Money
From Encyclopediak
Money, Mun y, a term used to designate the medium of exchange and the measure and standard of value. Whatever fulfills these functions, however crudely, is money.
FUNCTIONS. In primitive conditions exchange of commodities was effected by means of barter corn was traded for clothing. But it is easy to see that as the population of the community grew, and the conditions of life became more complex and industry more specialized, this method would be increasingly difficult. Suppose the man who made clothing did not want more corn, but wanted an axe. The farmer who wanted clothing for his corn would have to find an axe maker who wanted corn and effect an exchange with him then trade the axe for clothing. If all three, however, knew of some common article, such as tobacco, for instance, in terms of which they could express the value of corn, clothing and axes, it would be easy to negotiate exchanges of these goods. Certain articles of universal need or recognized value thus came to be used as means of exchange such as shells, clothing, corn, salt, wampum, cattle, furs, hides. Gradually those articles that were most convenient and durable would be chosen for this purpose. So the metals came to be used as money and as the result of further experience, these were practically narrowed down to the precious metals as best adapted to all. Thus money developed its primary function, that of a medium of exchange. But if money is to fulfill that function satisfactorily, we must know how much other commodities are worth in terms of this article. Money thus becomes also a measure of value. This is what we mean by prices that is, goods arc worth such and such an amount as measured by money. The enormous importance of this function of money will be recognized at once without discussion. Modern commerce and civilization would be impossible without it. There is a still further function of money, closely akin to this. Many transactions are made involving the future a note payable five years hence a lease running for 10 years, 20 years, 99 years. It would work great injustice for the man who assumes such an obligation today to pay twice its value or half its value at maturity because of fluctuations in the medium of payment. A standard of value is therefore essential, for the sake of permanency and stability. Money fulfills this function also, making possible the storing up and measuring of wealth for the future.
VARIETIES. The choice of gold and silver as money was due to the fact that they best embody the qualities requisite for that purpose namely, intrinsic usefulness or value the greatest amount of value in the smallest bulk and weight divisibility, so that both smaller and larger coins may be provided a quality of gold, but not of diamonds, for instance uniformity, so that one unit shall be like all the others in value not the case with fur-currency or cattle-currency durability of material and stability of value. These same reasons have gradually led to the adoption of gold alone as the standard in most of the important commercial nations. This was accomplished in the United States by act of Congress on March 14, 1900. In some countries, however, both gold and silver constitute the standard (See Bimetallism) and even in those countries that maintain a gold standard, silver coins are used, having a value determined in terms of gold (See Dollar) so that both are the basis of the currency, although only one is technically the standard. There are two main kinds of money. Standard or intrinsic money is that which is intrinsically worth its face value, or practically so. Sometimes a small amount of alloy is used for the sake of greater hardness and durability as in United States silver dollars and gold coins, which contain ten per cent copper, and are designated as .900 fine. The other kind of money is token or representative money, which is not worth its face value, but merely represents that value in various forms. Such money in the United States constitutes the subsidiary coinage of silver 50-cent, 25-cent and 10-cent pieces the minor coinage of nickels and pennies and the several kinds of paper money. Flat money is representative money which is made legal tender by action of the government without promise of redemption in gold or silver. (See Fiat Money) In the more highly civilized nations representative money has come to be of great importance.
