorted to when bullion was scarce; the need to prevent a fall (or a low valuation) of sterling in the foreign exchanges, the need to give profitable employment for British capital and British workmen, rather than to stimulate foreign production and employment, the need to provide a ready reserve of precious metals so as to make it unnecessary for the monarch to have to rely on an illiquid, impoverished country or a recalcitrant Parliament for the special taxes required for defense purposes and so on. (5: the expansion of trade and finance, 1485-1640, Location – 75/95)

DAVIES, Glyn, A History of Money.

GOLDSMITH BANKERS

After the chartering of the Goldsmith's Company in 1327, the King entrusted the Company to perform several functions, including the supervision of the currency, especially foreign exchange resulting from international trade. In the beginning of the 17th century there existed already a variety of ‘bankers’ apart from the goldsmith’s, including the wool processor, the textile merchant, the tax farmer, the pawnbroker and the scrivener.

In the 17th century, the London goldsmiths expanded their services to include storage of wealth, providing loans, transferring money and providing bills of exchange and tallies. In addition, longer-term changes such as increased consumption and changes in fashion caused demand for larger stocks and higher levels of capitalization. The Goldsmiths bankers copied certain financial concepts from the monetary activities in Amsterdam, imposing Holland as the world’s entrepot.

In the second half of the 17th century the banking system developed further in England. For the Goldsmiths, this required innovating in a new technology. Before the Civil War (1642-1651), the London goldsmith bankers had been creditors, though in 1660 they became the biggest debtors in England. The goldsmith bankers developed a kind of a Fractional Reserve banking, which enabled them as a group to create credit out of thin air. Ultimately, one of the goldsmiths' main functions evolved into the market government debt.

In London, the goldsmith bankers held their own reserves in gold or silver rather than turn all specie over to a central repository such as the Tower of London or the mint where it could be seized by the central authority. By issuing notes that gave the holder the right to withdrawn the specie upon due notice, the goldsmith bankers created an increase in the means of payment. Importantly for the security of the system as a whole, they held each other’s notes in sufficient quantity to have a claim upon the reserves of other goldsmiths in case of a sudden demand for redeeming their own notes.

These also served as a “poison pill” against a threat of a run on a bank’s reserves by a competing bank. In this way, the goldsmiths created a mutually reinforcing payments network that laid the basis for further market interactions in the future when markets for new securities appeared. (The “Glorious” revolution – P. 11/39).

NEAL, Larry, A Concise History of International Finance; 2015;

In London, the goldsmith bankers held their own reserves in gold or silver rather than turn all specie over to a central repository such as the Tower of London or the mint where it could be seized by the central authority….

This already proves that trust in the government was very limited. The centralization of precious metals increases the possibility that everything can disappear in a short period of time and this therefore weakens trust. Decentralization, on the other hand, is more likely to generate trust.

The end of the Goldsmith bankers came in sight due to the following events:

a)Stop of the Exchequer in 1672: The Crown departments had sold too much debt to the leading London Goldsmith bankers. This debt was secured against first call on the following two years’ revenues. In fact this was an attractive investment with annualised returns of 8 to 10%. Then the Crown found itself no longer able to honour its debts, so the ‘Stop’ came suddenly and the payments were suspended.

b)The founding of the Bank of England in 1694. The primary purpose of the Bank was to raise and lend money to the State. Under its Charter and various Acts of Parliament, it received privileges of issuing bank notes. The Goldsmiths were not able to perform clearing, while this activity was undertaken by the Bank of England.

c)The South Sea Bubble in 1720, which marked the end to the public banking activities of the goldsmiths.

MILLED COINS

One of the methods of coin debasement (decreasing the weight of precious metal in a coin) is clipping, being the act of shaving off a portion of a precious metal coin in order to have profit. Previously the coins were hammered instead of milled, therefore people could easily scrape off small particles from the coin’s circumference, either because there were no marks or stripes on the outside of the coin, or because there was no engraving on the coin that extended to the edges. Coin clipping was considered to be an act of counterfeiting.

Other methods of debasement were sweating, the act of shaking coins in a bag and collecting the dust worn off. This coins’ dust was sold as precious metal ‘dust’ that could be used for recoining. Another method of debasement was the so-called: plugging. If the coins had a certain thickness, the counterfeiter made a hole in the coin and filled it up with cheap metal and closing the hole while using only a part of the precious metal.

When the coins were so badly damaged, and therefore debased due to these alterations, people's confidence in them disappeared. With every transfer, each coin was checked, one by one, and accepted or rejected. Finally, the authorities had to intervene over time and retrieve the mutilated coins, have them remelted and re-minted. The exploit of collecting, melting and reminting was very expensive; also resulting in continuous product losses. After the reminting, by ‘hammering’, the fraud restarted.

The Royal Mint issued in 1663 the first coins minted by using a machine developed by the Frenchman Pierre Blondeau. By the application of this machine, the coins were now milled, with grained or lettered edges, in order to end this kind of counterfeiting.

BULLION EXPORTS

The dilemma of this period arose from the fact that the stock of precious metals which, for lack of acceptable alternatives (particularly in England), supplied the bulk of the domestic circulating medium also served as the means of settling unfavourable trade balances, thus exposing the domestic economy to disruption through sudden bullion outflows. And the means whereby this fluctuating stock of precious metals most immediately impinged on the domestic economy was through the currency system. (P. 40)

KELLY, Patrick Hyde, Locke On Money.1991.

England's wealth was measured by the accretion of gold and silver. The government was concerned that the export of precious metals did not get out of hand, as this would mean a weakening of the domestic economy. In this context, the East India Company played an important role. In the eastern countries there was not much interest in English products and on the other hand, the English residents imported many exotic luxury products. The payment for the import of the goods was usually done in silver and gold bullions. A second reason for the loss of bullion was the financing of the army for the continuous wars.

Finally, there was a remelting of the silver coins in circulation. On the one hand, the Mint ‘undervalued’ the silver, on the other hand, the remelting was further encouraged by the deplorable condition of the minted silver coins in circulation due to constant clipping, sweating and plugging. As a result, many silver coins were remelted into bullion and exported at a profit.

THE NEED TO RECOINAGE

A BIG PROBLEM WITH SMALL CHANGE

Each country had to deal with the so-called “big problem of small change”. Thomas Sargent and François Velde, (Federal Reserve Bank Chicago), published a paper on this problem in which a standard formula was set up to settle this problem. In this paper, Sargent and Velde stated that Cipolla outlined how Western Europe had been struggling with this problem of getting the right mix of larger and smaller coins. Smaller coins can eventually be used to pay a large amount, but not vice versa. Thus, larger coins cannot be used to pay smaller debts.

Every elementary textbook of economics gives the standard formula for maintaining a sound system of fractional money: to issue on government account small coins having a commodity value lower than their monetary value; to limit the quantity of these small coins in circulation; to provide convertibility with unit money… Simple as this formula may seem, it took centuries to work it out. In England it was not applied until 1816, and in the United States it was not accepted before 1853. (Cipolla, The Big Problem of the Petty Coins, 1956, quoted)

SARGENT Thomas J. and VELDE François R., The big Problem with Small Change.

Great Britain finally decided in 1817 to introduce token coins, with fixed convertibility rates to the large denomination coins and bank notes, in order to solve the problem of the small change.

THE GREAT RECOINAGE OF 1696

In contrast to the unification of mints undertaken in Holland, and the establishment of a virtual unit of account in the “banco guilder”, Britain was unable to initiate comparable reforms in its coinage. This was partly due to separate coinages in England, Ireland and Scotland, and the political difficulties of making reform in one kingdom without a corresponding reform in the other, a problem that plagued the British currencies even after the re-coinage of 1696. (The “Glorious” revolution – P. 10/39)

NEAL, Larry, A Concise History of International Finance.

As already explained, under the section (I-1-4-5) the hammered silver coins were in a miserable physical condition due to cutting, sweating and plugging. They were now about to have all the silver coins handed in by the citizens, remelted and minted in the new ‘milling’ way.

The great controversy between John Locke and William Lowndes preceded this. The detailed exposition of both theories is explained in the addendum 5.

Lowndes' proposal to introduce a smaller weight of silver in the coins was eventually rejected. On the 10th of June 1696, it was then officially stated that the old coins would be reintroduced into the royal mint on the basis of their weight rather than their face value.

Requiring all Receivers and Collectors of the Publick Taxes to take hammer’d Silver Money at five shillings and eight Pence an Ounce. (P. 220-224, quoted in Wikipedia)

SALMON Thomas, The Chronological Historian. 1723.

I-1-4-6THE ENGLISH INDIVIDUAL IN A TURBULENT 17TH CENTURY

Observing all events in England in the 17th century, one wonders how the individual and their families could protect themselves financially against these new threats.

COINS AND TOKENS USED BY MAJORITY OF THE PEOPLE

Glyn Davies wrote in his History of Money, coins and tokens remained the only currency used by the vast majority of the people.

AN OUNCE OF SILVER

Silver is the Measure of Commerce by its quantity, which is the Measure also of its intrinsic value. If one grain of Silver has an intrinsick value in it, two grains of Silver have double that intrinsick value, and three grains treble, and so on proportionable. This we have daily Experience of, in common buying and selling. For if one Ounce of Silver will buy. i.e. is of equal value to one Bushel of Wheat, two Ounces of Silver will buy two Bushels of the same Wheat. i.e. has double the value.

LOCKE, John, Further Considerations concerning raising the Value of Money. 1695.

From the moment the common people got their hands on silver coins, they were tempted to make an extra profit out of the already tarnished coin. In the end, it was the arbitrator who initiated the export trade of bullion and perhaps reaped the greatest profits. Anyway, it took a very long time before all hammered coins were converted to milled coins by the Royal Mint.

More than likely, the milling of the coin was an improvement for the ordinary men, as they now had a more secure feeling that these coins were more difficult to debase physically (clipping, sweating and plugging). On the other hand, they might also have followed the discussion between John Locke and William Lowndes concerning the purity of the precious metals (silver) that would be used in recoinage.

TOKENS

In England, copper farthings were permitted in the first part of the 17th century. During the English Civil War, production ceased and there was a great shortage of change. With the rapid growth of trade, these shortages worsened and local authorities and merchants began to issue tokens themselves. The material used for these tokens was copper, brass and lead. In 1672 the production of farthings was restarted and the private production of tokens was forbidden.

At the end of the 18th century coin shortages occurred again when the Royal Mint reduced production. As a result, merchants again took the initiative to produce tokens.

I assume that John Locke had the best of intentions in showing that it was necessary to assure sound money in a nation. However, by focusing only on the silver, he got entangled. It is grand to designate the terms of one, two or three grains of silver, but it was not technically possible at the time to convert this aspiration into a functional coin.

DISTRUST IN THE GOVERNMENT

People also gradually experienced the decline of goldsmiths and the emergence of bank notes, which probably caused a lot of ignorance and suspicion.

Those with common sense and awareness of the continuous wars with Spain, Holland, France and later with the colonies, understood that the king and the government were always looking for more funding, which increased the national debts and forced them to be innovative with taxes and currency debasement.

Trust and confidence are such crucial factors among others in monetary policy. This is why an entire part, PART V in Moneyed Money, is devoted to this phenomenon. In that part of the work, I deal not only with trust in ‘a’ government, but also in other institutions, organisations, tools, devices etc.

THE EMERGENCE OF INTERNATIONAL CAPITALISM

In conclusion, it is clear that the century or so after 1640 is of quite fundamental importance in the development of a modern financial system. Before the period, modern banking was unknown in Britain; after it, Britain led the world in financial, agricultural and industrial development. It had taken many centuries to establish the rules of metallic money creation. The rules by which the optimum of amount of paper money should be decided required a long period of experimentation and legislation to supplement the internal disciplines of bank management and the harsher lessons of bankruptcy. It required also the growth of a central banking system of control linked to the heavy anchor of a gold standard. This was to be the path of monetary development in the next period from 1789 to 1914. (6: The Birth and Early growth of British banking – p. 93-94)

DAVIES, Glyn, A History of Money.

People who understood how monetary, fiscal and constitutional matter were intertwined in the history of the seventeenth and the beginning of the eighteenth century, could take advantage of the deficiencies in the systems.

Those who cognised, that governments always had to find solutions for budget shortfalls or for war financing, and who therefore knew that some agreements had only a limited time span, were able to organise themselves and thus evolve into the new rich. Others came steps too late and suffered the fate of the poor citizens who were simply content to survive.

I-2THE ORIGIN OF MONEY: A CONCISE AUTHOR’S SELECTION

It is interesting to learn how economists, anthropologists and other authors, describe their search for the origins and creation of money. To elaborate on the origins of money, one would need a separate study. I shall limit myself to the interpretations of a few scholars, spread over time and of whom I believe have given sufficient profundity to their reflections. I lend them their own words, so that there are no misunderstandings in translations and interpretations.

1335

Il semble à certains qu’un roi ou prince peut, de sa propre autorité, par droit ou privilège, muer librement les monnaies qui ont cours en son royaume, les réglementer à son gré et en retirer autant de gain et de profit qu’il lui plaît. D’autres, cependant, sont d’un avis opposé. C’est pourquoi j’entends dans le présent traité, écrire là-dessus ce qui, suivant la philosophie d’Aristote principalement, me paraît devoir être dit, en commençant par l’origine des monnaies, rien ne devant être affirmé à la légère…

Les hommes commencèrent donc à commercer sans monnaie… Mais, de cette façon, cependant, bien des difficultés se présentèrent dans l’échange et le transport des choses. Pour les diminuer, les hommes imaginèrent l’usage de la monnaie : elle serait l’instrument de la permutation des richesses naturelles, celles qui permettent d’elles-mêmes de subvenir aux besoins humains. (P. 47-48)

ORESME, Nicole, “Traité sur l’origine, la nature, le droit et les mutations des monnaies”, 1335

1776

When the division of labour has been once thoroughly established, it is but a very small part of man’s wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for, while another has less. (P.27)

SMITH, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations.

1871

Der Ursprung des Geldes (zu unterscheiden von der Abart desselben der Münze) ist wie wir sahen, ein durchaus naturgemässer, und er weist demnach auch nur in den seltensten Fällen auf legislative Einflüsse zurück. Das Geld ist keine staatliche Erfindung, nicht das Produkt eines legislativen Aktes und die Sanktion desselben seitens der staatlichen Autorität ist demnach dem Begriff des Geldes überhaupt fremd. Auch die Existenz bestimmter Waren als Geld hat sich naturgemäss aus den ökonomischen Verhältnissen herausgebildet, ohne dass die staatliche Einflussnahme hierbei erforderlich gewesen wäre. (Location: 9/17)

MENGER, Carl, Grundsätze der Volkswirtschaftslehre.

1889

The necessity for Money arises from a different cause. So long as the products exchanged were equal in value there would be no need for Money. If it could always happen that the exchanges of products or services were exactly equal there would be an end of the transaction……But it would often happen that when one person required some product or service from another person, that other person would not require an equal product or service from him in return: or even perhaps none at all….If, then, such a transaction took place between persons with such an Unequal result, there would remain over a certain amount of product or service 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 who had received the less amount of product or service to demand the balance due at some future time… (P. 65-66)

MACLEOD, Henry Dunning, The Theory of Credit, volume 1.

1912

Indirect exchange becomes more necessary as division of labour increases and wants become more refined. In the present stage of economic development, the occasions when direct exchange is both possible and actually effected have already become very exceptional. Thus along with the demand in a market for goods for direct consumption there is a demand for goods the purchaser does not wish to consume but to dispose of by further exchange. (P. 31)

VON MISES, Ludwig, The Theory of Money and Credit.

1919

According to the classical doctrine of money, mankind, in order to avoid the intolerable inconvenience of the direct barter of one kind of commodity or service for another, has learnt to choose one standard commodity to be offered by every buyer and accepted by every seller. (P.1)

HAWTREY, Ralph George, Currency and Credit.

2002

Economists, and especially monetarists, tend to overestimate the purely economic, narrow and technical functions of money and have placed insufficient emphasis on its wider social, institutional and psychological aspects. However, as is shown in this study, money originated very largely from non-economic causes: from tribute as well as from trade, from blood-money and bride-money as well as from barter, from ceremonial and religious rites as well as from commerce, from ostentatious ornamentation as well as from acting as the common drudge between economic men. (Preface to the third edition 2/5)

DAVIES, Glyn, A History of Money.

Robert P. Murphy has expanded on Carl Menger's reflection, to which I fully adhere:

One possible explanation is that a powerful ruler realized, either on his own or through wise counsellors, that instituting money would benefit his people. So he then ordered everyone to accept some particular thing as money. There are several problems with this theory.

First, as Menger pointed out, we have no historical record of such an important event, even though money was used in all ancient civilizations.

Second, there’s the unlikelihood that someone could have invented the idea of money without ever experiencing it.

And third, even we did stipulate that a ruler could have discovered the idea of money while living in a state of barter, it would not be sufficient for him to simply designate the money good. He would also have to specify the precise exchange ratios between the newly defined money and all other goods. Otherwise, the people under his rule could evade his order to use newfangled “money” by charging ridiculously high prices in terms of that good. Mengers’ theory avoids all of these difficulties. According to Menger, money emerged spontaneously through the self-interested actions of individuals. No single person sat back and conceived of a universal medium of exchange, and no government compulsion was necessary to effect the transition from a condition of barter to a money economy.

MURPHY, Robert P., The Origin of Money and its Value. 2003.

I-3AN ANTHOLOGY OF CONFLICTING DEFINITIONS OF MONEY

All such attempts at definition seem to me to involve the logical blunder of supposing that we may, by settling the meaning of a single word, avoid all the complex differences and various conditions of many things, each requiring its own definition. (P. 248)

JEVONS, William Stanley, Money and the Mechanism of Exchange, 1875.

I-3-1DEFINITIONS INCORPORATING MOST IMAGINABLE VARIATIONS

Below I have listed the definitions of money developed by various economists, authors, bankers, international organisations and others. I am convinced that the reader will conclude after perusing the numerous variants and perhaps approach the noun 'money' alternatively in the future.

