Chapter VIII.How the People on the Island Came to Use Currency in the Place of Money.As time went on, changes in the method of doing business gradually occurred on the island. Instead of being an isolated and unknown community, their existence as an organized, civilized state became generally known to the rest of the world, and a brisk trade and commerce resulted from the exchange of the products of the island for the products of other countries. An excellent harbor existed at each end of the island, and about these points the population naturally aggregated, and built up two very considerable towns. The middle of the island, on the other hand, was elevated into high mountain ranges, covered with dense forests, in crossing which travelers journeying between the two cities were often robbed of all the gold they carried about them. To obviate this danger, and avoid the necessity of carrying gold, persons living at opposite ends of the island, therefore, adopted a system of giving written orders for money on each other, which each reciprocally agreed to pay to the person whose name was written in the order or draft, and then periodically settled or balanced their accounts by offsetting one order or payment against another. In this way value or purchasing power was transmitted long distances much more cheaply and conveniently than could be effected by the transmission of gold itself; and also much more safely, inasmuch as the thieves could make no use of the orders, even if they obtained them. And thus it was that thepeople on the island became acquainted with and first used what were afterward known as “bills of exchange.”1This labor-saving and danger-avoiding device, moreover, proved so useful, that the idea soon suggested itself that by an extension of the principle involved in the bill of exchange the necessity of carrying gold at all in any quantity might also be avoided. A public office was therefore established, where people might deposit their gold under the guardianship of the state, and receive a ticket or receipt for the amount, payable in coin on demand; which tickets, from the fact that every body knew that they were convertible into gold at will, and that no more tickets were issued than corresponded to gold actually deposited and retained, soon came to be regarded as equally good and valid as gold itself, and vastly more convenient for the purpose of making exchanges. And thus it was thatcurrency(from the Latincurro, to run) originated and came into use on the island as a substitute and representative of money.2Thename originally given to these receipts was first “bank-credits,” and then “bank-notes,” but after a time people acquired a habit of designating them as “paper money.” But this latter term was conceded to be but a mere fiction of speech and a bad use of language; for every intelligent person at once saw that a promise to deliver a commodity, or an acknowledgment of the receipt of, or a title to, a thing, could not possibly be the commodity or the thing itself, any more than a shadow could be the substance, or the picture of a horse a horse, or the smell of a good dinner the same as the dinner itself.Nevertheless, as an instrumentality for transferring commodities used for money, and avoiding the loss and waste unavoidable in handling and transporting such commodities, the currency thus devised was a great invention, and being always represented by, or, as we may express it, covered with, the commodity—gold—which, of all things, fluctuates least in value, it perfectly answered the purpose of money, without actually being so. It also furnished another striking illustration of the superiority of the commodity gold to serve either as money or as an object of value for deposit, against which receipts or certificates of deposit might be issued to serve as currency; for if other valuable commodities, like cattle, corn, cloth, or coal, had been selected for a like purpose, the bank would have been obliged to erect large pens, sheds, and warehouses for the storing of the deposits; and, let them be guarded ever so carefully, their value or purchasing power would, after a time, rapidly diminish from natural and unavoidable causes.A shadow is not a substance.A shadow is not a substance.The value of most commodities, even in a perfect condition, furthermore differs so much by reasons of mere locality, that there could be no possible uniformity in the value of the receipt for the deposit of one and the same article, issued by banks in different places, to serve as currency; the value or purchasing power of a ton of coal, or a fat ox, being one thing at the mouth of a coal-mine or on a prairie stock-farm, andquite a different thing