• Choose a category
• All
• Classic-Fiction

By Root 1366 0

to find a single theorist who has devoted serious consideration to the fundamental problems of the value of money and credit without having referred to the peculiar circumstances in which notes and checks are used. That this recognition of the individuality of certain kinds of credit transactions has not led to the distinction of commodity credit and circulation credit is probably to be ascribed to certain accidents in the history of our science. The criticism of isolated dogmatic and economic-political errors of the Currency principle that constituted the essence of most nineteenth-century investigation into the theory of banking and credit led to an emphasis being placed on all the factors that could be used to demonstrate the essential similarity of notes and other media of bank credit, and to the oversight of the important differences that exist between the two groups of credit characterized above, the discovery of which constitutes one of the permanent contributions of the Classical School and its successors, the Currency theorists.

The peculiar attitude of individuals toward transactions involving circulation credit is explained by the circumstance that the claims in which it is expressed can be used in every connection instead of money. He who requires money, in order to lend it, or to buy something, or to liquidate debts, or to pay taxes, is not first obliged to convert the claims to money (notes or bank balances) into money; he can also use the claims themselves directly as means of payment. For everybody they therefore are really money substitutes; they perform the monetary function in the same way as money; they are "ready money" to him, that is, present, not future, money. The practice of the merchant who includes under cash not merely the notes and token coinage which he possesses but also any bank balances which he has constantly at his immediate disposal by means of checks or otherwise is just as correct as that of the legislator who endows these fiduciary media with the legal power of settling all obligations contracted in terms of money—in doing which he only confirms a usage that has been established by commerce.

In all of this there is nothing special or peculiar to money. The objective exchange value of an indubitably secure and mature claim, which embodies a right to receive a definite individual thing or a definite quantity of fungible things, does not differ in the least from the objective exchange value of the thing or quantity of things to which the claim refers. What is significant for us lies in the fact that such claims to money, if there is no doubt whatever concerning either their security or their liquidity, are, simply on account of their equality in objective exchange value to the sums of money to which they refer, commercially competent to take the place of money entirely. Anyone who wishes to acquire bread can achieve his aim by obtaining in the first place a mature and secure claim to bread. If he only wishes to acquire the bread in order to give it up again in exchange for something else, he can give this claim up instead and is not obliged to liquidate it. But if he wishes to consume the bread, then he has no alternative but to procure it by liquidation of the claim. With the exception of money, all the economic goods that enter into the process of exchange necessarily reach an individual who wishes to consume them; all claims which embody a right to the receipt of such goods will therefore sooner or later have to be realized. A person who takes upon himself the obligation to deliver on demand a particular individual good, or a particular quantity of fungible goods (with the exception of money), must reckon with the fact that he will be held to its fulfillment, and probably in a very short time. Therefore he dare not promise more than he can be constantly ready to perform. A person who has a thousand loaves of bread at his immediate disposal will not dare to issue more than a thousand tickets each of which gives its holder the right to demand at any time the delivery of a loaf of bread.