Books and documents:
Agustí Chalaux de Subirà, Brauli Tamarit Tamarit.
Agustí Chalaux de Subirà.
Agustí Chalaux de Subirà.
Agustí Chalaux de Subirà.
Magdalena Grau, Agustí Chalaux.
Chapter 2. Monetary reality through history.
- The pre-monetary barter.
- Monetary reality among the primitive peoples.
- The monetary systems of the rising civilizations.
- Emergence of the specific metal currency.
- From metal currency to paper currency.
- The present monetary system.
- Bibliography for this chapter.
In the previous chapter we have used an exposition system which suggested,
to a certain extent, some sort of historical reconstruction of the development
of monetary systems: first there is the non-monetary barter; then the monetary
units appear and the market values are established (prices and salaries);
finally, in some evolved societies, the monetary instruments appear.
We are aware that this reconstruction is very theoretical and simplifies
the complexity of the facts which actually took place. For this reason,
in this chapter we want to offer some brushstrokes to give some support
to the broad outline made in the previous chapter.
However, it is necessary to point out that the reconstruction of the
development of the monetary reality, both among prehistoric peoples and
among present primitive peoples, shows serious difficulties: the existing
documents are few and partial, and their interpretation is a very delicate
With all these limitations then we face our subject.
1. The pre-monetary barter.
From studies carried out on the utilitarian exchange among the primitive
peoples existing at present, it can be inferred that among these peoples
(and perhaps also, through an ethnographic parallelism, among the prehistoric
peoples), barter has not an exclusively utilitarian character, but it mainly
fulfils a social function.
Actually, in human populations with a simple social organization (those
of hunters-harvesters), the individual and familiar sustenance is always
granted and, therefore, exchange is not vitally necessary. On the contrary,
it is socially needed, as it is used to establish friendship bonds or alliances
with other groups; or to affirm the existing social relations inside the
Because of the great importance of this social component of primitive
barter, often it is endowed with formalities, with complex rituals bound
to magic, that is to the sacral conception of man's life. Every exchange
act is considered as sacred, the same as all social relations.
2. Monetary reality among the primitive peoples.
Among the primitive peoples existing at present, the knowledge and use
of some sort of monetary system stands out in three parts of the world:
Western Africa and Congo; Melanesia and Micronesia; Eastern North America.
It must be pointed out that all the peoples in these areas develop an
advanced utilitarianism, of a neolithic type, either farming or shepherd's.
But this neolithic utilitarianism is still little specialized: every
small social-producer unit can yet provide for itself to a great extent,
and for this reason the utilitarian barter still holds a strong social
These peoples have no scripture system either.
But they have monetary systems constituted by what we have called monetary
units and market values.
Indeed, among the primitive populations of the above-mentioned areas
(not only these areas, but mainly these), some objects (which of
course vary according to the population) have a great social importance:
they are symbols of wealth, and bestow social prestige on those owning
Because these objects are often exchanged ceremonially during some given
social events, many ethnologists have compared them to a reduced or primitive,
form of metal currency, which was in force among all the present-day civilized
peoples until some time ago (until it was definitely substituted by the
so-called bank notes).
Now, we suggest a different interpretation: these specific objects
seem to have two completely separated functions. The first one, fundamentally
social, creative and sustaining social relations, is the one which develops
through the actual, specific, exchange of these specific objects, in certain,
very well specified cases, of great social importance. The second, exclusively
utilitarian one, is that of being used as standards of value measurement
in the exchange of the ordinary utilitarian goods. In this second case,
the objects are never really exchanged, but they are only an abstract reference
to calculate equivalences among other goods, valued in them: this
is what we have called a monetary unit. The values in monetary units attributed
to goods (produced or producing goods) are the market values of such goods.
Most of the times, the ethnologic documentation we have is not enough
to confirm or to invalidate this interpretation with an empiric basis.
This is due mainly to the prejudices of ethnologists, who direct their
observation towards some given realities, neglecting some more significant
ones for an overall study of the primitive utilitarianism.