Money is the instrument and measure of commerce and not silver. It is the instrument of commerce from the authority of that government where it is coined.

BARBON, Nicholas, A Discourse Concerning Coining the New Money Lighter, 1696

The geography of money refers to the spatial organization of currency relations- the functional domains within which each currency serves the three traditional functions of money: medium of exchange, unit of account, and store of value. (P. 1)… Money is whatever people come to believe will be accepted by other, for whatever reason. (P. 190)

COHEN, Benjamin J., The Future of Money.

Money is anything that is widely used for making payments and accounting for debts and credits. (P. 53)

DAVIES, Glyn, A History of Money.

Money is a Measure, and must be of necessity an Institute of Law, that the Unit of money is All Money within a given legal jurisdiction, that the practical Essence of money is Limitation, and that coins and notes alike are Symbols of money – are fully discussed and illustrated in my “Science of Money. (Preface, viii)

DEL MAR Alexander, M.E., History of Monetary Systems, 1895,

Money, whatever its form, is a medium of exchange- a means of payment with a value that everyone trusts – a unit of account and a store of value.

ECB: (24/11/2015)

We conclude that the definition of money is an issue to be decided, not on grounds of principle as in the priori approach, but on grounds of usefulness in organizing our knowledge of economic relationships. There is no hard and fast formula for deciding what total to call “money.” (P. 104)

FRIEDMAN Milton; SCHWARTZ Anna Jacobson; Monetary Statistics of the United States.

The reader should proceed in these pages in the knowledge that money is nothing more or less than what he or she always thought it was- what is commonly offered or received for the purchase or sale of goods, services or other things. (P. 6)

GALBRAITH John Kenneth; Money.

Money is an independent commodity and its price must be determined afresh, by the sale itself, every time it changes hands. (P. 62)

GESELL, Silvio, The Natural Economic Order, 1918.

Anyone who has ever taken a course in economics has learned that money is basically three things: (1) a medium of exchange, (2) a store of value, and (3) a measure of value. But as I have pointed out before, those are three functions; they do not describe the essence of money. The essence of modern money is credit. (P. 114)

GRECO, Thomas H., Jr, the End of Money and the Future of Civilization,

Money is one of those concepts which, like a teaspoon or an umbrella, but unlike an earthquake or a buttercup, are definably primarily by the use or purpose which they serve. The use or purpose of money is two-fold; it provides a medium of exchange and a measure of value. (P. 1)

HAWTREY, R. G., Currency and Credit, 1919.

Money is usually defined as the generally acceptable medium of exchange, but there is no reason why within a given community there should be only one kind of money that is generally (or at least widely) accepted. (P. 55)

HAYEK, F.A.; Denationalisation of Money.

Money is an instrument, a tool for handling claims and debts. (P. 51)

HUBER, Joseph, Modern Money and Sovereign Currency,

Money can be anything that can serve as a store of value, unit of account and medium of exchange…To put it a different way, money is something that holds its value over time, can be easily translated into prices, and is widely accepted.

IMF: Irena Asmundson and Ceyda Oner – 2012.

Money, then, is credit and nothing but credit.

MITCHELL - INNES; The Banking Law Journal. 1913

Standard legal tender coin of full weight is undoubtedly money, and as convertible legal tender banknotes are exactly equivalent to the coined money for which they may at any moment be exchanged, it has often been considered that these also may be included. (P. 186)

JEVONS William Stanley, Money and the Mechanism of Exchange,

Something which is merely used as a convenient medium of exchange on the spot may approach to being Money, inasmuch as it may represent a means of holding General Purchasing Power. (P. 3)

KEYNES, John Maynard, Treatise On Money, V1. 1930.

If by money we mean the standard of value…(P. 229)…Money in its significant attributes is, above all, a subtle device for linking the present to the future; and we cannot even begin to discuss the effect of changing expectations on current activities except in monetary terms. (P. 294)

KEYNES, John Maynard, The General Theory of Employment, Interest, and Money, 1936.

Das Geld ist ein Geschöpf der Rechtsordnung. (P. 1)Geld bedeutet stets chartales Zahlungsmittel (P. 33)

KNAPP George Friedrich: Staatliche Theorie des Geldes, 1905,

Money is an agreement, within a community, to use something as a means of payment. (P. 41)

LIETAER, Bernard; The Future of Money.

Money is anything whatever which a Debtor can compel his Creditor to accept in payment of a Debt: it is also called Legal Tender. Money is a right or Title to obtain some equivalent for a product or service. (P. 146)

MACLEOD, Henry Dunning, The Theory of Credit. 1889.

For immediate (current) business money needs only to be a clearly defined, easy handled, and generally acceptable medium of exchange. (P. 15)

MARSHALL, Alfred, Money Credit & Commerce, 1923.

The commodity that functions as a measure of value, and, either in its own person or by a representative, as the medium of circulation, is money. (Location 2630 of 18828)

MARX, Karl, Das Kapital.

Das naturgemässe Produkt der verschiedenen ökonomischen Sachlage verschiedener Völker in denselben, und derselben Völker in verschiedenen Zeitperioden. (Location: 1/16)

MENGER, Carl, Grundsätze Der Volkswirtschaftslehre.

Money is a commodity, and its value is determined like that of other commodities, temporarily by demand and supply, permanently and on the average by cost of production. (Loc: 72/74)

MILL, John Stuart, Principles of Political Economy, 1848.

Money is gold, nothing else.

MORGAN, John Pierpont, (testifying in front of the USA Congress in 1912)

La Monnaie est une richesse particulière équivalente dans les achats, à la valeur vénale de toutes sortes de richesses commerçables. (P. 457)

QUESNAY, Les Pensées monétaires dans l’histoire.

…but money is a commodity which no country has any wish or necessity to increase…while money is the general medium of exchange. (Location: 2412 of 5867)

RICARDO David, The Principles of Political Economy and Taxation.

What is money? Experts recite the three-part definition of money as a medium of exchange, a store of value, and a unit of account. The unit of account part of the definition is useful but almost trivial. Medium of exchange also refers indirectly to value…The entire standard definition can thus be collapsed into the one remaining part, the store of value... If, then, money is value, what is value? (P.165-166)

RICKARDS, James, The Death of Money. 2014.

As the general medium of exchange money is a good that is universally and routinely accepted in exchange by market participants; or, put another way, it is the one good that is traded for all other goods on the market. (P. 116)

SALERNO, Joseph T. ; Money, Sound and Unsound. 2015.

La Monnaie est un produit de l’industrie humaine : le gouvernement s’en réserve communément la fabrication exclusive ; et sa matière première, quand elle est de métal, s’usant peu, ce sont presque toujours des mêmes matières dont on se sert, mais qui reçoivent de nouvelles empreintes selon les temps et les lieux. (P. 591)

SAY, Jean – Baptiste; Traité d’économie politique. 1803.

Money is nothing more than a technical tool of social clearing, partly from the further knowledge of the peculiar way in which money performs this function. (Location 4639 of 8291)

SCHUMPETER, Joseph A., Treatise on Money. 1930-1950.

By the money price of goods it is to be observed, I understand always, the quantity of pure gold or silver for which they are sold, without any regard to denomination of the coin. (P. 50)

SMITH, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations. 1776.

Toutes les marchandises sont à quelques égards monnaie… une monnaie de pure convention est donc chose impossible… (Turgot, 1766, vol II, p.557, 558) … Ce n’est qu’en raison de leurs propriétés particulières que, au fil du temps, l’or et l’argent se sont imposés comme monnaie, … et cela sans aucune convention arbitraire des hommes, sans intervention d’aucune loi, mais par la nature des choses. Ils ne sont point, comme bien des gens l’ont imaginé, des signes de valeurs ; ils ont eux-mêmes une valeur (ibid. p. 560) (P..557-560)

TURGOT, Réflexions sur la Formation et la Distribution des Richesses.

A medium of exchange which is commonly used as such is called money. The notion of money is vague, as its definition refers to the vague term “commonly used”. There are borderline cases in which it cannot be decided whether a medium of exchange is or is not “commonly” used and should be called money. But this vagueness in the denotation of money in no way affects the exactitude and precision required by praxeological theory. (Chapter 17, Location:.1/110.)

VON MISES, Ludwig, Human Action. 1948.

Some commodity which every one shall freely receive in exchange for what he has but does not desire personally to consume, in the confident assurance that, with it, he can, at any time, and of kinds and in quantities to suit his immediate wants, obtain from other what they have but do not desire to use. (P. 3)

WALKER, Francis Amasa, Money, 1878.

I-3-2CONFUSING ‘CLARIFYING’ ADJECTIVES

Many economists have considered it indispensable, perhaps with the best of intentions, to further clarify the term money with the addition of an adjective. These adjunctions, in various languages caused even more confusion throughout history. Most of them are found in the English language. See below for a short list, without any additional delineation, as this would lead us too far.

Mercantile money, Tribute money, Commodity money, Metallic money, Full bodied money, Representative full bodied money, Credit money, Fiat money, Representative money, Inside money, Outside money, Broad money, Honest money, Near money…

I could go on, because almost every author wants to briefly describe what new 'types' or 'refinements' of money can be discovered. I have found myself joining in this quest for "clarification" by calling the work "moneyed" money. In the final part of this work I will try to explain what I mean by the adjective 'moneyed'.

I-3-3HOW TO EXPLORE THIS CONFUSION?

I have found no branch of my subject so difficult to reduce to principles, as the doctrine of money…(BOOK III, Of Money and Coin, Introduction, P. 2)

STEUART James, Sir, An Inquiry into the Principles of Political Economy.1767.

Most economists, national and international institutions, bankers, Governments, authors and others proceed from their own point of view and position, and thereby add accents to their definition, to the proponents and functions of money, that ultimately only could confuse the reader. Is this due to a historical aspect, to local custom, to a governmental pressure or intentionally to cause confusion?

What is the point of using the following terms: social, community, government, credit, bank, market, standard legal tender, standard of value, social clearing, liquid financial asset and others, in abovementioned definitions? When we identify such a variety of determinations, it seems to me that we may well conclude that there is no single correct 'one-size-fits-all' outlining for a definition of money.

For most people, it is fair to say that there is a totally different interpretation for terms such as love, courage, power...etc. Such definitions involving a feeling, an appreciation, that lead to a diversity of views. For the aspect of money, one assumes that this may not be the case. The term money is associated with a 'science', whereby the users believe that their insight is the correct one.

While reading J.M. Keynes' Treatise on Money, his first sentence of this work, and within the concept, money of account, had stuck with me. Research shows that we find this term in writings of several economists from the 17th, 18th, 19th, 20th and even the 21th century.

In the addendum 4, I try to find out why J.M. Keynes uses this designation to build up his work.

By letting the ‘former’ economists have their say, we discover that the background of the term involves more than a simple translation being a ‘unit of account’ or ‘currency’.

The analysis may show that the use of terms that are insufficiently defined give rise to misconceptions of all kinds. And in some cases one might suspect that it was perhaps the intention of certain academics to create that confusion.

I-3-4INDIVIDUALS

The simplest approach to define money is to originate from the point of view of the individual. Initially there are 2 individuals who agree on a tool of indirect exchange. It is important to explore this simple relationship in profoundness. If one succeeds in doing so, only then other elements may be considered. If there are no individuals, then it does not make sense to mention government, community, market, banks, etc. Perhaps it is luminous to consult these 3 individuals:

000.000.003
individuals have more wealth than

750.000.000

poorest people in the world.

I-4A DEFINITION OF MONEY ACCORDING TO ‘MONEYED MONEY’

Some authors state that there is no point in making a definition of money; being an insight that I cannot agree with. In the context of a 'scientific' concept, it is nevertheless opportune to launch into a definition of money, so that the reader conceives a priori the author's basic assumptions.

Some literature defines a definition as a concise description outlining the distinctive features of a concept, ensuring clarity and preventing confusion with other concepts. A well-crafted definition avoids circularity by refraining from using terms synonymous with the concept being defined. Alternatively, in certain contexts, definitions may take an abstract form, identifying constituent components to allow for the evaluation of unspecified contract types against them.

As a result of this rationale, the following definition seems to me to be the most appropriate:

Money is a denomination for means/tools, eventual intended to be used in agreements/contracts, for indirect exchange.

I-4-1DENOMINATION

In the English language the denomination is ‘money’. In other languages, as already stated, it is: Geld, monnaie, mene, maneh, moneta, mnà, moneda…

Further on in this work, I will elaborate on the appliance of the term ‘currency’. After all, these are only denominations with a historical background.

I-4-2MEANS / TOOLS

I-4-2-1SEVERAL MEANS / TOOLS

The determination or choice of the means, tools is the substantial component of the definition.

Agreed means: means (tools) agreed upon between two parties within an agreement or contract.

Free means : means (tools) which individuals or organizations may use in common agreement.

Imposed means: means (tools) which are obliged by the authorities.

There is not a single, but various means, merely when the individuals and or organizations have a free choice.

It is preferable to set out from a commercial activity, in which the initiative may originate from either the provider or the purchaser of goods and services. During the negotiations, it can be determined whether the buyer of the goods or services wants to persuade the agreement or whether the provider is eager to sell his goods or services. In the case of commercial pressure from the seller, the buyer may impose his conditions concerning the choice of the tool. On the other hand, if commercial pressure is more likely to emerge from the buyer, the seller will rather determine his means option.

I-4-2-2QUALIFICATION OF THE MEANS / MEDIA / TOOLS

Some economists take it to the extreme by stating, for example, that ‘currency’ cannot be defined as being money and that purely silver or gold is money. Others emphasise that only the assets created by the State are money. If we adhere to the 'moneyed money' definition, then all means, both the agreed media, the free media and even the imposed media, comply with the term 'money'. The individual will decide for oneself in certain circumstances what will be the most qualitative means.

If they need to make a payment at a very short notice, they may employ a smartphone, and thus accomplish an indirect exchange on basis of a digital means. In case of a currency distrust, the applicants may agree on another means of payment. Even if they are resident of a country, in which it is determined by law which tool should be used, people will try to obtain other means; if necessary they will find it on the black market.

I-4-2-3PROPERTIES OF MONEY

When employing this English terminology, properties of money, the first thing that comes to mind is the characteristics of money detailed by Professor Jevons:

Before venturing, however, to discuss such complex questions, we must proceed to a preliminary discussion of the properties in question, which may thus perhaps be enumerated in the order of their importance:—

1. Utility and value.

2. Portability.

3. Indestructibility.

4. Homogeneity.

5. Divisibility.

6. Stability of value.

7. Cognizability. (P. 31)

JEVONS, William Stanley, Money and the Mechanism of Exchange, 1875.

This approach by Professor Jevons is explored in PART II, PART V and PART VII of Moneyed Money. Jevons was primarily referring to the characteristics of metal money. Today, we should rather refer to this section as : properties of means or tools of indirect exchange.

In Human Action, Ludwig von Mises makes the following remarks regarding physical properties of things:

It is necessary to realize that all economic categories are related to human action and have nothing at all to do directly with the physical properties of things. Economics is not about goods and services; it is about human choice and action. (Chapter 18; 4. Period of production, waiting time, and period of provision, Location: 29/80)

VON MISES, Ludwig, Human Action. 1948.

I align with Von Mises' argument, asserting that the concept of money itself does not directly concern properties. Money and trade are indeed part of economic categories. However, various instruments have entered the market, including paper money, debit and credit cards, digital methods, etc., each possessing distinct features, advantages, and drawbacks.

Consequently, the selection of a particular tool, and thus its inherent properties, by the user can significantly influence their 'human action'. While the specific characteristics of these tools are not discussed here, they are elaborated upon in subsequent sections of "Moneyed Money."

I-4-3EVENTUAL INTENDED TO BE USED

I-4-3-1LIQUIDITY - PREFERENCE

I give the floor to J.M. Keynes giving his opinion on liquidity – preference:

In other words, what is the degree of his liquidity-preference – where an individual’s liquidity - preference is given by a schedule of the amounts of his resources, valued in terms of money or of wage-units, which he will wish to retain in the form of money in different sets of circumstances. (P. 166)

For if a man hoards his savings in cash, he earns no interest, though he saves just as much as before. On the contrary, the mere definition of the rate of interest tells us in so many words that the rate of interest is the reward for parting with liquidity for a specified period… Thus the rate of interest at any time, being the reward for parting with liquidity, is a measure of the unwillingness of those who possess money to part with their liquid control over it. The rate of interest is not the “price” which brings into equilibrium the demand for resources to invest with the readiness to abstain from present consumption. It is the “price” which equilibrates the desire to hold wealth in the form of cash with the available quantity of cash; - which implies that if the rate of interest were lower, i.e. if the reward for parting with cash were diminished, the aggregate amount of cash which the public would wish to hold would exceed the available supply, and that if the rate of interest were raised, there would be a surplus of cash which no one would be willing to hold. (P. 167) … The three divisions of liquidity-preference which we have distinguished above may be defined as depending on (i) the transactions-motive, i.e. the need of cash for the current transaction of personal and business exchanges; (ii) the precautionary-motive, i.e. the desire for security as to the future cash equivalent of a certain proportion of total resources; and (iii) the speculative-motive, i.e. the object of securing profit from knowing better than the market what the future will bring forth. (P.170)

KEYNES, John Maynard, The General Theory of Employment, Interest, and Money, 1936.

You can read below, Mr. Albert L. Hahn and Henry Hazlitt’s reaction:

According to Keynes’ liquidity preference theory, interest is paid for the “desire to hold wealth in the form of cash” and received as “the reward for parting with cash” against some instrument of saving. It is “the reward for not hoarding, not the reward for not spending.” In other words, the owner of a savings account receives interest because he does not hoard, not because he does not spend money; and he loses interest because he hoards money, not because he spends it. (P. 147)

HAHN, Albert L., The Economics of Illusion, 1949.

