Chapter 1. The monetary systems.
- First level: actual goods.
- Second level: abstract
- Third level: mixed market
- Fourth level:
How are they made and what are the monetary systems good for?
To answer these questions, we shall disregard all that is explained
to us by «economists»4
and we shall directly explain our own idea of the monetary reality.
We are not going to make here a description of how the monetary systems
presently in force work, but of how the primitive monetary systems worked,
and of how the present ones should work: we shall therefore suggest
To attain a maximum understanding of this matter, we shall make a distinction
among four levels of reality:
1st level: actual goods.
2nd level: abstract monetary units.
3rd level: mixed market values (actual-abstract).
4th level: monetary instruments.
1. First level: actual goods.
All living beings, and among them also man, need to consume a number
of goods (and in the case of man, also services) in order to carry on and
to better realize their existence.
These goods are called utilitarian goods, because they are useful
to satisfy the consumption needs of living beings.
In the same way we call utilitarianism the production and distribution
system of utilitarian goods existing in a given community (vegetal, animal
In the human species has been developed, during millennia of evolution,
a mode of utilitarianism which is today paramount in all modern societies:
it is the market-monetary utilitarianism (in short: market utilitarianism).
This utilitarian regime is typified basically by the fact that the produced
goods are not consumed by their own producers, but are exchanged in a market,
by means of regulating agreements which constitute a monetary system.
The utilitarian goods exchanged in a market are called generally merchandise,
and are of two kinds: produced merchandise (which may be inert objects,
dependent living beings, or utilitarian services), and producing merchandise
(which are the forces which allow the production of the previous
We must underline the fact, therefore, that it makes no sense to talk
about a monetary system if it is not in a context of actual, really existing,
level: abstract monetary units.
At the beginning the market -that is, the exchange of goods- took place
without any need for a monetary system.
Every basic exchange of an actual A merchandise for an actual B merchandise
-called barter- was done without the instrumentality of previously
established monetary conventionalities. The only factors to be kept in
mind were the particular needs of the two exchange agents: if these needs
were satisfied by means of a given barter, the barter was carried out.
But the perception of this satisfaction was of a qualitative order, as
no reference was made to a quantitative value standard which would allow
to calculate the exact equivalence between the values of any two given
But when the market utilitarianism of a society grows, is amplified,
becomes complex, then the need for a measuring system of the quantitative
exchange value of goods becomes evident, in order to be able to carry out
quantitatively equivalent exchanges. Then the monetary unit is born.
In the same way that, to measure actual distances we use a metre, which
is a conventional and abstract length unit, to measure the exchange value
of actual goods, we use monetary units, which are social conventionalities,
completely abstract and universal5.
They are abstract because they are pure formal conventionalities, empty
of actual contents; they are universal because they make up an abstract-accounting
common denominator of all the real and heterogeneous goods existing in
the market considered as a whole; that means, they are poured out into
one single system of interrelated correlation, measure and numbering.
Every actual merchandise contains then, conventionally, a given number
of abstract monetary units: thanks to this monetary homogenization of real
goods, naturally heterogeneous, it is easy to calculate numerically exact
equivalences among any different real goods.
Let us observe, however, that the introduction of a monetary unit on
a market does not cause barter to disappear, that is the actual exchange
of two real goods: it only makes it numerically easier and more perfect.
3. Third level:
mixed market values.
The immediate consequence of the introduction of a monetary unit is
fixing the market values. This means simply that to every specific merchandise
a market value is given, that is the given number of monetary units
The attribution, to every specific produced merchandise, of a given
market value in monetary units, produces a sales price.
The attribution, to every specific producing merchandise, of a given
market value in monetary units, produces a salary.
Prices and salaries are mixed realities, specific-abstract, as they
result from the comparison between specific goods (first level) and abstract
monetary units (second level).
4. Fourth level:
Somo protohistoric societies, which enjoyed a very dynamic market, reached
at a given time a situation in which market values (prices and salaries),
which up to then had been established almost exclusively through tradition,
therefore very stable -as it happens in scarcely dynamic societies-, were
established by a free agreement between the two contracting parties of
every basic, free exchange. Thus, prices and salaries fluctuate and change
freely and continuously, not only in terms of the desire every party has
to own the merchandise the other is offering, but also in terms of the
environmental circumstances (war or peace; want or abundance; transport,
warehousing difficulties or easiness...).
