Front Page Titles (by Subject) NOTE ON THE RE-COINAGE OF 1696-99. - A Select Collection of Scarce and Valuable Tracts on Money
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NOTE ON THE RE-COINAGE OF 1696-99. - John Ramsay McCulloch, A Select Collection of Scarce and Valuable Tracts on Money 
A Select Collection of Scarce and Valuable Tracts on Money from the Originals of Vaughan, Cotton, Petty, Lowndes, Newton, Prior, Harris, and Others, with a Preface, Notes, and Index (London: Printed for the Political Economy Club, 1856).
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NOTE ON THE RE-COINAGE OF 1696-99.
THE proposal of Mr. Lowndes for degrading the Standard of the Currency by Raising the Nominal Value of the Crown, or 5s. piece, to 6s. 3d. (25 per cent.) and so in proportion with other Coins, was chiefly defeated through the vigorous resistance of Mr. Locke. To oppose it that great philosopher published his celebrated tracts on “Raising the Value of Money,”* in which he examined and refuted the various arguments by which Mr. Lowndes and others had endeavoured to vindicate the policy of such a proceeding. But, though the Old Standard was happily preserved in its integrity, some of the principles that should have been kept in view in settling the basis on which the Currency was henceforth to be placed appear to have been all but wholly overlooked.
The regulations under which Gold and Silver Coins were circulated in England previously to 1663 differed at different periods. In that year the Guinea* was first coined, and its value (though fixed by the Mint regulations at the low rate of 20s. in silver) and the values of the other Gold Coins then in circulation, varied according to the fluctuations in the market values of Gold and Silver, the latter being in effect the only legal tender. Gold, however, had, for a lengthened period, been coming more and more into circulation; and, owing to a variety of causes, the principal perhaps being its greater aptitude to serve as Currency, combined with the worn, clipped, and extremely unsatisfactory state of the Silver Coins, it was used in the reign of Charles II. in preference to Silver in all large payments. Previously to the great Re-Coinage of 1696-99, Silver Coins were so much degraded that the Guinea passed current for 28s. and 30s.
When, therefore, the subject of the Re-Coinage came to be considered, the first questions to be examined were, whether Gold or Silver should be selected as the Standard of the Currency? or whether both metals should be used as Standards?
Both Lowndes and Locke agree in considering Silver as having hitherto been in fact the only Standard of the Currency; and the latter was impressed with a strong (though we believe ill-founded† ) conviction of its great superiority in that respect to gold. Such being their opinion, it is plain that the proposal of Lowndes was neither more nor less than a proposal to degrade the Standard to the extent of 25 per cent. And we are under the greatest obligations to Locke and his supporters in Parliament by whom so nefarious a project was successfully opposed.
But Parliament, wholly engrossed by the Re-Coinage of Silver, does not appear to have ever considered what was to be done with Gold. And yet it is plain that if it was intended that Gold Coins should continue in circulation, and be legal tender indifferently with Silver, the future state of the Currency would depend on the Mint valuation of Gold and Silver, or on the rate at which the one was to be received for the other. If this valuation had been made so as to correspond pretty exactly with the real values of the metals then, as little or nothing would have been gained by using the one rather than the other, Coins of both might have continued to circulate together. But it is difficult at any time to make such an accurate adjustment of the values of the two metals; while, supposing it were made, it could not, owing to changes in their real values, be maintained for any considerable period. And whenever a change takes place in their comparative values, it becomes the obvious interest of everybody to use that metal in preference which is over-valued, the other being employed in the arts, or exported to places where it passes at its fair value.
But though sufficiently obvious, and set in a clear light by Mr. Locke, these considerations were completely lost sight of in 1696-99. After the Re-Coinage had been effected, the rates at which Gold and Silver Coins were to be interchanged were not fixed by authority—that is, the rule laid down in the Proclamation of 1663 was not interfered with. But this rule had fallen into desuetude, and after the Re-Coinage the value of the Guinea was estimated by the Public at 21s. 6d., and it was readily received at that rate in all payments.*
It appears, however, from the best attainable information, that this valuation of 21s. 6d. was really equivalent to a premium of 10d. in favour of the Guinea, it being worth only about 20s. 8d. of the new Coins. And in consequence of this marked, though unintentional preference of Gold, it was used, to the exclusion of silver, in all considerable payments; while the new Coins of the latter, being not only under-valued but in excess, immediately began to be exported.
The growing scarcity of Silver consequent on this exportation being in the end productive of considerable inconvenience, an attempt was made to stop it in 1717, by reducing by Proclamation the value of the Guinea from 21s. 6d. to 21s., Gold and Silver being respectively made legal tender in that proportion, or in the ratio of 1 lb. of Gold to 15 lb. of Silver. But notwithstanding this reduction, which was made pursuant to the advice of Sir Isaac Newton (see post), the Guinea was still over-valued as compared with Silver. This over-valuation was estimated at the time at about 4d. in the Guinea, or 1 per cent.* And as the value of Silver compared with Gold continued to increase for most part of last century, it afterwards became considerably greater; a circumstance which rendered it more and more the interest of all parties to pay in Gold rather than in Silver. Hence Gold became in practice, what Silver had formerly been, the sole legal tender; and during the lengthened period from 1717 down to 1816, no Silver Coins of the legal weight and purity would remain in circulation, but were either melted down or exported, the Silver Currency consisting entirely of light worn Coins.
It is evident from these statements that Locke and those who effected the Re-Coinage of 1696-99 should, to be consistent, and prevent the immediate exportation of the new Coins, have reduced the Mint value of the Guinea to 20s. 8d. or 20s. 6d., or have made it optional merely to take Gold at its market price.* But it is probably better that they did not. The over-valuation of Gold gave us a Gold Currency which, besides being incomparably more commodious, is, despite the dictum of Locke, in most respects preferable, especially in a country like this, to a Silver Currency.†
Had Lowndes, instead of an excessive reduction of 25 per cent. in the value of the Silver Coins, contented himself with proposing a reduction of 3 or 4 per cent., and his proposal been agreed to, it is probable that Gold would, notwithstanding, have continued to be preferred by the Public, and Silver been used only in small payments; and if so, the system of 1816 would have been to some extent anticipated. But the degradation which he proposed was so very great that, unless the ratio of Gold to Silver had been at the same time very largely raised, or the Gold Coins been called in and their weight proportionally reduced, they would have been entirely banished from circulation. It is quite impracticable, where two sets of Coins are equally legal tender, to degrade the one without at the same time degrading the other, or forcing it abroad.
In the system established in 1816, Silver is received at the Mint at the rate of 5s. 2d. per oz. and issued at the rate of 5s. 6d. per do. the 4d. being retained as a seignorage to defray the expense of Coinage. Silver was then, also, made legal tender to the extent of 40s. only in any one payment. In consequence, it has become a merely subsidiary currency. This system, which was suggested by the first Earl of Liverpool, has answered extremely well.
[* ]The first of these tracts, entitled “Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money,” was published in 1691.
[* ]So called from its being partly coined of gold brought from the coast of Guinea.—Snelling’s Gold Coins, p. 29.
[† ]See on this subject some conclusive remarks in Liverpool On Coins, p. 145.
[* ]Snelling’s Gold Coins, p. 31.
[* ]Liverpool On Coin, pp. 68—85.
[* ]This latter alternative was proposed by Locke.
[† ]Liverpool On Coins, p. 145.