This section is from the "The Science Of Wealth" book, by Amasa Walker.
Hence we must take that for a standard, which, on the whole and in the long-run, is subject to the least fluctuation. Of all objects of this kind, we shall see that the precious metals are the least liable to great and violent changes in value.
In examining the principle of barter, we were forced, by its practical difficulties, to accept the resource of a universal equivalent for all commodities. This, in its original form, is money. But the course of civilized industry has introduced several forms of such an equivalent, of which the money, by which men first escaped from the difficulties of barter, is only one. All these forms are classed as currency; and therefore, in discussing the instruments of exchange, next after barter we come to the subject of— Currency
This is a general term for all the contrivances by which society seeks to effect a general exchange of values, and discharge pecuniary obligations. There are four distinct kinds or species of currency, each differing from the others in important particulars.
1st, The first of these instruments is called money. Any article, which, having a universally recognized value in itself, all persons accept as an equivalent, or medium of exchange, and which, consequently, becomes the standard by which all other values are measured or determined, and in which all pecuniary obligations are expressed and discharged, is money. Being composed generally of the precious metals, it is often known as " hard-money currency," but is more properly a value currency. Real money is simply value in a form the most available for commanding all other values, a service which all will accept for any other kind of service, which measures all other services or values most conveniently.
2d, The second kind of currency consists of written promises, made usually by governments, to pay money at a distant or indefinite period, which nevertheless, by force of law or other circumstances, are accepted as money, and perform its general functions. The notes issued by the treasury of the United States, and familiarly known as " greenbacks," now (1865) in circulation, are of this description.
They form a strictly credit currency, but, in common parlance, are called paper money.
3d, A third description of currency is formed of written promises to pay specie on demand, issued in excess of the actual amount of specie, or money, in possession of the promisors absolutely held for the redemption thereof. These notes or promises are generally issued by corporations, called banking institutions, and circulate, while current, as money, performing all its functions. This is called a MIXED CURRENCY.
4th, A fourth kind of currency consists of written promises, payable on demand, issued by responsible parties, for the payment of which, in full, the specie is actually held in trust by the promisors. As such a currency is precisely adapted to all the wants of the trading and business classes, and fully combines convenience with safety, the two great desiderata, it is with great propriety called a mercantile currency.
Of the four kinds of currency, it will be observed, that two, the first and fourth, are classed as value currency; the second, as credit; the third, as mixed, consisting of value and credit.
The following is a brief recapitulation of the different kinds of currency : —
I. Money...... i.e. . Specie.
II. Credit currency . . . i.e. . Promises without specie.
III. Mixed currency . . . i.e. . Promises with part specie.
IV. Mercantile currency . . i.e. . Promises with full specie.
After this statement and classification of the different kinds of currency, it is proposed to examine each in detail, and determine their several characteristics, and also the influence of each upon the industrial interests and general welfare of mankind.
No subject is more involved in mystery and uncertainty in the popular mind than that of currency. This arises, principally, from the fact, that the different kinds are confounded, and the whole matter thereby rendered incomprehensible. The general use of mixed-currency notes, which, to a superficial observer, seem to possess all the attributes of money, has a tendency to produce this result.
To obtain a clear and intelligent view of the subject, it is therefore quite necessary, that we divest it of all its usual environments and associations, and, for the time being, even of the forms and terms with which we are familiar, and regard the question as abstractly as possible.