85. THE ORIGIN OF REPRESENTATIVE MONEY'

By W. STANLEY JEVONS

The origin of representative money is of much interest. Ancient nations were unacquainted with the use of paper money, simply because they had no paper. But it would be a mistake to suppose that they did not employ representative money.

One of the very earliest mediums of exchange consisted of the skins of animals. The earliest form of representative money consisted of small pieces of leather, usually marked with an official seal. It is a very reasonable suggestion made by Storch, Bernardakis, and other writers, that when skins and furs began to be found an inconveniently bulky kind of money, small pieces were clipped off, and handed over as tokens of possession. By fitting into the place from which they were cut they would prove ownership, something in the same way as notched sticks, or tallies, were for many centuries used to record loans of money to the English Exchequer. We know by experience in the case of paper money that if a people had become thoroughly accustomed to the circulation of these small leather tallies they would in time forget their representative character, and continue to circulate them, when the government or other holders of the skins themselves had made away with the actual property. Such is no doubt the history of the leather money which long had currency in Russia.

It is, however, in China that the use of paper money was most fully developed in early times. More than a century before the Christian era an emperor of China raised funds to prosecute his wars in a way which shows that the use of leather tokens was familiar to the people. The tokens having been made of the skins of white deer, he collected together into a park all deer of this color which he could find, and prohibited his subjects from possessing any animals of the same kind. Having thus obtained a monopoly of the material, reminding one of the monopoly of the Bank of England in water-marked paper, he issued pieces of white leather as money at a high rate.

86. GENERAL ADVANTAGES OF PAPER MONEY'

By W. STANLEY JEVONS

There are several purposes that may be detected in the use of paper currency. Perhaps the most obvious reason is that of avoiding 'Adapted from Money and the Mechanism of Exchange (1875), pp. 192–94. (D. Appleton & Co.)

Ibid., pp. 195–200.

the trouble and risk of handling large amounts of the precious metals. In order to keep large sums of metallic money in safety a person must have strongholds and watchmen. At the present time in the United States silver and gold certificates have come to replace the actual silver and gold coins, in part for the reason just enumerated and in part for the one which follows.

The weight of metallic currency is a second reason for the use of representative documents in large transactions. In proportion as the legal tender is more bulky and inconvenient to carry about is this motive more powerful. Thus, when the state of Virginia employed tobacco as the medium of exchange in the eighteenth century, the tobacco was placed in stores, and receipts on paper were handed about. Paper money was issued in Russia under Catherine II in 1768, on the ground that copper money, then forming the legal tender, was inconvenient. So much were these assignats, or notes, preferred that they at first circulated at a premium of per cent. In the present state of commerce even gold money would be far too heavy to form a convenient medium of making payments. M. Chevalier states that it would require forty men to carry the gold equal in value to the Regent Diamond. The average daily transactions in the London Banker's Clearing-House amount to twenty millions of pounds sterling which if paid in gold coin would weigh 157 tons, and would require nearly eighty horses for conveyance. If paid in silver the weight would be increased to more than 2,500 tons. I find that a Bank of England note weighs about 20 grains, whereas a single sovereign weighs about 123 grains, and a note may represent five, ten, fifty, a thousand, or ten thousand such sovereigns with slight differences in the printing. If we were obliged to handle a medium of exchange actually embodying value, it would, ere now, have been necessary to employ precious stones, or some metal much more rare and precious than gold.

A further and very potent motive for employing representative tokens or notes consists in the saving of interest and capital, which is effected by substituting a comparatively valueless material in place of costly gold and silver. This may be accomplished in two ways. When in straits for want of revenue a government may issue paper currency as a means of paying its obligations, agreeing to receive back the paper at some future date in payment of obligations to it. It will be observed that this is a forced loan which enables a government to procure funds without interest. A saving of interest is also

effected whenever a government has paper notes outstanding in excess of the gold held in readiness to redeem them.1

87. CHINESE PAPER MONEY IN THE THIRTEENTH CENTURY BY MARCO POLO

Now that I have told you in detail of the splendour of this City of the Emperor's, I shall proceed to tell you of the Mint he hath in the same city, in which he hath his money coined and struck, as I shall relate to you. And in doing so I shall make manifest to you how it is that the Great Lord may well be able to accomplish even much more than I have told you, or am going to tell you, in this book. For, tell it how I might you never would be satisfied that I was keeping within truth and reason!

The Emperor's Mint then is in this same City of Cambaluc, and the way it is wrought is such that you might say he hath the Secret of Alchemy in perfection, and you would be right! For he makes his money after this fashion.