ten, twenty, or a hundred miles distant. But in the case of gold, the space needed to store up what represents a vast value is very small, while the value or purchasing power of gold not only is, but is certain to remain, on the average, very constant all the world over.31Historically, bills of exchange probably originated with the Jews of the Middle Ages, who, ever liable to persecution, adopted a system of drafts, or written orders, upon one another, which each agreed to honor and pay to the person named in the draft.2It was in this manner that the first bank of which we have any record originated in 1171, namely, the Bank of the Republic of Venice. Venice in that year was at war and needed money. The Council of Ten, or the Government, called upon the merchants to bring in their gold or coin into the public treasury, and gave credit on the books of the state for the amounts so deposited; which credits carried interest (always promptly paid) at the rate of four per cent. per annum. Soon after the establishment of this bank one of the depositors died; and it becoming necessary to distribute his estate among five children, his bank-credit was divided into five portions and transferred to five new owners. A system of transferring bank-credits was thus introduced, and proved so useful that in a brief time the merchants adopted it very generally as a means of paying balances in all great business transactions. The banks of Amsterdam and of Hamburg were also subsequently established on substantially the same basis, and are doing business to-day successfully. The Bank of Venice did business for five hundred years; during which period the state was prosperous, and there were few failures among the mercantile classes.3If to any it may seem puerile and unnecessary to enter into such explanations, it may be well to remind them that one of the schemes for a new currency, which has of late found some earnest advocates in the United States, is that of Josiah Warren, of Ohio, who proposed that currency “should be issued by those men, women, and children who perform useful service”—i. e., grow corn, mine coal, catch cod-fish, pick up chestnuts and the like—“but by nobody else;” such results of service being deposited in safe receptacles, and having receipts of deposit issued against them to serve as “equitable money.” A further axiom of Mr. Warren was, “that the most disagreeable labor” (not the most useful) “is entitled to the highest compensation;” and, therefore, inferentially entitled to issue the most money. A specimen of this equitable money before the writer reads as follows:The most disagreeable labor is entitled to the highest compensation.$1.00Cincinnati, Ohio.Due to Bearer,EIGHT HOURS’ LABOR,In Shoe-making, or a Hundred Pounds of Corn.William Morton.No. —, F—— Street.Time is Wealth.Of course, to make this money equitable, and its issue, as claimed, “the satisfactory solution of the great problem of labor and capital,” there must be some presupposed equitable relation between eight hours of shoe-making and a hundred pounds of corn. But one hundred pounds of corn in Illinois are the result of only a quarter as much labor as a hundred pounds in New England; and what comparison is there between eight hours’ work of a skilled mechanic and that of a mere cobbler in making shoes? or of the man who performs a disagreeable, slavish piece of work, and of the genius who invents or makes a machine that makes this disagreeable work unnecessary?E. D. Linton, of Boston, one of Warren’s most eminent disciples, improves on Warren’s ideas, and proposes that the United States Government should prepare and issue a currency, which should read as follows:The United States will pay One Dollar to Bearer, on demand, in —— bushels of Illinois Fall Wheat, at United States No. 1 Store-house, No. 12 River Street, Chicago, Ill.This note is receivable for all debts due the United States.And the same inferentially in respect to pigs, coal, shoes, and the services of doctors, lawyers, and cooks. So, then, if the note is not to be on its face a lie, and the promise is to be actually performed on demand, the necessity will be absolute on the part of the Government of the United States to have store-houses for wheat at Chicago, pig-pens at Peoria, coal-mines or dépôts at Pottsville, and trained professionals ready on call to plead a case, preach a sermon, cure a cold, and cook a dinner; and all of these last must take their pay in pigs if required. But as a pig has one value at Peoria, and another value at almost every other place, the dollar’s worth of pig which the United States would pay might be a whole pig in one place, a half in another, and possibly only the snout in another.