In spite of this difficulty, we have chosen a couple of examples which
seem to go in the given direction.
First example: in the Admiralty Islands (Malaysia), the natives can
evaluate all their goods in shells and dogs teeth. In ordinary exchanges,
however, the shells and dogs teeth are almost never used, while their use
is compulsory in ritual exchanges.
Second example: among the Lele of Kasai (Congo), the raffia fabric is
the wedding heritage which any man about to marry must have. But, at the
same time, the goods which are the object of non-ritual exchange may all
be evaluated in raffia fabric units: in these exchanges, then, the raffia
fabric does not appear as a real merchandise, but only as a value standard.
In these peoples, then, we are bound to talk about the existence of
abstract monetary units, and not of real monetary objects (as some ethnologists
do). In order to make this interpretation extensive to all the neolithic
peoples who know some sort of monetary reality, it would be necessary to
carry out thorough studies which do not exist yet -or, at least, are not
within our reach-.
3. The monetary systems of the rising civilizations.
Archaeology has shown us in the last decades how the first civilizations
rose in Southwestern Asia, the Indus Valley, Egypt, and later the Aegean
Sea, the Valley of the Danube...
These civilizations were based on an advanced neolithic utilitarianism,
with extensive corn cultivation and with a well-established work division.
With them writing appears; but writing is only a consequence of another
social practice we are very interested in, that is the use of monetary
Probably these societies had, from the beginning of their reaching the
neolithic age, well-defined monetary units. For example, in Mesopotamia
the monetary unit was rye, and later also silver. This does not mean, as
we have just said, that in the specific exchanges goods were bartered against
rye (or silver), but only that rye and silver were the value standards
with respect to which the value of each one and all the goods could be
Now at this moment -which coincides with the beginning of the Bronze
Age, during the the 4th millennium b.C.- the Near East civilizations have
a noteworthy economic development: there is a drastic increase of population
in Iran and Iraq, and the craft specialization and the beginning of large-scale
trade appear. Trade is carried over very large distances. This sort of
economic explosion is coupled to the appearance of very strange artifacts,
which have been recently studied and interpreted. We are talking about
the bullae, which are a sort of clay bags, more or less spherical,
full of different clay shapes, and sealed on the outside. These bullae
are the heirs of a complex accounting system6
based on tokens -apparently representing different goods and different
numerical values- which goes as far back as the beginning of the Neolithic,
towards the 9th millennium b.C. These tokens are of the same sort as the
ones which are found, at a later time, inside the bullae.
But the introduction of bullae means an important quality change.
We may interpret the fact that the tokens were kept together, closed inside
a clay envelope, as an indication that these tokens represented a given
transaction carried out between two people. The fact that many of the bullae
discovered up to now carry two different seals gives support to
If this were so, the bullae would be what we have called a monetary
a document acting as a go-between and recording an elementary trade operation
which has been carried out. Probably, in addition, these bullae
could be intercompensated, because we know that the Mesopotamian temples
already then carried out complex banking and administration functions.
The bullae, then, were what we would call today an agreed voucher,
an accepted invoice and a cheque cashed written out by the customer.
Later, the bullae became the famous cuneiform tablets: the tokens
sealed inside the envelope started to be graphically represented on the
outside. This is the most probable origin of the cuneiform writing.
4. Emergence of the specific metal currency.
From a given historical moment onwards -which we probably may locate
in the 3rd millennium b.C. in Mesopotamia- the monetary instruments change
completely their features.
The primitive monetary instruments which we have just described in the
previous paragraph, had a radically abstract-auxiliary nature, had no intrinsic
value. Their operation did not imply the use of any specific object, but
only the reference to an abstract monetary unit. Even if the abstract monetary
unit were symbolized by a given specific merchandise (some shells, a sack
of rye, an ox...), this merchandise never participated in the operations,
since what was meant was to make an abstract reference to its value, and
not to exchange other goods for it.