He makes them take of the bark of a certain tree, in fact, of the Mulberry Tree, the leaves of which are the food of the silkwormsthese trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes. The smallest of these sizes is worth a half tornesel; the next, a little larger, one tornesel; one, a little larger still, is worth half a silver groat of Venice; another a whole groat; others yet two groats, five groats, and ten groats. There is also a kind worth one Bezant of gold, and others of three Bezants, and so up to ten. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names and to put their seals. And when all is prepared duly, the chief officer deputed by the Kaan smears the Seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the Seal remains printed upon it in red; the Money is then authentic. Any one forging it would be punished 'The greenback currency of the United States is also a case in point. There are $346,000,000 outstanding with a specie reserve of only $150,000,000.-EDITOR. Henry Yule's edition of Travels of Marco Polo, pp. 423-26. (J. Murray,

2

with death. And the Kaan causes every year to be made such a vast quantity of this money, which costs him nothing, that it must equal in amount all of the treasure of the world.

With these pieces of paper, made as I have described, he causes all payments on his own account to be made; and he makes them to pass current universally over all his kingdoms and provinces and territories, and whithersoever his power and sovereignty extend. And nobody, however important he may think himself, dares to refuse them on pain of death. And indeed everybody takes them readily, for wheresoever a person may go throughout the Great Kaan's dominions he shall find these pieces current, and shall be able to transact all sales and purchases of goods by means of them just as well as if they were coins of pure gold. And all the while they are so light that ten Bezants' worth does not weigh one golden Bezant.

Furthermore all merchants arriving from India or other countries, and bringing with them gold or silver or gems and pearls, are prohibited from selling to anyone but the Emperor. He has twelve experts chosen for this business, men of shrewdness and experience in such affairs; these appraise the articles and the Emperor then pays a liberal price for them in those pieces of paper. The merchants accept his price readily, for in the first place they would not get so good a one from anybody else, and secondly they are paid without any delay. And with this paper money they can buy what they like anywhere over the Empire, whilst it is also vastly lighter to carry about on their journeys. And it is a truth that the merchants will several times in the year bring wares to the amount of 400,000 Bezants, and the Grand Sire pays for all in that paper. So he buys such a quantity of those precious things every year that his treasure is endless, whilst all the time the money he pays away costs him nothing at all. Moreover, several times in the year proclamation is made through the city that any one who may have gold or silver or gems or pearls, by taking them to the Mint shall get a handsome price for them. And the owners are glad to do this, because they would find no other purchaser give so large a price. Thus the quantity they bring in is marvellous, though those who may not choose to do so may let it alone. Still, in this way, nearly all the valuables in the country come into the Kaan's possession.

When any of those pieces of paper are spoilt-not that they are so very flimsy either-the owner carries them to the Mint, and by paying 3 per cent on the value he gets new pieces in exchange. And if

any Baron, or anyone else soever, hath need of gold or silver or gems or pearls, in order to make plate, or girdles, or the like, he goes to the Mint and buys as much as he list, paying in this paper money.

Now you have heard the ways and means whereby the Great Kaan may have, and in fact has, more treasure than all the Kings in the World; and you know all about it and the reason why.

88. PAPER MONEY AND PROSPERITY'

Paper currency would increase the wealth of the nation in the following ways:

I. It would replace a very expensive medium of exchange-Gold, by a very cheap one-Paper. The fifty or sixty millions of gold which are now supposed to be in circulation, and which are merely used as counters, would be then replaced by notes. Here at once would be a saving of more than two millions a year, by converting this large amount of dead stock into active, productive stock (hear). Suppose a farmer had been taught that it was necessary to use a golden ploughshare worth £1,000, and a man came and said, "I will make for you a ploughshare of iron for 100 pence, which will do the work just as well": it is plain that the farmer would have the difference between £1,000 and 100 pence to employ as active capital (hear). He could improve his land, drain, manure, and what not, when he had substituted a cheap ploughshare for a dear one (hear, hear). Lord Liverpool's wisdom led him to a contrary opinion, when he advocated the introduction of the present system. "The richest standard, Gold," said he, "is best adapted for a rich country." The country was prospering with, and by, cheap money. "Adopt an expensive money," said Lord Liverpool. "Plough your land with a golden ploughshare." We did so, and threw aside an inexpensive and tried instrument merely to adopt a fanciful theory (hear, hear, and cheers).

II. But the most important advantage of a Representative Paper Currency is this—that we should obtain a circulating medium capable of expansion, a money in which prices would be able to rise as taxes are imposed, so that taxes might be added to the cost of production, and a remunerative price be obtained (hear). And further, as our

'Adapted from an "Address to the Retford Currency Society" in Currency Tracts. Published by the Society for the Emancipation of Industry. (London,