At this moment the market reality becomes so rich and complex, that
the invention of new exchange forms becomes necessary, to allow more rapid
and easy transactions: then, in the most advanced societies monetary instruments
Monetary instruments must not be confused neither with the monetary
units, nor with market values; but they imply the existence of both of
them. In a society where one or more monetary units are defined, and prices
and salaries are freely established, a monetary instrument will
consist, simply, of working out an accounting document, intercompensating
in an accounting system.
Let us explain it: the monetary instrument (which we could also call
monetary document, or monetary sign...) is a document which registers
a free market transaction, a free elementary exchange. But its interest
depends on the fact that it allows barter (the direct exchange of a given
A merchandise for a given B merchandise) to disappear, and allows the possibility
of making delayed exchanges, both in time and space. The working of the
delayed exchange through the monetary instrument is the following: let
us imagine that Mr. X wants to obtain from Mr. Y a specific A merchandise,
with a value of a monetary units; but has no B merchandise to offer
in exchange (in sucha quantity to attain the same monetary value of «a»
monetary units). In this case, Mr. Y can supply Mr. X the A merchandise,
without obtaining any specific merchandise in exchange, but receiving a
document in which Mr. X acknowledges a debt towards Mr. Y for «a»
monetary units. If both Mr. X and Mr. Y have personal current accounts
in a suitable establishment (for example, in the city temple), then the
debt written down in the monetary instrument may be immediately compensated
by writing down the necessary notes on the two current accounts.
So, a monetary instrument is, simply, a debt acknowledgement, documented
and intercompensating through a system of personal current accounts.
This simple invention will revolutionize the market, because the delayed
exchange is much more flexible and allows a greater market dynamics than
barter. After this, it is not necessry to invent anything new as far as
a monetary system is concerned, because the monetary instrument is flexible
enough to suit any situation, of whatever market complexity. It is only
necessary to update it in terms of the market realities and of the present
technological possibilities. This we shall discuss in the following chapters.
As a final synthesis on the nature of the monetary systems, we shall
say that these are complex realities -but not difficult to understand-
where the following levels must be marked out:
specific goods really existing on the market (whether produced goods, or
producing goods), which are to be exchanged;
monetary units, universal numerical-abstract conventionalities, which are
used to determine exactly the exchange value of each and all the previous,
market values (prices and salaries), mixed values resulting from comparing
specific goods and monetary units;
monetary instruments, documents which advise and inform about a debt acknowledgement,
for a given quantity of monetary units, of one person towards another one
(both of them well identified too).
The monetary unit is a measuring unit, and as such it is completely abstract.
The monetary instrument is a document which registers at the same time,
a measuring action (a measurement, consisting of establishing a market
value) and a market action (a transaction).
As a matter of fact, neither of them makes any sense, if there is not
a specific merchandise to be measured and exchanged through a contract.
The really existing specific goods are then the final basis of the existence
of monetary units, of market values (prices and salaries) and of monetary
instruments: that is, of the existence of monetary systems.
We may apply a simple metaphor to understand the instrumental-artificial-abstract
character of all monetary systems.
The specific goods (whether produced or producing) are the basic realities
of any utilitarianism: we call them first realities, because they
are the direct objects of man's utilitarian interest.
On the contrary, we may imagine the monetary system as a mirror
which supplies images of the specific goods and of the market acts:
monetary realities are then second realities, derived from the first
Let us imagine that, every time that two market agents make an operation,
the merchandise being the object of the operation goes quickly through
the mirror (of the monetary system), and projects its image. The image
is its market value (price or salary). But, at the same time, there is
a camera which makes a snapshot of this image, and also of the two agents
which produced it: the picture obtained is the monetary instrument, the
document of what has been going on. The image in the mirror is a fleeting
one, it disappears as soon as the operation is over; but the document remains,
recording all the features of the operation which has been carried out.
As far as the monetary units are concerned, they are the outline, radically
abstract-numerical, of the previous images (the mirror image and the camera
The value of these monetary images is auxiliary-instrumental: they are
used to better handle the specific goods which produced them, but they
have no intrinsic value. Only specific goods have an intrinsic value.
Besides, it is very important to point out that there cannot be monetary
images without specific goods producing them. Monetary realities are always
second, derived from the specific realities of the utilitarian market.
the word «economy» and all those derived from it in quotation
marks, when we use them in their present meaning, because we give this
word, usually, a very different meaning, next to its original etymological
meaning see (chapter 23).
the etymological meaning is «to pour out or to shed different realities
into one single correlation system».