In Mesopotamia, however, probably since the middle of the 3rd millennium
b.C., appears and becomes general a new kind of monetary instrument, which
we call metal currency: we all know what a metal currency is (gold, silver...),
and we can understand that it is no longer an abstract-auxiliary instrument,
but a very specific object, having an intrinsic value (valuable in itself).
The metal currency (and, generally speaking, any monetary instrument being
a specific object) is also called merchandise-currency, because its main
feature is that a specific merchandise is chosen, among all the others,
to be mediator in any exchange of any other merchandise. That is, a merchandise
is delivered against a merchandise-currency.
During the reign of Hammurabi (1760 b.C.) the use of gold, silver or
bronze ingots in Babilonia is already fully testified. But not only the
Mesopotamian civilization carried out this decisive change. All the historical
civilizations, sooner or later, reached the metallist monetary system.
In the Indus valley they used oblong copper bars; among the Hittites, iron
ingots; in Mycenae, bronze plates imitating animal skins, and in China
also bronze plates in the shape of dresses.
The first metallic monetary instruments were, even inside each civilization
and each empire-city, very different in their shapes and of very variable
metal qualities. For this reason, at every operation the metal used had
to be weighed and tested.
Further on, in order to solve this problem, the use of standard metal
pieces became general, as they were guaranteed for a given weight and quality.
The guarantee was given by the seal of the person striking the pieces -this
seal was engraved on the pieces-: these metal pieces are the actual coins,
and the first ones with documented information go back to the 7th century
b.C. in Asia Minor.
If at the beginning, anybody with sufficient authority and wealth could
strike his own currency, as time went by this function became a monopoly
of the official powers.
The specific metal currency has lost the basic feature of the primitive
monetary instruments: these were, in the first place, a document of the
effected operation; on the contrary, the metal currency is essentially
anti-documentary. Even if we shall deal with this matter in more detail
in the next chapter, we shall say now that the metal currency has three
features which make it completely useless in any attempt of effective documentation;
it is anonymous (it does not identify the operation agents), it
is uniform (it does not analyse the features of the operation),
and it is dynamic, it circulates indefinitely (it does not
allow any sort of statistics).
In every trade operation -and in every social-monetary act- the only
function carried out by metal currency, is that of being some sort of payment
means, that is an instrument which allows to solve, bring about, finish
the operation or act under consideration: by delivering some coins any
monetary situation can be considered as paid, settled, solved. And from
this point of view the use of metal currency is even easier, quicker and
more convenient, than preparing a documentary monetary instrument, which
must be written, signed and later compensated.
Now, the metallist systems have a very definite limit for their development,
which is the quantity of metal for minting purposes existing in a given
geopolitical community at a given time.
For this reason it has been necessary to give up, little by little,
these systems, as we shall see further on.
5. From metal currency to paper currency.
The present-day monetary instruments are still essentially anti-documentary.
Now, from the appearance of the metal money up to now, the monetary instruments
have gone back slowly to one of their original features: abstraction, which
was reached definitely starting from 1914.
The reason is the shortage of precious metals.
In fact, as we have already said, the monetary systems are abstract
constructions which have the function -through the quantification they
allow- to make the exchange of specific goods easier, and later, with the
monetary instruments, to document it. These abstract constructions, then,
are parallel to the specific, existing goods, produced or producing ones;
they evolve with them and are adapted to them. When we substitute the abstract
construction through a specific object and, on top of that, scanty -precious
metals-, this flexibility of the monetary system, this ability to adapt
to the market reality, is definitely lost. Serious distorsions are derived,
both of our vision of reality and of its healthy working.
Let us now go quickly through the history of this return to the necessary
abstraction of the monetary system.
Already in the Middle Ages, the shortage of precious metals caused kings
and other currency minting authorities to make unconfessed or public currency
manipulations. Since the emission and the legal tender of currency are
in the hands of the local authorities, they can cause the nominal and legal
value of the currency pieces not to be equal to the actual metal value,
-either by striking new currency with the same nominal value, but with
less quantity of metal, or officially and artificially increasing the nominal
value of the circulating pieces-. Through these means, the minting authority
could make its payments using a small amount of metal. These methods were
used currently all along the Low Middle Ages: the royal treasuries were
almost permanently indebted, and found in this monetary trick the solution
to their problems. But this solution was only temporary, as the unavoidable
consequence of the currency manipulations was the price and salary increase,
an increase which again made the monetary State situation worse, so new
manipulations had to be carried out, thereby starting an infernal cycle.