What is it that Keynes is trying to prove ? He is trying to prove that “liquidity” is wicked; that the freedom of people to buy and sell securities in accordance with their own judgement ought not to be allowed; and that their money ought to be taken from them and “invested” by bureaucrats, omniscient and beneficent by definition: (P. 219)

“Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of ‘liquid’ securities. It forgets that there is no such thing as liquidity of investment for the community as a whole (p.155)

HAZLITT, Henry, The Failure of the “New Economics”, An Analysis of The Keynesian Fallacies, 1959.

if the reward for parting with cash were diminished….

I have the Flemish-Dutch mother tongue and I wonder why J.M. Keynes uses such phrasing that only causes confusion. Other authors, fully versed in the English language, note that Keynes' 'word' usage causes confusion in many cases. Some of them argue that this was done intentionally.

To Part: | divide, break, detach, dissociate, withdraw….
Cash: | money, currency, dough, liquid assets…

As far as I understand the following terminologies may be used:

When I have coins, banknotes or other means of indirect exchange at home or in a safe somewhere, I call this hoarding. Indeed, this act does not yield any interest. I may therefore consider this as cash money?

When I have opened a current and/or savings account with a bank and I have deposited money into this account, then I have given a loan to the bank. I can carry out transactions with this deposit and in most cases I receive a positive interest on both the current account (limited) and the savings account. In specific circumstances this can also be a negative interest. The question then remains whether this deposit can be regarded as 'cash'?

If we set out from the reasoning that saving is not consuming, then one can say that hoarding and not using the funds deposited in the bank can be considered as saving and therefore not consuming.

I aim to demonstrate the significance of providing clear definitions for terms that could potentially cause confusion. This ensures that readers understand the author's interpretation of these terms.

I-4-3-2HOARDING

DEFINITIONS AND DESCRIPTIONS OF HOARDING

For the definition of hoarding, I consulted Merriam Webster:

1a: The practices of collecting or accumulating something (such as money or food) (first used in 1589).

1b: something that is hoarded.

2 psychology: the compulsion to continually accumulate a variety of items that are often considered useless or worthless by others accompanied by an inability to discard the items without great distress.

MERRIAM WEBSTER: 28/11/2022

ECONOMIST’S COMMENTS ON HOARDING

The right to hoard is fundamental to human nature and defence of one’s future well-being.

GUTTRIDGE Christopher R., A Critique of A. Mitchell Innes’s ‘What is Money ? 2018.

Gold and silver, for many reasons, are the fittest materials hitherto known for hoarding: They are durable; convertible without damage into any form 5 of great value in proportion to their bulk; and being the money of the world, they are the readiest exchange for all things, and what most readily and surely command all kinds of services. In the days of prosperity therefore, it would be prudent to lay up a kind of dead stock of the precious metals, against any emergencies that might happen. (Part 1 The Theories of Commerce Money and Exchanges - Locations 1306-1309)

HARRIS, Joseph, An Essay upon Money and Coins. 1757,

Stockpiling is also found outside of human economic activity and genetically is the initial expression of economic behavior in general. It is plausible that this is connected above all with that form of stock building that we denote by hoarding. (Location: 1281 of 8291)

SCHUMPETER, Joseph A., Treatise on Money. 1930-1950.

Menger has pointed out that the special suitability of goods for hoarding, and their consequent widespread employment for this purpose, has been one of the most important causes of their increased marketability and therefore of their qualification as media of exchange. (P.35)

VON MISES, Ludwig, The Theory of Money and Credit. 1912.

What is called hoarding is a height of cash holding which – according to the personal opinion of an observer – exceeds what is deemed normal and adequate. However, hoarding is cash holding. Hoarded money is still money and it serves in the hoards the same purposes which it serves in cash holdings called normal. He who hoards money believes that some special conditions make it expedient to accumulate a cash holding which exceeds the amount he himself would keep under different conditions, or other people keep, or an economist censuring his action considers appropriate. (3. Location: 10/205)

VON MISES, Ludwig, Human Action, A Treatise on Economics.

A distinction between active and idle money is also made when one speaks of money hoarding and proceeds to a comparison between the “hoarded” quantity of money and the quantity of money that would be necessary to perform the monetary services; what distinguishes this from the previous case is the way in which the boundary between active and idle money is drawn. Both distinctions must be rejected. The service of money is not confined to transactions. It fulfils its task not only at the moment it passes from one hand to the next. It also performs services when it rests in the till, as the most marketable good, in anticipation of its future use in trade as a generally used means of exchange. The demand for money of individuals, as well as the entire economy, is determined by the desire to maintain a cash balance and not by the aggregate of transactions to be warried out during a certain time period. It is an arbitrary procedure to divide the money stock into two parts: that which is designated to perform money services proper and that which serves as a money hoard. Of course, no damage will be done if, on the one hand, the demand for money is separated into a demand for hoarding and a demand to perform the monetary service proper. But a formula which portrays and solves only an arbitrarily delineated part of the problem must be rejected if we are able to show another one which will deal with and solve the whole problem in a uniform fashion. (P. 61-62)

VON MISES, Ludwig, Money, Method, and the Market Process, Essays by Ludwig von Mises.

The concept of hoarding may be regarded as a first approximation to the concept of liquidity-preference. Indeed if we were to substitute ‘propensity to hoard’ for ‘hoarding’, it would come to substantially the same thing. But if we mean by ‘hoarding’ an actual increase in cash-holding, it is an incomplete idea – and seriously misleading if it causes us to think of ‘hoarding’ and ‘not-hoarding’ as simple alternatives. For the decision to hoard is not taken absolutely or without regard to the advantages offered for parting with liquidity; - it results from a balancing of advantages, and we have, therefore, to know what lies in the other scale… All that propensity of the public towards hoarding can achieve is to determine the rate of interest at which the aggregate desire to hoard becomes equal to the available cash. (P. 174)

KEYNES, John Maynard, The General Theory of Employment, Interest, and Money, 1936.

He who hoards money believes that some special conditions make it expedient to accumulate a cash holding… It also performs services when it rests in the till, as the most marketable good, in anticipation of its future use in trade as a generally used means of exchange….(von Mises)

If a person has a tendency to hoard money, this may have several causes. It is plausible that this individual is one of the many world citizens who has no relationship with a bank. It is also probable that a bank related individual no longer have confidence in banks; suspecting that the 'borrowed' money, totally or in part, may be obstructed. Therefore he prefers to keep it in another place.

All that propensity of the public towards hoarding can achieve is to determine the rate of interest at which the aggregate desire to hoard becomes equal to the available cash…….(Keynes)

In his General Theory of Employment, Interest, and Money, Chapter 8, The Propensity to Consume; Keynes is stating that “The ultimate object of our analysis is to discover what determines the volume of employment. In this context, I can understand that the terms, employment and hoarding, do not fit well together in such an analysis. This book was written for certain western countries (i.e. United States and the United Kingdom), but certainly not from the point of view of the ‘world citizen’.

Lord Keynes may have by-passed the Mark Twain quote:

I am more concerned about the return of my money than the return on my money

I-4-3-3MONEYED MONEY’S INDIVIDUALS

“4 billion
people still don’t have internet access.”

“2 billion:

Number of Adults Worldwide Without Access to Formal Financial Services.”

For most of the 'moneyed money'- individuals, the dispute of opinions between the 'liquidity preference', the interest and the determination of 'hoarding', barely matters. If ‘poor’ people have a surplus of a tool for indirect exchange, they will keep it without delay; hoping that this hoarded means will still have the same purchasing power in the following days and weeks and that this tool will still be accepted by their suppliers.

Should they have the freedom to make a choice of these ‘unconsumed’ means, I am sure they will decide themselves what choice to make. It does not matter to these people what the exact definition of their unused tools might be. Most of these individuals are not contracting, but only storing a limited quantity of means for indirect exchanges.

In a free society, the individual decides what kind of tools he will store for later use in a potential negotiation and purchase. He will consider the following elements to support his decision:

-trust and confidence in the tool(s).

-the assurance of the deposit location for the tools(s)

-accessibility and liquidity of the tool(s)

That is why the component, eventual intended to be used, of the Moneyed Money’s definition is so important to these people.

I-4-4AGREEMENTS / CONTRACTS

Money itself, namely that by delivery of which debt-contracts and price-contracts are discharged, and in the shape of which a store of General Purchasing Power is held, derives its character from its relationship to the Money-of-Account, since the debts and prices must first have been expressed in terms of the latter. (P.3)

KEYNES, John Maynard, Treatise On Money, V1. 1930.

I do not agree at all with the content of his statement, but I concede that there is a relationship between money and a contract. That is why I think it is important to elaborate on the subject of agreement. An agreement, contract or covenant is an accord between at least two natural or legal persons, being the parties or otherwise called the contracting parties, as to what they will do with each other or for each other, the performance to be rendered, or not to be rendered. An agreement does create an obligation, but the reverse is not always true.

Every country has certain contract rules. Private international law determines which law is applicable in a given case. An arbitration may deviate from this. The word 'contract' is often used for the written record of a reciprocal agreement. A written record of an agreement may be useful as evidence of the existence of the agreement, but it is not a necessity.

An agreement may be void or voidable if it is contrary to higher laws, public order and morality, or if there are 'defects of will'.

The result of a negotiation may end into an agreement or contract. At least one individual has a certain wish or demand, to obtain a certain service or product, or to sell goods or a services to the other party.

One of the elements of the agreement may be the payment condition. Namely, the determination of the means or tool to be used to establish the agreement. Other elements of the agreement may include: timing, quality, quantity, legal conditions, and other elements. Whether there is an oral agreement or a written contract; all elements are important to ensure the success of the agreement.

I-4-5INDIRECT EXCHANGE

Before I analyse this last part of the Moneyed Money definition, indirect exchange, I think it would be appropriate to go over the so-called functions of money. As we have been able to establish, there are several authors who also believed in integrating certain functions in their definition of money. In my opinion, it is a wrong choice, but nevertheless it is advisable to investigate this further.

I-4-5-1FUNCTIONS OF MONEY

(NON-) ACADEMICS ON THE FUNCTIONS OF MONEY

For some scholars I have shortened their definition of money and simply mentioned the functions section. I have found the functions of money from other authors in their texts and briefly mentioned them here. From the wide range of academics and authors, I give a brief overview below:

the three traditional functions of money: medium of exchange, unit of account, and store of value.(P. 1)

COHEN, Benjamin J., The Future of Money, Princeton University Press.

(1) a medium of exchange, (2) a store of value, and (3) a measure of value. But as I have pointed out before, those are three functions; they do not describe the essence of money. The essence of modern money is credit. (P. 114)

GRECO, Thomas H., Jr, the End of Money and the Future of Civilization,

The use or purpose of money is two-fold; it provides a medium of exchange and a measure of value. (P. 1)

HAWTREY, R. G., Currency and Credit. 1919,

It is in the highest degree important that the reader should discriminate carefully and constantly between the four functions which money fulfils, at least in modern societies. We are so accustomed to use the one same substance in all the four different ways, that they tend to become confused together in thought. We come to regard as almost necessary that union of functions which is, at the most, a matter of convenience, and may not always be desirable. We might certainly employ one substance as a medium of exchange, a second as a measure of value, a third as a standard of value, and a fourth as a store of value. In buying and selling we might transfer portions of gold; in expressing and calculating prices we might speak in terms of silver; when we wanted to make long leases we might define the rent in terms of wheat, and when we wished to carry our riches away we might condense it into the form of precious stones. This use of different commodities for each of the functions of money has in fact been partially carried out…. There is evident convenience in selecting, if possible, one single substance which can serve all the functions of money.

JEVONS, William Stanley, Money and the Mechanism of Exchange, 1875.

The first chief function of money is to supply commodities with the material for the expression of their values, or to represent their values as magnitudes of the same denomination, qualitatively equal, and quantitatively comparable. It thus serves as a universal measure of value. And only by virtue of this function does gold, the equivalent commodity par excellence, become money. (Location 2054 of 18828)

MARX, Karl, Das Kapital, 1867– Capital, 2012 by Dragan Nikolic, Aristeus Books.

The three functions of Money: Common Denominator of Value, Medium of Exchange, Standard of Value. (Chapter IV. Of Money)

MILL, John Stuart, Principles of Political Economy, 1848

These functions are medium of exchange, standard of value, standard of performance, and store of value. (Location – 950-8291)

SCHUMPETER, Joseph A., Treatise on Money, 1930-1950,

Money can be anything that can serve as a store of value, unit of account and medium of exchange…….To put it a different way, money is something that holds its value over time, can be easily translated into prices, and is widely accepted.

IMF: Irena Asmundson and Ceyda Oner – Finance & Development, September 2012, Vol.49.

Money, whatever its form, is a medium of exchange, a unit of account and a store of value.

ECB: (24/11/2015)

I have discovered the most extensive enumeration of the functions of money in Glyn Davies’ 'A History of Money'. He provides the following enumeration with the comment whether the function is rather abstract or concrete:

Specific functions (mostly micro-economic): 1/ Unit of account (abstract) - 2/ Common measure of value (abstract) - 3/ medium of exchange (concrete) - 4/ means of payment (concrete) - 5/ standard for deferred payments (abstract) - 6/ store of value (concrete)

General functions (mostly macro-economic and abstract): 7/ liquid asset - 8/ framework of the market allocative system (prices) - 9/ a causative factor in the economy - 10/ controller of the economy (P.50)

DAVIES, Glyn, A History of Money, 2002.

to become confused together in thought… one single substance which can serve all the functions of money…..(Jevons)

I fully agree when Jevons brings up the term "confusion" in this context. In my humble opinion, most mistakes are made by trying to bring together as many elements as possible to ultimately ruin a simple definition. On the other hand, Jevons considers that it would be much simpler if only one substance was used. In the nineteenth century, this idea was a wish rather than a material possibility. We now live in the 21st century and humans have since become more inventive technologically.

universal measure of value….

For all functions incorporating the 'value' element, I simply refer to the addendum 2. In this addendum, I try to expose the sense and nonsense of using the terminology ‘value’ in a monetary context.

THE FUNCTIONS OF MONEY ELABORATED IN AN EXAMPLE

I suspect the best means of approaching the function(s) of money is by setting an example. A USD10 banknote can be called, without any doubt, a tool of indirect exchange. What functions can we assign to this banknote?

1/ This is a medium of exchange: With this banknote I can buy several products.

2/ A unit of account ? Yes, on the banknote is written the name of the currency and the number 10. If this banknote is used for a purchase, for example, then the unit of account element is already conceived in the fact that it will be used as the medium of exchange.

3/ Store of value ? Before using this 'function', the occupant should initially define the term 'value' and may notice that other people may have a different definition of 'value'. Even if several users would have the same definition of the phenomenon of 'value', we can still say that this banknote might be a store of value today and maybe in a few weeks, but certainly not in a few years.

4/ Measure and standard of value ? These are meaningless terms in this context as explained in my addendum 2. When two people want to carry out a trade and agree about using a means of indirect exchange, they may have already conceived about the 'value' (or better ‘worth’- mathematical value - yesterday, now and tomorrow) of this tool.

Fortunately, almost every author mentions the significant term: means of exchange.

I-4-5-2DIFFERENT KIND OF EXCHANGES

Henry Dunning Macleod lists below the 6 combinations that may give rise to an exchange.

There being, then, Three, and only Three, distinct orders of Exchangeable Quantities, it is evident that they may be combined two and two in Six different ways. These six different kinds of Exchange are –

A Material thing for a Material thing. As when gold money is exchanged for lands, houses, corn, jewelry, timber, cattle, &c.

A Material thing for labor. As when gold money is paid as wages, fees or salary for any service done.

A Material thing for a Right. As when gold money is given to purchase Bills of Exchange, the funds, copyrights, patents, shares in commercial companies, or any other valuable right.

Labor for Labor. As when persons agree to perform reciprocal services for each other.

Labor for a Right. As when wages, fees, salaries, or any service done is paid for in bank notes, cheques, bills of exchange, &c.

A Right for A Right. As when a banker buys one Right of Action such as a Bill of Exchange, and gives in exchange for it a Credit in his books: which is another Right of action. (P. 30)

MACLEOD Henry Dunning, The Theory of Credit, volume 1, 1889,

The instances cited by Macleod date from the 19th century and should be interpreted in that context.

I-4-5-3DEFINITION OF ‘INDIRECT EXCHANGE’

The importance of defining is illustrated once again when trying to understand the term 'indirect exchange'. I do accept that if one searches under the term, ‘theory of indirect exchange’, that more detailed information may be found. For this comparison I have consulted the following sources:

indirect exchange: A situation in which goods, services, etc. are traded between two countries using the currency of a third country.

CAMBRIDGE DICTIONARY:

indirect exchange: 1: exchange (as of checks, drafts) between three or more places - 2: exchange in which rates give the value of the unit of home currency in terms of foreign currencies –

MERRIAM – WEBSTER

When we say that it must be very time consuming, inconvenient, and often impossible to find an exchange partner who has just what you need, and needs just what you have, which is why indirect exchange became established and is maintained. (Location 950 of 8291.) …

In the case of money we further understand that the use of highly marketable or salable goods,

i.e. those that everyone more or less can use or wishes to have, become customary in indirect exchange and that such goods gradually become recognized as a medium of exchange without express agreement or legislative compulsion, even without any consideration for the common interest (Menger, P558) (Location 980 of 8291) Quoted in

SCHUMPETER, Joseph A., Treatise on Money, 1930-1950.

Interpersonal exchange is called indirect exchange if, between the commodities and services the reciprocal exchange of which is the ultimate end of exchanging, one or several media of exchange are interposed. The subject matter of the theory of indirect exchange is the study of the ratios of exchange between the media of exchange on the one hand and the goods and services of all orders on the other hand. The statements of the theory of indirect exchange refer to all instances of indirect exchange and to all things which are employed as media of exchange. (Chapter 17 Indirect Exchange, Loc.:2/136)

VON MISES, Ludwig, Human Action, A Treatise on Economics.

I-4-5-4MEANS OF INDIRECT EXCHANGE THE FUNCTION OF MONEY

I adhere to those authors who take the view that the sole function of money is a medium of indirect exchange.