Chapter VIII.How the People on the Island Came to Use Currency in the Place of Money.As time went on, changes in the method of doing business gradually occurred on the island. Instead of being an isolated and unknown community, their existence as an organized, civilized state became generally known to the rest of the world, and a brisk trade and commerce resulted from the exchange of the products of the island for the products of other countries. An excellent harbor existed at each end of the island, and about these points the population naturally aggregated, and built up two very considerable towns. The middle of the island, on the other hand, was elevated into high mountain ranges, covered with dense forests, in crossing which travelers journeying between the two cities were often robbed of all the gold they carried about them. To obviate this danger, and avoid the necessity of carrying gold, persons living at opposite ends of the island, therefore, adopted a system of giving written orders for money on each other, which each reciprocally agreed to pay to the person whose name was written in the order or draft, and then periodically settled or balanced their accounts by offsetting one order or payment against another. In this way value or purchasing power was transmitted long distances much more cheaply and conveniently than could be effected by the transmission of gold itself; and also much more safely, inasmuch as the thieves could make no use of the orders, even if they obtained them. And thus it was that thepeople on the island became acquainted with and first used what were afterward known as “bills of exchange.”1This labor-saving and danger-avoiding device, moreover, proved so useful, that the idea soon suggested itself that by an extension of the principle involved in the bill of exchange the necessity of carrying gold at all in any quantity might also be avoided. A public office was therefore established, where people might deposit their gold under the guardianship of the state, and receive a ticket or receipt for the amount, payable in coin on demand; which tickets, from the fact that every body knew that they were convertible into gold at will, and that no more tickets were issued than corresponded to gold actually deposited and retained, soon came to be regarded as equally good and valid as gold itself, and vastly more convenient for the purpose of making exchanges. And thus it was thatcurrency(from the Latincurro, to run) originated and came into use on the island as a substitute and representative of money.2Thename originally given to these receipts was first “bank-credits,” and then “bank-notes,” but after a time people acquired a habit of designating them as “paper money.” But this latter term was conceded to be but a mere fiction of speech and a bad use of language; for every intelligent person at once saw that a promise to deliver a commodity, or an acknowledgment of the receipt of, or a title to, a thing, could not possibly be the commodity or the thing itself, any more than a shadow could be the substance, or the picture of a horse a horse, or the smell of a good dinner the same as the dinner itself.Nevertheless, as an instrumentality for transferring commodities used for money, and avoiding the loss and waste unavoidable in handling and transporting such commodities, the currency thus devised was a great invention, and being always represented by, or, as we may express it, covered with, the commodity—gold—which, of all things, fluctuates least in value, it perfectly answered the purpose of money, without actually being so. It also furnished another striking illustration of the superiority of the commodity gold to serve either as money or as an object of value for deposit, against which receipts or certificates of deposit might be issued to serve as currency; for if other valuable commodities, like cattle, corn, cloth, or coal, had been selected for a like purpose, the bank would have been obliged to erect large pens, sheds, and warehouses for the storing of the deposits; and, let them be guarded ever so carefully, their value or purchasing power would, after a time, rapidly diminish from natural and unavoidable causes.A shadow is not a substance.A shadow is not a substance.The value of most commodities, even in a perfect condition, furthermore differs so much by reasons of mere locality, that there could be no possible uniformity in the value of the receipt for the deposit of one and the same article, issued by banks in different places, to serve as currency; the value or purchasing power of a ton of coal, or a fat ox, being one thing at the mouth of a coal-mine or on a prairie stock-farm, andquite a different thing ten, twenty, or a hundred miles distant. But in the case of gold, the space needed to store up what represents a vast value is very small, while the value or purchasing power of gold not only is, but is certain to remain, on the average, very constant all the world over.31Historically, bills of exchange probably originated with the Jews of the Middle Ages, who, ever liable to persecution, adopted a system of drafts, or written orders, upon one another, which each agreed to honor and pay to the person named in the draft.2It was in this manner that the first bank of which we have any record originated in 1171, namely, the Bank of the Republic of Venice. Venice in that year was at war and needed money. The Council of Ten, or the Government, called upon the merchants to bring in their gold or coin into the public treasury, and gave credit on the books of the state for the amounts so deposited; which credits carried interest (always promptly paid) at the rate of four per cent. per annum. Soon after the establishment of this bank one of the depositors died; and it becoming necessary to distribute his estate among five children, his bank-credit was divided into five portions and transferred to five new owners. A system of transferring bank-credits was thus introduced, and proved so useful that in a brief time the merchants adopted it very generally as a means of paying balances in all great business transactions. The banks of Amsterdam and of Hamburg were