Category Archives: Money & Banking

“Amalgam of currencies.” A Framework to Understand Chinese Monetary History, 1800-1949

Money and Monetary System in China in the 19th-20th Century: An Overview
Debin Ma (, Department of Economic History, London School of Economics (Great Britain)


Abstract: This article provides an historical overview on the development of Chinese money and monetary regimes between about 1800 and 1950. It develops a simple conceptual framework based on the relative costs of assessing the inherent value of the currencies of different denomination. Based on this framework, I develop a historical narrative that ties important political and institutional changes with the evolving structural changes in the Chinese monetary regime marked by the vicissitudes in the use of copper, silver currencies and paper money in both the private and public financial sectors from the Opium War in mid-19th century to the end of the Civil War in the 1950s.

Review by Manuel Bautista González

Silver 8-reales of the Mexican Republic with Chinese chopmarks, made in Mexico and circulated in China. British Museum, CM 1920-9-7-343, Room 68: Money.

China was the first country to have coins, or the first along with Lydia in Asia Minor; the first to have paper currency, free banking (competitive issue of notes), and a government monopoly of paper currency; perhaps the first to have a kind of currency board (circa 1270); and a pioneer in some fairly sophisticated forms of exchange control. – Schuler (2012).

This paper, distributed by NEP-HIS on 2012-02-27, offers both a conceptual framework (based on politics and geography) and a historical overview of monies/money and the monetary system of China. As was the case in most of the world, diversity and concurrence of several monies prevailed in the Chinese monetary system well until the 20th century. A bimetallic, commodity standard prevailed, with silver bars named tael (or liang) as the main reference unit, convertible with a “fixed” price in official copper money, and copper cash coins strung together named tiao (or chuan), whose value fluctuated across regions, time and trades. Spanish American silver dollars also circulated widely (with chops of local assayers) since the 16th century (see an example above).

Imaginary units of account, denominated in either silver bars, copper cash or silver dollars were the effectual anchors of the system. The most successful units of account, the Kuping tael and the Haikwan tael, were used for the payment of direct and custom taxes across the empire, but even those standards were challenged across the territory. Currencies were traded with a “nearly infinite set of cross exchange rates” (Ma 2012, 5).

Continue reading

Utopian visions of the ‘cashless society’

Pre-1900 utopian visions of the ‘cashless society’

Matthew Hollow (


Abstract – This article looks in more depth at the different ways in which ideas about cashless societies were articulated and explored in pre-1900 utopian literature. Taking examples from the works of key writers such as Thomas More, Robert Owen, William Morris and Edward Bellamy, it discusses the different ways in which the problems associated with conventional notes-and-coins monetary systems were tackled as well as looking at the proposals for alternative payment systems to take their place. Ultimately, what it shows is that although the desire to dispense with cash and find a more efficient and less-exploitable payment system is certainly nothing new, the practical problems associated with actually implementing such a system remain hugely challenging. This paper was written for the Cashless Society Project, an interdisciplinary and international effort to add some historical and analytical perspectives to discussions about the future of money, banking and payments. For more information, see

Review by Bernardo Bátiz-Lazo

This short paper was distributed by NEP-HIS on 2012-09-03. It is part of a broader effort to discuss the future of money through contemporary and historical perspectives.

In this paper Mathew Hollow identifies the idea of cashlessness within five pre-1900 authors namely, Thomas More’s Utopia (1516), the socialist utopians Robert Owen (1771–1858), William Morris (1834–1896) and Samuel Butler (1835–1902), and Edward Bellamy’s Looking Bakwards (1888). Although none of these authors actually coins the term ‘cashless’, Hollow tell us that

‘… new ideas about monetary systems have been presented and debated is the utopian treatise…. through which thinkers of all political persuasions could articulate their thoughts and ideas as to how to overcome the various practical and ethical problems associated with money.’

This was revealing as I expected cashlessness to emerge as part of the ‘classical political economy’, 19th century French economists like Léon Walras, J. B. Say, within the work of Stanley Jevons, Karl Menger or simply related to ideas dealing with the separation between real and nominal economies. Also of interest is that these early authors initially discuss money (in the form of gold and silver coins) and move to portray a dissatisfaction with financial intermediaries (which in a way echoes today’s critiques).

Hans Holbein the Younger, Sir Thomas More (1478–1535), oil on panel, 1527

Matthew Hollow argues that in Utopia, More is concerned with how money is a hindrance to peace and prosperity and therefore the best way to do away with all the problems associated with money is to do away with it. But for for this to work society has to be reorganised from first principles. As a result, the inhabitants of the Island of Utopia are in no need of anything (as far as finance is concerned). A perfect society. An idea that later on reappears in many shape and forms, including 20th science fiction authors (which, by the way, take a superficial attitude towards this and largely side step deeper issues relating to money, financial institutions or economic organisation).