The idea which lay first to hand for an explanation of the specific function of money as a universal current medium of exchange, was to refer it to a general convention, or a legal dispensation. The problem, which science has here to solve, consists in giving an explanation of a general, homogeneous course of action pursued by human beings when engaged in traffic, which, taken concretely, makes unquestionably for the common interest, and yet which seems to conflict with the nearest and immediate interests of contracting individuals. Under such circumstances what could lie more contiguous than the notion of referring the foregoing procedure to causes lying the sphere of individual considerations? To assume that certain commodities, the precious metals in particular, had been exalted into the medium of exchange by general convention or law, in the interest of commonweal, solved the difficulty, and solved it apparently the more easily and naturally inasmuch as the shape of the coins seemed to be a token of state regulation. Such in fact is the opinion of Plato, Aristotle, and the Roman jurists, closely followed by the mediaeval writers. Even the more modern developments in the theory of money have not in substance got beyond this standpoint. (II. Attempts at solutions hitherto: Location 1-2/3)

MENGER, Carl, On the Origin of Money, 1892, The Great Library Collection By R.P. Pryne.

A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production. Money is a medium of exchange. It is the most marketable good which people acquire because they want to offer it in later acts of interpersonal exchange…. Money is the thing which serves as the generally accepted and commonly used medium of exchange. This is its only function. All the other functions which people ascribe to money are merely particular aspects of its primary and sole function, that of a medium of exchange. (3. Demand for money and supply of money – Location: 9-10/205)

VON MISES, Ludwig, Human Action, A Treatise on Economics.

A medium of exchange is a good… All the other functions which people ascribe to money are merely particular aspects of its primary and sole function, that of a medium of exchange

This work was first published in 1949 and since then several means of indirect exchange have appeared on the market. We knew the evolution of commodities, of silver and gold, of paper and have now arrived in the 'digit' and cryptocurrency world. No one knows what new options will present themselves in the course of the next years. As I will discuss later, it is important that the user can continue to have a wide choice of means of indirect exchange. He must always be to choose a tool that strikes him as the most qualitative and reassuring in specific circumstances.

I-5CONCLUDING THOUGHTS ON THE CONCEPT OF MONEY

The concept of money was, is and will remain a controversial topic in the future. This topic has been raised and described so many times historically, and to date no one can say for sure whether an optimal definition of this concept will ever be able to be displayed. A hurdle of academics, with the most diverse specializations have gnashed their teeth on this phenomenon.

In my opinion, a clearer path can be found if one embarks only from the point of view of the individual. I am convinced that it becomes even more insightful, if one launches from the point of view of the individual, having limited education, no banking connections and no access to the internet.

An individual who has internet access, a banking relationship and a monthly deposit from his employer, health or pension fund is already in an intertwined system, with no immediate intention of reflecting deeply about his financial situation on a daily basis. In many cases, he appears to be a dazed internet, television, game consumer just ‘undergoing’ events.

An individual living in a developing country, exempt of internet, bank account and employment contract, may be obliged to have a totally different mindset every day, because there is a constant need to contemplate how he can take care of his family and himself.

If he enters into an agreement with a principal to fulfil a job, hoping that his performance will be rewarded with a tool for immediately satisfying his basic daily needs. If this person still would have the opportunity to save (not to consume), he hopes that the obtained tool may be used for consumption at a later moment, and that the tool will not be subject to any loss of purchasing power in the short or long term.

Usually these people do not reside in a free world, where they can choose between multiple means for indirect exchange. In many of these countries, the government has promulgated that only their particular fiat currency can be used as a means of payment; where there is great uncertainty regarding its purchasing power.

Based on this data, the individual will explore alternative ways out to still obtain increased security to take care of daily needs. In some situations, he will try to obtain other coins on the black market and in some cases he will opt for direct exchange (barter) rather than accepting fiat money. Therefore, consulting with such an individual in certain cases seems more appropriate, rather than reading writings of certain 'professionals' who are living in a secure position.

I am convinced that these individuals will grasp the proposals, formulated in PART VII of Moneyed Money, with both hands.

Having finished Part I, it is appropriate on this basis to attempt a breakdown of the next steps that may eventually lead to the treatment of the term 'moneyed'.

SUBDIVIDING MONEYED MONEY

Having found an appropriate definition of money, we should stick to the definition’s content and being the guideline in evolving towards the ultimate objective, which is the content of a Moneyed Money. When basing ourselves on this Moneyed Money definition,

Money is a denomination for means/tools, eventual intended to be used in agreements/contracts, for indirect exchange,

then I believe that the most important term in this definition is 'means' - 'tools'. If we want to dissect topic 'means - tools' further, it is important to examine historically which means/tools came into existence, which issues were associated with them and how these means continued to evolve.

S-1    HISTORICAL AMBIGUITY SURROUNDING TYPES OF MONEY

In Part I of Moneyed Money, under section (I-3-2), I have listed some adjectives for money used by economists and other academics. Under that section, I mentioned that instead of clarification, there would rather be confusion. Just as we have observed the numerous definitions of money, we can identify the same phenomenon with the categories or types of money. One of the options is to adopt the types of money from J.M. Keynes' 'Treatise on Money', V1, (page 5 – 11). See below a list of Keynes’ used terms (some of which are obsolete).

Money-proper, Bank-Money, State-Money, Representative Money, legal-tender Money, Commodity Money, Fiat Money, Managed Money, Current Money, Central Bank-Money, Member Bank-Money, Reserve-Money, Income-Money, Business-Money, Savings-Money.

Another interesting option is this one drawn up by John Kenneth Galbraith:

Writers on money have regularly distinguished between three types of currency: (P. 73)

(1)That which owes value, as do gold or silver, to an inherent desirability derived from well – established service of pride of possession, prestige of ownership, personal adornment, dinner service or dentistry;

(2)That which can readily be exchanged for something of such inherent desirability or which carries the promise, like the early Massachusetts Bay notes, of eventual exchange; and

(3)Currency which is intrinsically worthless, carries no promise that it will be redeemed in anything useful or desirable and which is sustained, at most, by the fiat of the state that it be accepted.

GALBRAITH, John Kenneth, MONEY.

S-2    DELINEATION OF THE MEANS (TOOLS)

Just the noun's choice may cause confusion. In economic literature, we regularly come across the following terms: Means, Medium, Media, Tools, Instruments, Resources…. For simplicity's sake, I will try to limit myself to the use of 'means' or 'tools'. If we approach the ‘means’ aspect from the position of the 'INDIVIDUAL', a completely different light can be shed on the use of a TOOL.

The main issue is the agreement of the tool’s choice for the indirect exchange. Today, it is quite conceivable that I might buy an object from someone using a certain tool and then, the day after, the seller no longer agrees with it. We may observe today for example in pubs and restaurants, where the sign at the entrance reads: bank cards are not accepted, only cash. By focussing on one particular issue: THE MEANS (TOOLS), one is largely prevented from drowning in numerous other issues that are better thought of and worked out by professionals. Therefore, other aspects of money: money supply, velocity, indexing etc., are only briefly touched upon in this work, but not elaborated on.

S-3    THE NATURE OF THE MEANS (TOOLS)

We could roughly classify the nature of the tools as follows:

"Ethical" tools: Commodity, tokens, coins, banknotes, demand deposits, electronic money, etc.

"Unethical" means: human trafficking, slavery, child labour, prostitution, drugs, etc.

We will not analyse these 'unethical' means any further..

S-4    CLASSIFICATION OF MEANS (TOOLS) FOR INDIRECT EXCHANGE

I am convinced that classifying the means of indirect exchange is a very difficult task due to the course of monetary history, translations and the specific insights of economists and economic schools. Therefore, it is not surprising that in the course of history new denominations have been applied. In some situations, this was justified by new technical developments, in other cases it was unjustified and new terms brought confusion rather than clarification. It boils down to putting the most common terms in the literature next to each other and trying to identify a direction. I am aware that not everyone will agree with the terms used and with the content of the alphabetical list.

banknote, credit money, commercial bank money, commodity money, complementary money, cryptocurrency, demand deposit, digital money, electronic money, fiat money, fiduciary money, metal money, paper money, representative money, scriptural money, token money, virtual money,

S-5    RATIONALE BEHIND THE SUBDIVISION OF MONEYED MONEY

PART II COMMODITIES, TOKENS AND METALS

These three elements are historically intertwined. We do see a shift over time from commodities, via tokens to metals, since the latter provides greater security for the negotiating parties.

PART III OTHER MEANS (TOOLS) FOR INDIRECT EXCHANGE

With the development of printing, means of indirect exchange can now be produced swiftly and on a large scale. We witness from that moment an important development from paper to digital money.

PART IV (NON -) ACADEMICS ON MONEY

In Part IV, in recording the ‘money’ reflections of several economists and other academics, we can note the great linguistic confusion taking place even today. Is it far-fetched to call this monetary phenomenon the science of confusion?

PART V TRUST AND CONFIDENCE

Having dissected the four previous parts in detail, one major historical aspect that always emerges in the phenomenon of money is the presence of TRUST and CONFIDENCE. These aspects has to deal not only with the tools used, but with all other issues directly or indirectly related to it such as: government, banks, markets, currencies, the internet.

PART VI TOMORROW’S MONETARY REFORMS?

In this part, we may overview what is the current state of the element of money at the global level. We also feature economists and other academics who have an insight into what the future may hold in the monetary sphere.

PART VII - MONEYED MONEY

In Part VII, I make a suggestion as to how an individual could employ a means of indirect exchange and whereby one would thereby gain greater confidence in the present and the future.

PART II COMMODITY, TOKEN AND METAL

“4 billion | People still don’t have internet access.”
“2 billion: | Number of Adults Worldwide Without Access to Formal Financial Services.”
000.000.003 | Individuals have more wealth than
750.000.000 | Poorest people in the world.

MONEYED MONEY’S DEFINITION OF MONEY

Money is a denomination for means/tools, eventual intended to be used in agreements/contracts, for indirect exchange,

ABSTRACT

In this pivotal section of Moneyed Money, the emphasis is placed on the crucial element of means/tools in the definition of money. Recognizing the significance of this component, the subdivision chapter is thoughtfully divided into two parts to comprehensively explore the historical trajectory of the first tools employed as indirect means of exchange for reaching agreements.

Part II commences by tracing the historical origins of means/tools in indirect exchange. An exploration of why and how commodities and tokens were initially used and how these means evolved into metals unfolds. The discussion explores the issues of sustainability, divisibility, and acceptability, and their role in shaping the evolution of these means. Human innovations in the technical realm are examined as catalysts for this evolution.

The focus then shifts to the mining of metals and the origin and properties of coins. A detailed examination of the main metals used for coinage unfolds, beginning with copper and transitioning to the precious metal silver. The historical and technical intricacies of coinage are unravelled, providing insight into the pivotal role of metals in the development of currency.

Given the historical importance of gold, this section places a nuanced lens on its multifaceted role in the monetary landscape. The exploration spans the history of gold, its price evolution, global quantity, and diverse investment channels.

To augment the understanding of the historical importance of silver and gold, an extensive selection spanning approximately 400 years is presented. This compilation encompasses the perspectives of economists and authors, offering diverse insights into the role of these precious metals within monetary systems.

By navigating through these historical dimensions, Moneyed Money endeavours to provide a comprehensive foundation for comprehending the use of money today and in the future. The intricate interplay of historical developments, technical innovations, and economic perspectives informs a nuanced understanding of the evolution of means/tools in the realm of money.

PART II COMMODITY, TOKEN AND METAL

CONTENTS

II-1COMMODITY MONEY

II-1-1DEFINITION OF COMMODITY AND COMMODITY MONEY

II-1-2(NON-) ACADEMICS ON COMMODITY MONEY

II-1-3MONEYED MONEY’S COMMENTS ON COMMODITY MONEY

II-2TOKEN MONEY

II-2-1DEFINITION OF TOKEN MONEY

II-2-2(NON-) ACADEMICS ON TOKEN MONEY

II-3METAL MONEY

II-3-1SOME TECHNICAL INFORMATION ON METALS

II-3-1-1BASIC INFORMATION ON METAL

II-3-1-2PROPERTIES OF METALLIC MONEY

II-3-1-3PRECIOUS METALS: DEFINITION AND COMMENTS

II-3-1-4SOME TECHNICAL CRITERIA

II-3-2MINING

II-3-2-1DEFINITION AND CHARACTERISTICS OF MINING

II-3-2-2BRIEF HISTORY OF MINING

II-3-2-3CANTILLON ON THE ECONOMIC IMPACT OF MINING

II-3-3THE ORIGIN OF COINS

II-3-3-1THE EVOLUTION FROM METALS TO COIN

II-3-3-2THE DEVELOPMENT OF COINAGE IN LYDIA

II-3-3-3FURTHER DEVELOPMENT IN THE WESTERN WORLD

II-3-4THE DEFINITION AND PARTICULARITIES OF A COIN

II-3-4-1CHEMICAL ELEMENTS USED IN METAL MONEY

II-3-4-2THE COIN’S APPLIANCE OBJECTIVES

II-3-4-3THE COIN AS A TOOL FOR INDIRECT EXCHANGE

II-3-4-4THE ‘MINT’

II-3-4-5MAIN METALS FOR THE PRODUCTION OF COINS

II-4COPPER

II-4-1THE DEFINITION AND PARTICULARITIES OF COPPER

II-4-2HISTORICAL PRICE EVOLUTION OF COPPER

II-4-3(NON-) ACADEMICS… ON COPPER

II-5SILVER

II-5-1THE DEFINITION AND PARTICULARITIES OF SILVER

II-5-1-1DEFINITION OF SILVER

II-5-1-2SOME CHARACTERISTICS OF SILVER

II-5-2BRIEF HISTORY AND SOME APPLICATIONS OF SILVER

II-5-3HISTORICAL PRICE EVOLUTION OF SILVER

II-5-4THE GOLD – SILVER RATIO

II-6GOLD

II-6-1THE DEFINITION OF GOLD

II-6-2SOME CHARACTERISTICS OF GOLD

II-6-3BRIEF HISTORY OF GOLD

II-6-3-1ORIGINS AND OCCURENCE

II-6-3-2GOLD MINING AND USAGE

II-6-3-3MONETARY USAGE

II-6-4HISTORICAL PRICE EVOLUTION OF GOLD

II-6-5TOTAL QUANTITY GOLD MINED AND RESERVES

II-6-6GOLD INVESTMENT CHANNELS

II-6-6-1GOLD COINS

II-6-6-2GOLD BARS

II-6-6-3GOLD EXCHANGE – TRADED PRODUCTS

II-7PERSPECTIVES OF (NON-) ACADEMICS ON SILVER AND GOLD

II-7-1LOCKE ON SILVER AND GOLD IN THE 17TH CENTURY

II-7-1-1LOCKE ON SILVER

II-7-1-2LOCKE ON GOLD

II-7-1-3LOCKE ON TWO METALS

II-7-1-4(NON-) ACADEMICS ON LOCKE’S VIEW ON SILVER AND GOLD

II-7-2REFLECTIONS ON SILVER AND GOLD IN THE 18TH CENTURY

II-7-2-1JOHN LAW’S VIEW ON SILVER AND GOLD

II-7-2-2GERVAISE ON SILVER AND GOLD

II-7-2-3VANDERLINT ON SILVER AND GOLD

II-7-2-4CANTILLON’S ESTIMATION ON SILVER AND GOLD

II-7-2-5DAVID HUME ON SILVER AND GOLD

II-7-2-6TURGOT’S “REFLECTIONS” ON PRECIOUS METALS

II-7-2-7STEUART’S CONCERNS REGARDING PRECIOUS METALS

II-7-2-8ADAM SMITH’S OPINION ON PRECIOUS METALS

II-7-3CONSIDERATIONS IN THE 19TH CENTURY

II-7-3-1A BANKER’S VIEW ON PRECIOUS METALS

II-7-3-2JEAN BAPTISTE SAY AND THE PRECIOUS METALS

II-7-3-3DAVID RICARDO’S IDEAS ON GOLD

II-7-3-4KARL MARX’ VISION ON GOLD….. AND ALSO ON SILVER

II-7-3-5MACLEOD’S THEORY OF CREDIT - ON SILVER AND GOLD

II-7-3-6PRECIOUS METALS BECAME MONEY – CARL MENGER

II-7-3-7JOSEPH SHIELD NICHOLSON ON GOLD

II-7-4THE 20TH CENTURY - PRECIOUS METAL’S CONSIDERATIONS?

II-7-4-1DIFFUSE REFLECTIONS AND EVENTS ON GOLD

II-7-4-2THE NATURAL LAW OF WILLIAM BROUGH - 1909

II-7-4-3LUDWIG VON MISES ON PRECIOUS METALS - 1912

II-7-4-4HAWTREY’S PRECIOUS METAL’S - ‘MIX UP’ IN 1919

II-7-4-5ALFRED MARSHALL AND PRECIOUS METALS - 1923

II-7-4-6JOHN MAYNARD KEYNES FREE OF GOLD FEVER 1913 – 1936

II-7-4-7FRIEDRICH HAYEK ON PRECIOUS METALS - 1990

II-7-4-8MILTON FRIEDMAN ON GOLD - 1962

II-7-5PROPOSALS ON GOLD AND SILVER IN THE 21ST CENTURY

II-8‘METALLIC’ CONCLUSIONS

II-8-1HISTORICAL TIME BAR FOR PRECIOUS METAL COINS

II-8-2TIME LINE FOR PRECIOUS METALS

II-8-3SILVER AND OTHER METALS

II-8-4WHAT ABOUT GOLD?

PART II COMMODITY, TOKEN AND METAL

II-1COMMODITY MONEY

II-1-1DEFINITION OF COMMODITY AND COMMODITY MONEY

In economics, a commodity is an economic good, usually a resource, that has full or substantial fungibility: that is the market treats instances of the good as equivalent or nearly so with no regard to who produced them.

