CHAPTER 1 MODERN MONETARY SYSTEMS § 1. Definition of monetary systems. In order to understand monetary phenomena some knowledge of monetary systems and their operation is necessary. Now monetary systems involve the concurrent use of various kinds of monetary instruments—gold, silver or other metals, paper—and they are distinguished, not only by the number and character of the various cur- rencies used, but also by a whole complex of legal require- ments and actual circumstances which varies considerably as between one country and another. The use of coin and the concurrent use of several metals as money are very ancient ; but there are two essential characteristics which distinguish modern monetary systems whatever differ- ences there may be in the methods employed. One is the system of minting and the other is the issue of fiduciary currency, usually notes. In France, under the old régime, the right of minting was an attribute of sovereignty, but the State purchased bar gold and silver at variable rates and used it to strike coins such as the gold louis or the silver crown. The State then proceeded to tariff these coins and put them into cir- culation as representing a certain number of units of account which 1t fixed and a/rered as it wished ; thus as late as the end of the 18th century the French gold louis, which was originally tariffed at 20 livres, was raised to 24 livres.! 1'This is a measure which in less crude form brought about the same result as the “increases” in money practised in the Middle Ages. These “increases” consisted in reducing the amount of metal in a coin while claiming to preserve its value, thus raising its legal tender. (See A. Landry, “Essai économique sur les mutations des monnaies.”) 3