vol 7 1999 [CIHS] - ISBN 3-85093-023-8

P9 - SALT and the EVOLUTION of MONEY

David Bloch [M.R.Bloch* Salt Archive]

Abstract

To define money, the most helpful formulation is the one defined by Knapp, and accepted by Keynes. Knapp made it clear that most transferable goods could be used for barter and consequently used as a 'means of payment': however such 'means of payment' only became 'money' when chartered by a state authority and accepted by its administration for, and in lieu of tax.

This differs from Aristotle's concept. He thought that authoritative marks and stamps confirming correct weight and composition, converts a 'means of payment' into money, thus associating the intrinsic material usefulness with its purchasing power as money.

The 'State Theory' suggested by Knapp on the contrary, implies that the essential monetary qualities are independent of its intrinsic values, as long as it is suitable to physically carry the marks of the charter.

These two concepts have in common the standardisation of form, weight, chemical composition and colour. This fact has obscured the understanding of money, and still hinders the appreciation of the genesis of money and its historical development.

FAIR EXCHANGE

The worth of Sodium Chloride, or "common salt", as it became known, as an exchanged value for other essential commodities, such as food, fuel, luxuries or slaves, has a yet to be determined, important role in state finances and in the origin of money. Salt [NaCl] is not just an essential commodity. It is essential for life. The primary necessity [absolute requirement] is Physiological. Its importance as a meat preservative in the great temples, manufacture of glass, processing leather, soap, textiles and not least, gunpowder, was diminutive in comparison. It is as basic for animal life as the air we breath, the water we drink, and the proteins we eat. A salt deficiency is as critical as a water deficiency. Water and salt are essential to maintaining extracellular and intracellular concentrations of salt to activate cells in all plant and animal life. The body may endure periods of lack of food, but without salt and water , living cells would quickly perish from dehydration. 'Slavery' is only an extreme illustration of the social consequence of salt hunger.

Aristotle believed that primitive barter trading of standardised commodities, 'hall-marked' by some authority for correct weight and quality, represented the first use of money. "As the necessaries of nature were not all easily portable' he says. 'people agreed for the purposes of barter, mutually to give and receive some article which, while it was itself a commodity, was practical and easy to handle in the business of life; some such article as iron or silver, which at first was defined simply by its size and weight". Metal was not the only material used as a barter money. Salt was also frequently mentioned as an important, such commodity, particularly as a topic of fundamental personal consequence when related to individual income or 'salary' Roman soldiers were at certain times, partly paid in salt [salarium] and from which the word is derived.

Seal impressions designating "value/contents" on Ceramic handles from excavations in Jerusalem, are

Middle Israel period 1020-842 bc Late Israel period 842-587 bc Persian period 587-332 bc [5.6.7] Hellinistic period 332-37 bc [ Museum of Taxes - Jerusalem ]

The Greeks had no coin money prior to Penopolesian war. Herodotus tells us that the Lydians were reputed to be the first to coin gold and silver money, and the Talent which the Greeks called the Euboic certainly came from Asia. Once introduced and accepted the weight of a coin , was confirmed by setting a stamp or a 'hallmark' [a salt mark ; 'hal' ΆΛΑΣ = salt Greek] upon every coin to relieve one from the trouble of check weighing it. The stamp impressed upon the coin, was an indication of quality and finally a guarantee of the value it represented. It was a similar concept, to the stamps impressed on salt cakes, and still used in this century, in central Africa as a means of payment . It initially related specifically to the coin's weight and probably to an equivalent weight of salt, rather than to its intrinsic value. Roman accounting began with copper coins, and gold was introduced only 100 years after the death of Alexander. Thus the choice of the material used only became a matter of availability and longetivity.