But the most prejudiced were the lower classes, which had not enough purchasing
power to face the price increases, and neither had the ability to manipulate
the currency which was imposed on them.
For our analysis, what we want now to point out is that the monetary
manipulations of the Middle Ages open the gap which starts to separate
the real value of specific metallic currency from the monetary value which
is conferred to it, artificially, according to the needs of utilitarian
When America is discovered, with its important precious metals mines
and treasures to be looted, it seems that the metal shortage is going to
finish. But this end is only relative, because the end of the Middle Ages
has witnessed an enormous development of trade relations and, therefore,
of the needs for currency. So the bankers of the time invented a new system
to make up for the metal shortage: we are talking about the bill of
At the beginning the bill of exchange is just a means to settle debts
from a distance, to avoid the dangers of transporting metal: the Barcelona
trader can pay his supplier in Genoa by means of a bill -a letter- which
the supplier will be able to transform into cash by presenting it to his
banker, because the Genoa banker and that of the Barcelona trader are in
But later, to the bill of exchange the concept of credit is added,
that is, of delayed payment. The customer who, at the time
of the operation, has not the necessary resources, may deliver a bill to
his supplier, which ensures the payment of the debt within a fixed time
limit. The supplier can keep the bill until the end of the foreseen delay,
when he will receive in cash the indicated amount.
Now, instead of waiting for the payment term to finish, the payee may,
in the meantime, use this bill to make his own payments, either handing
it over to a creditor of his (this practice is called endorsement);
or selling it to the bank, which will immediately deliver the indicated
amount in cash after deducting a given percentage as a remuneration of
the service given (and for this reason this practice is called discount),
taking charge of cashing the bill of exchange at the end of the payment
In both cases the final result, which we would like to point out, is
the same: the creation of new monetary instruments, the starting of a new
monetary circulation, which is added to the circulation of metal currency.
In fact, whether the bill of exchange circulates, or is discounted, there
is a creation of new monetary instruments, different from metal
currency, but which fulfil the same function.
When the bill circulates, it is just a piece of paper circulating and
representing a promise of cash payment at a given date, but this cash does
not exist yet; therefore the bill of exchange does not substitute metal
currency, but is added to it, it is a new monetary instrument which,
besides, has no value in itself, besides that of the trust it may arouse
that the payment will be actually made after the term comes to an end.
When the banker discounts the bill, we must be aware of the fact that
he does not pay with his own money, but he does it with his customers'
deposits, which may be demanded by them at any time; it is then also a
circulation, because there exist simultaneously the metal currency of the
bank customers' deposits and that of the person who has discounted the
bill. There is no mystery here because the banker knows that the deposits
will not be all drawn at the same time, and therefore he only needs to
hold a reasonable relationship between the total deposits and the total
operations, in order to be able at any time to face his commitments. When
the bill will finally be paid at the end of the term, the balance of the
situation will be restored.
In these two cases of invention of additional monetary instruments -which
are not metal currency, but which represent, within a given delay, the
payment of metal currency- the limitation, with respect to the metal currency,
is that these new instruments are temporary: they do not last indefinitely,
but finish, disappear, at the end of the term, when the bill has been cashed
by the payee.
With the invention of the bank note, this limitation disappears. The
bank note was invented in 1656 by Palmstruch, an Amsterdam banker. This
consists only of the fact that the bank, instead of paying its customers
with metal currency coins, pays with notes, pieces of paper which are a
promise from the bank to convert them into metal at any time the owner
demands it. Since these notes indicate no term, they may circulate indefinitely
until somebody decides to exchange them for metal.
