Of Money as a Medium of Exchange
166. In the earlier stages of societies the interchange of the few commodities required was conducted by barter, but as soon as their wants became more varied and extensive, the necessity of having some common measure of the value of all commodities— itself capable of subdivision—became apparent: thus money was introduced. In some countries shells have been employed for this purpose; but civilized nations have, by common consent, adopted the precious metals.(1*) The sovereign power has, in most countries, assumed the right of coining; or, in other words, the right of stamping with distinguishing marks, pieces of metal having certain forms and weights and a certain degree of fineness: the marks becoming a guarantee, to the people amongst whom the money circulates, that each piece is of the required weight and quality.
The expense of manufacturing gold into coin, and that of the loss arising from wear, as well as of interest on the capital invested in it, must either be defrayed by the State, or be compensated by a small reduction in its weight, and is a far less cost to the nation than the loss of time and inconvenience which would arise from a system of exchange or barter.
167. These coins are liable to two inconveniences: they may be manufactured privately by individuals, of the same quality, and similarly stamped; or imitations may be made of inferior metal, or of diminished weight. The first of these inconveniences would be easily remedied by making the current value of the coin nearly equal to that of the same weight of the metal; and the second would be obviated by the caution of individuals in examining the external characters of each coin, and partly by the punishment inflicted by the State on the perpetrators of such frauds.
168. The subdivisions of money vary in different countries, and much time may be lost by an inconvenient system of division. The effect is felt in keeping extensive accounts, and particularly in calculating the interest on loans, or the discount upon bills of exchange. The decimal system is the best adapted to facilitate all such calculations; and it becomes an interesting question to consider whether our own currency might not be converted into one decimally divided. The great step, that of abolishing the guinea, has already been taken without any inconvenience, and but little is now required to render the change complete.
169. If, whenever it becomes necessary to call in the half-crowns, a new coin of the value of two shillings were issued, which should be called by some name implying a unit (a prince, for instance), we should have the tenth part of a sovereign. A few years after, when the public were familiar with this coin, it might be divided into one hundred instead of ninety-six farthings; and it would then consist of twenty-five pence, each of which would be four per cent. less in value than the former penny. The shillings and six-pences being then withdrawn from circulation, their place might be supplied with silver coins each worth five of the new pence, and by others of ten-pence, and of twopence halfpenny; the latter coin, having a distinct name, would be the tenth part of a prince.