There is good evidence to support Aristotle's view. For instance bread-like moles [amoles] of salt each weighing approximately 5 kgs are still circulating in Ethiopia as a means of payment. ' In the Treasury of the Lling of Limmu, salt pieces originally given to him as yearly tribute are stored, though, like many another investment, it was not an ideal treasure as some travelers found out when they tried to sell a hundred salt pieces given to them by the King , but worth only forty new ones at the time.' Or again, 'the villagers in the Cameroons consider their salt store common property, kept in a special house, its contents being the main indicator of the wealth of the tribe.' The trading of standardised pieces of salt had all the aspects of dealing in money.

Close association of salt with money was noted by Marco Polo journeying through China in the 11th century AD. He wrote about it as if it were a treasure as precious as gold. 'Kai-nu is a (Chinese) province .,. the money or currency they make use of there. is thus preferred: their gold is turned into small rods and being cut into certain lengths passes according to its weight without any stamp. This is their greater money. The smaller is of the following description: in this country there are still springs from which they manufacture salt by boiling it in small pans. After the water has boiled for an hour it becomes a kind of paste which is formed into cakes of the value of twopence each. These, flat on the lower and convex on the upper side are placed upon hot tiles near a fire in order to dry and harden. On this latter species of money the stamp of the Grand Kihan is impressed, and it cannot be impressed by any other than his own officers. When these are carried by the traders .. to little frequented parts, they obtain a saggio [sack] of gold for sixty, fifty or even forty salt cakes ... the further they are removed from the towns ', 'The same merchants travel through other parts of Tibet where the salt money has equal currency. Their profits are considerable, because these country people regard it as an 'indispensable necessary' whereas the inhabitants of the cities use only the broken fragments of the cakes, putting the whole cakes into circulation as money..'

MIINTING and MICROECONOMIES

In addition to the quasi-currency role of standardised metal and salt pieces, there developed a definite association between making salt and the actual operation of minting money. In very early times many ancient towns in Greece and Medieval Europe did both. So, in Charlemagne's reign ' ..it was convenient to authorize the collector of a particular tax - the farmer of a salt pan, as the steward of royal domain .... to receive payment, at need ... presentations in kind, foreign or ancient coins of metal by weight, and to render the amount or the revenues of his [salt] farming, in coins minted on the spot, and bearing a signature which served as a guarantee of their standard and value, and a place-name which recorded their place of origin.'

Schwabisch Hall in Germany is a good example of such inter related currency and trade arrangements. The Hall Senate owned salt springs and factories here, and in the Middle Ages they also minted coins which were issued for services done or goods delivered to the town for the purchase and sale of their salt. The coins were also chartered as legal currency for duty payments and tolls on the local roads, bridges and gates. They became known as the 'coins' of Halle or 'Heller' money , derived from an old German word for salt - 'Halle' . Because of its local purchasing power, this currency was highly rated in most German markets, although its value frequently changed according to supply and demand. Since the production of salt was monopolised by the Hall Senate it also monopolised the minting and its charter.

Although the historical links with the metal trade are clearly evident, salt has not been used as money in the sense that is generally accepted or understood today. Perhaps anlaysing the historical connection and its evolution would help us to appreciate the role of money in modern economies. Clearly the ability to monopolise the supply of salt compared with the other critical physiological necessaties of life eg; water to drink, air to breathe and proteins to eat, gave any party the authority to control this means of exchange

In the view of J.M.Keynes, the state determines what should be considered as money as well as the right to vary it's function at will. The claim that money is created or chartered by the state forms the basis of the 'state theory' of money, which in modern times, has come to be associated with the name of G.F.Knapp. He accepts as money ...'anything which the state undertakes to accept at the state offices in lieu of payment or in exchange for monopoly goods'. ......"There are means of payment which are not yet money; then there those which are money; later still, those which have ceased to be money". G.F. Knapp. 1924.

This definition implies that the substance of which the money is made, has no part in its currency value. Of course, it is important that money should conform to recognised standards such as portability and weight. It should also be durable. However if it was valuable in its own right, as gold soon came to be valuable, or, even on rarer occasions, salt: or, if the pieces were beautiful in design and of artistic merit, so as to become collectors' objects: but such qualities became to be considered irrelevant as regards their monetary significance.

