A medium of exchange alspprnmotes bor rowing and lending. Without it a person with an unused surplus could aid another with a deficit only by transferring his surplus to him, but unless this happened to be in the precise form needed, which would rarely be the case, it would do the borrower little or no good. On the other hand, with a proper medium of ex change the lender can transfer to the borrower the means of purchasing at any time anything the market supplies, thus enabling him either to satisfy his own immediate wants or to pur chase the means of producing wealth.
In order that exchanges may be accurately, conveniently and safely made under all con ditions, that is, when the commodities to be exchanged differ widely in quality and value or when they differ very little, when the ex change is to be completed without delay or after a delay of days, weeks, months or years, when the persons between whom the exchange is to be made are face to face or separated widely in space or time, etc., the medium of exchange must represent every conceivable combination or amount of value; must be easily, cheaply and safely transportable from place to jilice; must be easily recognizable, durable, and certain in value; must be acceptable to all the parties in volved in the trade, and must be automatically adjustable in volume to the fluctuating needs of commerce.
In the United States at the present time the medium of exchange must render it possible to make trades in values as low as one cent and as high as millions of dollars, and in every possible combination of amounts between those figures. It must be possible also to make up these amounts in a very short space of time, without long and difficult calculations and with out danger of loss. The medium of exchange would be imperfect and quite incapable of meet Mg the public needs if it did not measure up to this requirement.
Since commerce takes place between people living far apart, in different cities, states and even nations, the medium of exchange must be of such a character that it can be sent through the mails and by express, over the railroads and on steamships, and be carried about in bags, pockets and purses, and it must be pos sible without danger of loss to transport in these waycllramounts large and small.
The importance of being easily recognized is well illustrated in a busy station where change must be made with great rapidity and where difficulty of distinguishing one element of the medium of •exchange from another would render impossible the transaction of the necessary business.
Without elements of great durability a good medium of exchange would be impossible, be cause the wear and tear necessarily involved is great, and as an instrument of saving it quently needs to be kept for long periods of time. Certainty of value is also absolutely essential. If there is any uncertainty regard ing the value of any element of the medium of exchange, people will either refuse to accept it, in which case it will cease to be a medium, or they will protect themselves against possible loss by charging a higher price for the goods or services exchanged. In either case com merce is obstructed or made impossible.
In order thatpeople may be willing to part with their commodities in return for the medium of exchange, they must be assured that it in turn will serve them in making desired pur chases — that is, that the persons who have the goods they want will be willing to accept it in exchange for such goods. This requirement implies the possession of practically universal acceptability in some of the elements of the acceptability among wide circles in all of them, and of interchangeability be tween all, such interchangeability enabling the holder of any element which does not possess universal acceptability to exchange it for one which does.
The volume of exchanges in any community varies from time to time. In this and most other countries it varies with the seasons, being greatest in the spring and fall and least in midsummer and midwinter. The medium of exchange should adjust itself to these changes increasing automatically in volume as the volume of exchanges increases, and decreasing automatically under the opposite conditions.
The qualifications required' in a good medium of exchange account for the composi tion of the currencies of modern nations and for the changes which have taken place in the past and which are still in progress. Every such currency consists of elements which from different points of view may be classified as follows: (1) hand-to-hand money, written or printed orders of one party to pay specified sums to another, and book accounts; (2) coin, government notes and bank currency, the lat ter sub-classified into bank notes and checking accounts; and (3) standard money and credit currency.