In Hollow’s interpretation of More, money is more than a medium of exchange, unit of account or store of value. It actually acquires a social dimension. An idea that is not really explored systematically until perhaps Georg Simmel’s The Philosophy of Money (1907) or even Viviana Zelizer’s The Social Meaning of Money (1994).

Hollow’s then takes us to the 19th century to show how More’s ideas influenced Robert Owen (1771–1858) and William Morris (1834–1896). Like More, Hollow tells us, Owen ‘detested’ the monetary system and proposed one of locations where workers could exchange their surplus, and was critical of  gold and silver ‘.. as a means of exchange and was particularly concerned about the effect that a shortage of either could have upon the welfare of the poor.’ Owen goes as far as proposing a medium of exchange with the quality of ‘… expansion and contraction to a fractional accuracy ..’ but fails to specify how this would work. We all know that Owen’s ideas were highly influential in both the US and Britain and in spite of several efforts, they all failed in practice.

Hollow also reminds us how More’s ideas of a perfect society with no ideas of private property or commercial profit resurge in William Morris’ News from Nowhere (1890). Its a future where money holds no value. So why is this relevant? Hollow says that these ideas ..’ reflected a deep seated unease that many contemporaries felt about the pace of economic and industrial development.’

Regarding Samuel Butler’s satirical utopian text Erewhon (1872), Hollow believes the message behind the ‘Musical Bank’ reflected Butler’s view of a fundamental reshaping of the already outworn financial services of his era and a critique of the coins and note system of the Western world.

Edward Bellamy (1850-1898)

Of course, a review of pre-1900 authors would be incomplete without Edward Bellamy’s now classic book. But here Hollow helps us by comparing and contrasting the Ballamy’s ideas with those of his contemporary utopians. This includes tackling head on whether Bellamy indeed introduced the idea of a ‘credit card’ in light of his own views on credit.

Finally, Hollow offers some conclusions as to why there is more in the socialist utopian literature about the cashless society than just removing the ‘conventional’ notes and coin system (which was already there as a posibility in More). But that it was technologically difficult and doing away with cash would require a major transformation of society. Here then a clear link with the idea of cashless and checkless that emerges in the mid-20th century along side business applications of computer technology.

In summary, Matthew Hollow offers a short yet provocative essay as to early notions of cashlessness which help to put the idea of a cashless society in long term perspective.

Matthew Hollow (Durnham)

“If credence is given to colonial writers.” Revisiting the Colonial Money Puzzle

Chronic Specie Scarcity and Efficient Barter: The Problem of Maintaining an Outside Money Supply in British Colonial America

Farley Grubb (, University of Delaware (United States)


Abstract: Colonial Americans complained that gold and silver coins (specie) were chronically scarce. These coins could be acquired only through importation. Given unrestricted trade in specie, market arbitrage should have eliminated chronic scarcity. A model of efficient barter and local inside money is developed to show how chronic specie scarcity in colonial America could prevail despite unrestricted specie-market arbitrage, thus justifying colonial complaints. The creation of inside fiat paper monies by colonial governments was a welfare-enhancing response to preexisting chronic specie scarcity, not the cause of that scarcity.

Review by: Manuel Bautista González

Farley Grubb

“Assuming money rather than explaining it allows economists to do money-price-output analysis without caveats” – Grubb 2012: 22

This paper distributed in NEP-HIS 2012-05-22 embeds institutional, regulatory and market constraints within a transactions cost model to account for the chronic specie scarcity affecting British colonial America. In so doing, Grubb offers interesting insights on how to tackle problems in the history of commodity money systems.

The model offered in this paper is part of Grubb’s project to assess what has been called “the colonial money puzzle”, a heated scholarly controversy on the applicability of the quantity theory of money in explaining monetary phenomena in colonial America.

Continue reading

Mutuality and Financial Innovation

The New Deal and the Origins of the Modern American Real Estate Loan Contract in the Building and Loan Industry

Jonathan D. Rose (Federal Reserve Board) (

Kenneth Snowden (University of North Carolina at Greensboro)(

URL a href=’

We treat the direct reduction loan contract as an instance of financial innovation and describe its adoption within the building and loan (B&L) industry beginning in the 1880s and culminating in the 1930s. A long chain of complementary innovations at B&Ls gradually reduced the costs of adoption, leading to moderate use by the 1920s and potential for far greater use. In the 1930s, extreme dissatisfaction with other contracts radically altered the adoption calculus, as did new competition from FHA-insured lenders. Federal savings and loan charters built upon the accumulated innovations at B&Ls by emulating the small segment of the industry that had adopted direct reduction lending by the 1920s. Other policies helped restructure the liabilities of B&Ls to accommodate the loss of credit risk sharing and mutuality inherent to older contracts. New Deal policies therefore built upon and facilitated the ongoing process of financial innovation that brought the familiar modern loan contract to the conventional loan market.