We have now already two permanent monetary circulations, well differentiated
from each other: the circulation of specific metal currency; and the circulation
of bank notes, which have no intrinsic value, but which represent a permanent
promise of conversion into gold, and therefore are based on the trust
in the emitting bank, in its ability to face the conversion demands. This
monetary circulation, then, is no longer specific, but holds a relationship
with actual circulation (that of metal currency): the permanent possibility
to become it.
Thanks to the bank note, banks have the possibility of solving the problem
of the precious metals shortage -which, in spite of the successive discoveries
of mines during the 19th century, are still inadequate: we are in full
In fact, private banks emit notes in quantities well above the cash
contents of their deposits. As we have already said, they may do so without
any problem, as long as they hold a reasonable proportion between cash
and notes. But through this mechanism they create the monetary instruments
which the market or society need, since the metal currency is inadequate.
The monetary system we have just described -based on the metal currency
and the convertible bank note-, called gold standard, typifies the whole
of the 19th century.
But finally also this system has become unsuitable for the needs of
a developed utilitarianism. With the new evolution, the monetary instruments
will definitely change their nature, and will go back to their primitive
abstraction. Let us see how this took place.
During the 19th century, the Central Banks of the different States monopolize
the emission of bank notes, which then become legal tender. But every time
that a State has political or utilitarian problems (production crises;
wars; revolutions...), because it must face greater expenses, it issues
more notes, until the time comes when there is a trust crisis, everybody
wants to convert his notes in metal and then the compulsory tender is established,
that is the inconvertibility of bank notes. When things become normal again
convertibility may be reestablished.
During the First World War, the enormous expenses caused by the war
caused the almost total emptying of the vaults of the States at war -whose
gold migrated, for a great part, to the U.S.A.-. Notes are issued in great
amounts, but evidently their convertibility must be suppressed.
Since then the monetary systems of the civilized world have been typified
by the inconvertibility of the bank notes, either officially or actually.
After the war, some countries tried to reestablish some sort of partial
convertibility, but the crisis of 1929 definitely settled the matter.
the monetary system sprung out of the First World War is based on the giving
up of metal currency -inside each state, since in the international relations
things are, for some time, different (that is up to 1971 when Nixon separates
dollar from gold)- and on the prevalence of the inconvertible bank note,
which we call pseudo-bank note o paper currency. This paper
currency has no relationship with gold: it does not represent it in any
amount, and cannot be converted into it. Which is then its nature? which
is its foundation?
Paper money -that which still circulates in our time- is based simply
and exclusively in the need we have of it, in the social conventionalism
which has made it a necessary instrument for the market and social acts,
and in the trust which is granted to it as an instrument which fulfils
its tasks suitably. Therefore, its nature is already radically auxiliary-abstract:
its value is that of an instrument which helps us in the accounting and
exchange of specific goods existing on the market; it is then an auxiliary
and abstract value, not an intrinsic or specific value, which only specific,
produced or producing, goods have.
6. The present monetary system.
In this long -but with a wealth of teachings- evolution towards the
metal currency, a deeper and deeper breach has been opened between the
specific-intrinsic value of precious metals, and the abstract-auxiliary
value of the moentary instruments. With the introduction of paper currency,
these two realities have become definitely dissociated: at present, they
bear no relation with each other.
On reaching this point the monetary system, free from the heavy ballast
of metals, can evolve towards more and more intangible forms, more dematerialized,
more abstract, in accordance with its primitive nature.
This is in fact what has happened, and what still happens under our
eyes. Today, paper currency is not the only sort of monetary instrument
used. To it has been added the so-called scriptural currency, which is
purchasing power entered on an account. The paper currency which we take
to the bank becomes there monetary units entered on a personal account;
these units will then be able to circulate through a simple game of entries
between different accounts, without any need to circulate paper currency:
this is called clearing. Two people having current accounts in the same
or in different banks, may effect their mutual payments by simply entering
the corresponding figures in their respective accounts.
This new form of monetary circulation is the last invention of the banks
to face, in this case, the paper currency shortage, controlled by the State.