also subsequently established on substantially the same basis, and are doing business to-day successfully. The Bank of Venice did business for five hundred years; during which period the state was prosperous, and there were few failures among the mercantile classes.3If to any it may seem puerile and unnecessary to enter into such explanations, it may be well to remind them that one of the schemes for a new currency, which has of late found some earnest advocates in the United States, is that of Josiah Warren, of Ohio, who proposed that currency “should be issued by those men, women, and children who perform useful service”—i. e., grow corn, mine coal, catch cod-fish, pick up chestnuts and the like—“but by nobody else;” such results of service being deposited in safe receptacles, and having receipts of deposit issued against them to serve as “equitable money.” A further axiom of Mr. Warren was, “that the most disagreeable labor” (not the most useful) “is entitled to the highest compensation;” and, therefore, inferentially entitled to issue the most money. A specimen of this equitable money before the writer reads as follows:The most disagreeable labor is entitled to the highest compensation.$1.00Cincinnati, Ohio.Due to Bearer,EIGHT HOURS’ LABOR,In Shoe-making, or a Hundred Pounds of Corn.William Morton.No. —, F—— Street.Time is Wealth.Of course, to make this money equitable, and its issue, as claimed, “the satisfactory solution of the great problem of labor and capital,” there must be some presupposed equitable relation between eight hours of shoe-making and a hundred pounds of corn. But one hundred pounds of corn in Illinois are the result of only a quarter as much labor as a hundred pounds in New England; and what comparison is there between eight hours’ work of a skilled mechanic and that of a mere cobbler in making shoes? or of the man who performs a disagreeable, slavish piece of work, and of the genius who invents or makes a machine that makes this disagreeable work unnecessary?E. D. Linton, of Boston, one of Warren’s most eminent disciples, improves on Warren’s ideas, and proposes that the United States Government should prepare and issue a currency, which should read as follows:The United States will pay One Dollar to Bearer, on demand, in —— bushels of Illinois Fall Wheat, at United States No. 1 Store-house, No. 12 River Street, Chicago, Ill.This note is receivable for all debts due the United States.And the same inferentially in respect to pigs, coal, shoes, and the services of doctors, lawyers, and cooks. So, then, if the note is not to be on its face a lie, and the promise is to be actually performed on demand, the necessity will be absolute on the part of the Government of the United States to have store-houses for wheat at Chicago, pig-pens at Peoria, coal-mines or dépôts at Pottsville, and trained professionals ready on call to plead a case, preach a sermon, cure a cold, and cook a dinner; and all of these last must take their pay in pigs if required. But as a pig has one value at Peoria, and another value at almost every other place, the dollar’s worth of pig which the United States would pay might be a whole pig in one place, a half in another, and possibly only the snout in another.
Chapter VIII.How the People on the Island Came to Use Currency in the Place of Money.
As time went on, changes in the method of doing business gradually occurred on the island. Instead of being an isolated and unknown community, their existence as an organized, civilized state became generally known to the rest of the world, and a brisk trade and commerce resulted from the exchange of the products of the island for the products of other countries. An excellent harbor existed at each end of the island, and about these points the population naturally aggregated, and built up two very considerable towns. The middle of the island, on the other hand, was elevated into high mountain ranges, covered with dense forests, in crossing which travelers journeying between the two cities were often robbed of all the gold they carried about them. To obviate this danger, and avoid the necessity of carrying gold, persons living at opposite ends of the island, therefore, adopted a system of giving written orders for money on each other, which each reciprocally agreed to pay to the person whose name was written in the order or draft, and then periodically settled or balanced their accounts by offsetting one order or payment against another. In this way value or purchasing power was transmitted long distances much more cheaply and conveniently than could be effected by the transmission of gold itself; and also much more safely, inasmuch as the thieves could make no use of the orders, even if they obtained them. And thus it was that thepeople on the island became acquainted with and first used what were afterward known as “bills of exchange.”1This labor-saving and danger-avoiding device, moreover, proved so useful, that the idea soon suggested itself that by an extension of the principle involved in the bill of exchange the necessity of carrying gold at all in any quantity might also be avoided. A public office was therefore established, where people might deposit their gold under the guardianship of the state, and receive a ticket or receipt for the amount, payable in coin on demand; which tickets, from the fact that every body knew that they were convertible into gold at will, and that no more tickets were issued than corresponded to gold actually deposited and retained, soon came to be regarded as equally good and valid as gold itself, and vastly more convenient for the purpose of making exchanges. And thus it was thatcurrency(from the Latincurro, to run) originated and came into use on the island as a substitute and representative of money.2Thename originally given to these receipts was first “bank-credits,” and then “bank-notes,” but after a time people acquired a habit of designating them as “paper money.” But this latter term was conceded to be but a mere fiction of speech and a bad use of language; for every intelligent person at once saw that a promise to deliver a commodity, or an acknowledgment