Marx describes the historical process by which these tokens come into existence, using the example, of the leather strips used in Russia, as tokens representing firs and hides that were the money commodity used there.
“First of all custom turns a certain, relatively worthless object, a piece of leather, a scrap of paper, etc., into a token of the material of which money consists, but it can maintain this position only if its function as a symbol is guaranteed by the general intention of commodity-owners, in other words if it acquires a legal conventional existence and hence a legal rate of exchange. Paper money issued by the state and given a legal rate is an advanced form of the token of value, and the only kind of paper money which directly arises from metallic currency or from simple commodity circulation itself.” (p 116)
In Russia, the perishable and unwieldy nature of the money commodity led to he spontaneous development of the money tokens as a medium of circulation, in the form of small pieces of stamped leather. This evolution required no state intervention, or conscious decision, but flows naturally from the process of commodity exchange itself.
“these pieces thus became money orders payable in hides and furs. Later they were called kopeks and became mere tokens representing fractions of the silver rouble and as such were used here and there until 1700, when Peter the Great ordered their replacement by small copper coins issued by the State.” (p 116)
The intervention of the state, therefore, is not the source, either of the development or money or money tokens. At a certain point, however, the state does take over this role of determining the currency, and standard of prices.
“Symbolic paper money indeed does not differ at all from subsidiary metal coin except in having a wider sphere of circulation. Even the merely technical development of the standard of price, or of the mint-price, and later the external transformation of gold bars into gold coin led to state intervention and consequently to a visible separation of internal circulation from the general circulation of commodities, this division being completed by the transformation of coin into a token of value. Money as a simple medium of circulation can after all acquire an independent existence only within the sphere of internal circulation.” (p 116)
This paper money is also to be distinguished from credit money, which results from a more advanced stage of production “and conforms to very different laws.” (p 116)
The recognition of the difference between money and money tokens, and so the ability to replace the latter with paper, was clearly grasped by Benjamin Franklin. In his, Remarks and Facts Relative to the American Paper Money, 1764, Franklin notes the extent to which silver coins were worn down, in Britain, and yet continued to circulate as though they were full weight.
“At this very time, even the silver money in England is obliged to the legal tender for part of its value; that part which is the difference between its real weight and its denomination. Great part of the shillings and sixpences now current are by wearing become 6, 10, 20, and some of the sixpences even 50%, too light. For this difference between the real and the nominal you have no intrinsic value; you have not so much as paper, you have nothing. It is the legal tender, with the knowledge that it can easily be repassed for the same value, that makes three pennyworth of silver pass for a sixpence." (Note *, p 118)
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