The Online Library of Liberty

A project of Liberty Fund, Inc.

• Notice.
• Mr M C Culloch’s Publications.
• Treaties and Essays On Subjects Connected With Economical Policy; With Biographical Sketches of Quesnay, Adam Smith, and Ricardo
• A Treatise On Money. 1
• Sect. I.—: Circumstances Which Led to the Use of Money. Principal Properties Which Every Commodity Used As Such Ought to Possess. Not a Sign Or a Measure of Value, But a Real Equivalent.
• Sect. II.—: Circumstances Which Regulate the Exchangeable Value of Money.
• Sect. III.—: A Moderate Seignorage On Coined Money Advantageous. Principles Which Should Regulate Its Amount. 1
• Sect. IV.—: Expense of a Currency Consisting of the Precious Metals.
• Sect. V.—: Paper Money. Principle On Which Its Value Is Maintained.
• Sect. VI.—: Whether Gold Or Silver Should Be Adopted As the Standard of the Currency, Or Whether It Should Consist of Both.
• Sect. VII.—: Standard of Money. Degradation of the Standard In Rome, France, Great Britain, and Other Countries. Effects of This Degradation.
• Tables Relative to the Money of the United Kingdom.
• Treatise On the Circumstances Which Determine the Course of Exchange.
• Inland Exchange.
• Foreign Exchange.
• Sect. I.—: Nominal Exchange.
• Sect. II.—: Real Exchange.
• Sect. III.—: Computed Exchange.
• History and Influence of Bills of Exchange.
• Essay On Interest and Usury Laws.
• A Treatise On the Letting and Occupancy of Land.
• 1.: Money Rents.
• 2.: Proportional Rents.
• 3.: Produce Rents.
• 4.: Service Rents.
• An Essay Showing the Erroneousness of the Prevailing Opinions In Regard to Absenteeism.
• Sketch of the History of Commerce, to the Sixteenth Century.
• Sect. I.—: PhŒnician Commerce.
• Sect. II.—: Grecian Commerce.
• Sect. III.—: Roman Commerce.
• Sect. IV.—: Italian Commerce In the Middle Ages.
• Sect. V.—: Vasco De Gama and Columbus.
• An Essay On the Rise, Progress, and Decline of Commerce In Holland.
• An Essay On the Rise, Progress, and Decline of the Hanseatic League.
• Essay On the Origin of the Compass.
• Sketch of the Progress of Maritime Law.
• An Essay On the Colonial System of the Ancients.
• Sketch of the Life and Writings of Francis Quesnay.
• Sketch of the Life and Writings of Adam Smith, Ll.d.
• Sketch of the Life and Writings of David Ricardo, Esq., M.P.

Sect. IV.—

Expense of a Currency consisting of the Precious Metals.

A moderate seignorage has but an inconsiderable effect in reducing the expense of a metallic currency. This, which is much greater than is generally imagined, is not occasioned by the coinage, which is comparatively trifling, but by the value of the gold and silver vested in coins. If, for example, the currency of the United Kingdom consisted wholly of gold, it would amount to at least sixty millions of sovereigns; and if the customary rate of profit were 6 per cent., it would cost £3,600,000 a-year: for were this sixty millions not employed as money, it would be employed in branches of industry in which, besides affording wages to numerous individuals, it would yield 6 per cent., or £3,600,000 a-year, nett profit to its possessors. And this is not the only loss. The sixty millions would not merely be withheld from the great work of production, and the country deprived of the revenue derived from its employment, but it would be perpetually diminished. The wear and tear of coins is by no means inconsiderable; and supposing the expenses of the coinage were defrayed by a moderate seignorage, the deficiency in the weight of the old worn coins, on their being called in to be recoined, falls on the public. There is, besides, a constant loss from shipwreck, fire, and other accidents. When due allowance is made for these causes of waste, it may not, perhaps, be too much to suppose, that a country, which had sixty millions of gold coins in circulation, would have annually to import and coin the hundredth part of this sum, or £600,000, to maintain its currency at its proper level.

Thus it appears that, were the customary rate of profit in the United Kingdom 6 per cent., it would cost £4,200,000 a-year to maintain sixty millions of gold coins in circulation. A reduction of the rate of profit would no doubt proportionally reduce the amount of this expense; but the reduced expense might still bear the same proportion to the total income of the country that the higher expense did, and if so, the cost of the currency would not be at all diminished. The case of France furnishes a striking example of the heavy charges attending the general use of a metallic currency. The gold and silver currency of that kingdom has been estimated by M. Fould at 2,200 millions fr., and by others at 2,500 millions.1 Now, supposing the lowest estimate to be the more correct, and taking the rate of profit at 6 per cent., this currency must cost France a hundred and thirty-two millions fr. a-year, exclusive of the wear and tear and loss of the coins, which being taken, as before, at the hundredth part of the entire mass, will make the whole annual expense amount to a hundred and fifty-four millions fr., or to about six millions sterling. This heavy expense forms a very material deduction from the advantages resulting from the use of a currency consisting entirely of the precious metals, and has doubtless been the chief cause why all civilised countries have endeavoured to fabricate a portion of their money of less valuable materials. It has not, however, been the only cause. It is obvious, were there nothing but coins in circulation, that the conveyance of large sums from place to place would be a very laborious process; and that even small sums could not be conveyed without considerable difficulty. Of the substitutes, calculated alike to save expense and to lessen the cost of carriage, paper is in every respect the most eligible, and has been by far the most generally adopted. By using it instead of gold, we substitute the cheapest for the most expensive currency; and enable the society to exchange all the coins which the use of paper renders superfluous, for raw materials, or manufactured goods, by the use of which its wealth and enjoyments are increased. It is also transferred with the utmost facility. Hence, since the introduction of bills of exchange, most great commercial transactions have been adjusted by means of paper only; and it also is used to a very great extent in carrying on the ordinary business of society.

Sect. V.—

Paper Money. Principle on which its Value is Maintained.

In the earliest periods, subsequent to the invention of writing, the pecuniary engagements of individuals would be written on some sort of material. This secures alike the debtors and creditors; and obviates most part of the differences which are so very apt to arise when the terms of contracts are not distinctly specified. But a very short time only would elapse before individuals, having the written obligations of others in a portable form, would begin to transfer them to their debtors. And, after the advantages derivable from their employment in this way had been ascertained, it was an obvious source of emolument for persons, in whose wealth and discretion the public had confidence, to issue their obligations to pay certain sums, in such a form as might fit them for performing the functions of a circulating medium. None would refuse to accept as money the promissory notes or obligations of individuals of large fortune, and of whose solvency no doubt could be entertained. And as full value must be originally given for these notes, it is clear that, whilst their continuance in circulation is no loss to the public, it is a source of profit to the issuers.

Suppose, for example, that a merchant issues a promissory note for £1,000: Previously to putting it in circulation, he will have received an equivalent in money, or in some sort of produce; or, which is by far the most common case, he will have advanced it to an individual who has given him security for its repayment with interest. In point of fact, therefore, the issuer has exchanged his promise to pay £1,000 for the interest to be derived from a real capital of that amount; and so long as the promissory note, the intrinsic worth of which cannot well exceed a sixpence, remains in circulation, he will, supposing interest to be 5 per cent., receive from it a revenue of £50 a-year. The business of bankers who issue notes is conducted on this principle. They could make no profit were they obliged to keep dead stock or bullion in their coffers, equal to the amount of their notes in circulation. But if they be in good credit, a fourth or a fifth part of this sum will perhaps be sufficient; and their profits, after the expenses of their establishments, including the manufacture of their notes, are deducted, will be measured by the excess of the profit derived from their notes in circulation, over what they might derive from the employment of the stock kept in their coffers to meet the demands of the public. “A bank would never be established, if it obtained no other profits but those derived from the employment of its own capital: its real advantage commences only when it employs the capital of others.”1

No means having been devised to limit the supply of promissory notes issued by private individuals, their value, it is plain, could not be maintained if the issuers fell into discredit, or were relieved from their promise to pay them. But it is otherwise with promissory notes issued by the state, or by a company acting under its control. The quantity of such notes may be effectually limited. And we have seen that, when this is the case, intrinsic worth is not necessary to a currency, and that, by properly regulating the supply of paper declared to be legal tender, its value may be sustained on a par with gold or any other commodity.

A limitation of this sort sustained Bank of England paper at a variable value in the interval between the passing of the restriction act in 1797, and the resumption of bullion payments in 1820. And no rational explanation of this phenomenon, which is entirely at variance with the old theories of paper money, can be given on any other principle. The fact of their being more or less depreciated creates no indisposition on the part of the public to apply to banks whose notes are legal tender. Applicants for loans are indifferent whether the issuers of paper have, by issuing in excess, depressed its value relatively to gold, or whether they have restricted the supply so as to keep it on a level with that metal. These circumstances affect those whose incomes do not vary with variations in the value of money; but, inasmuch as prices rise and fall with its increase or diminution, they have little influence over merchants, who are the principal demanders of discounts. The presenter of a bill for £500 or £1,000 to a bank, has received it, if it have arisen out of a real commercial transaction, in lieu of goods which, at the then value of money, were worth £500 or £1,000; and it is this sum which, by presenting the bill to the bank, he wishes to obtain. If the value of money had been different, the price of the goods, and consequently the sum in the bill, would also have been different. It is to this market value of money at the time, that attention is exclusively paid in commercial transactions. When Bank of England paper was depressed through excess, in 1809-1814, from 10 to 25 per cent. below the value of bullion, the circumstance of its being enacted, that it should be paid in cash at the restoration of peace, had as little effect in raising its value, as its depreciation had in diminishing the applicants for discounts. The truth is, that individuals never resort to a bank for paper money, unless they have immediate occasion for it. As soon as it has been obtained, they throw it upon the market, for whatever it will bring. And as they purchased it on the same terms (for the value of money is hardly ever sensibly affected in the interval between the discount of a bill and the period when it becomes due), they generally get as much for it, and perhaps more, than it cost. We shall immediately explain what constitutes the natural limit to applications for discounts; but enough has been said to show, that it has nothing to do with the convertibility of notes into cash.

