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solely to buy goods, either for its owner or for someone to whom he transfers it as a gift or as a means of settling an obligation. When no longer employed in one of these ways it has ceased to be a medium of exchange.

5. A STORE OF VALUE'

BY FRED M. TAYLOR

This function of money has its origin in two facts already touched upon in speaking of the medium of exchange; viz.: (1) that a necessary stage in the effecting of exchanges through money is the interval of waiting between the sale of goods for money and the use of the money to buy other goods, and (2) that this stage can usually be indefinitely prolonged at the will of the owner of the money. As a result of these facts our freedom of choice as to the time when we shall utilize our wealth is indefinitely increased. The products of today are sold today; but through the magic of money they satisfy the wants of next week or next month or next year. It sometimes happens that people sell things which will keep indefinitely and which they really want and will later buy back with the very money received from their sale, simply because they consider the money a safer form in which to keep their wealth during the interval. This is especially likely to happen in badly governed countries where property is insecure. But it also happens in well-governed countries if for any special cause temporary insecurity prevails. On the eve of a great war bonds and stocks are likely to be treated in this way. So in the midst of a disastrous war even a civilized nation may be in such desperate straits that people anticipate a confiscation of certain kinds of property and hasten to turn them into money as being more easily concealed. In such extreme cases as these it certainly seems legitimate to say that money acts as a storer of value. But even in the more ordinary cases, so long as the special object in the mind of the seller of goods is to get his wealth into a form which will keep, we may without serious impropriety describe the operation as a storing of value. Only we must not forget that money's storing value is not a work independent of its serving as a medium of exchange, but is merely the artificial prolonging or emphasizing of one of the three necessary stages in its mediating of exchanges.

I

Adapted from Some Chapters on Money, pp. 20-22. Published by the University of Michigan, 1906.

6. THE RELATION OF MONEY AND PRICES When we say that money serves as a common denominator or standard of values we mean that it is the one commodity with which or by which all others are compared. Now in comparing any given commodity with money it is of course necessary to take a certain definite quantity of such commodity and also a definite quantity of the monetary material. The quantity of money that has been chosen in the United States as the standard, or dollar, is 25.8 grains of metal, of which 23.22 grains is gold and the remainder copper alloy. To express the value of another commodity in terms of money, therefore, we always compare a certain quantity of it, as a pound, bushel, or yard, with 25.8 grains of standard gold. If a bushel exchanges for a dollar, we say its price is one dollar; while if it requires two dollars, or one-tenth of a dollar only, to make an even exchange, then we say the price is two dollars or ten cents.

While this universal statement of values in terms of price is of inestimable advantage, it nevertheless gives rise to problems of its own. The article chosen as a standard is itself a commodity and subject in consequence to fluctuations in value when compared with other commodities. The forces that may influence prices in general are numerous and the question of price levels is one of the most complex in the entire field of economics. But without going into any of the controverted questions we may nevertheless elucidate here a fundamental principle. If for any cause whatever the value of the standard should fall, it is obvious that the prices of all other commodities, assuming no change in them, would rise. And, conversely, if the value of gold should rise, the prices of other commodities would fall. Indeed, it is often stated that a fall in the value of gold is a rise in prices, since it is by means of rising prices that the fall in value manifests itself. At any rate this general price relation or equation is fundamental to monetary discussions.

Wherever time contracts are entered into the parties thereto face the possibility that the money which constitutes the legal means of payment may change in value, and at the expiration of the contract stand for a greater or less purchasing power in terms of other commodities. This uncertainty is ordinarily not of great importance for obligations of short duration; but there have been occasions when a fluctuating value of the standard money has utterly demoralized business-that based on short-time as well as that based on long-time contracts. It is for this reason that stability of value is always

emphasized as of the greatest importance in connection with the commodity chosen as money.

7. THE STANDARD FOR DEFERRED PAYMENTS1

We may now consider the third function of money, namely, to serve as a standard of deferred payments. Whenever a contract is made covering a period of time, within which serious changes in the economic world may take place, then difficulties may arise as to what is a just standard of payments. Various articles might serve equally well as a standard for exchanges performed on the spot, but it is not so when any one article is chosen as a standard for deferred payments. Without much regard to theory, the world has in fact used the same standard for transactions whether settled on the spot or whether extending over a period of time.

