Money or the medium of exchange has not always been gold or silver, nor even always metals. Only two hundred years ago in China pieces of silk had the same value as money. About three hundred years ago the red Indians in the United States had skins as money, and gave away equal weights of gold for glass and considered they had made a good bargain with the white settlers. In some parts of Africa even to-day cowries are the medium of exchange and in such places gold has practically no exchangeable value; in this connection I might as well mention that cowries formed the medium of exchange in some parts of China, even as late as the latter half of the eighteenth century.

With further progress in civilization and further accentuation of division of labour the nature, the meaning and the value of what is commonly known as money also changed considerably. When the trade was confined to a circuit of villages, say, within a radius of twenty miles, the use of money was not always imperative or to the best advantage of everybody. If the individual has a small quantity of wheat and is in need of cloth, it is not advantageous to transfer it first into money and then buy the cloth; under normal conditions he could always find a number of people holding cloth who are as much in need of wheat as he is of cloth; in such cases, therefore, it is to the advantage of both parties to engage in direct barter. In the early stages of civilization the use of money is avoided as much as possible and only resorted to when it is absolutely necessary. The reason is obvious.

Money as money had very little value in the early stages of civilization, principally because, in contrast to the position of to-day, the luxuries that one needed and could command were extremely few. Even when there was inter-village and inter-urban trade this was of very small proportions, because the bulk of whatever business there was was effected through the medium of barter. The next stage was when circumstances induced the people of the village or town to produce more than they could sell. It happened that on many an occasion, through some special fertilizer or effort on the part of individual cultivators, the total quantity of wheat growing in a village was much more than it could use or dispose of. As there was no concerted effort at any period in ancient times, it was out of the question that cultivators could then combine to restrict the output. Consequently the only alternative to over-production - which was not an uncommon occurrence - was to find fresh markets. It was not always possible to procure in exchange for surplus produce the commodity used in that village; the holders of wheat compromised, therefore, by taking some article or other which was a speciality of the new market in which they ventured - the result being that they brought into the village at least one article of luxury. The history of civilization has been that the further the progress the more the increase in luxury. If a village or town was industrious it could produce increased quantities, and as a consequence was able to buy its necessaries as also a great deal of luxuries. Even at this stage the progress made was far short of the normal conditions of to-day. A primitive town or village might have enough produce to buy all the necessaries and also the luxuries that could be thought of, and still have more left in its hands. It could not keep the produce indefinitely, nor could it trust the neighbouring markets with the produce and take only promises to pay. The situation was then met by the buyers and sellers agreeing upon a certain article as a medium of exchange. That means that where a buyer has not got any product which the seller needs and where the stress of circumstance necessitates the completion of a sale, the buyer gives, in exchange for the produce he takes, some article, that would be able to procure whatever article the seller needs within a certain radius. In other words the buyer gives the seller "money," with which the latter could buy anything that he wants at any time suitable to him.

This explains the oft-repeated statement that money has no intrinsic value. The value of money is gauged by its capacity to buy and its capacity to remain, other things being equal, with as little change as possible. If in a country where, for argument's sake, the economic and industrial condition remains practically without change, a certain quantity of money is able to buy ten bushels on one day and only eight bushels on the next, the inference is that the currency of such country leaves a great deal to be desired. The primary object of having money is to have a fixity of value; and all efforts in the direction of currency reform, ever since mankind began to have money, were directed towards obtaining such fixity. Even as late as only a hundred years ago the success achieved in this direction was absolutely nil. I do not propose to enter into a detailed discussion of the history of currency; but a few general observations as to why the fixity of value in money, which was admitted to be a good thing in the abstract, was not possible of achievement, may help towards understanding the position in China. Bad as are conditions in China to-day, with its several provincial currencies, the position is not half as bad as France in the early decades of the nineteenth century, or Germany even as late as 1860. The whole area of what now composes the federation of Germanic states is not more than the area of Kiangsu and Anhui put together. Yet while the total of the different currencies prevalent in Kiangsu and Anhui was never more than 30 the Germanic states had over 70 different currencies. The question in China to-day, or in European countries in the past, has always been one of profit not only in the exchange of commodities for commodities but also in that of commodities for money. If the produce is taken from one market to another and if the markets have different currencies the holder of the produce naturally expects to obtain the best value for his commodities and also for the money that he receives. It must also be understood that only fifty years ago in Europe the different markets were practically independent of each other. While wheat may be selling at fifteen shillings a bushel in Dresden the value in Odessa is probably a shilling; in the former place scarcity increases the price abnormally while in the latter place plenty brings down the price. At present transportation is easy and cheap, and it is always the case that if in one place the price of a certain produce is high that market attracts the attention of other markets where the price of the same commodity is cheap. Large quantities are shipped immediately to the place where there is scarcity - the result being the levelling down of prices.