Those who offer accommodation bills for discount, like those who offer real bills, consider only the present value of money. They immediately employ the proceeds in the purchase of commodities or services, or in the payment of debts; and whether one pound notes be worth 10s. or 20s. is of no consequence to them, inasmuch as the amount of the bill is regulated accordingly.

That country bank notes cease to circulate as soon as any suspicion is entertained of the solvency of their issuers, is nowise inconsistent with these statements. They bear to be exchangeable, at the pleasure of the holder, for Bank of England notes. But from the restriction in 1797 down to 1820, the latter not being exchangeable for anything else, took the place of coin, and became the standard of value. Hence, when a country bank lost credit, the circulation of its notes was stopped, from its being believed that it would be impossible to obtain Bank of England paper in their stead; or, in other words, that they would not exchange for that description of paper which constituted the real medium of exchange. But it is impossible that this paper should itself be affected by a want of credit. Every one knew that it had no intrinsic worth. And, as already shown, its value was regulated (and must, whenever it is not made exchangeable for a given quantity of some other commodity, continue to be regulated) by the amount in circulation.

It appears, therefore, that if there were perfect security, that the power of issuing paper money would not be abused; that is, if there were perfect security for its being issued in such quantities, as to preserve its value relatively to the mass of circulating commodities nearly equal, the precious metals might be dispensed with, not only as a circulating medium, or marchandise banale, but also as a standard to which to refer the value of paper.

Unfortunately, however, no such security can be given. This is a point respecting which there can be no difference of opinion. The history of this and all other countries, shows that the power of making unrestricted issues of paper money has never been entrusted to any man, or set of men, without being abused; that is, without its being issued in inordinate quantities. If a private banking company have power to supply the state with paper, to suppose that they should exert themselves to sustain its value on a par with gold, by carefully limiting their issues, would be equivalent to the not very reasonable supposition, that they should be attentive only to the public interests, and have little or no care of their own private advantage. The re-enactment of the restriction act, would have no influence over the value of paper, provided its quantity were not at the same time increased. But who can doubt that, in such circumstances, it would be increased? Such a measure would enable the Bank of England to exchange bits of engraved paper, not worth perhaps five shillings a-quire, for as many, or the value of as many, hundreds of thousands of pounds. And is it to be supposed, that the directors and proprietors should not avail themselves of such an opportunity to amass wealth and riches? If government enable a private gentleman to exchange a scrap of paper for an estate, will he be deterred from doing so by any considerations about its effect on the value of the currency? In Utopia we might, perhaps, meet with an individual influenced by such scruples, but if we expect to find him in England, we shall most likely be disappointed. It is quite essential that the issuers of paper money should be placed under some check or control. And the comparatively steady value of the precious metals, at once suggests that none can be so effectual as to lay them under the obligation of exchanging their notes, at the pleasure of the holders, for given and unvarying quantities of gold or silver.

It has, however, been contended, that there is a material difference between paper issued by government in payment of its debts, and that which is issued by private banking companies in discount of good bills. In regard to the former, it is admitted on all hands that it may be issued in excess; but in regard to the latter, it has been strenuously urged that “notes issued only in proportion to the demand, in exchange for good and convertible securities, payable at specific periods, cannot occasion any excess of the circulation, or any depreciation.” As all the statements advanced by those who argued that our paper currency was not depreciated between 1797 and 1819, involve this principle, it may be worth while to examine it a little minutely.

In the first place, it may be observed, that the demand for discounts does not depend on the nature of the security required for their repayment, but on the rate of interest for which they may be obtained, compared with the ordinary rate of profit made by their employment. If an individual can borrow £1,000, £10,000, or any greater sum, at 3, 4, or 5 per cent., and if he can realise 4, 5, or 6 per cent., or upwards, by its employment, it is evidently for his interest, and it would be for the interest of every other person similarly situated, to borrow to an unlimited extent. And banking companies, relieved from all obligation to pay their notes in cash, and not, of course, obliged to keep any unproductive stock or bullion in their coffers, would be able to issue their notes at the lowest possible rate of interest; and the demand for their paper would, therefore, be proportionally great.

“The interest of money,” says Mr Ricardo, “is not regulated by the rate at which the Bank of England will lend, whether it be 5, 4, or 3 per cent., but by the rate of profit which can be made by the employment of capital, and which is totally independent of the quantity or of the value of money. Whether the bank lent one million, ten millions, or a hundred millions, they would not permanently alter the market rate of interest; they would alter only the value of the money which they thus issued. In one case, ten or twenty times more money might be required to carry on the same business than what might be required in the other. The applications to the bank for money, then, depend on the comparison between the rate of profit that may be made by the employment of it, and the rate at which they are willing to lend it. If they charge less than the market rate of interest, there is no amount of money which they might not lend; if they charge more than that rate, none but prodigals and spendthrifts would be found to borrow of them. We accordingly find, that when the market rate of interest exceeds the rate of 5 per cent., at which the bank uniformly lends, the discount office is besieged with applicants for money; and, on the contrary, when the market rate is even temporarily under 5 per cent., the clerks of that office have no employment.”1

From 1809 to 1815 inclusive, the period in which the value of paper relatively to gold was lowest, the market rate of interest considerably exceeded the rate of 5 per cent., which was then charged by the Bank of England and most country banks. Although, therefore, the amount of paper currency had, in that interval, been very much increased, the applicants for fresh discounts continued as numerous as ever. And had the Bank directors not been apprehensive that, ultimately, they might have to pay their notes in specie, there can be little doubt that the numbers of them in circulation would have been materially greater. Such, at least, would have been the case, had the directors acted to the full extent of their avowed opinion, that it was impossible to reduce the value of paper, by engrossing into the circulation such quantities as were issued in discount of good bills. The wants of commerce are altogether insatiable. Inconvertible paper money, provided the rate of interest at which bills are discounted be less than the market rate, can never be too abundant. As long as this is the case, million after million may be thrown upon the market. The value of the currency may be so reduced as to require a one pound note to purchase a quartern loaf; but the circumstance of its value being diminished in proportion to the increase of its quantity, would render the demand for additional supplies as great as ever.

Were the Bank of England in possession of a process whereby she could produce sovereigns with the same facility as notes, there could be no question that she might depreciate the value of gold, by making large issues of what was produced at so very little cost. Now, in what respect would this fictitious case differ from the real situation of the Bank, were the restriction act renewed and made perpetual? She would then be able, without let or hindrance, to exchange paper for landed property, manufactured goods, government securities, etc. But we have seen that the value of this paper, like the value of gold in the hypothetical case, depends entirely on the proportion which the supply bears to the demand. And as the demand is not affected by an increase of quantity—for that increase, by diminishing its value, renders the larger quantity of as little efficacy as the smaller—it is abundantly clear, provided the Bank lent at a sufficiently low rate of interest, that there could be no limit to her issues.

On the whole, therefore, whether the power to issue paper be vested in a private company or in government, it is plain, it should be placed under some efficient control, such as the obligation to pay in gold or silver. It is easy to discover the manner in which a check of this kind limits the issue of paper and sustains its value. Whenever the Bank has issued so much paper as to sink its value relatively to bullion, its notes begin to return upon it, to be exchanged for a higher value; and the Bank is obliged, to prevent the exhaustion of its coffers, to contract its issues, and raise its paper to a level with gold. An extremely small profit, or an extremely small depreciation of paper, as compared with gold or silver, is sufficient to make the holders of bank paper send it to be exchanged for these metals; and hence the value of bank notes, convertible at pleasure into an unvarying quantity of gold or silver, can never differ considerably from its value. The issues of the Bank of England were, for more than a century previously to 1797, limited in the manner now explained; and, during that whole period, they were hardly ever depreciated ¼ per cent., and never more than 2 per cent., and that but for a few days only.

But though it be thus necessary to avert injurious fluctuations in the value of paper, that it should be made exchangeable at the pleasure of the holder for gold or silver, it is not essential to this end that it should be made exchangeable for gold or silver coins. Previously to the resumption of specie payments by the Bank of England in 1821, she was obliged to give bars of assayed bullion in exchange for notes, according to a plan suggested by Mr Ricardo. And there can be no doubt that this obligation would have sustained the value of paper quite as effectually as it is sustained by the obligation to pay in coin of the legal weight and purity, at the same time that it would have saved the greater part of the heavy expense occasioned by the use of metallic money. But, how important soever, these were not the only considerations that had to be attended to. The discovery of means for the prevention, or at least diminution, of the forgery to which the substitution of notes for guineas had given rise, was indispensable to the maintenance of Mr Ricardo’s plan; and, notwithstanding all the efforts that have been made, this desideratum has not yet been supplied. Forgery in the larger description of notes, or in those for £5 and upwards, may, with due precaution, be prevented from becoming injuriously prevalent. But low notes, or those of the value of £1 or £2, having to circulate amongst the labouring classes, and in immense numbers, present facilities for the issue of spurious paper, which it has been found impossible materially to diminish. Hence, in 1821, the plan of paying in bars of bullion was abandoned, and the Bank of England recommenced paying in specie.