WIKIPEDIA: https://en.wikipedia.org/wiki/Commodity. (29/11/2022)

Commodity money is money whose value comes from a commodity of which it is made. Commodity money consists of objects having value or use in themselves (intrinsic value) as well as their value in buying goods….Commodity money value comes from the commodity out which it is made. The commodity itself constitutes the money, and the money is the commodity.

WIKIPEDIA, https://en.wikipedia.org/wiki/Commodity. (5/2/2022)

One might assume that a concept like 'commodity money' would be easy to define. But again, the terms 'intrinsic' and 'value' appear in this definition that are not accepted by all academics. This is elaborated in detail in the addendum 2.

In section (I-4-2-2), I noted that … the individual(s) will decide for himself in certain circumstances what will be the most qualitative means.

In this context, 'commodity money' may not be regarded as a 'top-quality' tool, but it is still accepted by both parties in specific situations. At the time of the agreement, both parties place a certain level of confidence in this 'commodity' money. The seller of the product or service trusts that they can utilise this form of 'commodity' money in other agreements or contracts. There are a lot of mediums that were used as commodity money. We can list the most important ones: Gold and silver, copper, shells, barley, salt, rice, dried cod, peppercorns, large stones, decorated belts, alcohol, cigarettes, candy, cannabis, etc.

II-1-2(NON-) ACADEMICS ON COMMODITY MONEY

But, when we consider the purposes for which Money is required, it its easily seen that no substance possesses so many advantages as a Metal. The use of Money being to preserve the record of services due to its possessor for any future time, it is clear that Money should not alter by time. A Money of dried cod would not keep very long, nor would it be easily divisible. Not many bankers would like to keep their accounts in dried cod, tobacco, sugar, or in dead men’s skulls. (P. 76)

MACLEOD, Henry Dunning, The Theory of Credit, volume 1.1889.

It must not be supposed that the form of coin, or document, employed as current-money, constitutes the enigma in this phenomenon. We may look away from these forms and go back to earlier stages of economic development, or indeed to what still obtains in countries here and there, where we find the precious metals in a uncoined state serving as the medium of exchange, and even certain other commodities, cattle, skins, cubes of tea, slabs of salt, cowrie shells, etc, still we are confronted by this phenomenon, still we have to explain why it is that the economic man is ready to accept a certain kind of commodity, even if he does not need it, or if his need of it is already supplied, in exchange for all the goods he has brought to market, while it is none the less what he needs that he consults in the first instance, with respect to the goods he intends to acquire in the course of his transactions. (Introduction, 1-2/3)

MENGER, Carl, On the Origin of Money, 1892, The Great Library Collection By R.P. Pryne.

Commodity Money is composed of actual units of a particular freely-obtainable, non-monopolised commodity² which happens to have been chosen for the familiar purposes of money, but the supply of which is governed – like that of any other commodity – by scarcity and cost of production. (P. 7) ² Or of warehouse warrants for actually existing units of the commodity. E.g. American Gold Certificates are best regarded as Commodity Money.

KEYNES, John Maynard, Treatise On Money, V1. 1930.

Commodity money. A physical commodity originally value for its commercial uses which has come to be used as money. As long as it remains a commercial commodity, its value as a commodity and as money is interchangeable and dependent on market conditions… GLOSSARY -36/122… The commodity money disappears from the domestic market. Bad money, says Gresham’s Law, drives good money out of the country. It would be more correct to say that the money which the government’s decree has undervalued disappears from the market and the money which the decree has over-valued remains… The outflow of commodity money is thus not the effect of an unfavourable balance of payments, but the effect of a government interference with the price structure. (14 Balances of Payments – 106/165)

VON MISES, Ludwig, Human Action, A Treatise on Economics.

Here the question comes into consideration as to whether, thirdly, the phenomenon of material money does not deserve logical priority in the sense that it is essential to lend significance to the unit with which the social account-setting system works and with which firms and households calculate, thus whether, in other words, this device to that degree must remain metallic or “material” generally, whether association with the market value of a quantity of metal – or of some other good – would be needed for households and firms to gain some idea of it. (Commodity Money as One Means of Payment Among Many, Loc. 4261 of 8291)

SCHUMPETER, Joseph A., Treatise on Money, 1930-1950.

After thousands of years of continual usage commodity money reached its culminating excellence in the form of the gold standard as it operated in and from the United Kingdom in the period from about 1850 to 1914., (The ascendancy of Sterling, 1789-1914- Location. 4261)

DAVIES, Glyn, A History of Money.

Of perhaps more crucial contemporary importance, it follows that the impetus is decisively away from commodity money and towards money as mere ‘symbol’, although neither social relation is fully established, and indeed Labourism emerges as part of the disempowerment of capitalism, as the era of Bretton Woods revealed. This is to say, while there can be no movement back to commodity money, there has been equally little movement to establish and deep ontological commitments to direct social relations on anything more than a dependency basis. In this context, of money becomes increasingly negligible if not nonexistent.

KENNEDY Peter, 10. A Marxist account of the relationship between commodity Money and symbolic money in the context of contemporary capitalist development. Conclusion 29/39 the determinant relation that commodity money had over symbolic forms

within ..SMITHIN, John, What is Money ?

Today, money is nowhere a commodity. It is everywhere an irredeemable piece of paper that is not backed by anything. ‘Schlichter observed that it was ‘ simply a historic fact that commodity money has always provided a reasonable stable medium of exchange, while the entire history of state paper money has been an unmitigated disaster when judged on the basis of price level stability.’ (19 Delusions of Debt, 36/37)

KWARTENG, Kwasi, War and Gold.

² Or of warehouse warrants for actually existing units of the commodity…..

It is noteworthy how J.M. Keynes adeptly transforms a certificate (paper) into commodity money. I believe that many users of commodity money have likely faced objections persuading a counterparty to accept a commodity as a tool for exchange. The difficulty of convincing someone to acknowledge a document as a substitute for a physical commodity would only intensify the issue. In his renowned work, "The General Theory of Employment, Interest and Money," Keynes continues to draw comparisons between money and tangible items like wheat, although he no longer explicitly employs the term "commodity money" in this influential book.

In this context, the determinant relation that commodity money had over symbolic forms of money becomes increasingly negligible if not nonexistent.. (Kennedy)… Today, money is nowhere a commodity. It is everywhere an irredeemable piece of paper that is not backed by anything...(Kwarteng)

I certainly do not support bold statements such as those expressed by Peter Kennedy in the aforementioned quote. I also hold a differing viewpoint from the statements made by Mr. Kwarteng. Peter Kennedy and Kwasi Kwarteng appear to be unaware of the substantial global population without internet access and a banking relationship, leading to the absence of a bank account for many individuals.

“4 billion | people still don’t have internet access.”
“2 billion: | Number of Adults Worldwide Without Access to Formal Financial Services.”

In the present day, individuals in less affluent regions continue to rely on coins and paper money, and quite likely commodity money, when lacking access to traditional coins or banknotes, similar to practices in more economically advanced societies.

II-1-3MONEYED MONEY’S COMMENTS ON COMMODITY MONEY

Commodity money, in this context, encompasses all physical goods that have historically, and in specific situations, been utilised for indirect exchanges. It is essential to acknowledge that both metal and paper constitute physical materials. The distinction lies in the term 'commodity,' highlighting the specific nature of the medium. With commodities, the focus is on potentially raw materials, agricultural products, materials, or parts of animals. In the case of paper, the emphasis shifts to the written or printed content rather than the material itself.

A fundamental characteristic of commodity money is the immediate recognisability and acceptance of the perceived worth by its users. Over centuries, various regions employed different commodities for indirect exchanges. These commodities needed to be abundant but not overly so, known to both parties, and reasonably easy to handle. For instance, the Aztecs used cocoa beans, while others relied on salt, tobacco, nails, dried fish, rice, barley, and more. The notable advantage of commodity money was its dual purpose of facilitating exchange and, in some cases, serving as a consumable. Still, there were several disadvantages, including limited durability, non-equivalent units, and hazards in user-friendly exchanges.

In specific circumstances, such as during war or in prison environments, indirect exchanges persist through items like cigarettes and canned goods. While paper, sand, and other raw materials are commodities, they don't meet the criteria of commodity money due to factors like abundance. It is crucial to recognise that in normal circumstances, developed countries have transitioned from using means of indirect exchange ranging from dried cod to barley. The past century witnessed a revolution for ordinary users, moving from metal money to paper money and further to digital money.

Currently, silver and gold, as commodities, are facing international attention. Despite manipulation and vilification of 'commodity gold' and 'commodity silver' on certain paper markets, central banks worldwide are discreetly accumulating these commodities in unprecedented quantities behind the scenes.

II-2TOKEN MONEY

II-2-1DEFINITION OF TOKEN MONEY

ETYMOLOGY    TOKEN

Old English taken “sign, symbol, evidence, Meaning “coin-like piece of stamped metal”.

Token money, or token, is a form of money that has little intrinsic value compared to its face value. Token money is anything that is accepted as money, not due to its intrinsic value but instead because of custom or legal enactment. Token money costs less to produce than its face value. A banknote, e.g. a five pound note, is token money because despite its value being 5 pounds it only costs a few pence to produce.

WIKIPEDIA, https://en.wikipedia.org/wiki/Token_money. (29/11/2022)

I share similar concerns regarding the definition of 'token money' on Wikipedia, particularly regarding the notions of 'intrinsic' and 'value', which may not be universally accepted.

See my observations in section: (I-1-2-1)

II-2-2(NON-) ACADEMICS ON TOKEN MONEY

Token money. Usually minor or subsidiary coins, but actually any distinguishable material which circulates as a substitute for a small amount of money and whose value as money exceeds its commodity value. Token money is generally needed to facilitate exchanges involving small amounts of money and for that reason, its acceptability is often limited to a maximum sum. Token money differs from fiat money (q.v.) in that it is, within limits, a claim for money proper and the amount outstanding is usually limited to the quantity needed for settling small amounts. Token money is a money-substitute (q.v.) and so far as its monetary value exceeds its commodity value, it is a fiduciary medium (q.v.). (Location - 105/121-122)

VON MISES, Ludwig, Human Action, A Treatise on Economics.

The “big problem of small change” for Great Britain as a whole persisted until 1817, when the government finally minted token coins with fixed rates of convertibility to their large denomination coins and bank notes – the “standard formula” – according to Sargent and Velde. (The “Glorious Revolution” (or Dutch coup d’état) – loc. 9-10/35)

NEAL, Larry, A Concise History of International Finance.

Thus in that year Joseph Harris, assay master of the mint, considered that ‘Copper coins with us are properly not money, but a kind of tokens’ though admittedly ‘very useful in small home traffic’ (Craig 1953.250). (6: Location. 10/63) …. Gradually in the eighteenth century because of two self-reinforcing causes, namely, first, the poor quality and shortage of silver coins, and secondly the rise of money substitutes in the form of metal tokens and bank paper, gold became increasingly to be the preferred standard metal in practice. (7: Location. 101/114)

DAVIES, Glyn, A History of Money.

to facilitate exchanges involving small amounts of money….(von Mises)

Dating back to Ancient Greece and the Roman Empire, copper coins were employed for very small transactions, highlighting a historical struggle known as 'the big problem of small change.' The practical problem arises from the physical impracticality of using silver for minute transactions, such as purchasing a few onions. The coin's size would be so diminutive that it becomes difficult to handle. Consequently, token money, whether in the form of a note or coin, needs to have some worth lower than its practical usage.

Token money is a money-substitute (q.v.)….(von Mises)…. Copper coins with us are properly not money, but a kind of tokens’….(Harris - Davies)

In the 17th and 18th centuries, certain economists and scholars restricted the term 'money' exclusively to silver or gold coins. Other forms of currency were designated as 'tokens.' This classification was based on the worth of the medium rather than the mutual agreement between users. This approach led to misunderstandings, as individuals had varying definitions in mind whenever they referred to the term 'money.' The focal point of this discussion continues to be the definition of money. According to the Moneyed Money’s definition, given that money serves as a denomination for a medium of indirect exchange, there should be no ambiguity in considering certain 'tokens' as money if they are accepted by participants in an indirect exchange. The quality of the 'means' can be debated.

II-3METAL MONEY

But on the whole for most people sound currency still means, as it has long meant, a metallic currency. It is the only bulwark against inflationism, that insidious financial vice, which seems so attractive, but overindulgence in which may enfeeble or wreck the system. (P. 364 - 365)

HAWTREY, Ralph George, Currency and Credit,1919.

For millennia, there has existed a connection between metals and money, and even in the contemporary era, metal money continues to be utilised globally. Despite calls for a 'cashless' society in the 21st century, advocating for the elimination of paper and metal money, metals and precious metals, particularly gold, maintain their significance. In the realm of Moneyed Money, I will specifically focus on the enduring appeal of gold.

One of the first requisites of Money is that it should be easily divisible into very small fragments: so that its owner should be able to get any amount of service he pleases at any time. Taking these requisites into consideration it is evident that there is no substance which combines them so well as a Metal. Metal is uniform in its texture: it can be divided into any number of fragments, each of which shall be equal in value to any other fragment of the same weight: and, if required, these fragments can always be re-united and form a whole again of the value of all its parts: which can be said of no other substance. All civilized nations, therefore, have adopted a Metal as Money: and of Metals, Gold, Silver, and Copper have been chiefly preferred. (P. 76)

MACLEOD, Henry Dunning, The Theory of Credit, volume 1.1889.

II-3-1SOME TECHNICAL INFORMATION ON METALS

II-3-1-1BASIC INFORMATION ON METAL

A metal is a chemical element from one of the following series in the periodic table of elements: Alkali metals, alkali earth metals, transition metals, main group of metals. Some commonly known types of metals are: iron, aluminium, copper, chromium, nickel, lead, zinc, tin, gold, silver and platinum, as well as some alloys made of metals such as: bronze, brass, stainless steel and solder.

Metals have a number of characteristic physical properties:

They usually have a shiny appearance

They have a high toughness and are malleable

They usually have a high melting point; with the exception of mercury and gallium, all metals are solids at ambient temperature.

They are good conductors of heat and electricity.

An alloy is a mixture of metals, but can also contain non-metals. Alloys are produced to give metals the desired properties such as hardness and malleability. In the bronze age (about 2000-1000 BC), people already knew how to make an alloy from copper that was easier to work by adding tin. This alloy is called bronze.

II-3-1-2PROPERTIES OF METALLIC MONEY

I am guided by William Stanley Jevons' masterly work of 1875, Money and the Mechanism of Exchange. By working out the properties of metallic money, we can also distinguish the properties and or issues of non-metallic money.

The prevailing defect in the treatment of the subject is the failure to observe that money requires different properties as regards different functions. To decide upon the best material for money is thus a problem of great complexity, because we must take into account at once the relative importance of the several functions of money… In a simple state of industry money is chiefly required to pass about between buyers and sellers. It should then, be conveniently portable, divisible into pieces of various size, so that any sum may readily be made up, and easily distinguishable by its appearance, or by the design impressed upon it. When money, however, comes to serve, as it will at some future time, almost exclusively as a measure and standard of value, the system of exchange, being one of perfected barter, such properties become a matter of comparative indifference, and stability of value, joined perhaps to portability, is the most important quality. Before venturing, however, to discuss such complex questions, we must proceed to a preliminary discussion of the properties in question, which may thus perhaps be enumerated in the order of their importance:—

1. Utility and value.

2. Portability.

3. Indestructibility.

4. Homogeneity.

5. Divisibility.

6. Stability of value.

7. Cognizability. (P.31)

JEVONS, William Stanley, Money and the Mechanism of Exchange. 1875.

UTILITY AND VALUE

The essential point is that people should be induced to receive money, and pass it on freely at steady ratios of exchange for other objects; but there must always be some sufficient reason first inducing people to accept the money. The force of habit, convention, or legal enactment may do much to maintain money in circulation when once it is afloat, but it is doubtful whether the most powerful government could oblige its subjects to accept and circulate as money a worthless substance which they had no other motive for receiving….

In order that money may perform some of its functions efficiently, especially those of a medium of exchange and a store of value, to be carried about, it is important that it should be made of a substance valued highly in all parts of the world, if possible, almost equally esteemed by all peoples. The beautiful lustre of these metals must have drawn attention and excited admiration as much in the earliest as in the present times. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange, 1875,

Doubtful….government could oblige its subjects to accept and circulate as money a worthless substance…..

If Jevons examined history, he had to comprehend that his statement 'doubtful' does not apply. In the 21st century, there are still governments that force people to use worthless means for indirect exchange. This is discussed further in PART V.

PORTABILITY

The material of money must not only be valuable, but the value must be so related to the weight and bulk of the material, that the money shall not be inconveniently heavy on the one hand, nor inconveniently minute on the other… The portability of money is an important quality not merely because it enables the owner to carry small sums in the pocket without trouble, but because large sums can be transferred from place to place, or from continent to continent, at little cost. The result is to secure an approximate uniformity in the value of money in all parts of the world… Substances may be too valuable as well as too cheap, so that for ordinary transactions it would be necessary to call in the aid of the microscope and the chemical balance. Diamonds, apart from other objections, would be far too valuable for small transactions…. The pretty octagonal quarter-dollar tokens circulated in California are the smallest gold coins I have seen, weighing less than four grains each, and are so thin that they can almost be blown away. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange. 1875.

the smallest gold coins I have seen, weighing less than four grains each…

The tradability of tools for indirect exchange holds significant importance. Jevons provides an example that still resonates in certain countries like Zimbabwe and Venezuela, a topic further explored in PART VII of this work. Portability, a subject often overlooked in the Western world, is crucial. Refugees from war zones grapple with this issue daily. Our grandparents experienced this during war periods when fleeing to another country, finding that even their coins and paper money were accepted or exchanged at usurious rates. In such circumstances, only recognizable and portable means of exchange hold the most ‘mathematical’ value. In the most extreme situations, direct exchange may be the only viable option.

