I attempted to send this message to the list last Friday but it
did not seem to get through - at any rate it is not in the pen-l
archives. My apologies to anyone who gets two copies.
A new, 700 page book on the history of money has just been published.
The author, an emeritus professor of the University of Wales, having
retired does not have direct access to Internet and therefore I am
posting these details to the list. (I should point out that I am
related to the author - he is my father). The reference is:
Davies, Glyn _A history of money from ancient times
to the present day_ Cardiff: University of Wales Press,
1994. 696 pages. ISBN 0 7083 1246 2.
Price #39.95 (Pounds Sterling).
Rather than attempt to summarize the contents of the book, which
which is extensive in its geographical as well as its historical
scope, I have simply appended the detailed table of contents to
this message.
However, to convey some of the principal arguments of the book I
have selected a number of quotations on a subject with lessons for
us today, namely inflation.
One of the author's main themes is the problem of simultaneously
trying to control the _quality_ and _quantity_ of money. He
discusses many cases of inflation over the past couple of thousand
years and identifies several (not necessarily mutually exclusive)
causes. These are:
1. Conflict between the Interests of Debtors and Creditors.
The history of money is one of "unceasing conflict between the interests
of debtors, who seek to enlarge the _quantity_ of money and who seek
busily to find acceptable substitutes, and the interests of creditors,
who seek to maintain or increase the value of money by limiting its
supply, by refusing substitutes or accepting them with great reluctance,
and generally trying in all sorts of ways to safeguard the _quality_ of
money." (pages 29-30).
"...it is of the utmost significance to realize that because the
monetary pendulum is rarely motionless at the point of perfect
balance between the conflicting interests of creditors and debtors,
so money itself is rarely `neutral' in its effects upon the real
economy and upon the fortunes of different sections of the
community..." (page 32)
"...the market gives no priority to posterity or the poor." (page 654)
"In the normal course of events money is rarely `passive' or
`neutral' while the safe haven of equilibrium on which so much
economists' ink has been spilled...is equally rarely attained." (page 655)
2. The Fungibility of Money
"Money is so useful - in other words, it performs so many
functions - that it always attracts substitutes: and the
narrower its confining lines are drawn, the higher the premium
there is on developing passable substitutes." (page 25).
In a discussion of the invention of money the author says:
"Money has many origins - not just one - precisely because it
can perform many functions in similar ways and similar functions
in many ways. As an institution money is almost infinitely
adaptable." (page 27).
"Money is by its very nature dynamically unstable in volume and
velocity, in quantity and quality." (page 29).
Money's adaptablility is chameleon-like. "Money designed for
one specific function will easily take on other jobs and come
up smiling. Old money very readily functions in new ways and
new money in old ways: money is eminently fungible." (page 29).
3. The Population Explosion
The author lays considerable stress on the effects of population
changes on attempts to control the quality and quantity of money,
pointing out that the population explosion of our times "has
been a virtually silent explosion as far as monetarist literature
is concerned. Thus nowhere in Friedman's powerful, popular and
influential book _Free to Choose_ is there any mention of the
population problem, nor the slightest hint that the inflation
on which he is acknowledged to be the world's greatest expert
might in any way be caused by the rapidly rising potential and
real demands of the thousands of millions born into the world
since he began his researches." (page 5).
Population pressures have had an effect on inflation in previous
ages too, e.g. the so-called "Price Revolution" in England in
the period 1540-1640, and the author also discusses the effect
of the _reduction_ in population caused by the ravages of the
Black Death.
4. The Military Ratchet
"The military ratchet was the most important single influence
in raising prices and reducing the value of money in the past
1,000 years, and for most of that time debasement was the most
common, but not the only, way of strengthening the `sinews of
war'." (page 643)
The financial consequences of Alexander the Great, the rise and
fall of the Roman Empire, the Viking assault on England, the
Norman Conquest, the Crusades, the Hundred Years War between
England and France, the Spanish conquest of Mexico and Peru,
the aftermath in Britain of the Napoleonic Wars, the U.S. Civil
War, and the financing of the two World Wars are all treated.
The importance of war as a cause of inflation increased with the
adoption of paper money in the west.