Sect. VI.—

Whether Gold or Silver should be adopted as the Standard of the Currency, or whether it should consist of both.

As the values of gold and silver perpetually vary, not only relatively to other things, but also relatively to each other, it is impossible arbitrarily to fix them by mint regulations. Gold may now, or at any given period, be to silver as 13, 14, or 15 to 1; but were sovereigns and shillings coined in that proportion, the discovery of a gold or silver mine of more than the ordinary degree of productiveness, or the discovery of any abridged process by which labour might be saved in the production of one of the metals, would disturb this proportion. And as soon as the mint valuation of the two metals ceases to correspond with that which they bear in the market, it becomes the interest of debtors to satisfy all claims upon them in the over-valued metal, which, consequently, is alone used in all considerable transactions.

The regulations under which gold and silver coins 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. But, from a variety of causes—the principal being, perhaps, the extremely unsatisfactory state of the silver coin, gold began, in the reign of Charles II., to be used in preference to silver in large payments. Previously to the great recoinage of silver in the reign of William III. (1696-1699), the silver coins were so much worn and degraded, that the guinea passed current at from 28s. to 30s. After the recoinage, its value was very generally estimated, without any interference on the part of government, at 21s. 6d.; a valuation which was equivalent to a premium of 10d. in its favour, it being really worth only about 20s. 8d. of the new silver coins.

In consequence of this marked, though unintentional, preference of gold, the silver coins shortly began to be largely exported; and, to stop their exportation, the value of the guinea was reduced, by proclamation in 1717, from 21s. 6d., at which it had been fixed by custom, to 21s., both metals being made legal tenders in that proportion, or in the ratio of 1 lb. gold to 15 lbs. silver. But notwithstanding this reduction, which was made pursuant to the advice of Sir Isaac Newton, the guinea was still over-valued as compared with silver. This excess was estimated at the time as being at least 4d. in the guinea, or 1 per cent.;1 and as the value of silver compared with gold continued to increase for the greater part of last century, it afterwards became considerably greater; and this circumstance rendered it, as already stated, more and more the interest of all parties to pay in gold rather than in silver. Hence gold became in practice the only 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 to other countries, where they passed at their full value. In consequence, the silver currency consisted entirely of light, worn coins. But as it existed only in a limited quantity, it did not, according to the principle already explained, sink in its current value. Though degraded, it was still the interest of debtors to pay in gold. If, indeed, the quantity of debased silver had been very great, or if the mint had issued debased pieces, it might have been the interest of debtors to pay in such debased money; but its quantity being limited, it sustained its value, and gold was really the standard of the currency.

The mint regulations issued in 1717, continued in full force down to 1774, when it was enacted by the 14 Geo. III., cap. 42, that silver coins should not be legal tender by tale for more than £25 in any one payment, but that standard silver should be legal tender to any amount in weight at the mint price of 5s. 2d. an ounce.1 This act had not, however, as some have supposed, any effect in causing the general employment of gold as money in preference to silver. For, to use the words of Mr Ricardo, “it did not prevent any debtor from paying any debt, however large its amount, in silver currency fresh from the mint. That the debtor did not pay in this metal was not a matter of chance, nor a matter of compulsion, but wholly the effect of choice. It did not suit him to take silver to the mint, but it did suit him to take gold hither. It is probable that if the quantity of this debased silver in circulation had been enormously great, and also a legal tender, that a guinea would have been, as in the reign of William III., worth thirty shillings; but it would have been the debased shilling that had fallen in value, and not the guinea that had risen.”1

In France, a different valuation of the precious metals produced a different effect. The louis d’or, which, previously to the recoinage of 1785, was rated in the mint valuation at 24 livres, was really worth 25 livres 10 sols. Those, therefore, who chose to discharge the obligations they had contracted, by payments of gold rather than of silver, plainly lost 1 liv. 10 sols on every sum of 24 livres. In consequence, very few such payments were made, gold was nearly banished from circulation, and the currency of France became almost entirely silver.2 In 1785, a sixteenth part was deducted from the weight of the louis d’or, and since that period the value of the precious metals, as fixed in the French mint, has more nearly corresponded with the proportion which they bear to each other in the market. Indeed, it was stated, in evidence before a committee of the House of Commons in 1819, that the difference between the mint and market proportions of gold and silver at Paris in 1817 and 1818, had not exceeded from one-tenth to one-fourth per cent. There is, however, no reason to presume that this coincidence, which must have been in a great degree accidental, can long be maintained under any arbitrary system. To ensure the indifferent use of gold and silver coins in countries where they are both legal tender, their mint values would require to be every now and then adjusted, so as to correspond with their real values. But as this would obviously be productive of much trouble and inconvenience, the preferable plan undoubtedly is to make only one metal legal tender, and to allow the worth of the other to be adjusted by the competition of the sellers and buyers.

The absurdity of employing two metals as legal tender, or as a standard of value, was unanswerably demonstrated by Locke and Harris, and has been noticed by every subsequent writer. But so slow is the progress of improvement, that it was not till 1816 that it was enacted that gold should be in law, what it had long been in fact, the only legal tender for sums of 40s. and upwards. From that period, silver has been a mere subsidiary currency, used only in small payments.

Whether, however, gold should have been adopted as the standard of exchangeable value, in preference to silver, is a question not so easy of solution, and on which there has been a great diversity of opinion. Locke, Harris, and Ricardo, are of opinion that silver is better fitted than gold for a standard; whilst Smith, though he has not explicitly expressed himself, appears to think that gold should be preferred. This latter opinion has been supported by Lord Liverpool, in his very valuable work “On the Coins of the Realm.” And his reasonings having received the approbation of Parliament, and gold having been made legal tender, all attempts to alter this arrangement ought to be opposed.

The late extraordinary increase in the supply of gold has led many persons to anticipate great inconvenience from the fall which may be expected to take place in its value. But, supposing that this fall should, as appears most probable, take place in the end, there is no ground for concluding that it will be brought about otherwise than by slow degrees; and if so, it will not occasion any injurious disturbance. About 140 or 150 years elapsed from the discovery of America before the influx of bullion from the new into the old world produced its full effect. And it is doubtful, considering the vastly increased field for the employment of gold and silver, whether the supplies from Siberia, California, and Australia, will speedily exercise any very material influence. We have elsewhere shown that a gradual fall in the value of gold would, in a public point of view, be highly advantageous.1

Whether gold or silver be adopted as the standard of the currency, does not affect its total cost or value; for, the quantity of metal employed as money, or the quantity of metal for which paper is the substitute, is always inversely as the value or cost of such metal. When gold is the standard, fourteen or fifteen times less of it than of silver is required; or, which is the same thing, if the denomination of a pound be given to any specific weight of gold or silver, fourteen or fifteen times more of such silver pounds will be required to serve as currency, fourteen or fifteen to one being about the proportion which gold bears in value to silver. Hence the expense of a gold or silver currency is identical. Gold being too valuable, in proportion to its bulk, to be coined into pieces of the value of a shilling or a sixpence, the subsidiary currency necessary in small payments, should be over-valued, and issued only in limited quantities, as is the case with the present silver coinage.

Were a seignorage charged on the gold coins, paper, it is obvious, might be depreciated to its extent, before it would be the interest of the holders to demand coin for the purpose of exportation, and consequently before the check of specie payments would begin to operate. But, even with a seignorage, all risk of paper being depreciated, might be obviated by making it obligatory on the Bank to pay their notes, either in bullion, at the mint price of £3, 17s. 10½d. an ounce, or coin, at the pleasure of the holder. A regulation of this kind could not be justly considered as imposing any hardship on the Bank; for no bullion would be demanded from her, except when, by the issue of too much paper, its value had been sunk below the standard.

Sect. VII.—

Standard of Money. Degradation of the Standard in Rome, France, Great Britain, and other countries. Effects of this degradation.

By the standard of money is meant the degree of the purity or fineness of the metal of which coins are made, and the quantity or weight of such metal in them. A pound troy, or twelve ounces, of the metal in English silver coins, contains 11 ounces 2 dwts. fine silver, and 18 dwts. alloy. And this standard pound, or pound sterling, is coined into 66 shillings; which, consequently, contain parts of of a pound troy, or 1614·545 grains fine silver. From the 43 of Elizabeth down to 1816, when the 56th Geo. III. cap. 68, imposing a seignorage of about six per cent. on the silver coin, was passed, the pound weight of standard silver bullion was coined into 62 shillings. All English silver coins have been coined out of silver of 11 oz. 2 dwts. fine, from the Conquest to this moment, excepting for a period of sixteen years, from 34th Henry VIII. to the 2d Elizabeth.