of the receipt of, or a title to, a thing, could not possibly be the commodity or the thing itself, any more than a shadow could be the substance, or the picture of a horse a horse, or the smell of a good dinner the same as the dinner itself.Nevertheless, as an instrumentality for transferring commodities used for money, and avoiding the loss and waste unavoidable in handling and transporting such commodities, the currency thus devised was a great invention, and being always represented by, or, as we may express it, covered with, the commodity—gold—which, of all things, fluctuates least in value, it perfectly answered the purpose of money, without actually being so. It also furnished another striking illustration of the superiority of the commodity gold to serve either as money or as an object of value for deposit, against which receipts or certificates of deposit might be issued to serve as currency; for if other valuable commodities, like cattle, corn, cloth, or coal, had been selected for a like purpose, the bank would have been obliged to erect large pens, sheds, and warehouses for the storing of the deposits; and, let them be guarded ever so carefully, their value or purchasing power would, after a time, rapidly diminish from natural and unavoidable causes.A shadow is not a substance.A shadow is not a substance.The value of most commodities, even in a perfect condition, furthermore differs so much by reasons of mere locality, that there could be no possible uniformity in the value of the receipt for the deposit of one and the same article, issued by banks in different places, to serve as currency; the value or purchasing power of a ton of coal, or a fat ox, being one thing at the mouth of a coal-mine or on a prairie stock-farm, andquite a different thing ten, twenty, or a hundred miles distant. But in the case of gold, the space needed to store up what represents a vast value is very small, while the value or purchasing power of gold not only is, but is certain to remain, on the average, very constant all the world over.3
As time went on, changes in the method of doing business gradually occurred on the island. Instead of being an isolated and unknown community, their existence as an organized, civilized state became generally known to the rest of the world, and a brisk trade and commerce resulted from the exchange of the products of the island for the products of other countries. An excellent harbor existed at each end of the island, and about these points the population naturally aggregated, and built up two very considerable towns. The middle of the island, on the other hand, was elevated into high mountain ranges, covered with dense forests, in crossing which travelers journeying between the two cities were often robbed of all the gold they carried about them. To obviate this danger, and avoid the necessity of carrying gold, persons living at opposite ends of the island, therefore, adopted a system of giving written orders for money on each other, which each reciprocally agreed to pay to the person whose name was written in the order or draft, and then periodically settled or balanced their accounts by offsetting one order or payment against another. In this way value or purchasing power was transmitted long distances much more cheaply and conveniently than could be effected by the transmission of gold itself; and also much more safely, inasmuch as the thieves could make no use of the orders, even if they obtained them. And thus it was that thepeople on the island became acquainted with and first used what were afterward known as “bills of exchange.”1
This labor-saving and danger-avoiding device, moreover, proved so useful, that the idea soon suggested itself that by an extension of the principle involved in the bill of exchange the necessity of carrying gold at all in any quantity might also be avoided. A public office was therefore established, where people might deposit their gold under the guardianship of the state, and receive a ticket or receipt for the amount, payable in coin on demand; which tickets, from the fact that every body knew that they were convertible into gold at will, and that no more tickets were issued than corresponded to gold actually deposited and retained, soon came to be regarded as equally good and valid as gold itself, and vastly more convenient for the purpose of making exchanges. And thus it was thatcurrency(from the Latincurro, to run) originated and came into use on the island as a substitute and representative of money.2Thename originally given to these receipts was first “bank-credits,” and then “bank-notes,” but after a time people acquired a habit of designating them as “paper money.” But this latter term was conceded to be but a mere fiction of speech and a bad use of language; for every intelligent person at once saw that a promise to deliver a commodity, or an acknowledgment of the receipt of, or a title to, a thing, could not possibly be the commodity or the thing itself, any more than a shadow could be the substance, or the picture of a horse a horse, or the smell of a good dinner the same as the dinner itself.
Nevertheless, as an instrumentality for transferring commodities used for money, and avoiding the loss and waste unavoidable in handling and transporting such commodities, the currency thus devised was a great invention, and being always represented by, or, as we may express it, covered with, the commodity—gold—which, of all things, fluctuates least in value, it perfectly answered the purpose of money, without actually being so. It also furnished another striking illustration of the superiority of the commodity gold to serve either as money or as an object of value for deposit, against which receipts or certificates of deposit might be issued to serve as currency; for if other valuable commodities, like cattle, corn, cloth, or coal, had been selected for a like purpose, the bank would have been obliged to erect large pens, sheds, and warehouses for the storing of the deposits; and, let them be guarded ever so carefully, their value or purchasing power would, after a time, rapidly diminish from natural and unavoidable causes.