"When modern paper money release prices from their metallic
anchors, the military ratchet began to be seen at its most
powerful...The `Continentals' of the new USA fell in value
by the end of the Revolutionary War to one-thousandth of
their nominal value, a process repeated by the Confederate
paper which similarly became worthless by the end of the
Civil War. The assignats of the French Revolution and the
hyper-inflation of the German mark between 1918 and 1924
are simply among the best known of hundreds of examples of
war-induced inflation." (page 644)
5. The Developmental Money Ratchet
"Second only to war as an engine of inflation is the general
acceptance of the need for an ever-expanding supply of money
in order to facilitate economic development, a belief which
in a weaker and vaguer form long preceded the Keynesian
revolution, though it was the Keynesian ratchet which acted
as a strong causative factor in the unusually high peacetime
inflations of the second half of the twentieth century." (page 644)
Glyn Davies cites Sir William Petty and John Law, "the Keynes
of the early eighteenth century", in this regard and discusses
the fiasco of the Mississippi Bubble.
However, he also points out that in certain circumstances this
ratchet can work and says "however much the Keynesian revolution
may be condemned for its long-run consequences of high and
stubborn inflation, Keynes's enormous success in providing cheap
finance for the Second World War and in being largely responsible
for the inestimable benefits of full employment for the first
post-war generation, i.e. for its short- and medium-term benefits,
should not be forgotten." (page 645).
As a result of the above-mentioned factors the supply of money
tends to alternate in every age between too little and too much,
with the pendulum swinging from excessive concern with the _quality_
of money to the opposite extreme of an inflationary, excessive
_quantity_ of money.
This is the basis of the author's Pendulum Meta-Theory of money, i.e.
a "general theory comprising sets of more limited, partial theories,
which spring out of the special circumstances of their time. The
enveloping pendulum or metatheory also explains why the usual theories
of money, despite being so confidently held at one time, tend to change
so drastically and diametrically (and therefore so puzzlingly to the
uninitiated) to an equally accepted but opposite theory within the
time span appropriate to historical investigation." (page 31).
In support of these claims Glyn Davies ranges widely, both
chronologically, from the dawn of civilization about 3000 BC
onwards, and geographically from China to the New World, Denmark
to Fiji. The development of financial policy and institutions
in Britain, the United States, France, Germany and Japan is
traced up to the present day. (The treatment of Britain and
the United States is particularly detailed). There is also a
chapter on the problems of the Third World.
Thus a huge range of evidence regarding the causes of changes
in both the _quality_ and _quantity_ of money is surveyed and
the author concludes with the words of the Russian novelist
Dostoevsky that:
"Money is coined liberty."
Author: Emeritus Professor, University of Wales: Economic
Adviser, Julian Hodge Bank Ltd. Former positions: Sir Julian
Hodge Professor of Banking & Finance and Head of the Department
of Economics & Banking, UWIST, Cardiff; Senior Economic Adviser
to the Secretary of State for Wales; Economic Adviser and
Director, Bank of Wales; Chairman Wales Careers Advisory
Council; Hon. Vice-President and Secretary Cardiff Business
Club; Senior Lecturer in Economics, University of Strathclyde.