The purity of gold is not estimated either in Great Britain, or in most other European countries, by the weights commonly in use, but by an Abyssinian weight called a carat.1 The carats are subdivided into four parts, called grains, and these again into quarters; so that a carat grain, with respect to the common divisions of a pound troy, is equivalent to 2½ penny-weights. Gold of the highest degree of fineness, or pure, is said to be 24 carats fine. When gold coins were first struck at the English mint, the standard of the gold in them was 23 carats 3½ grains fine, and ½ grain alloy; and so it continued without any variation to the 18th Henry VIII., when a new gold standard of 22 carats fine, and two carats alloy was introduced. The first of these was called the old standard; the second, the new standard or crown gold, because crowns, or pieces of the value of five shillings, were first coined of this new standard. Henry VIII. made his gold coins of both standards; and this practice was continued by his successors till 1633. From the latter period to the present, gold coins have been invariably of the new standard, or crown gold. Some coins of the old standard continued to circulate till 1732, when they were forbidden to be any longer current.2

The standard of our present gold coins is, therefore, eleven parts of fine gold, and one part of alloy. The pound troy of such gold is divided into 46 sovereigns, each of which ought, consequently, when fresh from the mint, to weigh of twelve ounces, or five dwts. 3 grains standard gold, or four dwts. 17 grains pure gold.

The alloy in coins is reckoned of no value. It is allowed, to save the trouble and expense that would be incurred in refining the metals so as to bring them to the highest degree of purity; and because, when its quantity is small, it renders the coins harder, and less liable to be worn or rubbed. If the quantity of alloy were considerable, it would lessen the splendour and ductility of the metals, and would add too much to the weight of the coins.

Having thus ascertained what the standard of money really is, we proceed briefly to examine the effects produced by its variation. This is a very important inquiry, both in a practical and historical point of view.

Directly to alter the terms of the contracts between individuals, would be too barefaced and tyrannical an interference with the rights of property, to be tolerated. Those, therefore, who endeavour to enrich one part of society at the expense of another, find it necessary to act with caution and reserve. Instead of changing the stipulations in contracts, they have ingeniously bethought themselves of changing the standard, by which these stipulations are adjusted. They have not said, in so many words, that ten or twenty per cent. should be added to, or deducted from, the debts and obligations of society, but they have, nevertheless, effected this by making a proportional change in the value of money. Men, in their bargains, do not, as has been already seen, stipulate for signs or measures of value, but for real equivalents. Money is not merely the standard by a comparison with which the values of commodities are ascertained; it is, also, the equivalent, by the delivery of a specified amount of which the stipulations in most contracts and engagements may be discharged. It is plain, therefore, that it cannot vary without affecting these stipulations. Every addition to its value makes a corresponding addition to the debts of the state, and of individuals; whereas every diminution of its value makes a corresponding diminution of these debts. Suppose that, owing to an increase in the cost of gold and silver, or in the quantity of bullion contained in coins of the same denomination, the value of money is raised ten per cent.: it is plain that this will add ten per cent. to the various sums which one part of society owes to another. Though the nominal rent of the farmer, for example, continues stationary, his real rent is increased. He pays the same number of pounds, or livres, or dollars, as formerly; but these have become more valuable, and require to obtain them the sacrifice of a tenth part more corn, labour, or other things, the value of which has remained stationary. On the other hand, had the value of money fallen ten per cent., the advantage would have been wholly on the side of the farmer, who would have been entitled to a discharge from his landlord, when he had paid him only nine-tenths of the rent really bargained for.

But, though it be thus obviously necessary, to prevent a pernicious subversion of private fortunes, and the falsifying of all precedent contracts, that the standard of money, when once fixed, should be maintained inviolate, there is nothing which has been so frequently changed. We do not now allude to variations in the value of bullion itself, against which it is impossible to guard, but to variations in the quantity of bullion contained in the same nominal sums of money. In almost every country, debtors have been enriched at the expense of their creditors. The necessities, or the extravagance of governments, have forced them to borrow. And to relieve themselves of their encumbrances, they have almost universally had recourse to the disgraceful expedient of degrading or enfeebling the coin; that is, of cheating those who had lent them money, and of enabling every private debtor in their dominions to do the same by his creditors.

The ignorance of the public in remote ages facilitated this variety of fraud. Had the names of the coins been changed when the quantity of metal contained in them was reduced, there would have been no room for misapprehension. But, though the weight of the coins was undergoing perpetual, and their purity occasional, reductions, their ancient denominations were almost uniformly preserved. And those who saw coins of a certain weight and fineness circulate under the names of florins, livres, and pounds, and who saw them continue to circulate as such, after both their weight and their fineness had been lessened, began to think that they derived their value more from the stamp affixed to them by authority of government, than from the quantity of the precious metals which they contained. This was long a very prevalent opinion. But the rise of prices which invariably followed every reduction of the standard, and the disturbance which it occasioned in every pecuniary transaction, undeceived the public, and taught them, though it may not yet have taught their rulers, the expediency of preserving the standard of money inviolate.

Before proceeding to notice the changes made in the currency of this and other countries, it may be proper to observe, that the standard is generally debased in one or other of the undermentioned ways.

First, by altering the denominations of the coins, without making any alteration in their weight or purity. Thus, suppose sixpence, or as much silver as there is in a sixpence, were called a shilling, then a shilling would be two shillings, and twenty of these shillings, or ten of our present shillings, would make a pound sterling. This would be a reduction of fifty per cent. in the standard.

Secondly, the standard may be reduced, by continuing to issue coins of the same weight, but making them baser, or with less pure metal and more alloy.

Thirdly, it may be reduced by making the coins of the same degree of purity, but of diminished weight, or with less pure metal; or it may be reduced partly by one of these methods, and partly by another.

The first of these methods of degrading the standard was recommended by Mr Lowndes in 1695; and if injustice is to be done, it is, on the whole, the least mischievous mode in which it can be perpetrated. It saves all the trouble and expense of a recoinage; though, as it renders the fraud too obvious, it has been but seldom resorted to. But in inquiries of this kind, it is rarely necessary to investigate the manner in which the standard has been degraded. And by its reduction or degradation, is usually meant a diminution of the quantity of pure metal contained in coins of the same denomination without regard to the mode in which it may have been effected.

Conformably to what has been observed in the first section of this treatise, relative to the universality of the ancient practice of weighing the precious metals in every exchange, it is found that the earliest coins of most countries had the same names and were of the same ponderosity as the weights commonly used in them. Thus, the talent was a weight used in the earliest periods by the Greeks, the as or libra by the Romans, the livre by the French, and the pound by the English, Scotch, &c.; and the coins originally in use in Greece, Italy, France, and England, received the same denominations, and weighed a talent, a libra or pondo, a livre, and a pound. The standard has not, however, been preserved inviolate, either in ancient or modern times. But to attempt to trace these changes with any degree of minuteness, would lead us into too many details; and we shall content ourselves with referring to those only which seem to be of most importance.1

Roman Money.—We learn from Pliny, that the first Roman coinage took place in the reign of Servius Tullius; that is, according to the common chronology, about 550 years before Christ. The as, or libra, of this early period, contained a Roman pound of copper, the metal then exclusively used in the Roman coinage, and was divided into twelve parts or unciœ. If we may rely on Pliny, this simple and natural system was maintained until 250 years before our æra, or until the first Punic war, when the revenues of the state being insufficient, it was attempted to supply the deficiency, by reducing the weight of the as from twelve to two ounces. But it is extremely improbable that a government, which had maintained its standard inviolate for 300 years, should have commenced the work of degradation, by at once reducing it to a sixth part of its former amount; and it is equally improbable that so sudden and excessive a reduction should have been made in the value of the current money of the state, and, consequently, in the debts of individuals, without occasioning the most violent commotions. Nothing, however, is said in any ancient writer to entitle us to infer that such really took place; and we, therefore, concur with those who think that the weight of the as had been previously reduced, and that its diminution, which, it is most probable, would be gradual and progressive, had merely been carried to the extent mentioned by Pliny during the first Punic war. In the second Punic war, or 215 years bc, a further degradation took place, and the weight of the as was reduced from two ounces to one ounce. And by the Papyrian law, supposed to have passed when Papyrius Turdus was tribune of the people, 175 years bc, the weight of the as was reduced to half an ounce, or to th part of its ancient weight, at which it continued till Pliny’s time, and long afterwards.1

The denarius, the principal silver coin in use amongst the Romans for a period of 600 years, was coined five years before the first Punic war, and was, as its name imports, rated in the mint valuation at ten asses. Mr Greaves, whose dissertation has been deservedly eulogised by Gibbon,1 shows that the denarius weighed at first only one-seventh part of a Roman ounce,2 which, if Pliny’s account of the period when the weight of the as was first reduced be correct, would give the value of silver to copper in the Roman mint as 840 to 1, which Greaves very truly calls a “most unadvised proportion.” But if we suppose, with Pinkerton,3 that, when the denarius was first issued, the as only weighed three ounces, the proportion of silver to copper would be as 252 to 1—a proportion which, when the as was soon afterwards reduced to two ounces, would be as 168 to 1, or about a third more than in the British mint. When, in the second Punic war, the as was reduced from two ounces to one, the denarius was rated at sixteen asses.

