The record-union., 1894-03-05
EXCHANGE AND MONEY.
Professor PIehn Discusses This Very
important Subject.
His Eighth Lecture Of the University
Extension Course-The Rise
and Fall of Silver.

of the University Extension ASSOCIATION.
The attendance was good, and the audi
ence was deeply interested.
Exchange, said the speaker, is so
natural resultant of the division OF
labor and so characteristic Of our modern
social and industrial organization that
many writers have tried to call the sci
ence of economics the science OF eX-
change.
How it arises is very easily seen. In
the division of labor one man cannot pro-
duce all he needs nor use himself all he
produces. For the rest he must depend
on his neighbor.
While society and high state of in
dustrial organization would be possible
without exchange, yet for modern So
ciety as at present organized it is abso-
lutely necessary. Some early societies
organized on a communiStic basis had nc
use for exchange, but they did not stand
long. A good example is the history OF
Virginia in the early days. Dishonesty
seems 10 be the regularly recurrent cause
of failure.
Yet exchange has obvious advantages.
The old Yankee idea Of trade was that
what one fellow gained the other lost.
This is erroneous, because, II true. ali eA-
changes would soon cease. Both partles
to a trade can and invariably are the
gamers.
WHAT IS VALUE?
The measure of things exchanged is
value. Value may be defined as an estl-
mate of the utility of the article offered as
compared with the Importance of the
has often been treated as if il were spe-
cial kind of value. 1t is, however, really
only one manifestation of value. To be
valuable in this way an article must, OF
course, be susceptible to exchange as we'll
as useful. Each case of exchange implies
two persons and two fourfold estimates.
each party valuing what he offers and the
suggested return, at the same time surmis-
ing how both are valued by the other. The
final value fixed for the exchange will be
that of the man who Is least willing to
make the exchange.
Price is value expressed in money.
The more nearly perfect competition be-
comes, the more clearly will price ten6 TO
conform to the absolute highest cost of
production. Such perfect competition is,
however, rarely found.
The early forms of exchange, where the
different goods were bartered one against
the other, involved many disadvantages.
Goods were not always equivalent in
value nor easily divisible. 1t was not al
ways possible to find the person who had
to sell what you wanted and wanted what
you had to sell. The result was that men
early hit upon some one commodity OF
universal susceptibility and made all ex-
changes for that. Not that this COM
modify WAS taken in order to consume it,
but because the taker knew he would
have no difficulty in passing it on to some
one else.
Many things have served in this capa-
oil no I'D
Cattle, skins. slaves, corn, tobacco, nails,
beads, cloth. have all served as money at
different times. 1t is probable that
GOLD AND SILVER
First came into use in this capacity be-
cause of their value for personal adorn-
ment. But it was soon seen that they had
special advantages. Comparatively high
value in small bulk; divisibility, so that
any requisite amount could be paid with
out loss of value; durability, impressi-
bility so that the value Of each piece could
be stamped upon it, were some of their
qualities. Comparative steadiness in
value, owing to the size and regularity
of the demand, and the large quantity al
ready in use, and number of other
things also added to their usefulness in
this relation.
Modern currencies involve something
more than the simple principles OF early
currencies. Base and subsidiary coins
exist, the former being the real measure
of value, the latter arbitrary subdivision
thereof. The coins are given forced cir
culation by being made legal tender
The question arises as to
WHAT SHOULD BE THE BASE, THE METAT,
OR BOTH?
That system in which the right of free
legal tender and unlimited coinage are
accorded to both metals at some fixed
ic IL ouf y o1I
these rights are accorded one metal only
or are only in part accorded the second is
known as full or partial monometallism,
If bimetallism be the policy chosen, the
ratio between the two metals in the cur
rency must be fixed.
The recent changes in the value of sill
yer form very remark able phenomenon
To understand it we shall have to go back
a long way in history. Before the open
ing OF the mines of Potosi, in l545, the
value of silver had been high and the rel
ative value about one to eleven. That is
one ounce OF gold would buy eleven
ounces of silver
After that the amount of both gold and
silver rapidly increased. Money, too, in
creased in consequence, and the ratio
soon changed. While it is impossible to
say definitely that the value of the two
metals together has changed, since we
have no accurate means of measuring
their value, because all other commodi-
ties f1uctuate more in value than they,
yet it is fair to assume that both rank in
value in proportion to the increase in
amount. But what is of greatest interest
is the relative value. That we can know
accurately. Silver fell slowly in terms of
gold from l545 to 100, when the ratio be-
came to 10, at which it remained, with
trit1ing fluctuations. for 20 years.
The lecturer then traced the attitude of
different nations to the two metals
through all this period. In lS4S began
great discussion, which has been well
called the Battle of the Standards. Those
who favored gold monometallism argued
that gold was the better medium for large
payments, because of its higher value.
That modern civilized nations dealt
mostly in large payments. That it would
be impossible to keep both metals at par
at any ratio selected, because the market
rates charged, and that metal which was
cheapest would be chosen by creditors as
the basis of payment and the ratio go out
of use. Those who favored bimetallism
denied these propositions and urged that
the greater steadiness in value attainable
by their system could more than offset
any possible cost that might be entailed.
In 1865 the Latin Union was formed
under the leadership of France to put
bimetallism into practice, and in 1867
a monetary conference was called by
those who favored bimetallism with a
view 10 inducing other countries to adopt
the same policy. 1t had the unexpected
result of starting war on silver. Shortly
after that Germany went from silver to
gold standard, thus at once lessening
the demand for silver and increasing that