1. Definitions Of Money

As the business of banking relates to the keeping and use of money, it is needful to start with a clear idea of money itself. The definition that embodies the general intelligent idea is, any metal stamped by the government for monetary use, and also any representative or substitute that may be given in exchange for commodities or for paying debts.

To this a broader and more abstract definition may be given: Any metal or other thing which possesses general purchasing power. This definition may be made luminous by an illustration. A is a chairmaker and wants shoes; B is a shoemaker and wants chairs. Each exchanges his products tor those of the other, and the wants of both are satisfied. If A could always exchange the things he did not need for the things he needed, with others who wanted them and could give A what he- wanted in return, there would he no use for money in exchanging commodities. In most cases, however, persons can not thus exchange directly. What, then, can they do? If there is anything which all desire, it is practicable for persons to exchange what they do not need, the hatter, his hats for example, for the thing desire 1 by ail, and afterwards exchange this for the chairs he does want. Anything that all desire may serve as money; and many things have been thus used by different nations. It should be remembered that the hatter when exchanging his hats for money desired chairs quite as much as he did when he exchanged his hats directly for them; and he would never make two exchanges, first his hats for money and afterward this for chairs, if he could get them by direct exchange. Usually, he can not exchange hats for chairs directly, and so the money taken in the first exchange - the medium that he intends to use for getting chairs - is in truth a great economizer of his time, as he can readily exchange this for them. Another fact is clearly seen in this transaction, - the hats possess only a limited purchasing power; in other words, not every one wants them and is willing to give money for them ; while money possesses a general purchasing power; almost every one is willing to take it in exchange for other things. Money, therefore, is a go-between to get other things. No one wants it as an end, as a permanent possession. So the millions of mankind are eagerly trying to get money, not to retain long, but to use as a means for getting the things they need to eat, wear, or keep.

2. Principal Metals Used As Money, And Reasons For Using Them

The principal metals used as money are gold and silver. The reasons why they have been thus used from the earliest times may be briefly stated.

a. Their Prior Use as Ornaments. Before they were ever used as money they satisfied desire; were used for personal adornment. If the question be asked, why did persons ever come to use them as ornaments? one may ask, why have persons ever used diamonds, shells, or other things for this purpose? The fact that they were thus used prior to their use as money is enough for us to know here. This, therefore, is a superadded use or function of the metals. We may also remark that this is now the most important use made of them.

b. They contain a Large Store of Value in a Small Space. The desire for them has always been so great, and they have been so scarce, compared with other metals, that poisons have always been willing to give much in exchange for a small quantity; and consequently we say, in ordinary speech, they are very valuable.

c. Their Supply is sufficient. Though scarce, enough for a small quantity to possess great value, the quantity in the aggregate is ample to serve as money. Diamonds are still more valuable, but they could not well serve as money; for, besides the mechanical difficulties in preparing them for circulation, which will readily come into the mind of the reader, the quantity is insufficient for monetary uses.

d. Their Steadiness of Value. The value of these metals has been steady, compared with other things, and this is a most desirable quality for a thing to possess which is to serve as money. It is true that within a few years the value of silver has greatly declined, but previously its value had been quite as steady as that of its sister metal. Both have preserved a greater uniformity of value dining many centuries than almost anything else within the domain of human use and exchange.

The importance of using as money something possessing permanent value is to prevent undue gain or loss to the re-ceiver or possessor. Suppose that the value of gold greatly varied, what would happen? if there were a great rise in its value, then the person who received it in exchange for his wheat, labor, or other commodities would be a great gainer; in other words, would get more for his gold when exchanging it afterward for chairs, shoes, and other things desired than he would receive in exchange for his wheat directly at the time of receiving gold. On the other hand, if there were a decline in its value, he would have received fewer chairs, shoes, and the like than he would had the exchange been made at an earlier period.

The risk of gain or loss is greatest in operations that are to extend over long periods. Thus if A borrows $100,000 in gold which is not to be repaid for ten years, there is a greater risk that the gold in which payment is to be made will undergo some changes, be worth more or less at the end of ten years than at the end of five. Suppose a loan is made to a farmer which is to be repaid at the end of five years. Furthermore, at the time of making the loan wheat is worth one dollar per bushel, measured by gold, but at the time of its repayment, measured by the same standard, is worth only half as much. He must sell twice as much grain to obtain the gold required to repay his loan as the lender could have bought with his gold had he been a wheat purchaser instead of a money lender to the farmer. The borrower, therefore, has been a heavy loser, and the lender a corresponding gainer by the rise in the value of the yellow metal.

e. They can readily be refined and alloyed. Gold and silver fulfill a monetary function more adequately than any other metals or other things which have been used, because all the mechanical requirements in preparing them for this use can be most successfully met. All impurities can be readily removed and a uniform quality obtained. They can be readily tempered or hardened by the mixture of a small quantity of copper, and thus endowed with better wearing power. Their composition also admits of stamping, or of marking denominations, without much cost. If the metals were too hard, this could not be done; if they were too soft, then a double defect would attend their circulation: their names would wear off, and they might lose their identity; and they would fall below legal weight and lose their legal existence. They might, indeed, continue to circulate either through stealth or ignorance, but they would have no clear legal right to be passed and received.