During his stay in Italy, Greaves weighed many consular denarii; that is, as he explains himself, denarii which were struck after the second Punic war and previously to the government of the Cæsars; and he found, by frequent and exact trials, that the best and most perfect of them weighed 62 grains English troy weight.4 Now, as the English shilling (new coinage) contains very nearly 87¼ grains standard silver, this would give 8½d. for the value of the consular denarius. We should, however, fall into the greatest mistakes, if we indiscriminately converted the sums mentioned in the Latin authors by this or any other fixed proportion. It is not enough to determine the real value of a coin, to know its weight: the degree of its purity, or the fineness of the metal of which it is made, must also be known. But Greaves assayed none of the denarii which he weighed. And though it were true, as most probably it is, that, from the first coinage of silver in the 485th year of the city to the reign of Augustus, the weight of the denarius remained constant at th part of a Roman ounce, or about 62 grains; and that, from the reign of Augustus to that of Vespasian, it only declined in weight from th to ⅛th of an ounce;1 still it is abundantly certain that its real value was reduced to a much greater extent. The authority of Pliny, in this respect, is decisive; for he states that Livius Drusus, who was tribune of the people in the 662nd year of the city, or 177 years after the first coinage of silver, debased its purity, by alloying it with ⅛th part of copper.2 And, in a subsequent chapter (the ninth) of the same book, he informs us that Antony the triumvir mixed iron with the silver of the denarius; and that, to counteract these abuses, a law was afterwards made, providing for the assay of the denarii. Some idea of the extent to which the purity of the coins had been debased, and of the disorder which had in consequence been occasioned, may be formed from the circumstance, also mentioned by Pliny, of statues being everywhere erected in honour of Marius Gratidianus, by whom the law for the assay had been proposed. But this law was not long respected; and many imperial denarii are now in existence, consisting of mere plated copper.3

Gold was first coined at Rome sixty-two years after silver, in the 547th year of the city, and 204 years bc The aureus originally weighed th part of the pondo, or Roman pound; but, by successive reductions, its weight was reduced, in the reign of Constantine, to only nd part of a pound. The purity, however, as well as the weight of the aureus, was diminished. Under Alexander Severus it was alloyed with ⅕th part of silver. We learn from Dion Cassius, contemporary of Severus, that the aureus was rated at twenty-five denarii, a proportion which Pinkerton thinks was always maintained under the emperors.1

The want of attention to this progressive degradation has led the translators of ancient writers and their commentators, to the most erroneous conclusions. The sestertius, or money unit of the Romans, was precisely the fourth part of a denarius.2 When, therefore, the latter was worth 8½d., the former must have been worth 2⅛d. But the sestertius being thus plainly a multiple of, and bearing a fixed and determined proportion to the denarius, and consequently to the as, the aureus, and the other coins generally in use, it would partake of their fluctuations. When they were reduced, it would be likewise reduced; for had it not, or had the number of degraded denarii and aurei contained in a given sum of sestertii been increased in proportion to their degradation, nothing, it is obvious, would have been gained by falsifying the standard. Inasmuch, however, as we know that on one occasion the republic got rid of half of its debts, dimidium lucrata est, by simply reducing the standard of the as, the value of the sestertius must have fallen in the same proportion, just as in England we should reduce the pound sterling by reducing the shillings of which it is made up.3

Arbuthnot’s “Tables of Ancient Coins,” which, for a lengthened period, were considered of high authority, are constructed on the hypothesis that the consular denarii weighed by Greaves were of the same purity as English standard silver, and that no subsequent diminution was made either in their weight or fineness. The conclusions derived from such data, though differing in degree, are of the same character as those which we should arrive at, if, in estimating the value of the pound sterling during the last hundred years, we took for granted that it contained a pound weight of standard silver, as in the period from the Conquest to the reign of Edward I. And, in addition to this source of error, the sums in ancient writers were, probably, at first set down with little regard to accuracy; and they have been peculiarly obnoxious to error from the carelessness of copyists and transcribers. But, however explained, many of the statements in the classics, as rendered by Arbuthnot and others, are quite incredible. Thus, we are told that Julius Cæsar, when he set out for Spain, after his prætorship, was £2,018,229 sterling worse than nothing; that Augustus received, in legacies from his friends, £32,291,666; that the estate of Pallas, a freedman of Crassus, was worth £2,421,875, and, which is still better, that he received £121,093 as a reward for his virtues and frugality; that Æsop, the tragedian, had a dish served up at his table which cost £4,843; that Vitellius spent £7,265,625 in twelve months, in eating and drinking; and that Vespasian, at his accession to the empire, declared that an annual revenue of £322,916,666 would be necessary to keep the state machine in motion. It is astonishing that but few of our scholars or commentators seem to have been struck with the palpable extravagance of these and similar statements; though, to use the words of Garnier, they have brought “l’Histoire Ancienne, sous le rapport des valeurs, au même degré de vraisemblance que les contes de Mille et un Nuits.” It should be remembered that, from the greater poverty of the mines of the old world, and the comparatively small progress made in the art of mining, the value of gold and silver was much—probably four times—greater in antiquity than at present. But, without taking this circumstance into account, the computations referred to are too obviously absurd to deserve any attention. Vespasian would have been very well satisfied with a revenue of twenty millions; and there are good grounds for supposing that the Roman revenue, when at the highest, never amounted to so large a sum.1

French Money.—From about the year 800, in the reign of Charlemagne, to the year 1103, in that of Philip I., the French livre, or money unit, contained exactly a pound weight or twelve ounces (poids de marc) of pure silver. It was divided into twenty sols, each, of course, weighing th part of a pound. This ancient standard was first violated by Philip I., who diminished considerably the quantity of pure silver contained in the sols. The example, once set, was so well followed up, that in 1180 the livre was reduced to less than a fourth part of its original weight of pure silver. In almost every succeeding reign there was a fresh diminution. “La monnoye,” says Le Blanc, “qui est la plus précieuse et la plus importante des mésures, a changé en France presque aussi souvent que nos habits ont changé de mode.” And to such an extent had the process of degradation been carried, that, at the Revolution, the livre did not contain a seventy-eighth part of the silver contained in the livre of Charlemagne. It would then have required 7,885 livres really to extinguish a debt of 100 livres contracted in the ninth or tenth centuries; and an individual who, in that remote period, had an annual income of 1,000 livres, was as rich, in respect to money, as those who, at the Revolution, enjoyed a revenue of 78,850 livres.1

We subjoin an abridged table, calculated by M. Denis, exhibiting the average value of the French livre in different periods, from the year 800 to the Revolution:—

Those who wish for a detailed account of the various changes in the weight and purity of French coins, may, besides the excellent work of Le Blanc, consult the elaborate and very complete tables at page 905 of the “Traité des Mésures” of Paucton, and at page 197 of the “Essai sur les Monnoies” of Dupré de St Maur.

It was not to be expected that degradations originating in the necessities, the ignorance, and the rapacity of a long series of arbitrary princes, should be made according to any fixed principle. They were sometimes the result of an increase in the denomination of the coins, but more frequently of a diminution of the purity of the metal of which they were struck. A degradation of this kind was not so easily detected; and, to render its discovery still more difficult, Philip of Valois, John, and some other kings, obliged the officers of the mint to swear to conceal the fraud, and to endeavour to make the merchants believe that the coins were of full value!1 Sometimes one species of money was reduced without any alteration being made in the others. No sooner, however, had the people, in their dealings, manifested a preference, as they uniformly did, for the money which had not been reduced, than its circulation was forbidden, or its value brought down to the same level with the rest.2 To render the subject more obscure, and the better to conceal their incessant frauds, individuals were at one time compelled to reckon exclusively by livres and sols, at other times by crowns or ecus; and not unfrequently they were obliged to refer, in computing, to coins which were neither livres, sols, nor crowns, but some multiple or fractional part thereof. The injurious effects of these constant fluctuations in the value of money are forcibly depicted by the French historians; and so insupportable did they become, that in the fourteenth and fifteenth centuries several cities and provinces were glad to purchase the precarious and little respected privilege of having coins of a fixed standard, by submitting to the imposition of heavy taxes.3

In Normandy, when it was governed by the English monarchs, there was a tax upon hearths, paid every three years, called monetagium, in return for which the sovereign engaged not to debase his coins. This tax was introduced into England by our early kings of the Norman race; but Henry I., in the first year of his reign, was induced to abandon it, and it has not since been revived.4

According to the present regulations of the French mint, the coins contain ths pure metal, and th alloy. The franc, which is equal to 1 livre 0 sols 3 deniers, weighs exactly 5 grammes, or 77·2205 English Troy grains. The gold piece of 20 francs weighs 102·96 English grains.1

English Money.—In England, at the epoch of the Norman conquest, the silver, or money pound, weighed exactly twelve ounces Tower weight. It was divided into twenty shillings, and each shilling into twelve pence, or sterlings. This system of coinage, which is in every respect the same with that established in France by Charlemagne, had been introduced into England previously to the invasion of William the Conqueror, and was continued, without any alteration, till the year 1300, in the 28th Edward I., when it was for the first time violated, and the value of the pound sterling degraded to the extent of per cent. But the really pernicious effect of this degradation did not consist so much in the trifling extent to which it was carried by Edward, as in the example which it afforded to his less scrupulous successors, by whom the standard was gradually debased, until, in 1601, in the reign of Queen Elizabeth, 62s. were coined out of a pound weight of silver. This was a reduction of above two-thirds in the standard; so that all the stipulations in contracts, entered into in the reigns immediately subsequent to the Conquest, might, in 1601, and since, be legally discharged by the payment of less than a third part of the sums really bargained for. And yet the standard has been less degraded in England than in any other country.

