Economics for Helen by Hilaire Belloc

When people begin exchanging by bartering goods one against another they at once find that there is an awkward obstruction to this kind of commerce; at least, they find it the moment there are more than two of them. It is this: That the person they are nearest to for the striking of a bargain may not want, at the moment, the particular thing they have to offer, but something else which a third party has who is _not_ present.

For instance: John is a hunter who has a surplus of skins to offer. He can get skins easier than other people. William, farming good soil, has surplus wheat to offer, and Robert, living near a wood and skilled as a woodman, has extra wood to offer. John wants wood. He takes one of his furs to Robert and says: "I will give you this fur for a cartload of wood. " But Robert may answer, "I don't happen to want a fur just now. What I do want is a sack of wheat."

Either no transaction will take place on account of this hitch, or one of these two things will happen: Robert will take the fur from John and give him his cartload of wood, and will then take the fur over to William, and see whether William wants a fur in exchange for some wheat. Or John, very much wanting the wood, will go to William, and if William wants a fur, will exchange it for wheat; then John will take the wheat back to Robert, and exchange it for the wood that he wants.

That is the sort of complicated and clumsy come-and-go that will be continually happening even with quite a few exchangers, and with quite a small number of articles. When it came to a great number of exchangers and a great number of articles the trouble would grow impossible and exchange would break down.

But things arrange themselves thus: It is soon found that one of the things which are being exchanged is easier to carry than the rest, and perhaps lasts longer and also can be easily used in small or large amounts. For instance, in the case of our three producers, John, William and Robert, _wheat_ might easily appear in this character. People always want wheat sooner or later. It keeps well. It is not very difficult to transport, and you can divide it into quite small amounts, or lump it up in large amounts.

So the chances are that when any of the three wanted to benefit by getting rid of some of his surplus produce he would get into the habit of taking _wheat_ in exchange, even if he did not want it for the moment. For he would say to himself: "I can always keep it by me and then exchange it against somebody else's produce when that somebody else happens to want wheat". Soon you would find each one of the three would be keeping a little wheat by him for the purpose of saving tiresome journeys to effect complicated double exchanges, and the wheat so used by all three of them would be in effect = MONEY = . It would be used as a common medium of exchange to facilitate the disposal of goods one against the other, without the elaborate business of making special barters, after long search.

Mankind has found, in most cases, that where a very large number of articles were being exchanged _two_ in particular naturally lent themselves to this particular use, and those two were GOLD and SILVER. They have also used bronze, and even iron and in some places rare shells, and all sorts of other things. But gold and silver came to be for nearly all mankind, and are now for all civilised mankind, the objects which most naturally are used as money.

The reason for this is as follows:

The thing which naturally becomes money out of all the things that are exchanged will be that which best combines a certain number of qualities, some of which we have already mentioned, and of which here is a list.

1. It must be portable, that is, a large weight of it must take up little room, so that quite considerable values can be taken easily from place to place -- for money has to be always moving from one to another to effect purchases and sales.

2. It must be easily divisible, for one is always wanting to use it in all sorts of amounts, very little and very large.

3. It must keep. That is, it must not deteriorate quickly, or it would have very little use as Money.

4. It must be of an even quality, so that, wherever you come across it, you may count on its being pretty well always the same, and therefore weight for weight of the same value.

5. It must be more or less stable in value. It would be difficult to use as money some object which was very plentiful at one moment and suddenly scarce at another; very cheap this year, and very dear next year -- such as are, for instance, agricultural products depending upon the season.

Now of all objects Gold and Silver best fulfil all these requirements. Precious stones are more portable, value for value. A £1,000 worth of diamonds takes up less space and is less heavy than a £1,000 worth of gold. And precious stones are fairly stable in value and also keep very well; but they are not easily divisible. Again, they are not of the same standard value in all cases. They vary in purity. But gold and silver have all the qualities required. Gold hardly decays at all through the passage of time, and silver very little; and each, but especially gold, is valuable for its bulk, and its value is fairly stable, and each is easily divisible and can therefore be presented in any amount, from a tenth of an ounce to a hundred pounds weight.

So, by the mere force of things, Gold and Silver became the Money of mankind. People kept gold and silver by them in order to effect their exchanges, and very soon a producer did not feel himself to be exchanging at all (in the sense of exchanging goods against goods), but thought of the affair as _Buying and Selling_. That is, of exchanging his produce, not against other produce, but against gold and silver, with the object of _later_ re-exchanging that gold and silver for other things that he needed.