This February 1933 article from the Notts Free Press has a self explanatory introduction to the bankers expressed understandings.
Sutton Rotarians had the pleasure on Tuesday of listening to an address from one of their own members, Mr. A. J. Warner, on the subject of "Coinage." As the manager of the local branch of the Midland Bank, Mr. Warner was eminently fitted to deal with such a subject, and his remarks were full of interest, as the following extracts show. The Vice-President (Mr. H. Wright) occupied the chair.
Mr. Warner said that in the early days people did not worry about money; they hadn't any money. This did not mean that they had no wealth, for wealth is anything that requires labour to produce and which can be exchanged. Money is simply a measure of wealth and a medium of exchange. For the exchange of goods in early days the principle of barter was adopted, but this was a very unsatisfactory way of doing business. In order to exchange goods, people were led to establish some particular form of wealth to serve as a medium of exchange, and as common measure of value for all other forms of wealth - in other words they invented money.
Money is the standard by which the value of commodities is measured, and the medium by which they are bought and sold. There is probably nothing which is of greater importance in the civilised world than money and nothing which comes more closely in contact with mankind in every department of life. Not only have all conceivable commodities a monetary value attached to them, but it is customary to ascribe a financial reason as the prime moving cause (either directly or indirectly) in almost every action in which a man is concerned.Measure of Value.
At different periods in various countries many articles have been used to meet the necessity, which was felt by all, of having something to act as a measure of value. In India, certain parts of Southern Asia, and in Africa, shells called couries are still used as a currency. Money is represented in Tibet and parts of China by small blocks of compressed tea, in Abyssinia by blocks of rock salt, and in some districts of Africa by dates. Sugar, tobacco, dried cod, dressed leather, furs, pieces of cloth, elephants teeth, carved wood and many other objects have been used for the same purpose. Skins have been a medium of exchange in many hunting communities, cattle being of great importance in the early stages of civilisation. The early Romans and other early peoples all over the world measured their wealth in oxen and cattle. The Latin word "pecuria" (meaning oxen) is root of the word "pecuria" (Latin for money). In the "Hiad" Homer says that the armour of Diomede was worth only nine oxen, and the armour of Glaueus was worth 100 oxen, which idicates that in those days oxen were regarded as a standard of value.First Mention of Money.
Although such articles as a circulating medium represent a great advance from the barter state of society, most nations began to recognise that metals being practically indestructible and not much subject to fluctuations in value, were the most convenient and best fitted to act as money. Silver was used by the Hebrews, and the first mention of money as a medium of exchange is found in Genesis, where Abraham purchased a cave from Ephron "four hundred shekels of silver, current money with the merchant." It would appear that when first the metals, whether iron, copper, gold or silver, were used they were in rude ingots or bars, without any stamps or designation upon them, and when being paid over they had, as in the case of Abraham's famous purchase, to be weighed in scales. The inconvenience of always having to weigh the metals, and the difficulty also of knowing whether the quality of the metal was what it was supposed to be, ultimately brought about the invention of coins.
The trouble of assaying the metals was done away with, for the coins at length came to bear on their faces the Government stamp, which as a rule, assured the holder that they were of a certain quality of metal. From this brief history of the evolution of it is seen that each coin, to the extent of its value, is like an order payable to bearer drawn upon anyone to whom it is presented. The true nature or function of money is the right and title to demand something from others.Use of Metals.
Sooner or later all communities come to use metals as money. Iron was used as money by the ancient Spartans; but because it is so heavy in proportion to its value, its place was taken by gold and silver. These metals are more satisfactory for money because they are precious, durable and easily stamped. At first, gold and silver passed by weight, as gold dust still often does in mining communities. Several of the common units of money were originally names of weights as the Hebrew "shekel," the Anglo-Saxon "mark," the later English "pound," the Italian "lira," and so on. The earliest known coins are those of the Lydians in Asia Minor dating from the 7th Century B.C. Even after coining began, the coins were often not taken by count but by weight, because dishonest people clipped or filed the coins for the sake of the little particles of gold and silver thus gained. It is to prevent this that modern gold and silver coins are made with raised and "milled" edges which show plainly any clipping or filing.
In all money systems to-day the Government establishes a certain amount of metal as a standard on its value. The British sovereign consists of 22 parts of pure gold to 2 parts of alloy. This establishes what is call the "single gold standard." Some nations have attempted to use both gold and silver as a standard, known as a "double standard" or "bimetalism." When the double standard is used, the law fixes the ratio which the two metals shall bear to each other in the coinage. Double standards have always failed because sooner or later the ratio between the real values of the two metal changes.