The tables annexed to this article give an ample account of these degradations, and also give the weight of the gold coins, and the proportional value of gold to silver, estimated both by the mint regulations, and by the quantity of fine gold and fine silver contained in the different coins.

Scotch Money.—The English derived their system of coinage from the French, and the Scotch theirs from the English. From 1296 to 1355, the coins of both divisions of the island were of the same size and purity. But, at the last-mentioned period, it was attempted to fill up the void occasioned by the remittance of the ransom of David II. to England, by degrading the coins. Till then the money of Scotland had been current in England, upon the same footing as the money of that country; and the preservation of this equality is assigned by Edward III. as a reason for his degrading the English coins. But this equilibrium was soon afterwards destroyed. In the first year of Robert III. (1390), Scotch coin passed only for half its nominal value in England; and, in 1393, Richard II. ordered that its currency, as money, should entirely cease, and that its value should henceforth depend on the weight of the genuine metal contained in it. “To close this point at once,” says Pinkerton, “the Scottish money, equal in value to the English till 1355, sunk by degrees, reign after reign, owing to succeeding public calamities, and the consequent impoverishment of the kingdom, till, in 1600, it was only a twelfth part of the value of English money of the same denomination, and remained at that point till the union of the kingdoms cancelled the Scottish coinage.”1

The annexed tables exhibit the successive degradations of the Scotch silver and gold coins.

At the Union, in 1707, it was ordered that all the silver coins current in Scotland, foreign as well as domestic, except English coins of full weight, should be brought to the Bank of Scotland, to be taken to the mint to be recoined. In compliance with this order, there were brought in,

Ruddiman conjectures, apparently with considerable probability, that the value of the gold and silver coins not brought in, amounted to about as much more. Much suspicion was entertained of the recoinage. And that large proportion of the people who were hostile to the Union, and did not believe in its permanence, brought very little money to the Bank. A few only of the hoarded coins have been preserved, the far greater part having either been melted by the goldsmiths, or exported to other countries.1

Irish Money.—The gold and silver coins of Ireland are identical with those of Great Britain. The rate, however, at which they used to circulate in the former, or their nominal value as money of account, was 8⅓ per cent. higher than in the latter. This difference of valuation, though attended with considerable inconvenience, subsisted from 1689 till 1825, when it was put an end to. For an account of the various species of metallic money which have at different times been current in Ireland, we beg to refer our readers to Simon’s “Essay on Irish Coins;”2 a work pronounced by Ruding to be “the most valuable of all the publications on the coinage of any part of the united empire.”3

Money of Germany, Spain, etc.—“In many parts of Germany, the florin, which is still the integer or money of account of those countries, was originally a gold coin, of the value of about 10s. of our present money (old coinage). It is now become a silver coin, of the value of only 20d.; and its present value, therefore, is only equal to a sixth part of what it was formerly. In Spain, the maravedi, which was in its origin a Moorish coin, and is still the money of account of that kingdom, was in ancient times most frequently made of gold. Le Blanc observes, that in 1220 the maravedi weighed 84 grains of gold, equal in value to about 14s. (old coinage) of our present money. But this maravedi, though its value is not quite the same in all the provinces of Spain, is now become a small copper coin, equal in general to only of an English penny! In Portugal, the re, or reis, is become of no greater value than of an English penny; it is so small, that in estimating its value in other coins, it is reckoned by hundreds and thousands. The moeda, or moidore, is equal to 4,800 reis; and this little coin has now, in fact, no existence but in name. Such has been the fate of all these coins, and such is the present state of their depreciation.”1

The principle of degradation has not, however, been uniformly acted upon. The quantity of bullion contained in coins of the same denomination, has sometimes, though rarely, been increased, and creditors enriched at the expense of their debtors. This method of swindling his subjects is said to have been first practised by the profligate Heliogabalus. The Roman citizens being bound to pay into the imperial treasury a certain number of pieces of gold, or aurei, the emperor, whose vices have become proverbial, to increase his means of dissipation, without appearing to add to the weight of the taxes, increased the quantity of metal contained in the aureus; and thus obtained, by an underhand trick, what he might not have obtained by a fair and open proceeding.2 In France, the value of the coins has been frequently raised. During the early part of the reign of Philip le Bel, who ascended the throne in 1285, the value of the coin had been reduced to such an extent as to occasion the most violent complaints on the part of the clergy and landholders, and generally of all that portion of the public whose incomes were not increased proportionally to the reduction in the value of money. To appease this discontent, and in compliance with an injunction of the pope, the king consented to issue new coins of the same denomination with those previously current, but which contained about three times the quantity of silver. This, however, was merely shifting an oppressive burden from the shoulders of one class to those of another less able to bear it. The degraded money having been in circulation for about sixteen years, by far the largest proportion of the existing contracts must have been adjusted with reference to it. No wonder, therefore, that debtors should have felt indignant at the injustice done them by this enhancement of the value of money, and that they refused to make good their engagements otherwise than in money of the value of that which had been current when they were entered into. The labouring class, to whom every sudden change in the value of money is injurious, having joined the debtors in their opposition, they broke out into open rebellion. “The people,” says Le Blanc, “being reduced to despair, and having no longer anything to care for, lost the respect due to the edict of his majesty; they pillaged the house of the master of the mint, who was believed to have been the chief adviser of the measure, besieged the temple, in which the king lodged, and did all that an infuriated populace is capable of doing.”1 The sedition was ultimately suppressed. It is not mentioned whether any abatement were made, by authority, from the claims of the creditors, in the contracts entered into when the light money was in circulation. It seems probable, however, from what is elsewhere mentioned by Le Blanc,2 that such was really the case.

The history of the French coinage affords several instances similar to that now brought under the notice of the reader. But, in England, the new coinage in the last year of Edward VI. is the only instance in which the value of money has been augmented by the direct interference of government. Previously to the accession of Henry VIII., the pound of standard silver bullion, containing 11 oz. 2 dwts. of pure silver, and 13 dwts. of alloy, was coined into thirty-seven shillings and sixpence. Henry, however, not only increased the number of shillings coined out of a pound weight of silver, but also debased its purity. The degradation was increased under his son and successor, Edward VI., in the fifth year of whose reign seventy-two shillings were coined out of a pound weight of bullion; and as this bullion contained only three ounces of pure silver to nine ounces alloy, twenty of these shillings were only equal to 4s. 7¾d. of our present money, including the seignorage.1 It appears from the proclamations issued at the time, and from other authentic documents, that this excessive reduction of the value of silver money occasioned the greatest confusion. A maximum was set on the prices of corn and other necessaries, and letters were sent to the gentlemen of the different counties, desiring them to punish those who refused to carry their grain to market. But it was soon found to be quite impossible to remedy these disorders otherwise than by withdrawing the base money from circulation. This was accordingly resolved upon; and in 1552 new coins were issued of the old standard in respect of purity; and which, though less valuable than those in circulation during the early part of the reign of Henry VIII., were above four times the value of a large proportion of the coins of the same denomination that had been in circulation for some years before.

It is, however, all but certain that such a rise in the value of money could not have taken place without occasioning the most violent commotions, had all the coins previously in circulation been debased. Equal injustice, it must be remembered, is always done to the poorest and not least numerous class of society, by increasing the value of money, that is done to the wealthier classes by its depression. And, though government had been disposed to sanction so enormous an invasion of the right of property, it is altogether impossible that the country could have submitted to have had 400 or 450 per cent. added to its taxes and other public burdens by a legerdemain trick of this kind, or that individuals would have consented to pay so much more than they had originally bargained for. Instead of deserving praise for accomplishing such a measure, Edward VI., who began the reformation of the coins, and Elizabeth, by whom it was completed, would have justly forfeited the esteem of their subjects, and lost their popularity. In truth, however, little or no change had been made during all this period in the value of the gold coins; and there is, besides, abundance of evidence to show that many of the old silver coins had remained in circulation. And as there is no mention made of the issue of the new coins having been attended with any inconvenience, it is nearly certain, as Mr Harris has remarked, that, during the period of the debasement of the standard, individuals had regulated their contracts chiefly with reference to the gold or old silver coins; or, which is the same thing, that “they had endeavoured, as well as they could, to keep by the standard, as it had been fixed in the preceding times.”1

We have been thus particular in examining this measure, because it has been much referred to. It plainly, however, gives no support to the arguments of those who appeal to it as affording a striking proof of the benefits which they affirm must always result from restoring a debased or degraded currency to its original purity or weight. Invariability of value is the great desideratum in a currency. To elevate the standard, after it has been for a considerable period depressed, is not a measure of justice, but is giving a new direction to injustice. It vitiates and falsifies the provisions in one set of contracts, that those in another set may be properly adjusted.

This, however, as already remarked, is the only instance in which the government of England has interfered directly to enhance the value of money. In every other case, where they have tampered with the standard, it has been to lower its value, or, which comes to the same thing, to reduce their own debts and those of their subjects.

It is unnecessary to enumerate in detail the various bad consequences which have resulted from these successive changes in the standard of value. But it deserves to be remarked, that an arbitrary reduction of the standard does not afford any real relief to the governments by whom it is effected. Their debts are, it is true, reduced, but so are their revenues. A piece of money that has been degraded will not exchange for the same quantity of commodities that it previously did. Whatever may be the reduction of the standard, prices are very soon raised to the same extent. If the degradation be 10 per cent., government, as well as every one else, will henceforth be compelled to pay £110 for commodities previously obtainable for £100. Hence, to bring the same real value into the coffers of the treasury, it is necessary that taxation should be increased whenever the standard is diminished; a measure always odious, and sometimes impracticable.