COINAGE. Both silver and gold came into use as money in very early times, certainly as early as 1800 B. C., silver being first so used. But for many centuries 1892 the metals passed by weight, as the shekel and talent among the Hebrews and the names of many coins today are still the names of weights, as drachma, lira, pound. The difficulty of weighing money on the scales, however, was a great inconvenience and a distinct advance in commerce was made when the pieces of money began to be stamped to indicate their weight and purity. This improvement was introduced by the Greeks about 900 B. C., and passed from them to the Romans. From the first the coining of money seems to have been recognized as a function of government, rather than of individuals, in order to secure uniformity and reliability. In the latter respect, however, unscrupulous rulers have often taken advantage of their prerogative by debasing the coinage. In the United States the coinage now includes the following The standard coinage consists of the 2.50, 5, 10, 20 gold coins, .900 fine and the silver dollar, weighing 412.5 grains in silver, .900 fine, equivalent to a gold dollar of 25.8 grains. .900 fine, or 23.25 grains of pure gold, which is the standard. The token or representative coinage includes the subsidiary silver coins, half dollars, quarter dollars and dimes, which contain 385.8 grains to the dollar, .900 fine 5-cent pieces weighing 77.16 grains, 75 per rent of which is copper and 25 per cent nickel and pennies, weighing 48 grains, of which 95 per cent is copper and 5 per cent tin and zinc. The subsidiary silver coins are legal tender to the amount of 10, and the nickels and pennies to the amount of 25 cents. These coins are fiat money to the extent of the difference between their intrinsic value and their face value. (See Mint)
PAPER MONEY. In addition to the coinage many countries have also paper money. This is wholly token or representative in character. It has practically no intrinsic value, but is used for the sake of convenience or to economize the precious metals, and its value depends wholly upon what it represents. In the United States this class of money includes gold certificates, silver certificates, United States notes, treasury notes and national bank notes. Gold certificates are issued by the government to represent gold of equal amount held in the United States Treasury for their redemption. Silver certificates, likewise, are issued by the government to represent coined silver dollars of equal amount held in the treasury. The United States notes, popularly known as greenbacks from the fact that their backs are printed in green ink, are legal-tender notes, first issued by the government during the exigencies of the Civil War. They reached their maximum amount of 449,338,902 in 1864, during which year they were worth on an average about 45 cents on the dollar. These notes were fiat money pure and simple, until the Gold Standard Bill of 1900 pledged the credit of the United States for their redemption in gold, and directed the treasury department to set aside a gold reserve of 150,000,000 for this purpose. The United States treasury notes of 1890 were issued in payment for silver bullion bought for coinage, and are being retired as fast as the bullion is coined into dollars. National bank notes are issued by national banks to the extent of the par value of United States bonds deposited by them as security in the national treasury except that five per cent of the total issue must be left with the treasurer for the redemption of worn-out bills. These bonds may be deposited to the amount of the bank's capital, if so desired. See Continental Money.
CREDIT MONEY. It would be very inconvenient to conduct all commercial transactions by the actual payment of cash, and would require an enormous bulk of money. The custom has arisen, therefore, of depositing the money in a bank, and drawing checks, drafts or bills of exchange against it and sending these in payment of bills. Such paper may be regarded as a kind of representative money or as the representative substitute for money. Its use depends wholly upor credit. It has not inaptly been termed credit money. The vast majority of commercial transactions are so conducted, to the estimated extent of 97 per cent of international commerce and 92 per cent of the commerce of the United States. See Credit.
FOREIGN MONETARY UNITS. The monetary units of various foreign countries in 1920 are as follows:
Argentina........peso
Austria-Hungary....crown
Belgium..........franc
Bolivia...........boliviano
Brazil............milreis
Chile.............peso
China............Hang or tael
Columbia ........dollar
Costa Rica.......colon
Denmark ........crown
Ecuador .........Sucre
Egypt............pound
England .........pound sterling
France...........franc
Germany.........mark
Greece ...........drachma
Guatemala .......peso
Haiti.............gourde
Honduras........peso
India .......... pgg
Italy.............lira
Japan............yen
Mexico...........peso
Netherlands ......guilder or florin
Newfoundland . . .dollar
Nicaragua .......peso
Norway..........crown
Panama..........balboa
Peru .............libra
Philippines.......peso
Portugal .........milreis
Russia ...........ruble
Salvador.........peso
Spain............peseta
Sweden ..........crown
Switzerland ......franc
Turkey ..........piaster
United States ....dollar
Uruguay .........peso
Venezuela........bolivar
Since 1914 the value of the money of certain countries, has depreciated to some extent.
MONEY IN CIRCULATION. The amount and kinds of money in circulation in the United States on July 1, 1918, exclusive of that held in the United States Treasury and the Federal Reserve Banks, to the amount of $1,001,303,125, was:
Gold Coin ............. $1,107,531,243
Gold Certificates ........ $828,231,744
Silver Dollars .......... $77,341,545
Silver Certificates ....... $381,806,776
Subsidiary Silver ........ $217,206,560
United States Notes ..... $339,936,233
Treasury Notes of 1890.. $1,851,130
National Bank Notes..... $704,137,008
Federal Reserve Notes... $1,726,755,670
Total ................$5,384,797,909
The per capita circulation in 1920 was $50.86.