Contents
Foreword by George Thomas, The Right Honourable Viscount
Tonypandy v
Dedication vii
Acknowledgements xv
Preface xvi
1 THE NATURE AND ORIGINS OF MONEY AND BARTER 1-32
The importance of money 1
Sovereignty of monetary policy 3
Unprecedented inflation of population 5
Barter: as old as the hills 9
Persistence of gift-exchange 11
Money: barter's disputed paternity 13
Modern barter and countertrading 18
Modern retail barter 21
Primitive money: definitions and early development 23
Economic origins and functions 27
The quality-to-quantity pendulum: a metatheory of money 29
2 FROM PRIMITIVE AND ANCIENT MONEY TO THE INVENTION OF
COINAGE, 3000-600 BC 33-64
Pre-metallic money 33
The ubiquitous cowrie 35
Fijian whales' teeth and Yap stones 36
Wampum: the favourite American-Indian money 38
Cattle: man's first working-capital asset 41
Pre-coinage metallic money 44
Money and banking in Mesopotamia 47
Girobanking in early Egypt 51
Coin and cash in early China 54
Coinage and the change from primitive to `modern' economies 57
The invention of coinage in Lydia and Ionian Greece 60
3 THE DEVELOPMENT OF GREEK AND ROMAN MONEY, 600 BC-AD 400 65-111
The widening circulation of coins 65
Laurion silver and Athenian coinage 67
Greek and metic private bankers 70
The Attic money standard 73
Banking in Delos 77
Macedonian money and hegemony 78
The financial consequences of Alexander the Great 81
Money and the rise of Rome 86
Roman finance, Augustus to Aurelian, 14 BC-AD 275 93
Diocletian and the world's first budget, 284-305 99
Finance from Constantine to the Fall of Rome 105
The nature of Graeco-Roman monetary expansion 108
4 THE PENNY AND THE POUND IN MEDIEVAL EUROPEAN
MONEY, 410-1485 112-75
Early Celtic coinage 112
Money in the Dark Ages: its disappearance and re-emergence 116
The Canterbury, Sutton Hoo and Crondall Finds 117
>From sceattas and stycas to Offa's silver penny 122
The Vikings and Anglo-Saxon recoinage cycles, 789-978 127
Danegeld and heregeld, 978-1066 130
The Norman Conquest and the Domesday Survey 1066-1087 133
The pound sterling to 1272 138
Touchstones and trials of the Pyx 143
The Treasury and the tally 146
The Crusades: financial and fiscal effects 152
The Black Death and the Hundred Years War 159
Poll taxes and the Peasants' Revolt 166
Money and credit at the end of the Middle Ages 168
5 THE EXPANSION OF TRADE AND FINANCE, 1485-1640 175-236
What was new in the new era? 175
Printing: a new alternative to minting 177
The rise and fall of the world's first paper money 180
Bullion's dearth and plenty 183
Potosi and the silver flood 187
Henry VII: fiscal strength and sound money, 1485-1509 189
The dissolution of the monestaries 193
The Great Debasement 197
Recoinage and after: Gresham's Law in Action, 1560-1640 202
The so-called price revolution of 1540-1640 211
Usury: a just price for money 217
Bullionism and the quantity theory of money 222
Banking still foreign to Britain? 232
6 THE BIRTH AND EARLY GROWTH OF BRITISH
BANKING, 1640-1789 237-82
Bank money supply first begins to exceed coinage 237
>From the seizure of the mint to its mechanization, 1640-1672 239
>From the great recoinage to the death of Newton, 1696-1727 244
The rise of the goldsmith-banker, 1633-1672 247
Tally-money and the Stop of the Exchequer 251
Foundation and early years of the Bank of England 254
The national debt and the South Sea Bubble 262
Financial consequences of the Bubble Act 266
Financial developments in Scotland, 1695-1789 271
The money supply and the constitution 278
7 THE ASCENDANCY OF STERLING 1789-1914 283-364
Gold versus paper... finding a successful compromise 283
Country banking and the industrial revolution to 1826 285
Currency, the bullionists and the inconvertible pound,
1783-1826 292
The Bank of England and the joint-stock banks, 1826-1850 304
The Banking Acts of 1826 305
The Bank Charter Act 1833 308
`Currency School' versus `Banking School' 310
The Bank Charter Act of 1844: rules plus discretion 313
Amalgamation, limited liability and the end of unit banking 315
The rise of working-class financial institutions 322
Friendly societies, unions, co-operatives and collecting
societies 322
The building societies 326
The savings banks: TSB and POSB 332
The discount houses, the money market and the bill on London 339
The merchant banks, the capital market and overseas