But a diminution of revenue is not the only bad effect which governments experience from reducing the standard of the currency. A state which has degraded its money, and cheated its creditors, is unable to borrow again on the same favourable terms as if it had acted with good faith. Those who lend money to knaves always stipulate for a proportionally high rate of interest. They must not only get as much as may be got from secure investments, but they must also get an additional rate, or premium, to cover the risk they run in dealing with those who have given proofs of bad faith, and on whose promises no reliance can be placed. A degradation of the standard is, therefore, about the most wretched device to which a bankrupt government can have recourse. It will never, indeed, be resorted to, except by those who are alike unprincipled and ignorant. “It occasions,” says Dr Smith, “a general and most pernicious subversion of the fortunes of private people; enriching, in most cases, the idle and profuse debtor at the expense of the frugal and industrious creditor, and transporting a great part of the national capital from the hands which were likely to increase and improve it, to those who are likely to dissipate and destroy it. When it becomes necessary for a state to declare itself bankrupt, in the same manner as when it becomes necessary for an individual to do so, a fair, open, and avowed bankruptcy is always the measure which is both least dishonourable to the debtor and least hurtful to the creditor. The honour of a state is surely very poorly provided for, when, in order to cover the disgrace of a real bankruptcy, it has recourse to a juggling trick of this kind, so easily seen through, and at the same time so extremely pernicious.”1

Some of the bad consequences resulting from changes in the value of money might be obviated, by enacting that the stipulations in preceding contracts should be made good, not according to the present value of money, but to its value at the time when they were entered into. This principle, which is conformable to the just maxim of the civil law (Valor monetæ considerandus atque inspiciendus est, a tempore contractus, non autem a tempore solutionis), was acted upon, to a certain extent at least, by the kings of France during the middle ages. Ordonnances of Philip le Bel, Philip of Valois, and Charles VI., issued subsequently to their having increased the value of money, or, as the French historians term it, returned from the “foible” to the “forte monnoie,” are still extant, in which it is ordered that all preceding debts and contracts should be settled by reference to the previous standard. But, though the same reason existed, it does not appear that any such ordonnances were ever issued when the value of money was degraded. It is obvious, indeed, that a government would derive no advantage from reducing the value of money, were it to order, as it is in justice bound to do, that all existing contracts should be adjusted by the old standard. Such a measure would reduce the revenue without reducing the national incumbrances; while, by establishing a new standard of value, and unsettling the notions of the public, it would open a door for every abuse, and be productive of infinite confusion and disorder in the dealings of individuals.

The odium and positive disadvantage attending the degradation of metallic money, have at length induced most governments to abstain from it. But they have only renounced one mode of playing at fast and loose with the property of their subjects, to adopt another and a still more pernicious one. The injustice which was formerly done by diminishing the quantity of bullion contained in coins, is now perpetrated with greater ease, and to a still more ruinous extent, by the depreciation of paper currency.1

In the long period from 1601 to 1797, no change was made in the mint value of money in this country. A project for enfeebling the standard, or reducing the quantity of silver in the pound sterling, was indeed entertained both in 1626 and 1695. In the former instance, it was quashed by the celebrated speech addressed by Sir Robert Cotton to the Lords of the Privy Council; and in the latter, by the opposition of Montague, then Chancellor of the Exchequer, in the House of Commons, and by the impression made by the writings of Locke out of doors. But we may be permitted to observe, that to preserve the silver coins of full weight, coined in 1696-1699, from being melted and exported, Montague and Locke should have taken care that gold, which had practically become the standard of the currency, was either rated at an equality with silver, or the latter allowed to pass at its market value. This, however, was not done. And, in consequence of its over-valuation, gold, as already explained, became the only currency. Silver coins of full weight ceased to circulate, while those that were degraded were used only in small payments.

In 1797, a peculiar combination of circumstances occasioned a heavy drain for bullion on the Bank of England; and, to prevent the anticipated exhaustion of her coffers, an order in council was issued on the 25th February 1797, by which cash payments at the Bank were suspended. This measure seems to have been necessary at the time. But it was unluckily continued after the necessity had gone by, and was eventually prolonged till after the conclusion of a definitive treaty of peace. The circulation of Bank of England paper was secured by its being exclusively issued in payment of the dividends on the public debt, and by its also being received as cash in all payments by the exchequer; but no attempt was made to maintain its value on a level with the value of gold and silver. The directors of the Bank were left to issue it on such terms and in such quantities as they judged proper; and it is due to them to state, that they exercised this extraordinary power with very considerable moderation.

For the first three or four years after the restriction, the directors, unaware, perhaps, of the nature of the power placed in their hands, seem to have regulated their issues nearly by the same rules which had regulated them, while they were obliged to pay in coin. The “Tables of the Price of Bullion,” published by order of Parliament, show, that until 1801, bank-notes were on a par with gold. In 1801 and 1802, they were at a discount of from 8⅓ to 7⅓ per cent.; but they again recovered their value; and from 1803 to 1809, both inclusive, they were at a discount of only £2, 13s. 2d. per cent. In 1809 and 1810, the directors appear to have entirely lost sight of the principles by which their issues had previously been governed. The average amount of bank-notes in circulation, which had not exceeded 17½ millions, nor fallen short of 16½ millions, in any one year, from 1802 to 1808, both inclusive, was in 1809 raised to £18,927,833; and, in 1810, to £22,541,523. The issues of country bank paper were increased in a still greater proportion; and, as there was no corresponding increase of the business of the country, the discount on bank-notes rose from £2, 13s. 2d., in 1809, to £13, 9s. 6d. per cent. in 1810. The recommendation to return to cash payments, contained in the “Report of the Bullion Committee,” presented to the House of Commons in 1810, appears to have given a slight check to the issues of the Bank. All apprehensions from this quarter were, however, speedily dissipated; for, in May 1811, when guineas were notoriously bought at a premium, and bank-notes were at an open discount, as compared with gold bullion, of upwards of ten per cent., the House of Commons not only refused to fix any certain period for reverting to cash payments, but voted a resolution, declaring that the promissory notes of the Bank of England had hitherto been, and were then, held to be, in public estimation, equivalent to the legal coin of the realm.

This extraordinary resolution, which took for granted that a part is equal to a whole, that £90 and £100 are the same thing, relieved the Bank from all uneasiness respecting the interference of Parliament, and tempted the directors to increase the amount of paper in circulation. In consequence, it was, in 1812, at an average discount of 20¾; in 1813, of 23; and, in 1814, of 25 per cent. This was the maximum of depreciation. The importation of foreign corn, subsequent to the opening of the Dutch ports in 1814, having occasioned a great decline of the price of the principal article of agricultural produce, produced an unprecedented degree of distress, first among the farmers, and subsequently among the country bankers. In 1814, 1815, and 1816, about 240 private banking companies stopped payment, of which a large proportion were found to be altogether bankrupt. And the reduction which was thus occasioned in the amount of notes in circulation, raised their value so rapidly, that, in October 1816, the discount was reduced to £1, 8s. 7d. per cent. In 1817 and 1818, the average discount on bank paper, as compared with gold, did not exceed £2, 13s. 2d. per cent. In the early part of 1819, it rose to about six per cent., but it very soon declined; and in 1820 and 1821, paper was nearly on a level with gold.1

These fluctuations were exceedingly injurious. From 1809 to 1815, the creditors of every antecedent contract, landholders whose estates had been let on lease, stockholders and annuitants of every description—all, in short, who could not raise the nominal amount of their claims or incomes proportionally to the fall in the value of money, were to this extent losers. The injustice that would have been done to the creditors of the state and of individuals, who had made their loans in gold, or paper equivalent to gold, by raising the denomination of the coin twenty-five per cent., however gross and palpable, would not have been greater than was actually done them in 1814, by compelling them to receive payment of their just debts in paper depreciated to that extent.

It is true, that after a currency has been for a considerable period depreciated, as much injustice is done by raising, as was previously done by depressing, its value. But there is good reason to doubt, whether the depreciation from 1809 to 1815 (for the depreciation of 2½ per cent. during the seven preceding years is too inconsiderable to be taken into account) extended over a sufficiently lengthened period to have warranted the legislature in departing from the old standard. It is needless, however, to offer any opinion on this rather difficult point; for we have seen that the value of paper was raised in 1816 almost to par by accidental circumstances without any interference on the part of government or of the Bank. Sir Robert Peel’s bill (59 Geo. III., cap. 99), to which this rise has been ascribed, was not passed till 1819, and could have nothing to do with what occurred three years previously. Its object was twofold,—to redeem the pledge given by Parliament to restore the old standard on the return of peace, and to shut the door against any fresh depreciation of paper.