In the words of ·Helffrich, the man who revived the German currency after World War 1, ...'the weight of noble metal in the coins, became only the substrate of the money about which the state authority, finally, could use at its discretion, as to what it should contain and any change required ...'

This differs from Aristotle's concept. He thought that markings for correct weight and measure as well as associating the intrinsic value of the article would convert a 'means of payment' into money.

TALLIES

The introduction of the so~called: - 'tally',- 'tessera' in Latin, 'kerbholz' 'notched wood' in German, 'twins' [teomim] in Hebrew, 'chi-chi', in Chinese and 'symbolon' in Greek, - all meaning 'corresponding' pairs, to make a complete identifiable unit when assembled together, may have helped to bring the evolution of modern currency a step nearer

The use of the tally is a very old and ingenious way of determining the authenticity of an identity, a document, a mesa'go. a receipt, an I.O.U, or an account. Originally, the tally technique depended on the randomness of the edges formed when an object such as a piece of wood, metal, ceramic or paper is split or torn. Each separation being unique, only the correct half would fit, when the pieces were brought together. There are many other ways of checking a tally , the most modern being electronic devices, the "smart card". But essentially, they all resemble a 'tally'. Although a primitive and rather laborious procedure, one can envisage this technology as an integral part of the development of money. Even wooden tallies were treated as if they were 'money' during the Middle Ages in England. They changed hands without losing value, and could be presented to the treasury and honored irrespective of the claimant's identity. According to M.Siegrist in her book 'Ricardus of Ely', ...every often the royal Treasury transferred some of their claims with the help of tallies, to credit people to whom it was in debt. In this way the tally became a means of payment.

One of the most practical applications of the tally system seems to have been for the proprietary marking of stored goods. A storekeeper needs to be able to identify the rightful claimant for deposits made. So he attaches one part of the tally, the 'stock'. to the stored article, giving the other, the 'foil', to the depositor who must later be able to produce this part and have it checked by testing the fit, when claiming the goods. Both parties could delegate the 'foil' pieces to other people, for example, their heirs. Not only could tangible goods be registered, but so also could a record of valued services rendered, or the number of 'acreti' ploughed, sacks of salt transported, and so on. Work of this kind would be "notched" up and the record stored and some work-equivalent object retrieved when the foil was presented.

In a curious aside: In ".. 1834 reforming zeal celebrated its triumph by destroying (In the furnaces which heated the House of Lords) the whole accumulation of ancient tallies, with disastrous results; the old Houses of Parliament were burned , together with practically all 'stocks' of the tallies -"[Encyclop.Brit. 1921].

Before going into the problem of how to inter-relate the value of goods, services and corresponding tallies, the technique of dealing with trivial deposits should be considered, since it led to the introduction of coinage and other printed money.

Willow 'tallies' - sticks up to eight feet long and one inch broad and notched to indicate sums loaned to the government The stick was split down the middle and one half was handed to the lender and the other half retained by the Exchequer of the Bank of England

When goods of small value were deposited, individually hand-made tallies of different kinds were too expensive to make in the demanded quantity. An efficient method of mass production had to be found although this obviously involved a greater danger of forgery. A random pattern could be produced by impressing a 'broken' edge into softer material such as clay, wax or malleable metal, or by striking it (with) the end of a broken-off nail, a mark which could not easily be imitated, so that many negative imprints could be turned out and checked against the matrix or master stamp - the original broken edge: later; it would be a picture or written word. In this way, one matrix for coins, or one copper plate for notes, reproduced valid token pieces. Forgery was minimised by employing the best artists to uniquely design them.

Making seals designed to indicate ownership, authenticity or to legitimise authority was a very ancient, skilful craft in Eastern countries. The 'cylinder' seal, with its rolling action and pattern repetition of the characters carried on it, may have helped in developing a mechanical reproduction of receipts for goods on deposit.