INDESTRUCTIBILITY

If it is to be passed about in trade, and kept in reserve, money must not be subject to easy deterioration or loss. It must not evaporate like alcohol, nor putrefy like animal substance, nor decay like wood, nor rust like iron. Destructible articles, such as eggs, dried codfish, cattle, or oil, have certainly been used as currency, but what is treated as money one day must soon afterwards be eaten up. Thus a large stock of such perishable commodities, cannot be kept on hand, and their value must be vary variable. The several kinds of corn are less subject to this objection, since, when well dried at first, they suffer no appreciable deterioration for several years. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley,, Money and the Mechanism of Exchange. 1875.

such perishable commodities….. several kinds of corn are less subject to this objection…

Indeed, not only consumable goods but also certain metals, like iron, fail to meet the condition of durability for a reliable means of exchange. When we consider all the elements, it becomes apparent that mostly precious metals possess the characteristics needed. Jevons' observation about corn is partly accurate. Depending on the quality, the shelf life of corn is limited, and its basic quality is likely to degrade after prolonged storage.

HOMOGENEITY

All portions of specimens of the substance used as money should be homogeneous, that is, of the same quality, so that equal weights will have exactly the same value. In order that we may correctly count in terms of any unit, the units must be equal and similar, so that twice two will always make four. If we were to count in precious stones, it would seldom happen that four stones would be just twice as valuable as two stones. Even the precious metals, as found in the native state, are not perfectly homogeneous, being mixed together in almost all proportions; but this produces little inconvenience, because the assayer readily determines the quantity of each pure metal present in any ingot. In the processes of refining and coining, the metals are afterwards reduced to almost exactly uniform degrees of fineness, so that equal weights are then of exactly equal value. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange. 1875.

the units must be equal and similar,… the assayer readily determines the quantity of each pure metal….

History has shown that the homogeneity of the coins was indeed an important aspect in judging the medium of exchange. Jevons is very optimistic about the capabilities of the assayer who can determine the quality of the bars. Fraud could never be abolished in the course of history. The silver content of the denarius was reduced by several Roman emperors, so that in the end one could hardly speak of a silver coin. Even today, there are evident cases of tampering with alloys in both coins and bars. To address this issue, it might be feasible to introduce machines capable of instantly analysing and decomposing the alloy of coins, providing a more effective means of detecting fraudulent alterations.

DIVISIBILITY

But the material of money should be not merely capable of division, but the aggregate value of the mass after division should be almost exactly the same as before division. If we cut up a skin or fur the pieces will, as a general rule, be far less valuable than the whole skin or fur, except for a special intended purpose; and the same is the case with timber, stone, and most other materials in which reunion is impossible. But portions of metal can be melted together again whenever it is desirable, and the cost of doing this, including the metal lost, is in the case of precious metals very inconsiderable, varying from 1/4d. to 1/2d. per ounce. Thus, approximately speaking, the value of any piece of gold or silver is simply proportional to the weight of fine metal which it contains. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange. 1875.

metal can be melted together again… precious metals very inconsiderable, varying from 1/4d. to 1/2d. per ounce…

The golden Krugerrand or the silver Maple leaf, including their fractional parts like halves, quarters, or tenths, may not necessarily be the most practical means of payment. The effectiveness of a medium of exchange becomes optimal when there is a solution that enables the use of (precious) metals in minimal quantities. Only then can it be considered a perfect indirect means of exchange.

STABILITY OF VALUE

It is evidently desirable that the currency should not be subject to fluctuations of value. The ratios in which money exchanges for other commodities should be maintained as nearly as possible invariable on the average. This would be a matter of comparatively minor importance were money used only as a measure of values at any one moment, and as a medium of exchange. If all prices were altered in like proportion as soon as money varied in value, no one would lose or gain, except as regards the coin which he happened to have in his pocket, safe, or bank balance. But practically speaking, as we have seen, people do employ money as a standard of value for long contracts, and they often maintain payments at the same invariable rate, by custom or law, even when the real value of the payment is much altered. Hence every change in the value of money does some injury to society.

It might be plausible said, indeed, that the debtor gains as much as the creditor loses, or vice versa, so that on the whole the community is as rich as before; this this is not really true. A mathematical analysis of the subject shows that to take any sum of money from one and give it to another will, on the average of cases, injure the loser more than it benefits the receiver. A person with an income of one hundred pounds a year would suffer more by losing ten pounds than he would gain by an addition of ten pounds, because the degree of utility of money to him is considerably higher at ninety pounds than it is at one hundred and ten. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange. 1875.

It is evidently desirable that the currency should not be subject to fluctuations of value….

As mentioned before, I believe that it makes no sense to include the element 'value' in this enumeration of properties. With this I refer again to the addendum 2.

COGNIZABILITY

By this name we may denote the capability of a substance for being easily recognized and distinguished from all other substances. As a medium of exchange, money has to be continually handed about, and it will occasion great trouble if every person receiving currency has to scrutinize, weigh, and test it. If it requires any skill to discriminate good money from bad, poor ignorant people are sure to be imposed upon. Hence the medium of exchange should have certain distinct marks which nobody can mistake. Precious stones, even if in other respects good as money, could not be so used, because only a skilled lapidary can surely distinguish between true and imitation gems. Under cognizability we may properly include what has been aptly called impressibility, namely, the capability of a substance to receive such an impression, seal or design, as shall establish its character as current money of certain value. We might more simply say, that the material of money should be coinable, so that a portion, being once issued according to proper regulations with the impress of the state, may be known to all as good and legal currency, equal in weight, size, and value to all similarly marked currency. (Chapter V: Qualities of the Material.)

JEVONS, William Stanley, Money and the Mechanism of Exchange, 1875,

the medium of exchange should have certain distinct marks which nobody can mistake….. seal or design,

When presenting a coin, the recipient should be able to promptly ascertain whether it is indeed the anticipated means of indirect exchange. The markings on these tools must be so distinct that even individuals with visual impairments can experience one hundred percent confidence by feeling and reading all elements on both the front and back of the tools. Similar to the devices designed to authenticate paper money, there should be a possibility to introduce machines for (precious) metals. These machines not only read the markings but also should guarantee the authenticity of the material used.

II-3-1-3PRECIOUS METALS: DEFINITION AND COMMENTS

Precious metals are rare, naturally occurring metallic chemical element of high economic value. Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high luster. Historically, precious metals were important as currency but are now regarded mainly as investment and industrial commodities. Gold, silver, platinum, and palladium each have an ISO 4217 currency code.

WIKIPEDIA: Precious metals, 12/04/2020

Aus der vorangehenden Darstellung des Wesens und des Ursprunges des Geldes ist ersichtlich, dass unter den gewöhnlichen Verkehrsverhältnissen zivilisierter Völker die edlen Metalle naturgemäss zum ökonomischen Gelde wurden. Der Gebrauch derselben zu Geldzwecken ist indes mit einigen Übelständen verbunden, deren Beseitigung das Bestreben der wirtschaftenden Menschen sein musste. Die hauptsächlichen Übelstände, die sich bei Verwendung der edlen Metalle zu Geldzwecke ergeben, liegen in der schwierigen Feststellung ihrer Echtheit, Ihres Feinheitsgrades und in der Notwendigkeit, die zähen Stoffe bei allen vorkommenden Transaktionen in entsprechende Stücke zu zerlegen. Schwierigkeiten, die nicht leicht ohne Zeitverlust und ökonomische Opfer zu beheben sind. (4, Die Münze)

MENGER, Carl, Grundsätze der Volkswirtschaftslehre.

To a naïve observer, money made out of precious metal was ‘sound money’ because the piece of precious metal was an ‘intrinsically’ valuable object, while paper money was ‘bad money’ because its value was only ‘artificial’. But even the layman who holds this opinion accepts the money in the course of business transactions, not for the sake of its industrial use-value, but for the sake of its objective exchange-value, which depends largely upon its monetary employment. He values a gold coin not merely for the sake of its industrial use-value, say because of the possibility of using it as jewellery, but chiefly on account of its monetary utility.

VON MISES, Ludwig, The Theory of Money and Credit. 1912. (P. 125)

while paper money was ‘bad money’ because its value was only ‘artificial’

While von Mises attributes these words to the 'naive observer,' it is undeniable that the distinction between ‘sound’ money and ‘bad’ money exists. This reaffirms the validity of the Moneyed Money definition being employed. In certain situations, one party may prefer to receive sound money over bad money. External market conditions or government-imposed usage may compel this party to adapt and shift to the so-called 'bad money.'

II-3-1-4SOME TECHNICAL CRITERIA

SYSTEMS OF MEASURES AND WEIGHTS

The origin and the use of weights and measures is a fascinating history:

Simon Stevin is credited with introducing the decimal system into general use in Europe. In 1586, he published a small pamphlet called ‘De Thiende’ (‘the tenth’) which historians credit as being the basis of modern notation for decimal fractional. Stevin felt that this innovation was so significant that he declared the universal introduction of decimal coinage, measures, and weights to be merely a question of time.

In 1783, The British inventor James Watt, who was having difficulties in communicating with German scientists, called for the creation of a global decimal measurement system, proposing a system which used the density of water to link and mass.

The first practical realization of the metric system came in 1789, during the French Revolution, when the existing system of measures, which had become impractical for trade, was replaced by a decimal system based on the kilogram and the metre. After the metre was redefined in 1960, the kilogram remained the only SI base defined by a physical artefact.

From the early 1990s, the International Avogadro Project worked on creating a 1 kilogram, 94 mm, sphere made of a uniform silicon-28 crystal, with the intention of being able replace the IPK with a physical object which would be precisely reproducible from an exact specification.

Measurements accurate enough to meet the conditions were available in 2017 and the redefinition was adopted at the 26th CGPM (13-16 November 2018), with the changes finally coming into force in 2019, creating a system of definitions which is intended to be stable for the long term.

WIKIPEDIA, History of the metric system. 2020.

In the distant past, societies did not employ precious metals in the form of coins; there were no denominations of monetary value for thousands of years. Instead, the weight of gold or silver held significance in commerce. Nations and tribes determined the value of uncoined silver and gold by placing the metal on one side of a balance and counterbalancing it with standardized weights.

The oldest civilizations carried on seamless trade by using equivalent units of mass to weigh money. Originally, the gerah, maneh, shekel, and talents were weights. The shekel was an international unit of weight long before it became a Hebrew coin.

Hereunder, I worked out several units of weights used by the oldest civilizations.

TECHNICAL ASPECTS OF GOLD – SILVER – COPPER

The table hereunder provides an overview of the most important technical aspects of some metals and precious metals that are dissected below.

There is disagreement among scientists when which metal was first discovered and used. For copper, the guesses range from 9000 BC to 4200 BC. The discovery and use of gold is estimated around 6000 BC and for silver around 4000 BC

II-3-2MINING

II-3-2-1DEFINITION AND CHARACTERISTICS OF MINING

Mining is the extraction of valuable minerals or other geological materials from the Earth, usually from an ore body, lode, vein, seam, reef, or placer deposit. The exploitation of these deposits for raw material is based on the economic viability of investing in the equipment, labor, and energy required to extract, refine and transport the materials found at the mine to manufacturers who can use the material.

WIKIPEDIA, https://en.wikipedia.org/wiki/Mining. 3/12/2022

There are four main mining methods: underground, open surface (pit), placer, and in-situ mining.
Underground mines are more expensive and are often used to reach deeper deposits.
Surface mines are typically used for more shallow and less valuable deposits.
Placer mining is used to sift out valuable metals from sediments in river channels, beach sands, or other environments.
In-situ mining, which is primarily used in mining uranium, involves dissolving the mineral resource in place then processing it at the surface without moving rock from the ground.

AMERICAN GEO SCIENCES. 3/12/2022

II-3-2-2BRIEF HISTORY OF MINING

The earliest known mine for a specific mineral is believed to be for coal in southern Africa, operating approximately 40,000 to 20,000 years ago. However, mining did not become a major industry until more advanced civilizations developed around 10,000 to 7,000 years ago. Before this time, the only metals available were those found in a metallic state in nature, with copper being the most common. Gold, silver, and mercury were also discovered. The application of fire to mined materials represented a technological breakthrough and proved to be a crucial advance for civilization, allowing metals to be melted and formed into objects.

With the development of Mediterranean civilization, mining became one of the world's most critical industries. Athens, for instance, prospered thanks to extractions from silver mines, and its fortunes shifted when control of these mines was taken by Sparta. Mining techniques evolved, with people creating systems of shafts and galleries supported by stone columns when wood became scarce in certain areas.

According to some perspectives, including that of Steve St. Angelo (SRS Rocco), a main cause of the fall of the Roman Empire was the shortage of energy to mine silver. While there was sufficient silver in the ground, the lack of wood around the mines, which powered and operated them, proved to be a limiting factor.

Additionally, extracting ore from stone pillars was a perilous undertaking. As civilization expanded, there was a growing need for money to finance various activities. Metal became essential for military equipment, and the demands of infrastructure reinforced the role of government.

II-3-2-3CANTILLON ON THE ECONOMIC IMPACT OF MINING

If gold or silver mines were found in a state, and considerable quantities of minerals were extracted from them, the owners of these mines, the entrepreneurs, and all those who work there, will increase their expenditures in proportion to the wealth and profit they make. They will also lend the money they have over and above what they need for their expenses and earn interest. All this money, whether lent or spent, will enter into circulation and will not fail to raise the price of commodities and goods in all the channels of circulation it enters. Increased money will bring about increased expenditure, and this will cause an increase of market prices in the good years and to a lesser degree in bad years. Everybody agrees that the abundance of money, or an increase in its use in exchange, raises the price of everything. This truth is substantiated in experience by the quantity of money brought to Europe from America for the last two centuries. (P. 147-148)…..

If money continues to be extracted from the mines, the abundance of money will increase all prices to such a point that not only will the property owners raise their rents considerably when the leases expire and resume their old lifestyle, increasing their servants’ wages proportionally, but the artisans and workmen will increase the prices of the articles they produce so high that there will be a considerable gains in buying them from foreigners who make them much cheaper. This will naturally encourage several people to import products at lower prices from foreign factories, and this will gradually ruin the artisans and manufacturers of the state who will be unable to sustain themselves by working at such low rates because of the high cost of living. When the overabundance of money from the mines has diminished the number of inhabitants in a state, accustomed those who remain to excessive expenditures, raised the prices of farm products and the wages for labor to high levels, and ruined the manufactures of the state by the purchase of foreign products by property owners and mine workers, the money produced by the mines will necessarily go abroad to pay for the imports. This will gradually impoverish the state and make it, in a way, dependent on foreigners to whom it is obliged to send money every year as it is extracted from the mines. The great circulation of money, which was widespread in the beginning, ceases; poverty and misery follow and the exploitation of the mines appears to be only advantageous to those employed in them and to the foreigners who profit thereby. This is approximately what has happened to Spain since the discovery of the Indies. (P.149-150)

CANTILLON, Richard, An Essay on Economic Theory.1755.

The great circulation of money, which was widespread in the beginning, ceases; poverty and misery follow and the exploitation of the mines appears to be only advantageous to those employed in them and to the foreigners who profit thereby….

The economists and policymakers who initiated "Quantitative Easing" in the 21st century, were they aware of historical economic theories, including those of earlier economists like Cantillon? Cantillon's writings, which focused on the circulation of precious metals, might not directly apply to the modern context of ‘mining digital currencies’.

II-3-3THE ORIGIN OF COINS

Money has always meant more than simply coins; but it was coins that thereafter in the main constituted money and also provided a simple and therefore universally understood and accepted base and reference point for all other financial accounting devices and exchanging media. (2: from primitive and ancient money to the invention of coinage, P.25)

DAVIES, Glyn, A History of Money.

II-3-3-1THE EVOLUTION FROM METALS TO COIN

The earliest forms of metal money did not consist of coins but were rather shaped as rings, decorations, or weapons. Civilizations such as the Egyptians and the Assyrian Empires used these metal objects for various purposes. The invention and use of coins, as a means of payment, appear to have emerged independently at different locations around the same period. Consensus suggests that the origins of coin money occurred approximately:

•770 BC in China

•700 BC in Lydia

•600 BC in India

In China, the first coins were likely produced in the region of the Yellow River during the Zhou dynasty. These early coins, known as 'knife and spade money,' took the form of models of knives and spades with a few characters cast in bronze. Around the same time, the first 'kèpèns' were created. Remarkably, these 'kèpèns' continued in use until the early 20th century. Chinese coins, historically, remained somewhat isolated from the rest of the world.

In India, around 600 BC, small kingdoms engaged in trade, and Indian coins were crafted by cutting silver plates and adjusting them to agreed-upon weights. These coins were consistently made of pure silver, and the Indians differentiated them by weight and shape, using square, rectangular, and round forms.

While these inventions occurred around the same time, it is fairly certain that the Chinese, Indian, and Lydian coins were developed independently. They were crafted in distinct ways and exhibited different shapes, with no single invention serving as a model for the others.

II-3-3-2THE DEVELOPMENT OF COINAGE IN LYDIA

David Graeber's exploration of the history of debt ('Debt, The first 5.000 years') and his argument that credit existed before coins and barter is a perspective that defies traditional economic narratives. While it's plausible that credit systems predated the widespread use of coins, the historical record does show the emergence of coins as a form of money. The adoption of coins as a medium of exchange and their subsequent global spread likely relates to the advantages they offered over credit systems. Coins offered a level of security and certainty in transactions that might have been lacking in credit-based systems. The debate over whether the invention of coins happened in Lydia or Ionia reflects the historical uncertainties surrounding the origins of coinage. While many experts lean towards Lydia as the likely origin, the precise details of the invention remain a subject of discussion. In Lydia, the presence of mountain rivers flowing into the Maiandros river, where light yellow precious metal (presumably gold) could be found, adds to the intrigue of the region's potential role in the early history of coinage.

This Lydian metal was called ‘electrum’ because of its amberlike appearance (it was electro-magnetic attraction of amber that was the common test for distinguishing precious amber from worthless beads). As the Lydian metallurgical skill improved, they learned how to separate gold and silver coins. (P. 23)

DAVIES, Glyn, A History of Money.