Paper money, which has been used for several centuries, is of two general kinds, but the varieties of each kind are very numerous. The first kind is that in which the piece of suitably engraved paper merely represents a certain amount of gold or silver coin. A good coin loses some of its precious metal by rubbing or abrasion as it passes continually from hand to hand. Also, in large amount it is very heavy to handle. The Bank of England puts the gold away in its vaults and issues bank notes that represent the gold and serve the same purpose. The other kind of paper money is based on some form of credit. If a bank or a Government is trusted ((that is, if its credit is good) people will gladly receive its promises to pay money in place of the money itself. Its note is nothing more or less than a promise to pay a certain sum of money to the holder of the note. So long as the holder has full confidence in the government, he very seldom demands payment. Instead, he uses the paper currency to buy things, and the man who gets it passes it on.Depreciated Currency.
Sometimes Governments issue too much paper money, just as an individual may promise to do more than he can possibly do, and then the notes cease to be taken at face value and the currency is said to be depreciated or at a discount. You will no doubt recall that in 1923 the million mark German notes were being sold in the streets at twopence each. Towards the end of the war, France, Belgium and Germany issued notes on various towns, and, as these were only of value in the towns they were drawn on, you can readily imagine the amazing, sometimes amusing, and often alarming situations that were created, especially when the troops who had these notes in their possession were suddenly ordered to another place.
The well-known "quantity theory" of money simply stated means that the value of money in terms of other goods decreases as the amount of money in circulation increases, and the value of the money increases as the amount in circulation decreases. As the word implies, a fiduciary issue of notes implies notes issued on trust, against the Government debt and securities, without a corresponding amount of covering gold.
Having described the workings of the national Mint, Mr. Warner said that many years ago there was a mint in almost every county, and at one time the sovereign, baron and bishop had the right to coin money, but in the reign of William III, all county mints were abolished. It is very interesting to note that to-day £20 worth of silver weighs 5lbs., this weight being identical with that of 20s. worth of pennies; or, in other words, £100 in silver weighs 25lbs., as does £5 in copper. It takes ten halfpennies to weigh the same as six pennies, so that if you ask for 20s. worth of halfpennies you would get 1lb. more weight in copper than if you had £1 in pennies."All You Could Carry."
If I were to ask you how much silver you could take providing you could have access to a bank's strong room, with the provision that you could have all you could carry, I have no doubt I should get many amazing amounts quoted. It is nevertheless a fact that the average man would have difficulty in taking more than £300, supposing he had to carry it, say, from here to the station. With this amount he would be carrying 75lbs. weight, besides the awkward nature of his load as regards bulk.
Although it is customary to refer to halfpennies and pennies as copper coins, this name is not strictly correct. The composition of bronze is ninety parts of copper, four parts of tin, and one part of zinc. Originally the penny was a silver coin of which 240 weighed a pound; hence the penny-weight (dwt.) the 240th part of 1lb. troy. Three new pennies to-day weigh exactly one ounce, which may be useful information should you wish to weigh a letter. The knowledge that a halfpenny measures exactly one in in diameter, and a penny 1⅛ inches, may prove equally useful when a simple measure is required. Bronze coins are legal tender only to the extent of one shilling, and silver coins to the amount of 40s.
Sixpences were first coined in 1551, and are exactly three-quarters of an inch in diameter. The shilling has varied considerably in value at different times. The florin, which is of the value of 2s., was introduced into the coinage in 1849, and gets its name from the city of Florence where it was first coined. The half-crown was first coined in 1551 and the crown or 5s. piece in the same year. Double-florins were first issued in 1887, but, as they were never popular coins and considered inconvenient to handle, the issue was discontinued in 1890, although at the present time they are still legal tender. Gold was first coined in England about 1257, and the denominations of English gold coins as set forth in the Coinage Act are - five pounds, two pounds, sovereign and half-sovereign. One pound sterling was introduced by Henry VII. The coin did not become the standard monetary unit until 1817, when its standard fineness was fixed at eleven-twelfth fine gold and one-twelfth alloy, chiefly copper.
It is hardly necessary for me to remind you that since 1914 gold coins have been withdrawn from circulation, being replaced by banknotes. Pre-Victorian sovereigns and half-sovereigns - that is, all gold coins coined before 1837 - are not now legal tender. Formerly the English standard gold coin was the guinea, which was first struck in 1663, when it was coined of gold imported from Guinea, hence its name. In 1717 its value was fixed at 21s., but it is now obsolete, the last issue being in 1813.
A hearty vote of thanks was accorded to Mr. Warner on the proposition of the Vicar of St. Mary's (Rev. R. P. Tinsley).