With the Euro in crisis, it seems pertinent to peruse the old Journals to look at the evolution of money in general and early projections about how a collective currency might emerge and successfully operate.
“Money,” wrote Mr EP Neale in 1925, “has assumed various forms in different ages and in different countries and in different stages of civilisation.”
Among hunting peoples, few commodities were likely to be more universally acceptable than skin, he wrote. For pastoral peoples, cattle were generally accepted as money, and the word “pecuniary” developed – from the Latin word pecus meaning cattle.
“Such primitive moneys were by no means ideal however, as some forms of it needed to be fed and watered, otherwise it would die and cease to be money. And in times of lawlessness, such money could not be conveniently concealed about one’s person.”
As time progressed, some article of “universal desire” was needed to displace such forms of currency, wrote Neale.
“An article readily recognisable, not easy to counterfeit and beautiful to contemplate; rare and difficult of acquisition and therefore sought in unlimited quantities as a mark of distinction and ostentation; not subject to violent fluctuations of supply and demand and therefore reasonably stable in value over long periods of time.”
Unlike the cow-money of primitive times, it needed to be portable, durable, divisible without loss of value, and homogeneous. Such an article was found in the precious metals gold and silver.
Passing first from hand to hand in the form of bars or ingots, which had to be weighed and assayed on the occasion of each transaction, money was eventually stamped and certified by some private authority and later by the State.
On the subject of an international currency, Neale acknowledged the spirit of speculation especially likely to permeate business between merchants in countries with different currency standards.
An international currency, he wrote, would possess exceptional advantages. It would save trouble to travellers who would no longer need to exchange their money in each country. It would facilitate the understanding of international price lists, statistics and accounts. It would also save unnecessary coining and minting operations and finally, provide a satisfactory currency for “minor and half-civilised states”.
If this international currency was also the standard money of each country, rates of exchange could be abolished. Or alternatively, wrote Neale, each country might retain its own standard money for internal purposes, and use the international money for external payments and receipts.
“The responsibility of keeping the value of the international stable in terms of things in general would then fall on the international authority issuing it and the duty of each national authority would be to keep the value of its national money stable in terms of the international money...”
But how would such international money be brought into circulation? The international authority issuing the money might do so in exchange for gold. But what would then be the position of impoverished countries with no stores of gold?
While the international authority might issue it in exchange for various goods, there would be nothing to prevent any country from creating unlimited supplies of national money in order to obtain international money, he wrote.
“It seems the only way the international authority could obtain real control over the supplies of international money would be by issuing it on loan, and varying the amount of its loans in accordance with the movements of general prices.”
It would appear, wrote Neale, that proposals for an international money generally resolve themselves into devices for facilitating a new form of loan.
“But the framing of a wise loan policy is a difficult task which must be tackled on its merits, and which is not likely to be made easier by becoming entangled with sweeping projects of monetary reform.”
“While we are so far from having set up an effective international authority,” Neale concedes, “and while there are so many unhappy nations on the look-out for a new way to pay old debts, it seems likely that proposals for international money will have to wait for a season.”
An international currency would need not only an international authority like the League of Nations with financial resources, such as the League does not possess, but would also require control of all local currencies by the same authority.
“But a world in which the nations would submit to have their own currency regulated by an authority at Geneva is too far away from the present time to be worth speculating about.”
And, judging from the problems the Euro has been struggling with, it still is. But to look on the bright side, at least we do not need to feed our money or attempt to smuggle a cow about our person.
- Alexandra Johnson