The creation of coins using drops of electrum, a natural alloy of gold and silver, marked with images and stamps or notches on either side, presented a significant development in the history of money. The notches or stamps on the coins didn't indicate weight but rather verified the quality of the coin. Various theories surround the origins and purposes of these early coins.

Some experts suggest a religious use, noting that drops of electrum were found in former temples, potentially used for multiple sacrifices due to their small size. Herodotus, in 687 BC, mentioned the existence of Lydian coins in his writings. Others connect the invention of coins to the expansion of long-distance trade. Before coins, silver was often traded in the form of bars. The shift to coins might have been driven by their smaller size, making them more convenient for exchanging goods and services with lower values than silver bars.

Some theories also link the rise of coins to the emergence of great empires, suggesting that coins initially served as badges of honour for mercenaries. The most plausible explanation for the creation and development of coins lies in the (re)handling and confidence in the means of indirect exchange aligns with the idea that coins evolved to facilitate transactions and foster trust in the worth they represented. The Greco-Lydian currency, with its quality, functions, and influence, is often considered a precursor in the history of coinage. While Chinese quasi-money coins have a longer history, the Greco-Lydian currency holds priority in terms of quality and impact on the development of currency.

II-3-3-3FURTHER DEVELOPMENT IN THE WESTERN WORLD

THE TECHNICAL SEPARATION OF GOLD AND SILVER

Around 560 BC, the Greeks and the Lydians achieved the separation of gold and silver. Following a currency reform by King Croesus in the Archaic period, gold and silver 'staters' were minted. These 'staters' were thick, small coins weighing more than eight grams. Over time, these 'staters' evolved into trade coins facilitating daily payment transactions. After Lydia was conquered by the Achaemenids under Darius I, adopting the use of the thick gold and silver stater.

In ancient Greece, one of the most significant coins was the silver drachma, introduced in the mid-sixth century BC and weighing approximately 4.5 grams. The worth of a drachma roughly corresponded to a daily wage. The drachma was further divided into 6 obols, and in some regions, into three obols, two, one-and-a-half, one-half, and one-quarter obols. Eventually, these were minuscule ‘grains’ of silver, still bearing a city symbol. The drachma, particularly the tetra-drachma, was widely used for trade in the Mediterranean. The aesthetic diversity of these coins was remarkable, with hundreds of different cities and colonies each having its own distinctive symbol.

ALEXANDER THE GREAT

The development and widespread confidence in coins played a significant role in the creation and sustenance of prominent empires. A prime example is the era of Alexander the Great, whose conquests covered a vast expanse. The substantial demand for precious metals and coined money emerged from the daily distribution of half a ton of silver to his 120,000 soldiers. To meet the demand for precious metal, Alexander's army initially looted available resources. Subsequently, the gold and silver mines in Macedonia were tapped into. As the conquests extended, the mines and miners in Persia, Tyre, and other city-states were expanded and reorganized. The local population, often subjected to slavery, became the labour force in these mines.

The influence of Alexander's coinage extended even to Celtic and Germanic tribes, where Alexander's coins were later imitated. The widespread use and acceptance of coins not only fuelled economic activities but also contributed to the consolidation and expansion of empires during this period.

THE ROMAN REPUBLIC AND THE DENARIUS

The Roman Republic, in 211 BC, introduced its version of the drachma, the denarius, a silver coin weighing more than four grams, equivalent to 'ten times' or 10 copper coins. Subsequently, some emperors minted gold coins on a large scale, known as the 'aureus' or gold coin. One contributing factor to the decline of the Roman Empire was the devaluation of the denarius. The coin's worth diminished as less silver and increasingly inferior metals were used in the alloy, ultimately rendering the denarius nearly worthless. Soldiers and mercenaries reached a point where they no longer accepted the denarius as a viable means of payment.

The Roman trade coins found imitation in neighbouring countries, with Gaul and England continuing the use of the denarius even after Roman rule ceased. Initially, the coin appeared as a cheap copper piece with a vague head on the obverse and some dashes on the reverse. The Carolingian coin reform around 792/93 AD transformed the denarius into a guaranteed silver coin with a specified weight, making it attractive for trade.

MEANWHILE OUTSIDE THE ROMAN EMPIRE

Outside the Roman Empire, in African and Arab countries, primitive coins were minted following the Roman model. A significant departure from the Roman-influenced coins occurred with the Sassanid dynasty in Iran. Succeeding the Parthians, they introduced a new type of coin; a thin, flat silver coin of approximately the same weight as the ‘Roman drachma.’ These coins depicted the king's head and profile with a large crown and impressive hairstyle on the obverse, while the reverse featured two priests next to a fire altar. This particular style endured for four hundred years, from 220 to 650, with the depiction remaining remarkably consistent.

In several Indian empires, the Greek and Roman style coins gradually replaced the stamped silver plates used during the Maurya dynasty. While round coins became the majority, square coins remained typical of India for an extended period. The great empires of the region, including the Indo-Greeks, Indo-Scythians, Kushans, and the Gupta Empire, adopted Greek-inspired forms, evolving them into increasingly stylized representations.

THE IMPACT ON THE DISCOVERY OF THE AMERICAS

The discovery of the great wealth of the Americas produced a far more immediate impact on the lives of common people than did the banking revolution. (chapter 6- P. 22/4)

WEATHERFORD Jack, The History of Money. 1997.

The discovery of the Americas had a profound impact on the further development of Europe. The influx of precious metals from the Americas, notably gold and silver, played a significant role in shaping the economic landscape of Europe during the Age of Exploration. The sudden abundance of these precious metals had far-reaching consequences. The extraction of precious metals often involved the exploitation of indigenous populations. European colonizers initially seized these valuable resources from the hands of the local inhabitants, leading to forced labour and enslavement in mines to intensify the extraction efforts. The influx of gold and silver from the Americas contributed to the economic prosperity of European nations, fuelled trade, and had significant effects on global commerce.

The discovery of the abundant mines of America, reduced, in the sixteenth century, the value of gold and silver in Europe to about a third of what it had been before. As it cost less labour to bring those metals form the mine to the market, so, when they were brought thither, they could purchase or command less labour; and this revolution in their value, though perhaps the greatest, is by no means the only one of which history gives some account. (P. 36-37)

SMITH, Adam, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776.

By the discovery of America, and the rich mines in which it abounds, a very great effect was produced on the natural price of the precious metals. This effect is by many supposed not yet to have terminated. It is probable, however, that all the effects on the value of the metals resulting from the discovery of America have long ceased; and if any fall has of late years taken place in their value, it is to be attributed to improvements in the mode of working the mines. From whatever cause it may have proceeded, the effect has been so slow and gradual that little practical inconvenience has been felt from gold and silver being the general medium in which the value of all other things is estimated. Though undoubtedly a variable measure of value, there is probably no commodity subject to fewer variations. (Location: 1047of 5857)
RICARDO, David, On the Principles of Political Economy and Taxation. 1817.

The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalized the rosy dawn of the era of capitalist production. (PP. 671-672)…

MARX, Karl, Das Kapital – Capital, 1867.

Along with commercial expansion came inflation, fuelled by the immense increase of gold and silver brought to Europe by the Spaniards from the newly found mines of the western hemisphere. An approximate tripling of the stock of specie in Europe resulted in a century of inflation, with prices tripling during the sixteenth century. The new money flowed first into the main Spanish port of Seville, then into the rest of Spain, and finally into other countries of Europe, and the geography of price rises followed accordingly. (P. 126)

ROTHBARD, Murray N., An Austrian Perspective of the History of Economic Thought.

NAPOLEONIC WARS UP TO THE FIRST WORLD WAR

The Napoleonic Wars witnessed a gradual shift where gold coins were replaced by paper money, with coins being reserved for use in times of unrest and concerns about inflation. The First World War marked a significant turning point as it led to the abandonment of the gold standard and the cessation of the widespread use of gold coins. During this period, the use of war coins emerged, typically minted from cheap metals such as zinc and aluminium. These were practical alternatives when precious metals were scarce due to wartime demands.

Around 1960-1970, the sharp rise in the price of silver contributed to the decline of silver coins. Modern minting often involves the use of complicated alloys that are easy to process in the minting process and have durability in circulation. These alloys offer a cost-effective and resilient alternative to precious metals, making coins more practical for everyday transactions.

II-3-4THE DEFINITION AND PARTICULARITIES OF A COIN

A coin is a small, flat, (usually, depending on the country or value) round piece of metal or plastic used primarily as a medium of exchange or legal tender. They are standardized in weight, and produced in large quantities at a mint in order to facilitate trade. They are most often issued by a government. Coins often have images, numerals, or text on them. Obverse and its opposite, reverse, refer to the two flat faces of coins and medals. In this usage, obverse means the front face of the object and reverse means the back face. The obverse of a coin is commonly called heads, because it often depicts the head of a prominent person, and the reverse tails.

WIKIPEDIA: COIN, 12/04/2020

II-3-4-1CHEMICAL ELEMENTS USED IN METAL MONEY

The production of coin money has always aimed at creating durable objects capable of remaining in circulation for an extended period, typically around 30 years. To achieve this, coins needed to meet specific criteria related to wear and tear resistance and corrosion resistance. Consequently, many coins were made from alloys, combining different metals.

The 15 main chemical elements used in creating coins include Gold, Silver, and Copper. Additionally, Aluminium, Antimony, Carbon, Chromium, Iron, Lead, Manganese, Magnesium, Nickel, Platinum, Tin, and Zinc were commonly used. Silver and gold were often alloyed with varying amounts of copper. Unlike today, the face value of coins was close to the worth of the precious metal they contained. If the owner of a coin found that the market worth of the precious metal exceeded its face worth, there was an incentive to melt the coin and sell the precious metal by weight.

Throughout history, efforts were made to establish a formula expressing the worth of a specific amount of gold in relation to a certain amount of silver or copper. The quantity of these metals in circulation was heavily influenced by the amount that could be recovered from mines. In ancient Egypt, for example, there was a period when silver was worth more than gold because there were gold mines but no silver mines in the country. These dynamics illustrate the complex interplay between the availability of metals, their market worth, and their role in coinage throughout history.

II-3-4-2THE COIN’S APPLIANCE OBJECTIVES

The hypothesis linking the introduction of coins to the growth of long-distance trade is not universally supported by archaeological evidence. Coins, in practice, often had limited travel distances. Additionally, historical records indicate that the Phoenicians continued to use Greek silver, weighing it, even after the Greeks began minting silver coins. This suggests that the use of coins might not have been immediately embraced in all trade networks. While it's plausible that the adoption of coins could have been influenced by a revival of local trade, there is no direct evidence to support this hypothesis. Such a hypothesis rests on the assumption that ancient economies functioned similarly to modern market economies, a notion that may not fully capture the complexities of historical economic systems.

Moreover, the delayed adoption of coins in more developed regions, such as India and China, raises questions about the factors influencing the use of coins. The absence of coins in the historical records of advanced civilizations like Egypt, Mesopotamia, the Aztecs, and the Incas further complicates the understanding of why coins were not universally embraced across different cultures and economic systems. The introduction and widespread use of coins remain a complex historical puzzle with various factors influencing their adoption in different regions and periods. Economic, cultural, and political factors likely played significant roles in shaping the trajectory of coinage in various parts of the ancient world.

II-3-4-3THE COIN AS A TOOL FOR INDIRECT EXCHANGE

In ancient Greece, the mathematical value of a coin was directly tied to the estimated amount of the metal it contained. The stamp on the coin served as a guarantee that it indeed held a specific weight of the designated metal, eliminating the need for individuals to weigh and assess the metal content themselves.

The Roman approach differed, as they imposed a tariff on their coins, determining the coin's worth through government decree. This official rate set by the government was typically higher than the intrinsic metal value of the coin. The difference between the metal worth and the rate, known as seigniorage, acted as a form of coin tax. This seigniorage revenue was utilized, among other purposes, to fund the coin minting process. Striking a balance was crucial; setting the rate too low resulted in financial losses, while a rate that was too high led to unpopular or unacceptable currency.

Historically, governments often issued coins strategically to capture or maintain specific markets. For instance, large Dutch silver coins were not primarily intended for circulation within the Netherlands but were produced for export to regions like Scandinavia, the Levant, and East Asia. Dutch gold coins, especially the ducat, found popularity in Poland and Russia. Conversely, within the Netherlands, large silver coins from the Southern Netherlands were in circulation. One of the most widely circulated coins was the Spanish currency of 8 Reales, known as peso or dollar, which dominated international trade for centuries.

In the contemporary Euro era, the mathematical value of a coin is no longer solely determined by its metal content. The metal in a Euro coin is generally worth less than the face value of the coin. Conversely, there have been instances where small coins were withdrawn from circulation because the mathematical value of the copper or silver content exceeded the nominal worth of the coin.

At the end of the twentieth century it is, surprisingly, still true that more coins are being produced and put into daily use by more people around the world than ever before, despite the fact that during the past three or four centuries paper money has grown first to supplement and then practically to supplant coins in terms of their relative values. As we enter the new millennium the rapid rise of completely new forms of money substitutes in the shape of plastic and electronic money finally threaten to accelerate the apparent terminal decline of the longest-lived, most tried and tested kind of money known to civilized society. Are coins, which have been dismally neglected by most economists for seventy years or more, finally to disappear into the dustbin of history, to be treasured only by numismatists and the occasional aberrant economic historian? (13: Further towards a Global Currency – Location 8/27)

DAVIES, Glyn, A History of Money.

At the end of the twentieth century it is, surprisingly, still true that more coins are being produced and put into daily use by more people around the world than ever before …disappear into the dustbin of history….

Addressing Davies' question requires a thoughtful reconsideration of the definition of a 'coin' and offers an opportunity for an innovative reconciliation. I am trying to develop an appropriate response in PART VII of this work. We need to rethink about the definition of a 'coin' and may provide an innovative reconciliation.

II-3-4-4THE ‘MINT’

A mint is an industrial facility which manufacturers coins that can be used in currency.

WIKIPEDIA, Mint_(facility) – 19/12/2015

The history of mints, the facilities where coins are produced, is intricately connected to the history of coins. It is reasonable to assume that the first mints were established in China, Lydia, and India, where coinage has ancient roots. The term "mint" finds its origin in the practice of manufacturing silver coins in Rome around 269 BC, specifically in the temple of Juno Moneta. It is likely that the word "money" and its counterparts in various languages, such as "monnaie" and "moneda," are derived from the name of this goddess.

In ancient times, coins were crafted by either pouring molten metal into molds or striking them between engraved dies. During the Middle Ages, metal bars were cast and then hammered out on an anvil to create coins. The 16th century marked a period of gradual modernization of coinage in Western Europe. Coin presses began to replace traditional methods, bringing efficiency to the minting process. Minting by means of a plunging weight was also employed in some places, bridging the gap between hand hammers and the more advanced screw press.

Industrial techniques, including the application of steam power, were introduced to coin manufacturing in Birmingham in 1788. By the early 20th century, mints were incorporating electrical power to drive rolls. This innovation allowed each pair of rolls to be driven independently without the need for cumbersome shafting, streamlining the coin production process. The evolution of minting technologies over the centuries reflects the continuous efforts to enhance efficiency, precision, and output in the production of coins.

The most notable mints are:
Austrian Mint, | Birmingham Mint (UK), | Dahlonega Mint (USA),
Franklin Mint (USA), | Japan Mint, | Monnaie de Paris,
United States Mint. | Swissmint | Perth Mint,
Royal Canadian Mint, | South African Mint, |
Joachimsthal Royal Mint (Czech Rep), | Casa de Moneda de México,
            , |  |

I should start by stating that the Mint is a monetary institution far more important than the Central Bank. It is an ancient and venerable institution. The Central Bank is a relatively new invention, hardly venerable. It was conceived to make ordinary people absorb the unpaid and unpayable debt of kings. The importance of the Mint is not to be found in its altogether negligible role of coining small change, the so-called subsidiary coinage which people use to make small purchases.

The Mint is all-important because it is designed to produce real money. The origin of the Mint is intertwined with religion. From the point of view of political economy, the Mint is a reminder of the fact that, ultimately, real money is created (and extinguished) by the people and not by the government, or banks approved by the government. For example, the U.S. Constitution reserves the power to create money directly to the people themselves who convert gold and silver at the Mint into the coin of the realm (and extinguish money by melting it down).

This is a power like habeas corpus that cannot be delegated, still less usurped. If the government grabs it, then, in the admirable phrase of Malcom Muggeridge, it becomes the power of habeas cadaver. The Mint is the symbol of Constitutional Money, the only kind not subject to manipulation. (P. 1)

FEKETE, Antal E., Opening the Mint to Gold and Silver. January 31, 2008,

II-3-4-5MAIN METALS FOR THE PRODUCTION OF COINS

Gold and silver are capable of serving not only the same purpose as tin and copper, but also most of the purposes of lead and iron. They have this further advantage over other metals in that they are not consumed by fire and are so durable that they may be considered permanent. (P. 104) … Iron, which is always useful and fairly durable, would not serve badly in absence of anything better. It is consumed by fire, and is too bulky in large quantities….Lead and tin have the same disadvantage of bulk iron and are consumable by fire, but in case of necessity, they would not do badly for exchange if copper was not more suitable and durable. (P. 108)

If the increase of hard money comes from gold and silver mines within the state, the owner of these mines, the entrepreneurs, the smelters, refiner, and all the other workers will increase their expenses in proportion to their profits. (P. 148) …. Where gold, silver, and copper are extracted from the mines, they have an intrinsic value proportional to the land and labour that enter into their production. States that have no mines have the added cost of importing metal. The quantity of money, like that of all other commodities, determines its value against all other goods in the bargaining process of the marketplace. (P.155)

CANTILLON, Richard, An Essay on Economic Theory. 1755.

As stated in the section (II-3-4-1), 15 different elements were used in the main metals for the creation of coins. However the 3 most important metals employed were gold, silver and copper.