In order to work with perfection as a standard for deferred payments, the article chosen as that standard should place both debtors and creditors in exactly the same absolute, and the same relative, position to each other at the end of a contract that they occupied at its beginning. This implies that the chosen article should maintain the same exchange value in relation to goods, rents, and the wages of labor at the end as at the beginning of the contract, and it implies that the borrower and lender should preserve the same relative position as regards their fellow producers and consumers at the later as at the earlier point of time, and that they have not changed this relation, one at the loss of the other. This makes demands which any article that can be suggested as a standard obviously cannot satisfy. And yet it is a practical necessity of society that some one article should in fact be selected as the standard. The business world has thus been forced to find some commodity which-while admittedly never capable of perfection-provides more nearly than anything else all the essentials of a desirable standard.

8. DIFFERENTIATION OF MONETARY FUNCTIONS2

By W. STANLEY JEVONS

It is in the highest degree important that the reader should discriminate carefully and constantly between the four functions which money fulfils, at least in modern societies. We are so accustomed to

1 Adapted from Report of the Monetary Commission of the Indianapolis Convention (1898), pp. 92–93.

2

Adapted from Money and the Mechanism of Exchange, 1875, pp. 16-17. (D. Appleton & Co.)

use the one same substance in all the four different ways that they tend to become confused together in thought. We come to regard as almost necessary that union of functions which is, at the most, a matter of convenience, and may not always be desirable. We might certainly employ one substance as a medium of exchange, a second as a measure of value, a third as a standard of value, and a fourth as a store of value. In buying and selling we might transfer portions of gold; in expressing and calculating prices we might speak in terms of silver; when we wanted to make long leases we might define the rent in terms of wheat, and when we wished to carry our riches away we might condense it into the form of precious stones. This use of different commodities for each of the functions of money has in fact been partially carried out. In Queen Elizabeth's reign silver was the common measure of value; gold was employed in large payments in quantities depending upon its current value in silver, while corn was required by the Act 18th Elizabeth, c. VI. (1576), to be the standard of value in drawing the leases of certain college lands.

There is evident convenience in selecting, if possible, one single substance which can serve all the functions of money. It will save trouble if we can pay in the same money in which the prices of things are calculated. As few people have the time or patience to investigate closely the history of prices, they will probably assume that the money in which they make all minor and temporary bargains is also the best standard in which to register debts and contracts extending over many years. A great mass of payments too are invariably fixed by law, such as tolls, fees, and tariffs or charges; many other payments are fixed by custom. Accordingly, even if the medium of exchange varied considerably in value, people would go on making their payments in terms of it as if there had been no variation, some gaining at the expense of others.

B. Money, Capital, and Wealth

(1) THE UNIVERSAL LOVE OF MONEY
9. PROVERBS ON MONEY'

A man without money is a bow without an arrow.
A man without money is a ship without sails.

A thousand pounds and a bottle of hay

Are just the same at doomsday.

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A man without money is like a bird without wings; if he soars he falls to the ground.

Money does not get hanged.

Money is the best bait to fish for men with.

Money is the soul of business.

Money is a universal language, speaking any tongue.
If you have money, take a seat;

If you have none, take to your feet.

Mention money, and the world is silent.

Money answereth all things.

Money begets money.

He that hoardeth up money takes pains for other men.
He who hath both money and bread

May choose with whom his daughter to wed.

If a man's money be white, no matter if his face be black.
If you have money, you are wise; if not, you are a fool.

If you make money your god, 'twill plague you like the devil.
Give me money, not advice.

man.

God makes and apparel shapes, but it is money that finishes the

God send you more wit and me more money.

Hate, religion, ambition, all have their hypocrisies, but money applies the thumbscrew to them all.

But help me to money and I'll help myself to friends.

He that hath no money in his purse should have fair words on his lips.

Good manners and plenty of money will make my son a gentleman.
Money makes a man for ilka that.

One handful of money is stronger than two handfuls of truth.
Put not your trust in money, but your money in trust.

When money speaks, truth keeps silence.

Money is a sword that can cut even the Gordian knot.

IO.

MONEY AND HUMAN MOTIVES'

Nothing in use by man, for power of ill,
Can equal money. This lays cities low,
This drives men forth from quiet dwelling-place,
This warps and changes minds of worthiest stamp
To turn to deeds of baseness.

-SOPHOCLES

Compiled by Walton H. Hamilton.

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