While industrial changes and conditions affect the choice of money, in turn money reacts upon the other industrial con ditions. If a new and more convenient material is found or the value of the money metal changes to a degree that affects the generalness of its use, industry is greatly affected. The discovery of mines in America brought into Europe in the sixteenth century a great supply of the precious metals, and this change in the use of money reacted powerfully upon industry. Money, being itself one of the most important of the industrial conditions, is affected by and in turn affects all others.
§ 6. The precious metals as money. Certain of the met als early began to show their superior fitness to perform the monetary function. The metals first used as money were copper, bronze (an alloy of copper with nickel), and iron. Those were truly precious metals in early times, for they were found only in small quantities in a few localities. They, therefore, were widely sought and highly valued as orna ments and for use as tools and weapons. But as the great ancient nations emerged into history, these materials were already being displaced in large measure. Their value fell greatly as a result of greater production due to somewhat reg ular mining. As wealth grew, as trade increased, as the use of money developed, as commerce extended to more distant lands, the heavier, less precious metals failed to serve the growmg monetary need, especially in the larger transac tions. Silver and gold, step by step, oftfm making little progress in a century, became the staple and dominant forms of money in the world, while copper and nickel still tinned to be used for the smaller monetary pieces. Every community has witnessed some stages of this evolution. In this contest silver had, up to the end of the Middle Ages, proved itself to be, on the whole, the fittest medium of ex change for most purposes, though gold was at the same time in use in larger transactions and in international trade among the leading commercial countries.
Gold discoveries in California in 1848, and in Australia, two years later, caused the production of gold to increase enormously,' and gold became a relatively larger part of the monetary stocks of western European and North American countries.
In a higher degree than any other one material, gold has the qualities of the main monetary material for rich and in dustrially developed communities. England was first to give
to gold the chief place in its monetary system ; the United States did so in 1834, and has continued to keep gold in that place (except for the period of paper money from 1862 to 1879) ; France did so about 1879, having shifted gradually from silver, after 1855, under the working of the bimetallic law ; Germany in 1873; and Japan since the later nineties. Other countries have been moving in the same direction. Since about 1890 some states (including Mexic6) and some of the colonial possessions of the great nations (including India and the Philippines) have adopted the plan of the "gold-ex See chart yf gold production, ch 5, Fig. 2. cf._ change standard." By this plan gold. is the standard price unit, while silver continues to be used all but exclusively as the material in circulation, its amount being controlled and its value regulated on principles to be explained below under coinage, seigniorage, and foreign exchange.
The most important of the countries in which silver is still the chief form of money is China. There are, however, nu merous countries, notably in South America and Central America, in which paper notes have long been almost the only form of money; and in the period. of the Great War every one of the belligerent countries excepting the United States approached or reached that condition where neither gold nor silver was actually in circulation.
§ 7. Varying extent of the use of money. Trade by the use of money at no time has become the exclusive method. Barter still lingers to-day.' The extent to which, on an average, money is used in different parts of the world differs widely. The use of money in Siberia is less than in Eu ropean Russia, and its use is less there than in western Europe. The use of money as compared with barter is generally much greater in the cities than in the rural districts. In the cities of Mexico not only money but banks and credit agencies are in general use; whereas the rural districts are more back ward and make far more use of barter than is the case in the United States. At the ports in the cities of China, India, and South America the use of money may be very like that in European cities; but go a little way into the interior of these countries, and conditions as to the use of money change greatly.