Should Bills of Exchange Be Allowed as Money?
Thomas Allen
One argument against the real bills doctrine is that a bill of exchange is credit, and such credit should not be used as money. Most people presenting this argument do not object to all types of credit being used as money. They accept some types of credit money, but object to other types of credit money.
Under the true gold standard, only full-bodied coins are true money. All other purchasing media are types of credit money.
Most who present this argument against the real bills doctrine seem to accept the use of token coins. Token coins are needed to buy low-valued items like a box of matches, which is worth less than a speck of gold. Token coins are a form of credit that functions as money.
Most seem to allow the use of checks and gold certificates. Checks and gold certificates are forms of credit that function as money. A check is an order to a bank to transfer gold from one account to another or to transfer gold from an account to cash in gold coins. A gold certificate is essentially a warehouse receipt for gold and can be converted to gold at any time.
However, they object to using bills of exchange as money. A bill of exchange is a spontaneously market-generated form of credit money that some call commercial money. So why discriminate against this type of credit money? Commercial money is more like gold than other forms of credit money in that it is a spontaneous market creation. To prevent the use of bills of exchange as money requires using political forces to overrule a natural market function.
[This article first appeared in The Gold Standard, issue #8, 15 August 2011.]
Copyright © 2011 by Thomas Coley Allen.
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