🚀 go-pugleaf

In a recent posting I pointed out that in a recent issue of _The Economist_ 
(26 November 1994 pages 25-30) there was an article article entitled
_Electronic money: so much for the cashless society_ which discussed e-cash
and the future of the Internet.

Since the invention of coinage there has been only one comparable major
change in the form of money used and that had a dramatic effect on
society as the following quotations show.
 
"Technical improvements in the media of exchange have been made for
more than a millenium.  Mostly they have been of a minor nature, but
exceptionally there have been two major changes, the first at the end
of the Middle Ages when the printing of money began to supplement the
minting of coins, and the second in our own time when electronic
money transfer was invented... The first stimulated the rise of banking,
while the second is opening the way towards universal and instantaneous
money transfer in the global village of the twenty-first century."
                                                              
"One of the most significant but insufficiently noted results of these
two major kinds of invention is the fundamental reduction they bring
about in the degree of governmental monopoly power over money.  When
coins were the dominant form of money, monarchs were jealous of their
sovereign power over their royal mints.  Paper money allowed banks to
become increasingly competitive sources of money, a development which
led not only to significant macro-economic changes but also facilitated
contemporary revolutionary constitutional changes.  It was no accident
that the Whigs, who supported the limited constitutional monarchy of
William and Mary were prominent in promoting the Bank of England."
                                                            (page 646)

"Similarly in the era of electronic banking `national' moneys are
becoming increasingly anachronistic as millions of customers,
irrespective of their country of domicile, are eagerly offered a
variety of competing financial institutions in a variety of competing
currencies.  They are spoiled for choice - and national money monopolies
are thereby also being `spoiled', in the sense of being reduced in
effectiveness.  The monetary authorities always try to reassert their
monopolistic power - in economic jargon, to make sure that money is
exogenously created - as opposed to money supplies produced elsewhere
by the working of market forces - or `endogeneously' as the economists
describe the process."
                                                    (pages 646-7)

"The fact that more than half of the total money supply was now being
created, not by the nint under the dictate of the monarch, but rather
by the London money market and provincial bankers gave rise to the
most profound constitutional consequences.  First, in order to carry
out his more burdensome civil and military duties, the monarch, after
a painful but vain struggle, had been forced to call parliaments annually.
Secondly because of the state's need to supplement taxes regularly and
substantially with various forms of short-, medium- and long-term
borrowing, the state had been forced to take into account the views and
interests of the moneyed classes and the nature of the institutions 
which its borrowing had very largely brought into being.  The national
debt not only created the Bank of England but also virtually created
the London money and capital markets in recognizably modern form long
before an equity market in industrial shares became of importance."
                                                            (page 280)

"For the first time in history money was being substantially created,
not ostentatiously and visibly by the sovereign power, but mundanely
by market forces..."
                     (page 281)

All the above quotations are from:

Davies, Glyn _A history of money from ancient times to the present day_
Cardiff: University of Wales Press, 1994.  ISBN 0 7083 1246 2.

In the final chapter of the book the question of "free trade in money
in a global cashless society" is considered.  The economist Friedrich Hayek
advocated the "de-nationalisation" of money i.e. the removal of all legal
obstacles preventing individuals using whatever form of money they wanted.
In that way, so he claimed, the market would produce the best forms of
currency.  Although Hayek was an important influence on many right wing
politicians, including Margaret Thatcher, no government has been willing to
go that far in giving up the state's control of money.  However, the Economist
article suggests that the advent of electronic cash could lead to privately
issued currencies competing with official state currencies.

Roy.Davies@exeter.ac.uk