In China, metal coins made their appearance between 1000 - 700 BC and were standardised for weight and measure by about 630 BC. Herodotus reckoned the value of gold to silver in the proportion of 13 to 1, : Plato who wrote about 50 years after him says it was 12 times the value of silver. The learned Budaeus and others after him, called the sum of 100 Denarii, " Libra centenaria" and "Libra nummaria" while confessing that he had never found either the word libra or pondo used to signify a sum of money: but always to the weight of the plate or bullion. There were three categories: gold with the highest value; silver of medium and copper/bronze - copper cash' the lowest. The cash coins came in various shapes and sizes, round, oblong, square, some with a hole in the centre; shaped like a spade, a knife or two pronged known as 'trouser money'. Other 'currencies' circulating at this time as well as salt, were tin, ore, feathers, tortoise and cowrie shells and even silk fabric of standard width and length.

The invention of the first coins may have been made possible by the relatively new steel industry. Instead of a 'vouchery' imprinted on clay or wax, a much more resistant metallic material, capable of withstanding the rigors of cbetween the trading public and the control administration pay offices could now be used. Mass produced durable vouchers were fashioned on a hard iron matrix which printed a seal on malleable metals like electrum, gold, silver and later, copper. Coins of non-ferrous metals had arrived to supersede the fragile clay pieces.

Shortage of metal for coinage seems to have been endemic in China -a predicament aggravated and compounded by wars, instability of regimes and social unrest. During the Han period for example, the old coins were called in and exchanged for new bronze (copper). This was believed to have enriched the treasury by about #5,000,000 calculated to have been more than the total supply in Medieval Europe At the same time it drained the country's resources. Similarly, in a later period inflation caused terrible problems in transporting so much coin and was one of the reasons for introducing the first deposit or 'exchange certificates' for tea, salt and other commodities and later, registering paper money itself.

One early initiative to counteract the coin shortage was made in 120 BC. Squares cut from the skin of white deer only found in the Emperor's hunting reserves were issued to a limited circle of nobles at the Court, as a medium of exchange.

Paper making was invented in China before the Christian era. The earliest known piece dates from the Wu Ti period between 140-81 BC. At first it was made of matted fibers from rags on a backing or frame soaked in water - perhaps discovered accidentally since washing fabrics is a common household chore. Mass production was made possible when it could be done by using the Mulberry tree bark [morus alba]. Marco Polo writes; 'the bark is stripped from these (Mulberry) trees, the leaves of which are used for feeding the silk worms, and taken from it that inner rind which lies between the coarser bark and the wood of the tree...'

The new material seems to have had very practical every day uses for clothing, bed sheets, curtains and other household furnishings such as screens, tiles and~ in enormous quantities, as burnt offerings to the dead, but curiously, not for writing. Not until the first century AD were the traditional writing materials, bamboo, wood and silk, slowly replaced by paper .

The ancient custom of making seals provided the link between the invention of paper manufacture and the ability to print on it. Chinese seals were usually square or rectangular with the characters carved in reverse order. They were used to stamp inscriptions on clay pottery, bricks or even, as Marco Polo witnessed, on salt. This stamping action was akin to print on wooden blocks, an achievement realized around 700 AD in China and followed 300 years later by moveable type printing and multi colour work in, or before the 12th Century

The Chinese then, were well aware, that the intrinsic service rendered by money, was not bound up with the value of the money material, though it was desirable that the substrate be rare, like mulberry paper or the white deerskin to reduce the possibility of forgery. It was the charter, the authoritative declaration [or hall-marked] by the Emperor which made it valuable because it guaranteed the token piece acceptable by his administrators as a means of payment and for monopoly goods such as salt. This monopoly was, so far as we can see, the most important source of income for the state. In 1329 AD, of all the tax paid with paper money, 82 percent came from the salt monopoly...'