By means of the entries in the current accounts the circulation of a lot
of paper-money is avoided; but, on top of that, new monetary circulation
can be produced. This is, indeed, the bankers' job: to create the purchasing
power which is lacking on the market, to make possible an additional monetary
circulation, when the existing one is not enough. And this is being done,
as it was before, through credit. But now the credit is no longer
granted by emitting bank notes more or less backed by cash deposits, because
this emission is controlled by the State; it is made by opening credit
current accounts, that is to people who have not made any prior deposit
of paper currency. And the guarantee of this credit is constituted by all
the deposits actually made in the bank. As before, the only thing needed
to ensure the solidity of this system is to hold a suitable relation between
these two monetary circulations: the circulation starting from the deposits
carried out, -which is limited to substituting the paper currency
circulation- and the circulation caused by credit -which is added
to the previous one-.
Scriptural money has become the currency par excellence of the
developed countries, where trade and industry contribute to multiply exchanges.
In some industrialized countries, it represents as much as 80% of the total
monetary mass. At present, it is rapidly becoming electronic money: some
simple electric impulses and some magnetic memories are enough to carry
out the transfer of entries. This growing dematerialization of the monetary
reality is the most obvious proof of its basically instrumental-abstract
Yes, the monetary system has gone back to its primitive features of
abstraction and instrumentality: the monetary instruments in force have
no intrinsic value, but simply act as intermediaries in the exchange of
actual goods, and to express their value in terms of abstract units.
It is also evident that these present-day monetary instruments -the
pseudo bank-notes and the scriptural money of the bank current accounts-
do not resemble at all that which in the previous chapter we have called
In fact, the monetary system, in spite of its evident evolution, still
retains all the inherent faults of the specific metal currency: anonymity,
uniformity and dynamism of the monetary instruments.
We will then now analyse which features should have a monetary system
without any of these faults, and find a way to update these features in
a monetary instrument really suited to the present trade complexity and
7. Bibliography for this chapter.
With respect to the pre-monetary barter and the relations of utilitarian
exchange among the hunters-harvesters:
With respect to the abstract monetary units among primitive preoples:
SAHLINS, M. Economy in the Stone Age. Madrid, Akal, 1977.
With respect to the abstract monetary units among ancient civilizations:
GODELIER, M. Economía, fetichismo y religión en las sociedades
primitivas (Chapter 9), Madrid, S. XXI, 1978.
FIRTH, R. (compiler) Temas de antropología económica
(«El racionamiento primitivo», by Mary Douglas) Mexico, Fondo
de Cultura Económica, 1974 (originally published in 1967).
HERSKOVITS, M.J. Antropología económica (Chapter 11,
«Dinero y riqueza»), Mexico, Fondo de Cultura Económica.
With respect to the accounting system and the bullae in Western
FINLEY, M.I. El mundo de Odiseo (Chapter 4, «Riqueza y trabajo»)
Madrid, Fondo de Cultura Económica, 1980.
CARLTON, E. Ideology and social order (pp. 136-137), London, Routledge
& Kegan Paul, 1977.
KLIMA, J. Sociedad y Cultura en la Antigua Mesopotamia (Chapter
10, «Comercio y Crédito») Akal 1980 (originally published
POLANYI, K. and others, Comercio y mercado en los imperios antiguos,
Barcelona, Ed. Labor 1976.
With respect to the European monetary history:
SCHMANDT-BESSERAT, D. The Earliest Precursor of Writing. Scientific American. June 1977, Vol. 238, No. 6, p. 50-58.
THE CAMBRIDGE ENCYCLOPEDIA OF ARQUEOLOGY, Cambridge University Press, 1980.
DASTE, B. La monnaie, vol. 1, La monnaie et son histoire,
Paris, Les Éditions d'Organisations, 1976.
the information concerning the development of this accounting system we
are indebted to Denise Schmandt-Besserat's research. To explain it, we
shall use her article «The Earliest Precursor of Writing.» (, published in Scientific American,
issue June 1977, Vol. 238, No. 6, p. 50-58.
case of course we are talking about pre-scriptural documents.