A shadow is not a substance.A shadow is not a substance.
A shadow is not a substance.
The value of most commodities, even in a perfect condition, furthermore differs so much by reasons of mere locality, that there could be no possible uniformity in the value of the receipt for the deposit of one and the same article, issued by banks in different places, to serve as currency; the value or purchasing power of a ton of coal, or a fat ox, being one thing at the mouth of a coal-mine or on a prairie stock-farm, andquite a different thing ten, twenty, or a hundred miles distant. But in the case of gold, the space needed to store up what represents a vast value is very small, while the value or purchasing power of gold not only is, but is certain to remain, on the average, very constant all the world over.3
1Historically, bills of exchange probably originated with the Jews of the Middle Ages, who, ever liable to persecution, adopted a system of drafts, or written orders, upon one another, which each agreed to honor and pay to the person named in the draft.2It was in this manner that the first bank of which we have any record originated in 1171, namely, the Bank of the Republic of Venice. Venice in that year was at war and needed money. The Council of Ten, or the Government, called upon the merchants to bring in their gold or coin into the public treasury, and gave credit on the books of the state for the amounts so deposited; which credits carried interest (always promptly paid) at the rate of four per cent. per annum. Soon after the establishment of this bank one of the depositors died; and it becoming necessary to distribute his estate among five children, his bank-credit was divided into five portions and transferred to five new owners. A system of transferring bank-credits was thus introduced, and proved so useful that in a brief time the merchants adopted it very generally as a means of paying balances in all great business transactions. The banks of Amsterdam and of Hamburg were also subsequently established on substantially the same basis, and are doing business to-day successfully. The Bank of Venice did business for five hundred years; during which period the state was prosperous, and there were few failures among the mercantile classes.3If to any it may seem puerile and unnecessary to enter into such explanations, it may be well to remind them that one of the schemes for a new currency, which has of late found some earnest advocates in the United States, is that of Josiah Warren, of Ohio, who proposed that currency “should be issued by those men, women, and children who perform useful service”—i. e., grow corn, mine coal, catch cod-fish, pick up chestnuts and the like—“but by nobody else;” such results of service being deposited in safe receptacles, and having receipts of deposit issued against them to serve as “equitable money.” A further axiom of Mr. Warren was, “that the most disagreeable labor” (not the most useful) “is entitled to the highest compensation;” and, therefore, inferentially entitled to issue the most money. A specimen of this equitable money before the writer reads as follows:The most disagreeable labor is entitled to the highest compensation.$1.00Cincinnati, Ohio.Due to Bearer,EIGHT HOURS’ LABOR,In Shoe-making, or a Hundred Pounds of Corn.William Morton.No. —, F—— Street.Time is Wealth.Of course, to make this money equitable, and its issue, as claimed, “the satisfactory solution of the great problem of labor and capital,” there must be some presupposed equitable relation between eight hours of shoe-making and a hundred pounds of corn. But one hundred pounds of corn in Illinois are the result of only a quarter as much labor as a hundred pounds in New England; and what comparison is there between eight hours’ work of a skilled mechanic and that of a mere cobbler in making shoes? or of the man who performs a disagreeable, slavish piece of work, and of the genius who invents or makes a machine that makes this disagreeable work unnecessary?E. D. Linton, of Boston, one of Warren’s most eminent disciples, improves on Warren’s ideas, and proposes that the United States Government should prepare and issue a currency, which should read as follows:The United States will pay One Dollar to Bearer, on demand, in —— bushels of Illinois Fall Wheat, at United States No. 1 Store-house, No. 12 River Street, Chicago, Ill.This note is receivable for all debts due the United States.And the same inferentially in respect to pigs, coal, shoes, and the services of doctors, lawyers, and cooks. So, then, if the note is not to be on its face a lie, and the promise is to be actually performed on demand, the necessity will be absolute on the part of the Government of the United States to have store-houses for wheat at Chicago, pig-pens at Peoria, coal-mines or dépôts at Pottsville, and trained professionals ready on call to plead a case, preach a sermon, cure a cold, and cook a dinner; and all of these last must take their pay in pigs if required. But as a pig has one value at Peoria, and another value at almost every other place, the dollar’s worth of pig which the United States would pay might be a whole pig in one place, a half in another, and possibly only the snout in another.