I give a brief overview of copper and silver, due to their historical importance; but I mainly go into depth on gold in this PART II. In the addendum 3, I will elaborate on the Silver and Gold Standard.

A summary of mine outputs of these 3 important metals in 2012.

Source: Metals focus, GFMS Thompson, Reuters, US Geological Survey. World Gold Council

II-4COPPER

II-4-1THE DEFINITION AND PARTICULARITIES OF COPPER

Copper is a chemical element with the symbol Cu (from Latin: cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkish-orange color. Copper is used as a conductor of heat and electricity, as a building material, and as a constituent of various metal alloys, such as sterling silver used in jewelry, cupronickel used to make marine hardware and coins, and constantan used in strain gauges and thermocouples for temperature measurement. Copper is one of the few metals that can occur in nature in a directly usable metallic form (native metals). This led to very early human use in several regions, from c. 8000 BC.

Thousands of years later, it was the first metal to be smelted from sulfide ores, c. 5000 BC, the first metal to be cast into a shape in a mold, c. 4000 BC and the first metal to be purposefully alloyed with another metal, tin, to create bronze, c. 3500 BC.

WIKIPEDIA, copper, 12/04/2020

II-4-2HISTORICAL PRICE EVOLUTION OF COPPER

The price formations of copper, silver and gold are reviewed in detail in PART V..

A price chart on copper's last 5 years already shows how widely prices can evolve, halve and double. The differences are further drastic when considering a 30-year time frame. From lowest to the highest price there is a 741% price difference.

II-4-3(NON-) ACADEMICS… ON COPPER

But these precious metals, are seldom sound pure, till they are made so by art for particular purposes; and when they are not pure, the metal com mixed with them is called alloy. This alloy is reckoned of no value; that is, if to an ounce of fine silver be super added, suppose, an ounce of copper, this addition of copper, though it increases the mass to double the quantity, yet gives that mass no additional value: So that one ounce of fine 'silver, is of as * great value * A certain proportion of copper will even depreciate the value of the silver mixed with it; if this proportion be so great, as to make the silver not fit for common purposes, without refining. value as the two ounces of this mixed mass.

And the reason of it is, because these metals cannot be again separated, either without a total loss of the copper, or without more cost than profit. In like manner, not only copper, but silver also, is an alloy to gold; and when they are com mixed together, the silver is reckoned of no value, unless it be in such proportion to the gold, as to make it worth the refiner's while to separate them. (Locations 669-687)…

The base coins here spoke of, would probably be the last that would be exported; as the silver in them, by being com mixed with so much copper, would really be lessened in its value; and the public would not only sustain this loss, but it would also lose the whole value of the additional copper. But in the present case, either the people would refuse taking these new coins at the mint rates, and make distinctions between them and other coins, as hath been before observed or, if they passed current, a door would be immediately opened for false coining. (Locations 3109-3113) - (Part 1 The Theories of Commerce Money and Exchanges)

HARRIS, Joseph, An Essay upon Money and Coins. 1757.

The practical difficulties in the way of coining extremely minute quantities of gold or silver, and the circumstance that at first the less precious metal is used as a measure of value instead of the-more precious, copper instead of silver, silver instead of gold, and that the less precious circulates as money until dethroned by the more precious – all these facts explain the parts historically played by silver and copper tokens as substitutes for gold coins. Silver and copper tokens take the place of gold in those regions of the circulation where coins pass from hand to hand most rapidly, and are subject to the maximum amount of wear and tear. This occurs where sales and purchases on a very small scale are continually happening. (p. 126)

MARX, Karl, Das Kapital – Capital. 1867.

Take a moment to think about it. The paper that your money is printed on is in most cases worth far less than the amount printed on it. If you would try to sell a piece of paper that wasn’t money for $20, people would laugh at you. And yet, when somebody sees the certified markings on a dollar bill, they don’t hesitate. On the other hand, some coins actually have more value than the amount stamped on it, due to its metallic content. Copper pennies are actually worth more than one cent. And yet most people don’t even think twice about using coins at face value. They know what it’s worth, and they trust the system, even if they don’t fully understand it. (Location: 41 of 1333)

THORNTON, Mike, History of Money.

This alloy is reckoned of no value

The statement by Joseph Harris, the 'master of the mint,' indicating that an alloy has no value, appears to me to be obtuse. In historical perspectives, alloys were sometimes viewed as less valuable than the pure metals they were composed of. Nevertheless, it is essential to recognize that the raw material, such as copper used in an alloy, did indeed have a worthwhile result. Had Harris been aware of the current applications of copper, he might never have used those terms. The red metal is a critical component in the production of wires, motors, electrical appliances, and plays a crucial role in renewable energy technologies and electric vehicles. What might have been considered of limited value in one era can be later recognized as indispensable due to innovations in various fields.

purchases on a very small scale….

For small purchases, both copper and the other non-precious metals were of some relevance and these then functioned as money plain and simple.

II-5SILVER

For nearly five centuries, the Indians of Bolivia have mined the greatest silver deposits in the world, and for five centuries they have remained among the poorest people on earth. (Chapter 6, P. 4/33)

WEATHERFORD Jack, The History of Money. 1997.

II-5-1THE DEFINITION AND PARTICULARITIES OF SILVER

II-5-1-1DEFINITION OF SILVER

Silver is a chemical element with the symbol Ag (from the Latin argentum, with atomic number 47. A soft, white, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. The metal is found in the Earth's crust in the pure, free elemental form ("native silver"), as an alloy with gold and other metals, and in minerals such as argentite and chlorargyrite. Most silver is produced as a byproduct of copper, gold, lead, and zinc refining.

Silver has long been valued as a precious metal. Silver metal is used in many bullion coins, sometimes alongside gold: while it is more abundant than gold, it is much less abundant as a native metal. Its purity is typically measured on a per-mille basis; a 94%-pure alloy is described as "0.940 fine". As one of the seven metals of antiquity, silver has had an enduring role in most human cultures.

WIKIPEDIA, silver, https://en.wikipedia.org/wiki/Silver. 12/04/2020

II-5-1-2SOME CHARACTERISTICS OF SILVER

Silver is similar in its physical and chemical properties to its two vertical neighbours in group 11 of the periodic table, copper and gold. Its 47 electrons are arranged in the configuration similarly to copper and gold; group 11 is one of the few groups in the d-block which has completely consistent set of electron configurations. Silver is an extremely soft, ductile and malleable transition metal, though it is slightly less malleable than gold. Silver has a brilliant white metallic luster that can take a high polish, and which is so characteristic that the name of the metal itself has become a colour name. The electric conductivity of silver is the greatest of all metals, greater even than copper, but it is not widely used for this property because of the higher cost. Silver readily forms alloys with copper and gold, as well as zinc.. Silver is a rather unreactive metal.

WIKIPEDIA, silver, https://en.wikipedia.org/wiki/Silver. 12/04/2020

II-5-2BRIEF HISTORY AND SOME APPLICATIONS OF SILVER

The Egyptians are thought to have separated gold from silver by heating the metals with salt, and then reducing the silver chloride produced to the metal.

By the time of the Greek and Roman civilizations, silver coins were a staple of the economy. The Greeks were already extracting silver from galena by the 7th century BC, and the rise of Athens was partly made possible by the nearby silver mines at Laurium, from which they extracted about 30 tonnes a year from 600 to 300 BC. The stability of the Roman currency relied to a high degree on the supply of silver bullion, mostly from Spain, which roman miners produced on a scale unparalleled before the discovery of the New World. Reaching a peak production of 200 tonnes per year, an estimated silver stock of 10.000 tonnes circulated in the Roman economy in the middle of the second century AD; five to ten times larger than the combined amount of silver available to medieval Europe and the Abbasid Caliphate around AD 800.

Central Europe became the centre of silver production during the Middle Ages, as the Mediterranean deposits exploited by the ancient civilizations had been exhausted. Silver mines were opened in Bohemia, Saxony, Erzgebirge, Alsace, the Lahn region, Siegerland, Silesia, Hungary, Norway, Steiermark, Salzburg, and the southern Black Forest. Most of these ores were quite rich in silver and could simply be separated by hand from the remaining rock and then smelted.

With the discovery of America and the plundering of silver by the Spanish conquistadors, Central and South America became the dominant producers of silver until around the beginning of the 18th century. Production occurred particularly in Peru, Bolivia, Chile, and Argentina, linking its name from that of the metal that composed so much of its mineral wealth. Much of this silver ended up in the hands of the Chinese.

In the 19th century, primary production of silver moved to North America, particularly Canada, Mexico, and Nevada in the United States: some secondary production from lead and zinc ores also took place in Europe, and deposits in Siberia and the Russian Far East as well as in Australia were mined. Poland emerged as an important producer during the 1970s after the discovery of copper deposits that were rich in silver, before the centre of production returned to the Americas the following decade. Today, Peru and Mexico are still among the primary silver producers, but the distribution of silver production around the world is quite balanced and about one-fifth of the silver supply comes from recycling instead of new production.

In the 19th and 20th centuries, new medicinal applications of silver emerged. Surgeons sutured post-operative wounds with silver attachments to reduce inflammation. Moreover, in the 1960s, NASA developed a water purifier that dispersed silver ions to kill bacteria and purify water on its spacecraft. The industrial revolution saw the beginning of silver's industrial applications. Thanks to its high light sensitivity and reflectivity, it became an important ingredient in photographic films, windows and mirrors.

Silver is the most electrically conductive metal, making it a natural choice for electronic devices. Virtually every electronic device with a switch or button contains silver, from smartphones to electric vehicles. Solar panels also use silver as a conductive layer in photovoltaic cells to efficiently transport and store electricity. Silver has always been useful to industries and technologies due to its unique properties, from its antibacterial nature to high electrical conductivity. Today, silver is critical for the next generation of renewable energy technologies.

II-5-3HISTORICAL PRICE EVOLUTION OF SILVER

Particularly striking in both charts are the violent price surges in the period 1971 and 2010. I will not go into this in more detail, but will certainly come back to this in PART V.

II-5-4THE GOLD – SILVER RATIO

The gold-silver ratio is the price of gold converted into ounces of silver. It is also seen as a representation of the relative performance of gold versus silver. A rising ratio reflects that gold is outperforming silver and a falling ratio indicates that silver is outperforming gold.

The offer ratio is the demand price of gold divided by the bid price of silver, which represents the price to buy (or go long) the ratio, i.e., buy gold and sell silver. The bid ratio is the bid price of gold divided by the ask price of silver, which represents the price to sell (or go short) the ratio, that is, sell gold and buy silver.

Historically, the gold-silver ratio was somewhere in the range of 15 - 10 to 1, reflecting the average stock of each metal. There were times in the history of money when the ratio was even lower. For example, China once had a ratio of 4 to 1 and the ancient Egyptians at one point even had a ratio of 1 to 1.

According to experts this ratio is going to affect the 1/16 again in the coming decades. These specialists argue that silver production is only 10 times the world's extraction of gold. Logically, this ratio should soon be 1/10.

Historically, we have seen on several occasions that their logical reasoning can be swept away in practice by (financial) powers other than logic and also by international military, monetary or economic conflicts.

II-6GOLD

Gold had done what no conqueror or religion had managed to do. It had brought virtually all people on earth into one social system. (chapter 10 – P. 18/22)

WEATHERFORD Jack, The History of Money. 1997.

II-6-1THE DEFINITION OF GOLD

Gold is a chemical element with the symbol Au (from Latin: aurum) and atomic number 79, making it one of the higher atomic number elements that occur naturally. In its purest form, it is a bright, slightly reddish yellow, dense, soft, malleable, and ductile metal. Chemically, gold is a transition metal and a group 11 element. It is one of the least reactive chemical elements and is solid under standard conditions. Gold often occurs in free elemental (native) form, as nuggets or grains, in rocks, in veins, and in alluvial deposits. It occurs in a solid solution series with the native element silver (as electrum) and also naturally alloyed with copper and palladium. Less commonly, it occurs in minerals as gold compounds, often with tellurium (gold tellurides).

WIKIPEDIA, gold, 12/04/2020

II-6-2SOME CHARACTERISTICS OF GOLD

Gold is resistant to most acids, though it does dissolve in aqua regia, a mixture of nitric acid and hydrochloric acid, which forms a soluble tetrachloroaurate anion. Gold is insoluble in nitric acid, which dissolves silver and base metals, a property that has long been used to refine gold and to confirm the presence of gold in metallic objects, giving rise to the term acid test. Gold also dissolves in alkaline solutions of cyanide, which are used in mining and electroplating. Gold dissolves in mercury, forming amalgam alloys, but this is not a chemical reaction.

WIKIPEDIA, gold, 12/04/2020

Gold is the most malleable of all metals, a single gram can be beaten into a sheet of 1 square meter, and an avoirdupois ounce into 300 square feet. Gold leaf can be beaten thin enough to become semi-transparent. Whereas most metals are gray or silvery white, gold is slightly reddish-yellow. The production of gold from a more common element, such as lead, has long been a subject of human inquiry, and the ancient and medieval discipline of alchemy often focused on it; however, the transmutation of the chemical elements did not become possible until the understanding of nuclear physics in the 20th century. Gold is unaffected by most acids and most bases.

WIKIPEDIA, gold, 12/04/2020

The gold content (fineness) of alloys is measured in carats (k). Pure gold (called fine gold in trade) is referred to as 24-carat. English gold coins intended for circulation from 1526 until the 1930s were typically a standard alloy of 22 carats, called crown gold, because of its hardness (US gold coins for circulation after 1837 contained an alloy of 0.900 fine gold, or 21.6 kt).

II-6-3BRIEF HISTORY OF GOLD

Gold is the vernacular tongue of currency.

WALKER, Francis Amasa, Money, 1878, E-book.

II-6-3-1ORIGINS AND OCCURENCE

Gold mining proves most economically viable in expansive, easily accessible deposits. Even ore grades as low as 0.5 parts per million (ppm) can be deemed economically feasible. Notably, gold remains invisible to the naked eye in the majority of gold mines, typically requiring ore grades of 30 ppm before becoming perceptible.

In instances of low-grade gold ore, containing less than one ppm of gold metal, a process ensues where the ore is ground and blended with sodium cyanide to facilitate gold dissolution. It's essential to acknowledge that cyanide, a highly toxic chemical, poses a severe threat to living organisms even in minute quantities. Numerous instances of cyanide discharges from gold mines, spanning both developed and developing nations, have transpired, resulting in the devastation of aquatic life across vast stretches of affected rivers.

II-6-3-2GOLD MINING AND USAGE

An overview of the chronology of gold, the first discoveries, mining and use of gold over the previous centuries, was included in the addendum 8 – 1.

The oldest known map of a gold mine dates back to the 19th dynasty of ancient Egypt (1320-1200 BC). Large gold mines existed across the Red Sea in what is now Saudi Arabia. Gold mining in the south-eastern corner of the Black Sea is thought to date back to the time of Midas. The deepest gold mines of the ancient world were found in the Maski region in Karnataka (India); while in the northwest of India were silver mines, dated to the middle of the 1st millennium BCE. Experts assume that gold and silver were beaten into thin fibers and woven into fabrics and dress.

In Roman metallurgy, new methods were developed to extract gold on a large scale with the introduction of hydraulic mining methods, especially in Hispania from 25 BC and in Dacia from 106 AD.

European exploration of the Americas was fueled not least by reports of gold ornaments displayed in great abundance by indigenous American peoples, especially in Peru, Ecuador and Colombia. Beginning in the early modern era, European exploration and colonization of West Africa was largely driven by reports of gold deposits in the region, eventually referred to by Europeans as the "Gold Coast". From the late 15th to the early 19th century, European trade in the region focused mainly on gold, along with ivory and slaves.

Since the 1880s, South Africa has been the source of much of the world's gold supply, and about 22% of currently recorded gold comes from South Africa. Production in 1970 accounted for 79% of world supply, about 1,480 tons. In 2007, China (with 276 tons) overtook South Africa as the world's largest gold producer. During the 19th century, gold rushes took place whenever large gold deposits were discovered. The first documented discovery of gold in the United States was at the Reed Gold Mine near Georgeville, North Carolina in 1803.

A gold rush is an interval of feverish migration of workers to an area that has had a dramatic discovery of gold deposits. In the 19th century the major gold rushes took place. This happened mainly in Australia, New Zealand, Brazil, Canada, South Africa and the United States.

Rich Gold and Silver Mines, that belong to certain Nations, and increase their Revenues beyond their natural Proportion, act on those Nations, as if they had drawn unto themselves by their Labour, a too great Portion of the Denominator of the World; and the Effects thereof, will last as long as the Mines, and act more or less in proportion as they are rich. (P.6)

GERVAISE, Isaac, The system or Theory of the Trade of the World, 1720,

And as it hence appears absolutely needful to keep Trade on a Foot, whereby the Balance may always, on the whole, be in our Favour; so it’s certain, the Mines which are continually giving Gold and Silver, do give sufficient to supply such a needful Balance to every Nation. For the gold and Silver, which the Mines, since the Europeans have possess’d them, have furnished Europe in general with, have not only furnished Quantities equal to the Increase of Mankind since that Time, but so much more Gold and Silver, as to in hance the Price of all Kinds of Commodities in Europe in general, but especially in those Nations who have, either directly or indirectly, had the most considerable Trade with the Countries where the Mines are; and this in all Probability they will always continue to do, but if not, I have and shall shew how to do that which will be always equivalent…. (P. 46)

VANDERLINT, Jacob, On Money Answers All Things, 1734.

II-6-3-3MONETARY USAGE

Gold holds global significance, serving as a widely accepted form of currency for efficient indirect exchange and as a means to store wealth in substantial quantities. Mints produce standardized gold coins, bars, and other units with fixed weight and purity for exchange purposes. In the 19th century, bills and gold certificates augmented the circulating stock of gold standard money in most industrial economies. In anticipation of World War I, warring nations shifted to fractional gold standards, inflating their currencies to fund the war effort. Post-war, victorious nations, particularly Britain, gradually restored gold convertibility; international shipments were reserved for bilateral trade or reparations payments.