Chapter 7: The Revolution in the Payment System
7. The revolution in the payment system 7.1 INTRODUCTION The transition to legal tender brought with it an interesting phenomenon, which we could call ‘payment system oblivion’. In the nineteenth century and the first few decades of the twentieth the payment system occupied a pre-eminent position in monetary thought. Just think of the amount of space and analysis dedicated to it – even though the term ‘payment system’ was not yet current – in some of the classics of monetary theory, such as Jevons, Wicksell, Von Mises and Keynes.1 In the literature produced between the later 1930s and the mid-1980s, by contrast, any search for a systematic treatment of the theoretical and institutional questions raised by the circulation of money would be fruitless. Theoretical and practical factors probably contributed to this situation in equal measure. On the theoretical plane, starting with Hicks’s celebrated ‘suggestion’,2 the emphasis in monetary analysis shifted progressively from the function of means of exchange to that of storage of value. This led to an emphasis on the problems connected with the holding of money, and a neglect of circulation.3 In this light theoreticians directed a good part of their work to comparing the properties of legal tender and commodity money. The two payment technologies, however, share the characteristic that they do not presuppose any clearing and settlement mechanism: in both, the means of exchange and the means of settlement are identical. On the practical plane, the consolidation of a monopoly on the issuance of legal tender and...
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