Part 101

What Is Money?

It is quite difficult to give a broad definition of money that will be understood by all, for in different ages and lands many things have been used as money besides the coins and bills which we think of only when we think at all what money is. Anything that passes freely from hand to hand in a community in the payment of debts and for goods purchased, accepted freely by the person who offers it without any reference to the person who offers it, and which can be in turn used by the person accepting it to give to some one else in payment of debt or for the purchase of goods, is money. This is rather a long sentence and perhaps difficult to understand, and so we will try to analyze what this means. If some one offered you a pretty stone as money in payment of a debt, it would be as good as any kind of money if you in turn could pass it on to any other person to whom you owed a debt or in payment of something you bought. The stone might appear to you to be valuable but it would not be good money unless you could count on every one else in the community accepting it at the same value. If everybody accepts it at the same value, it is as good as any kind of money. So that anything which is acceptable to the people in any community as a unit of value to pay debts, is good money, provided everybody thinks so and accepts it that way. In this case, then any kind of substance might become money provided it was used and accepted by everyone.

Why Do We Need Money?

We need money for the sake of the convenience which it provides in making the exchange of one kind of wealth for another and as a standard of value. When a community has adopted something or anything which is regarded by all of the people as a standard of value, all of the difficulties of trading disappear.

Who Originated Money?

The earliest tribes of savages did not need money because no individual in the tribe owned anything personally. All the property of the tribe belonged to the tribe as a whole and not to any particular person. Later on, when different groups of savages came into contact with each other, there arose the custom of bartering or exchanging things which one tribe possessed and which the other tribe wanted. In that way arose the business of trading or of what we call doing business, and soon the need of something by which to measure the values of different things arose. Some of the old Australian tribes had a tough green stone which was valuable for making hatchets. Members of another tribe would see some of this stone and notice what good hatchets could be made from it--better hatchets than they had been able to make. Naturally they wanted it so much that it became very valuable in their eyes and so they came wanting to buy green stones. But they had nothing like what we could call money today. They had, however, a good deal of red ochre in their lands which they used to paint their bodies. They got this red ochre out of the ground on their own lands just as the other tribe got green stones out of its ground, and those who owned the green stones which were good for making hatchets, wanted some red ochre very much, and so they traded green stones for red ochre. The green stones then took on a value in themselves for making exchanges for various commodities, and before long became a kind of money inside and outside the community so that when they wanted to obtain anything, the price was put by the merchant as so many green stones and he accepted these in payment for goods given in exchange. He was willing to do this because he knew he could use them in making trades for almost anything he might want, provided he had enough of the green stones. So you see these green stones of the Australian tribe became a rudimentary kind of money, just because a desire had arisen to possess them; and the red ochre was actual money in the same sense, for when this tribe found that other tribes would value this red ochre, they began getting the things they wanted and paying for them in red ochre. But the “unit of value” had to be developed to make a currency that was elastic. It required something that could be carried about easily--in fact it had to be something small enough so a number of units of value could be carried about without too much trouble. The Indians of British Columbia solved this difficulty of making an elastic currency by adopting as a unit of value a haiqua shell which they wore in strings as ornamental borders of their dresses--and one string of these shells was worth one beaver’s skin. These shells then were real money and one of the earliest forms of it.

The skins of animals were long used by savage tribes as money. The skins were valuable in trading and a man’s fortune was reckoned by the number of skins he owned. As soon as the animals became domesticated, however, the whole animal replaced the skin as the unit of value. This change undoubtedly came because a whole animal is more valuable than only its skin. The first skins obtainable however were worn by wild animals--the kind that the people could not deliver to someone else alive and whole. But when the animals became domesticated, which meant that man tamed them and kept them where he could control them at will, the skin and the wild animal ceased to be a unit of value because it was an uncertain kind of money. Among domestic animals, oxen and sheep were the earliest forms of money--an ox was considered worth ten sheep. This idea of using cattle as money was used by many tribes in many lands. We find traces of it in the laws of Iceland. The Latin word pecunia (pecus) shows that the earliest Roman money was composed of cattle. The English word fee indicates this also. The Irish law records show the same evidence of the use of cattle as money and within recent years the cattle still form the basis of the currency of the Zulus and Kaffirs.

When slavery became prominent many lands adopted the slaves as the unit of value. A man’s wealth was reckoned by the number of slaves he owned.

Then, when the practice of agriculture became more common, people used the products of the soil as money--maize, olive oil, cocoanuts, tea and corn--the latter is said to pass current as actual money in certain parts of Norway now. They used these products of the soil for money even in our own country. Our ancestors in Maryland and Virginia before the Revolutionary War, and even after, used tobacco as money. They passed laws making tobacco money and paid the salaries of the government officials and collected all taxes in tobacco.

Other early forms of money were ornaments and these serve the purpose of money among all uncivilized tribes. In India they used cowrie shells--a small yellowish-white shell with a fine gloss. The Fiji Islanders used whales’ teeth; some of the South Sea Island tribes used red feathers; other nations used mineral products as money--such as salt in Abyssinia and Mexico.