An important factor was the 'durability in use' of these token pieces. Copper coins were reasonably durable but not sufficiently so as to represent high values: gold and silver were too rare, although resistant. Fragile materials like paper could only replace metal if the charter covered the replacement of damaged or dirty notes, to be governed by strict procedure and legislation and punishments ·to be enforced when old notes were being burnt in the presence of judges and other important officials.

The Chinese could afford this substitution routine which gave the money an inbuilt longevity because paper was cheap, though not cheap enough, to replace copper coins of low denominations. For these, base metal was more economical. Paradoxically, gold, used for high value coinage could be replaced by paper, whereas single base metal coins could not. The cost of minting money in Southern China, where the technical skills had been developed, and then transferring it to the capital in the north in AD 1050 was reckoned to be 75% of its metal material value.

The time lag between the invention of iron tools and non~ferrous coins, is somewhat similar to the delay between the invention of paper - about 200 AD - and the technological achievement about 500 years later, which made printing paper money cheap enough to allow a virtually free replacement process.

One of the cheapest objects to be chartered for use as money, were sea shells which were made available by controlled import, to the monopolised state zone. In China and some other regions, they actually survived the introduction of paper money and both circulated together. Because the state 'minted' and circulated them on a monopolistic basis, shells which were imported as currency could therefore serve as a means for tax payments. In Lopburi, for instance, 24 liang money was worth as much as 10.000 cowrie shells' In Birma, 10 liang (paper money) equaled 11,520 cowrie shells and again, 'in Yunnan, shells were introduced as money in 1276 AD. A few years later, in 1282 AD, tax was established by payment in gold, but it could also be paid with shells and in 1305 the Governer of Yunnan ordered them to be used as an alternative to paper money. The Prohibition of shell imports was Codified in the Codex of the Dynasty, Yuan-schi (YS) quote104, 5a.~, . . and private imports [of shells] were made punishable as though they were a~case of counterfeiting money Even as late as 1637 special cylindrical shells were recognised as currency and a means for tax payment by the Dutch authorities in New England.'

In time and with prevailing conditions, both food and salt production improved, and early in the l0th century, the problem of how to increase the purchasing power of the money in circulation became acute.

It could have been solved by the state, ensuring a constant number of money units in circulation in return for income from increasing private sector goods and services. This would have meant that goods and services would become cheaper in terms of the money units available, and prices would drop. Alternatively more money could be issued eg. paper notes, for proportionately more goods, increasing the number of money units in circulation, Thus, prices would remain stable, but still allow the exchange of more goods and services: in short 'expansion'

The modern concept of 'too much money..chasing too few goods' was not relevant, if money units available were increased in proportion to the increase in goods and services. It is often thought that when the gold and silver coinage was increased by the addition of a base metal industry, agricultural production and trade suffered.

RECEDING SHORELINES AND PROSPERITY

In fact, the opposite is probably the case. During one of these periods, in the 10th century AD the ocean receded, exposing the vast flat evaporation areas enabling the production of more salt, and making it available in significantly increased quantities. In Europe and particularly in "Merry England" , as the Domsday records show, sea coast saltmaking was thriving.

The resulting economic expansion, caused such a severe shortage of metal coins that state business and private traders' needs could not be met. In China these conditions coerced the Chinese to prepare paper money and put it into circulation. Balazs describes the financial difficulties as: "enormous because of the demands made on the government by the army and administration on one hand, and great economic and trade development on the other...". Later the new Sung Emperor reorganised theadministration but the same massive expenditure for the army forced the government to coin new money. In 1050 AD there was 13 times more silver, eight times more copper and 14 times more iron than in 800 AD. Between 1000 AD and 1021 AD the State budget increased from 22,200,000 to 150,800,000. There is no doubt that the invention of paper money was the product of a growing private economy. The pre-conditions for this, papermaking and printing had been created earlier.