Keywords: New Deal; Building and Loan

Review by Bernardo Bátiz-Lazo

When Mark Billings and I edited the special volume for Business History – Volume 54, Issue 3 (New perspectives on not-for-profit financial institutions: Organisational form, performance and governance), we were overwhelm with the response of proposals. The paper by Rose and Snowden is witness to this and the fact there are interesting questions to be answered when revisiting why, where and when mutuality and co-operativism offer superior corporate governance to deal with particular risk/reward transactions within retal finance.

Jonathan D. Rose

Their paper was circulated by NEP-HIS on 2012-05-22. Its stated aim is to explore the origins of the direct reduction loan contract (i.e., fully amortized loans with equal monthly payments) and why measures during the New Deal led to its widespread adoption. Rose and Snowden convincingly argue that even though it offered more certainty to borrowers, “widespread adoption of this contract did not follow immediately after its inception, nor did it necessarily appear inevitable ex ante“.

Rose and Snowden take us back to the origins of the building and loan (B&L) society in the USA circa 1830’s, a mutual retail financial institution which was imported from the UK (where it was born in the Midlans circa 1780). These offered share accumulation loans where a borrower committed to make monthly purchases of equity shares until them plus retained dividends equalled the value of the loans. All savers eventually became borrowers and the society was terminated when everyone had received/paid their monies.

Kenneth Snowden

The share accumulation contract was to dominate B&L well into 1893 and it was until the 1920s and 1930s when it was abandoned as its risks became more apparent. New Deal institutions strongly favoured direct reduction contracts and very much help for its widespread adoption. But to get to this stage there was a long process of transformation which included the emergence a sinking fund as well as the so-called “permanent societies” (which Rose and Snowden prefer to call “non serial”).

Rose and Snowden’s is a fascinating account of financial innovation which has touched on a point largely overlooked by the literature on mutuality and certainly by studies of British building societies. One is thus left wondering why share accumulation loans lasted so long in the UK as well as offers a framework to revisit the demutalization debate.

“Nobody said it would be easy, and nobody was right.” On the (Im)possibilities of International Policy Coordination

International Policy Coordination: The Long View

Barry Eichengreen (, University of California at Berkeley (United States)


Abstract: This paper places current efforts at international economic policy coordination in historical perspective. It argues that successful cooperation is most likely in four sets of circumstances. First, when it centers on technical issues. Second, when cooperation is institutionalized – when procedures and precedents create presumptions about the appropriate conduct of policy and reduce the transactions costs of reaching an agreement. Third, when it is concerned with preserving an existing set of policies and behaviors (when it is concerned with preserving a policy regime). Fourth, when it occurs in the context of broad comity among nations. These points are elaborated through a review of 150 years of historical experience and then used to assess the scope for cooperative responses to the current economic crisis.

Review by: Manuel Bautista González

“The question is whether those who talk the talk also walk the walk.” (Eichengreen 2011: 1)

Barry Eichengreen

Financial turmoil in the European Union has been increasing in the last months. According to The Economist, credit in the eurozone is tighter than it was in the worst months after the Lehman bankruptcy. “Forget about a rescue in the form of the G20, the G8, the G7, a new European Union Treasury, the issue of Eurobonds, a large scale debt mutualization scheme, or any other bedtime story. We are each on our own”, wrote Simon Johnson and Peter Boone earlier this week (Johnson and Boone 2012). Paul Krugman has brought attention to the horrific consequences of the defeat of the European monetary experiment: “Failure of the euro would amount to a huge defeat for the broader European project, the attempt to bring peace, prosperity and democracy to a continent with a terrible history. It would also have much the same effect that the failure of austerity is having in Greece, discrediting the political mainstream and empowering extremists” (Krugman 2012).

It is in this context that this paper written by Barry Eichengreen and distributed by NEP-HIS on 2012-01-03 is an opportune “breathless historical review” (Eichengreen 2011: 29) of past attempts of international policy coordination in monetary, fiscal and financial matters from the last quarter of the nineteenth century to our days. In so doing, Eichengreen provides an interesting narrative centered in politics and institutions that complements optimally a reading of his classical work on the history of the international monetary system and global capital markets (Eichengreen 2008) as well as his most recent account of the US dollar as a dominant international currency (Eichengreen 2011b).

Continue reading