Up to this point we have talked about the things used as money from the standpoint of primitive forms of money. Today the metals have practically driven all these other crude forms of money out.

Metallic Forms of Money.

~WHY WE USE METALS FOR COINING~

The use of metals as money goes far back in the history of civilization but it has never been possible to trace the historical order of the adoption of the various metals for the purposes. Iron according to the statement of Aristotle was at one time extensively used as money. Copper, in conjunction with iron, was used in early times as money in China; and until comparatively a short time ago was used for the coins of smaller value in Japan. Iron spikes were used in Central Africa and nails in Scotland; lead money is now used in Burmah. Copper has long been used as money. The early coins of England were made of tin. Finally, however, came silver and silver was the principal form of money up to a few years ago. It was the basis of Greek coins introduced at Rome in 269 B. C. Most of the money of Medieval times was composed of silver.

The earliest traces of gold used as money is seen in pictures of ancient Egyptians “weighing in scales heaps of gold and silver rings.”

Why Do We Use Gold and Silver as Money Principally?

There are a good many reasons why gold and silver have become almost universal materials for use as money. Perhaps this will be better understood if these reasons are set down in order.

1st. It is necessary that the material out of which money is made should be valuable, but nothing was ever used as money that had not first become desirable and, therefore, valuable as money. This is only one of the incidental reasons for taking gold and silver for coining money.

2nd. To serve its purpose best, money should be easy to carry around--in other words, its value should be high in proportion to its weight.

The absence of this quality made the early forms of money such as skins, corn, tobacco, etc., undesirable. It was difficult to carry very much money about. Imagine the skin of a sheep worth a dollar, say, and having to carry ten of them down to pay the grocer. To a certain extent this difficulty occurred with iron and copper money and in times when they used live cattle it was a pretty expensive job to pay your debts because, while the cattle could move, it was still expensive to drive them from place to place. A man who accepted a thousand cattle in payment had to go to some expense in getting them home. Then it was expensive to have money when live cattle were used because the cattle, of course, had to be fed and from that point of view the poor man who had no money was better off than the rich man who had money. When cattle were used as money it cost a lot to keep it. Our kind of money doesn’t eat anything; in fact, if you put it in a savings bank, it will earn interest money for you. But when cattle were used as money it cost a great deal to keep them and so it was worse than not earning any interest.

3rd. Another quality that money should possess is divisibility without damage and also the quality of being united again. This quality is possessed by the metals in every sense because they can be fused, while skins and precious stones suffer in value greatly when they are divided.

4th. The material out of which money is made should be the same throughout in quality and weight so that one unit of money should be worth as much as any other unit. This could never be true of skins or cattle as the difference in the size of skins is very great sometimes, and a small skin from the same animal could not be worth as much as a large one, or a skin of an animal of inferior quality so valuable as a very fine one.

5th. Another quality which money should possess is durability. This requirement made it necessary to use something else besides animals or vegetable substances. Animals die and vegetables will not keep and so lose their value. Even iron is apt to rust and through that process lose more or less of its value.

6th. The materials out of which money is made should be easy to distinguish and their value easy to determine. For this reason such things as precious stones are not good to use as money because it takes an expert to determine their value and even they are not always certain to be correct.

7th. Then a very important quality that the material out of which money is made is that its value should be steady. The value of cattle varies very greatly and, in fact, most of the materials out of which the first currencies were made were subject to quick change in value in a short time. The value of gold and silver does not change excepting at long intervals. Gold and silver are both durable and easily recognizable. They can be melted, divided and united. The same is true of other metallic substances, but iron as stated is subject to rust and its value is low; lead is too soft. Tin will break, and both of them and copper also are of low value. Gold and silver change only slowly in value when the change at all; they do not lose any of their value by age, rust or other cause; they are hard metals and do not, therefore, wear. Their value in proportion to the bulk of the pieces used for money is so large that the money made from them can be carried without discomfort and it is almost impossible to imitate them.

Who Made the First Cent?

Vermont was the first state to issue copper cents. In June, 1785, she granted the authority to Ruben Harmon, Jr., to make money for the state for two years. In October of the same year, Connecticut granted the right to coin 10,000 pounds in copper cents, known as the Connecticut cent of 1785. Massachusetts, in 1786, established a mint and coined $60,000 in cents and half cents. In the same year, New Jersey granted the right to coin $10,000 at 15 coppers to the shilling. In 1781 the Continental Congress directed Robert Morris to investigate the matter of governmental coinage. He proposed a standard based on the Spanish dollar, consisting of 100 units, each unit to be called a cent. His plan was rejected. In 1784, Jefferson proposed to Congress, that the smallest coin should be of copper, and that 200 of them should pass for one dollar. The plan was adopted, but in 1786, 100 was substituted. In 1792 the coinage of copper cents, containing 264 grains, and half cents in proportion, was authorized; their weight was subsequently reduced. In 1853 the nickel cent was substituted and the half cent discontinued, and in 1864 the bronze cent was introduced, weighing 48 grains and consisting of 95 per cent. of copper, and the remainder of tin and zinc.

How Did the Name Uncle Sam Originate?