In 12th century China the economic picture was relatively simple and the function or paper money could be readily understood by the population. Apart from land taxes in south China, salt contributed 50%. alcohol 36% tea 7% and customs tax 7% Grain was the largest part of the commodities produced by the private sector for the State income Both salt and grain production were affected by weather changes and flooding. If the seashore salterns failed to make enough salt, there would be a salt shortage and then its price and the tax on it would rise: in the same way, the grain price would float in the case of a crop failure.

The authorities everywhere, whether Chinese Emperors supported by bureaucrats, or corporations like senates and parliaments, in Hellenistic areas, introduced legislation governing the creation and use of money. Under these laws, money tokens were chartered as an alternative to tax and tythe payment in kind; the amount of tax to be paid was decided and adjusted from time to time and finally, the resulting income budgeted to cover the authorities' obligation and expenses.

Chartered money printed and paid out by these public bodies was used to buy the goods and services offered by private individuals or groups. Since society in general, was sufficiently well organised and protected from illegal acquisitions, bargaining was the only means by which ordinary people or groups were able to find out what and how much, they could ask in exchange for their efforts. For example, chartered money could be used to buy one of the essential monopoly goods, specifically salt, as well as another essential commodity, privately produced bread. So the Roman soldier who got his salary in the form of salt 'anona'- or chartered money, could use either or both to buy the bread from the farmer. For his part, the farmer could store or use both as he wished. Alternatively, he could spend the money to pay for oil or meat from the neighboring farmer who, in turn could buy salt and pay his taxes with it. The storage/spending chain suggested here, would normally be longer, a more complicated procedure, and include 'usury and banking'. Each time such business was transacted, the partners had to consider how urgent their requirements were: and if hazards like theft, the vagaries of climate or the perishable qualities of some goods out-weighed the risks of storing money. However, money storage presented its own problems from simple destruction of notes or corrosion of coins to the wider implications of unstable regimes which had chartered the money in the first place and might, in part or wholly, fail to honor the promise to accept it for tax.

RECESSION AND FLOODING

The later reversal of this situation, in China - that is when the sea rose, flooding the evaporation pans, and salt became scarce again, occurred at the beginning of the 14th century AD when there was a twenty five fold increase in general prices without a corresponding growth in the money units circulating. It seems that the amount printed between 1260 and 1325 was about 60 million units, of which 47 were burnt by order of the administration after being exchanged for new paper notes. So the money put into circulation could not have exceeded 23 million - not an inflationary amount for a population of 50 to 60 million ... the purchasing power however, had decreased ... to one twenty-fifth between 1276 and 1308 AD . .' The cause of this disaster was delicately referred to as a 'shrinkage' in production. The sudden shortfall of raw materials was in part due to natural catastrophies such as floods - the Yellow River burst its dykes in 1351 the high sea levels at this time with the likely loss of some coastal salt works, climatic changes and the Plague epidemic, rather than a fraudulent increase of the amount of money units in circulation.

During the same period, northern Europe was finding it more difficult to match up to the increasing demand for salt. The old salt making locations were not producing enough when coastal sources became flooded. The Baltic was no longer self-supporting,' Prussia was becoming susceptible to salt famine, and peat digging in the Low countries had been prohibited because it endangered the sea defenses. And then, in 1349, the Black Death struck.

Estimated ocean level changes in pre-historic and historic times Fluctuation of Sealevels at all the points designated : =levels [A] - to- [K]

Conditions were no better in England. With a shrunken work force, fields remained untilled, production slowed down and coastal salt works along with other manufacturing industries suffered a reduction of output or closure: The cost of living rose dramatically. Faced with revolutionary demands for better pay from the peasantry, the nobility and gentry insisted upon parliamentary legislation to regulate employment and freeze wages. The country became an importer of 'Bay' salt at this time even though, in the seventeenth century it was considered inferior to the English salt and "improper for salting herrings". By the nineteenth century England had again become a major world exporter of salt