1Historically, bills of exchange probably originated with the Jews of the Middle Ages, who, ever liable to persecution, adopted a system of drafts, or written orders, upon one another, which each agreed to honor and pay to the person named in the draft.
2It was in this manner that the first bank of which we have any record originated in 1171, namely, the Bank of the Republic of Venice. Venice in that year was at war and needed money. The Council of Ten, or the Government, called upon the merchants to bring in their gold or coin into the public treasury, and gave credit on the books of the state for the amounts so deposited; which credits carried interest (always promptly paid) at the rate of four per cent. per annum. Soon after the establishment of this bank one of the depositors died; and it becoming necessary to distribute his estate among five children, his bank-credit was divided into five portions and transferred to five new owners. A system of transferring bank-credits was thus introduced, and proved so useful that in a brief time the merchants adopted it very generally as a means of paying balances in all great business transactions. The banks of Amsterdam and of Hamburg were also subsequently established on substantially the same basis, and are doing business to-day successfully. The Bank of Venice did business for five hundred years; during which period the state was prosperous, and there were few failures among the mercantile classes.
3If to any it may seem puerile and unnecessary to enter into such explanations, it may be well to remind them that one of the schemes for a new currency, which has of late found some earnest advocates in the United States, is that of Josiah Warren, of Ohio, who proposed that currency “should be issued by those men, women, and children who perform useful service”—i. e., grow corn, mine coal, catch cod-fish, pick up chestnuts and the like—“but by nobody else;” such results of service being deposited in safe receptacles, and having receipts of deposit issued against them to serve as “equitable money.” A further axiom of Mr. Warren was, “that the most disagreeable labor” (not the most useful) “is entitled to the highest compensation;” and, therefore, inferentially entitled to issue the most money. A specimen of this equitable money before the writer reads as follows:
The most disagreeable labor is entitled to the highest compensation.$1.00Cincinnati, Ohio.Due to Bearer,EIGHT HOURS’ LABOR,In Shoe-making, or a Hundred Pounds of Corn.William Morton.No. —, F—— Street.Time is Wealth.
The most disagreeable labor is entitled to the highest compensation.
$1.00
Cincinnati, Ohio.
Due to Bearer,EIGHT HOURS’ LABOR,In Shoe-making, or a Hundred Pounds of Corn.
William Morton.
No. —, F—— Street.
Time is Wealth.
Of course, to make this money equitable, and its issue, as claimed, “the satisfactory solution of the great problem of labor and capital,” there must be some presupposed equitable relation between eight hours of shoe-making and a hundred pounds of corn. But one hundred pounds of corn in Illinois are the result of only a quarter as much labor as a hundred pounds in New England; and what comparison is there between eight hours’ work of a skilled mechanic and that of a mere cobbler in making shoes? or of the man who performs a disagreeable, slavish piece of work, and of the genius who invents or makes a machine that makes this disagreeable work unnecessary?
E. D. Linton, of Boston, one of Warren’s most eminent disciples, improves on Warren’s ideas, and proposes that the United States Government should prepare and issue a currency, which should read as follows:
The United States will pay One Dollar to Bearer, on demand, in —— bushels of Illinois Fall Wheat, at United States No. 1 Store-house, No. 12 River Street, Chicago, Ill.This note is receivable for all debts due the United States.
The United States will pay One Dollar to Bearer, on demand, in —— bushels of Illinois Fall Wheat, at United States No. 1 Store-house, No. 12 River Street, Chicago, Ill.
This note is receivable for all debts due the United States.
And the same inferentially in respect to pigs, coal, shoes, and the services of doctors, lawyers, and cooks. So, then, if the note is not to be on its face a lie, and the promise is to be actually performed on demand, the necessity will be absolute on the part of the Government of the United States to have store-houses for wheat at Chicago, pig-pens at Peoria, coal-mines or dépôts at Pottsville, and trained professionals ready on call to plead a case, preach a sermon, cure a cold, and cook a dinner; and all of these last must take their pay in pigs if required. But as a pig has one value at Peoria, and another value at almost every other place, the dollar’s worth of pig which the United States would pay might be a whole pig in one place, a half in another, and possibly only the snout in another.