investment 344
The final triumph of the full gold standard, 1850-1914 354
8 BRITISH MONETARY DEVELOPMENT IN THE TWENTIETH CENTURY 365-454
Introduction: a century of extremes 365
Financing the First World War, 1914-1918 366
The abortive struggle for a new gold standard, 1918-1931 373
Cheap money in recovery, war and reconstruction, 1931-1951 382
Inflation and the integration of an expanding monetary
system, 1951-1973 395
A general perspective on unprecedented inflation,
1934-1990 395
Keynesian `ratchets' give a permanent lift to inflation 397
Filling the financial gaps 403
Stronger competition and weaker credit control 406
The American-led invasion and the Eurocurrency markets
in London 412
The monetarist experiment, 1973-1990 419
The secondary banking crisis: causes and consequences 419
Supervising the financial system 423
Thatcher and the medium-term financial strategy 429
EMU: the end of the pound sterling? 441
9 AMERICAN MONETARY DEVELOPMENT SINCE 1700 455-546
Introduction: the economic basis of the dollar 455
Colonial money: the swing from dearth to excess, 1700-1775 456
The official dollar and the growth of banking up to the
Civil War, 1775-1861 464
`Continental debauchery' 464
The constitution and the currency 466
The national debt and the bank wars 469
A banking free-for-all 477
>From the Civil War to the founding of the `Fed', 1861-1913 485
Contrasts in financing the Civil War 485
Establishing the national financial framework 488
Bimetallism's final fling 492
From gold standard to central bank(s), 1900-1913 497
The banks through boom and slump, 1912-1928 502
The `Fed' finds its feet, 1914-1928 502
Feet of clay, 1928-1933 507
Banking reformed and resilient, 1933-1944 510
Bretton Woods: vision and realization, 1944-1991 515
American Banks abroad 523
>From accord to deregulation, 1951-1980 528
Hazardous deposit insurance for thrifts, banks...and
taxpayers 533
>From unit banking to...balkanized banking 537
Summary and conclusion: from beads to banks without barriers 544
10 ASPECTS OF MONETARY DEVELOPMENT IN EUROPE AND JAPAN 547-92
Introduction: banking expertise shifts northward 547
The rise of Dutch finance 548
The importance of the Bank of Amsterdam 548
The Dutch tulip mania, 1634-1637 549
Other early public banks 552
France's hesitant banking progress 553
German monetary development: from insignificance to
cornerstone of the EMS 565
The monetary development of Japan since 1868 580
Introduction: the significance of banks in Japanese
development 580
Westernization and adaption, 1868-1918 581
Depression, recovery and disaster, 1918-1948 585
Resurgence and financial supremacy, 1948-1990 588
11 THIRD WORLD MONEY AND DEBT IN THE TWENTIETH CENTURY 593-638
Introduction: Third World poverty in perspective 593
Stages in the drive for financial independence 598
Stage 1: Laissez-faire and the Currency Board System,
c.1880-1931 600
Stage 2: The sterling area and the sterling balances,
1931-1951 604
Stage 3: Independence, planning euphoria and banking
mania, 1951-1973 607
Stage 4: Market realism and financial deepening, 1973-1993 613
The Nigerian experience 613
Impact of the Shaw-McKinnon thesis 616
Contrasts in financial deepening 619
Third World debt and development: evolution of the crisis 629
Conclusion: reanchoring the runaway currencies 636
12 GLOBAL MONEY IN HISTORICAL PERSPECTIVE 639-56
Long-term swings in the quality-quantity pendulum 639
The military and developmental money-ratchets 643
Free trade in money in a global, cashless society? 646
Independent multi-state central banking 649
Conclusion: `Money is coined liberty' 652
Bibliography 657-76
Index 677-96
ORDERS
The book may be ordered through good bookshops anywhere but
the suppliers listed below are particularly good sources:
United Kingdom. In stock now at:
Bankers' Books, 17 St. Swithin's Lane, London EC4N 8AL
tel. 071 929 4306.
*** North American orders ***:
Books International Inc., P.O. Box 605, Herndon, VA 22070, U.S.A.
tel. (703) 435 7074.
Other Countries: From the publisher -
University of Wales Press, 6 Gwennyth Street, Cardiff CF2 4YD,
Wales, UK.
tel. 0222 231919
FAX 0222 230908
******************
Roy Davies Telephone 0392 263884
The University Library FAX 0392 263871
University of Exeter
Stocker Road Internet [EMAIL PROTECTED]
Exeter EX4 4PT
UK
