If the value of the standard fluctuates, prices vary, labor is materially affected in its purchasing power, and the business man finds himself unable to tell whether his cost of production is changing or the standard of prices varying. No more important matter confronts the people than that of a stable standard of value as the basis of their monetary sys tem; yet any reason is apt to be given for a rise or a fall in prices rather than that a change has taken place in the standard of value.
In the fall of 1896 every village and town in the United States witnessed the gathering of interested groups on the street corners. With wonderful volu bility and no little heat all discussed the same subject, the standard of value. By one side it was asserted that the standard would be changed by free silver legislation, and by the other it was declared that a continuance of the gold standard would mean a de crease in prices and a lowering of wages. The-pocket books of all were concerned and the matter became a national question.
7. The does money serve as a meas ure of value? In any measuring process the first thing necessary is to establish a unit. In Washing ton, the Bureau of Standards has the real units of yard, foot, quart, etc. The British goverrunent keeps such standards in the Tower of London. These standards are reproduced and used by men in the busi ness of buying and selling. The same thing must be done for money if it is to serve its fundamental pur pose. Acting upon the recorrunendations of Alex ander Hamilton, Congress declared in 1791 that the unit of measurement should be called a dollar and provided that the gold dollar should consist of 24.75 grains of pure gold. In 1834 the amount of pure gold was reduced to 23.22 grains, the present stand ard.
The use of the dollar as a measure comes into full practice when men say that things are worth so much in dollars. They are then expressing value in terms of something else, and that something else is, when universally accepted, money. For many years prior to the establishment of a legal monetary unit, the people of the United States carried on their business in terms of the old Spanish dollar which was very similar to the one adopted by Congress.
8. Standard of deferred into the consideration of money as a standard we inject the time element, money may be designated as the stand ard of deferred payments. When men agree to make
payments at some time in the distant future.the credi tor looks more carefully into the character of the money in circulation than if the transaction involved a short-term credit only. If the money of circulation is unquestioned men will not hesitate to make such con tracts in terms of dollars. But if the solidity of the mEnetary circulation is in any way doubtful they seek to secure themselves as far as possible against any contingencies.
During the period of the suspension of specie pay ments in the United States, from 1861 to 1878, con tracts and other obligations, especially bonds, were often expressed not in dollars but in gold dollars of a specified weight and fineness. Under these circum stances the currency in general circulation failed to fill all the functions of money. It was not a stand ard of deferred payments, a special form of money being singled out for this purpose.
It is unnecessary to dwell at length upon the fact that money may serve as a store of value. The hoard of the miser, the accumulations of coin which the French peasant proverbially does up in a stocking and conceals in some out-of-the-way place, are reservoirs of value. Such a use of money is not to be com mended, but it cannot be doubted that it is one of the uses to which money may be put.
To recapitulate: money acts first as a medium of exchange, and second as a measure of these two functions are derived the facts that money also acts as a standard of deferred payments, and as a store of value.
9. Incidental functions of fact that money performs a number of essential functions car ries with it other activities that are of great impor tance. Just as money meets the needs of trade by obviating the necessity of barter, so does it act as a capital distributor. The savings of one group may thru the use of money be transferred to another group by transmitting money. The second group can then engage laborers, buy products already made, and be gin the erection of a building. Thru money, this second group was given power over capital goods.