ECONOMICS

Salt was never money in the true sense of the word. It was one of the very few essentials to life and a commodity whose quantity and quality could be standardised and therefore used as a convenient means of exchange or barter. However, it also may have been used as one of the most important methods of making state chartered money more attractive, and desirable. For in many important economies, salt was a monopoly commodity, controlled by government and which could be purchased with the state chartered money. The value of the money would have been effectively related to the prices at which the government monopoly was prepared, or able, to sell its own services and goods. In ancient times these exclusive services consisted initially of protecting and guaranteeing the supply of salt for the growing communities. It is perhaps no coincidence that the words, 'peace' and 'war' in ancient Hebrew are rooted in the word for 'salt'. As a direct result of the hardships, and necessary organisation involved in 'winning' salt from very limited inland sources, these services also sometimes included the monopolising of its uses. These were mainly the salting and preservation of meat and fish, and leather tanning. The ritual procedures and customs inherited by most of todays religions may be grounded in the original use of the 'altar' in ancient temples for sacrifice, slaughter and dehydration of protein meat. The Panthenons and the temple in Jerusalem were veritable abattoirs

Up to the time of the industrial revolution, salt was universally recognised as one of the chief state monopoly commodities - if not the chief one - since it provided some fifty percent of many state incomes. Its availability was dependent on weather, sea level changes, efficient transport and distribution, and not least, a highly sophisticated, protection organisation. Changes in sea level causing flooding of salt evaporation pans occured over periods of years and were only felt slowly, perhaps in a period of a generation or more. Such a creeping occurrence was hardly observed and recorded, though today we can see many examples, such as the successive building of the Portus harbours of Claudius, Trajan and Augustus, or, the alternating salt processing centers of Classis, Ravenna and Aquilea, or, any of the hundreds of sub sealevel sites around the Mediterranean.

A failure in any one of these supply systems , in turn caused catastrophic market changes, population migra, money fluctuations, and decline. As coal and oil began to replace peat and solar energy for much of the evaporation process of manufacturing, salt supplies around the world, quickly stabalised, and the critical aspect of 'common salt' passed into history, and was soon forgotten

SUMMARY

Money evolved from a system of 'Tallies' which represented receipts for work done or services rendered. The tallies such as coins and paper money, could also be mass produced , but were also easier to counterfeit, and so they tended to represent lower value denominations. All types of tallies, could be 'hall' [ΆΛΑΣ] marked in order to convert them in to money and then put into circulation. State authorities were bound to accept 'hall' marked money as dues and taxes. Tallies were not dependent on the innate qualities of the substrate for their market value.

The successful introduction of paper money in China in the 11th century demonstrates that the function of money as defined by Knapp, was well understood. When metals became too rare for their expanding economy, paper became the substrate for 'minting'. Their paper competed easily with gold and silver because it was relatively so cheap that the state could guarantee to replace it free of charge, when wear and tear, made this necessary. Paper money became completely corrosion resistant

Only until very recently, with the coming of the industrial age and the use of oil, and coal to produce in unlimited quantity , salt was the most important state monopoly commodity. It allowed the state to monopolise the charter guaranteeing the minting. It played a decisive role in the fluctuations of money purchasing power all over the world. Its production was, like grain, subject to the vagaries of nature, and directly effected the commodity and money markets unpredictably.

Modern economies have tended to treat money as a commodity, although its original use was only to represent and measure value. For all intents and purposes, this would mean that initially money has no value until it is exchanged for something of value. The value of goods and services must therefore be determined by the discrimination of the consumer. The convenience of salt was its uniformity and even the most primitive consumer could discern its value. In turn this must lead us to understand that money availability does not decide price fluctuations, but only the availability and quality of the services and essential commodities it represents. Thus at the community level money spent well, and which increases the community well-being may also be termed as deflationary . On the other hand money spent badly on poor services or limited availability of essential goods must therefore be inflationary.

BIBLIOGRAPHY