ABSTRACT
This introduction will bring in the basic analytical points of this book. The majority of humanity conducted business with multiple currencies until the 19th century. Contrary to the modern common understanding, which assumes the fungibility of money under a single sovereignty, different monies were exchangeable only with fluctuating rates reflecting different demand and supply for each. Money is always a means of exchange. However, there is considerable variation among the different sorts of exchanges that can occur. That is why a multiplicity of money emerged to accommodate the heterogeneity of exchanges. However, ever since Aristotle, monetary philosophy has commonly assumed that monetary transactions can only occur between people of different vocations or possessing different goods. This framework has obscured the fact that transactions also occurred between people of the same vocation who possessed similar goods, such as peasants, and this oversight has blinded us to the significant disparities which exist between different methods of transactions. In particular, exchanges among peasants who occupied the overwhelming majority of humanity throughout most of history often have not been the focus of scholarly attention, or otherwise been seriously underestimated.
There are two sets of binary options in opposition when conducting transactions, one being anonymous vs named, and the other proximate vs distant, which we can group into four quadrants illustrating the configurations of exchange in four different possible combinations. In the first binary opposition, people have a choice between greater freedom in the current transaction, or greater confidence and certainty for subsequent transactions; while in the latter opposition, traders select either direct, face-to-face and multilateral negotiation among people living proximately, or engage in brokered and bilateral transactions with people who are located at a distance. To neglect the exchanges occurring among peasants means to undervalue the importance of local trades. In terms of the frequency of trades, as opposed to volume, daily transactions by ordinary people (including peasants) made up the majority of transactions, though each of their individual transactions may have been of low value.
Depending on the situation, a given society will have developed relevant devices to cover all four quadrants of exchange. A typical case appears in the figure that follows, in which a large currency is used for anonymous/distant exchanges (Quadrant I), bills of exchange for named/distant exchanges (Quadrant II), bookkeeping for named/proximate exchanges (Quadrant III) and small currency for anonymous/proximate exchanges (Quadrant IV). The specific devices used and the relationship among the four quadrants differed country by country and has transformed throughout history.
Focussing on the ground level leads us to find three major turning points in the worldwide transformation of the configuration of the four quadrants of exchange: c.1300 under the Eurasian Mongol regime, c.1600 with the global silver march and c.1900 under the international gold standard system.
The concept of complementarity among monies sheds light on what conventional arguments, such as Gresham’s Law, the denomination problem and optimal currency zones, have overlooked.