It has sometimes, indeed, been alleged, that the rise in the value of the currency by reverting to specie payments in 1821, was in reality much greater than was indicated by the previous difference between the values of paper and gold; for it is maintained that the value of gold was itself raised by that measure. But we doubt whether this opinion have any good foundation. The supply of gold in the commercial world is too vast to allow of its value being sensibly affected by the drain occasioned by the resumption of cash payments in this country. It was probably, in fact, more than compensated by the cessation of hostilities, and the greater use of bills and other substitutes for coin, after the restoration of tranquillity. It is impossible, we believe, to specify a single article that has fallen in price since 1815, of which the fall may not be satisfactorily accounted for by changes in the channels of its supply, or in the cost of production, or both. These circumstances, we may add, have no doubt tended to counteract the influence of the late increase in the supplies of bullion, which has not, it is said, raised prices. But it is probable that, but for this increase, prices would have fallen still lower; and if it continue, it cannot fail, in the end, to raise the prices of all articles whose cost is not reduced.

But, even if it could be shown that the act of 1819 was inexpedient at the time when it was passed, it would add little or nothing to the plea of those who continue to clamour for its repeal or modification. All the objections which could be made to the degradation of the standard in 1819, apply with a thousand times the force to every scheme for degrading it in 1852; while, on the other hand, the various arguments which could have been urged in favour of the measure at the former period are now all but worthless. The restored standard has been maintained for thirty-three years; and ninety-nine out of every hundred existing contracts have been entered into with reference to it. To tamper with it now would be unmixed folly. We should again witness the most pernicious subversion of private fortunes. Debtors would be enriched at the expense of their creditors; the ignorant and unwary would become the prey of the cunning and crafty; and capitalists would be eager to transfer their stock from a country where it was impossible to lend it, except at the risk of getting it repaid in a depreciated currency. “Whatever, therefore,” to avail ourselves of the just and forcible expressions of Mr Harris, “may be the fate of future times, and whatever the exigency of affairs may require, it is to be hoped that that most awkward, clandestine, and most direful method of cancelling debts by debasing the standard of money, will be the last that shall be thought of.”1

TABLES RELATIVE TO THE MONEY OF THE UNITED KINGDOM.

No. I.—English Money.—Account of the English silver and gold coins; showing their value; the seignorage or profit upon the coinage, and the mint price of the pound troy of standard gold and silver, from the Conquest to the year 1816. (This and the next table, No. II., are taken from Part II. of “Essays on Money, Exchanges, and Political Economy,” by Henry James.)

No. II.—English Money.—Account of the quantity of fine silver coined into 20s. or the pound sterling, and of the quantity of standard silver, of 11 oz. 2 dwts. fine, and 18 dwts. alloy, contained in 20s. or the pound sterling. A similar account with respect to gold. And an account of the proportionate value of fine gold to fine silver, according to the number of grains contained in the coins: and the proportionate value of fine gold to fine silver, according to the price paid by the mint to the public. Calculated in grains and 1000 parts troy-weight.

No. III.—Scotch Money.—Account of the number of pounds, shillings, and pennies Scotch, which have been coined out of one pound weight of silver at different times; with the degree of purity of such silver, or its fineness, from the year 1107 to the year 1601. (From Cardonnell’s “Numismata Scotiæ,” p. 24.)

No. IV.—Scotch Money.—Account of the number of pounds, shillings, and pennies Scotch, which have been coined out of one pound weight of gold, with the degree of their purity, and the proportion that the gold bore to the silver. (From Cardonnell’s “Numismata Scotiæ,” p. 25.)

No. V.—English Paper Money.—Account of the average market price of bullion in every year, from 1800 to 1821 (taken from Papers laid before the House of Commons), of the average value per cent. of the paper currency, estimated from the market price of gold for the same period, and of the average depreciation of the paper currency.

[1 ] Chevalier de la Monnaie, p. 326.

[1 ] Ricardo, “Proposals for an Economical and Secure Currency,” p. 87.

[1 ] Principles of Political Economy, p. 511.

[1 ] Liverpool on Coins, pp. 68-85.

[1 ] Being intended as an experiment, this act was limited to the 1st May 1776. But not being found to be productive of any inconvenience, it was prolonged by other temporary acts. It was, however, suffered accidentally to expire in 1783, and was not renewed till fifteen years after, in 1798. And yet, despite the extremely degraded state of the silver coin, very few instances occurred during this lengthened period of its being offered in payment of any considerable sum.

[1 ] Principles of Political Economy, p. 520.

[2 ] Say, i. p. 393.

[1 ] Treatise on Taxation. Part II. c. 11.

[1 ] The carat is a bean, the fruit of an Abyssinian tree, called Kuara. This bean, from the time of its being gathered, varies very little in its weight, and seems to have been in the earliest ages, a weight for gold in Africa. In India it is used as a weight for diamonds, &c. (Bruce’s Travels, vol. v. p. 66.)

[2 ] Liverpool on Coins, p. 27.

[1 ] For an account of the money of the Greeks, and of the ancients generally, the reader is referred to Raper’s “Inquiry into the Value of the Ancient Greek and Roman Money” in the Transactions of the Royal Society for 1771; Pinkerton “On Medals;” Hussey “On Ancient Weights and Money;” and to the various articles on the same subject in Smith’s “Dictionary of Greek and Roman Antiquities.”

[1 ] “Servius rex primus signavitæs. Antea rudi usos Romæ Remeus tradit. Signatum est nota pecudum unde et pecunia appellata. . . . . Argentum signatum est anno urbis DLXXXV. Q. Fabio Cos. quinque annos ante primum bellum Punicum. Et placuit denarius prox. libris æris, quinarius pro quinque, sestertium pro dipondio ac semisse. Libræ autem pondus æris imminutum bello Punico primo cum impensis resp. non sufficeret, constitutumque ut asses sextentario pondere ferirentur. Ita quinque partes factæ lucri, dissolutumque æs alienum. . . . . Postea, Annibale urgente, Q. Fabio Maximo Dictatore, asses unciales facti: placuitque denarium xvi. assibus permutari, quinarium octonis, sestertium quaternis. Ita resp. dimidium lucrata est. Mox lege Papyria semunciales asses facti.” Plinii, “Hist. Nat.,” lib. xxxiij. cap. 3. Lugd. Bat. 1669.

[1 ] Decline and Fall, vol. iii. p. 89.

[2 ] This is, indeed, decisively proved by a passage in Celsus: “Sed et antea sciri volo in uncia pondus denariorum esse septem.”—Cels. lib. xv. cap. 17.

[3 ] Essay on Medals, vol. i. p. 162, edit. 1808.

[4 ] Greaves’ Works, i. 262. The weight of the denarius, as given by other authorities, may be seen in p. 135 of Hussey’s excellent “Treatise on Ancient Weights and Money.”

[1 ] Greaves, vol. i. p. 331. Gibbon’s Miscellaneous Works, vol. v. p. 71.

[2 ] Pliny Hist. Nat., lib. xxxiij. cap. 3, previously quoted.

[3 ] Bazinghen, “Dictionnaire des Monnoies,” tom. ii. p. 64.

[1 ] Essay on Medals, vol. i. p. 183.

[2 ] Vitruvius, Lib. iii. cap. 1.

[3 ] Writers on ancient coins, with the exception of Pinkerton, agree in supposing the sestertius to have been originally, and to have always continued to be, a silver coin. Pinkerton, however, has denied this opinion; and, on the authority of the following passage of Pliny, contends that the sestertius was, at the time when Pliny wrote, whatever it might have been before, a brass coin. “Summa gloria æris nunc in Marianum conversa, quod et Cordubense dicitur. Hoc a Liviano cadmiam maxime sorbet, et orichalci bonitatem imitatur in sestertiis, dupondiariisque, Cyprio suo assibus contentis.”—(Lib. xxxiv. cap. 2.) That is, literally, “The greatest glory of brass is now due to the Marian, also called that of Cordova. This, after the Livian, absorbs the greatest quantity of lapis calaminaris, and imitates the goodness of orichalcum (yellow brass) in our sestertii and dupondiarii, the asses being contented with the Cyprian (brass).” [Pliny had previously observed that the Cyprian was the least valuable brass.] This passage is, we think, decisive in favour of Pinkerton’s hypothesis. But, in the absence of positive testimony, the small value of the sestertius might be relied on as a pretty sufficient proof that it could not be silver. When the denarius weighed 62 grains, the sestertius must have weighed 15½, and been worth 2⅛d.; but a coin of so small a size as to be scarcely equal to one-third part of one of our sixpences, would have been extremely apt to be lost, and could not have been struck by the rude methods used in the Roman mint with anything approaching to even tolerable precision. It is, therefore, more reasonable to suppose that it was of brass.

[1 ] Gibbon, vol. i. p. 209, edit. 1838.

[1 ] Paucton, “Traité des Mésures, Poids,” etc., p. 693.

[1 ] Le Blanc, p. 212.

[2 ] Ibid. Introduction, p. 20.

[3 ] Ibid. p. 93.

[4 ] Liverpool on Coins, p. 107.

[1 ] Peuchet, “Statistique Elémentaire de la France,” p. 538.

[1 ] Essay on Medals, vol. ii. p. 124.

[1 ] Preface to Anderson’s “Diplomata,” p. 176.

[2 ] Originally printed at Dublin in 1749, in 4to, and reprinted with some additions in 1810.

[3 ] Annals of the Coinage, Preface, vol. i. p. 11. The work of Mr Lindsay on Irish Coins (4to, Cork, 1839), may also be advantageously consulted.

[1 ] Liverpool on Coins, p. 111.

[2 ] Lamp. “Vita Alex. Severi,” cap. 39. Perhaps Heliogabalus took the hint from Licinius, a freedman of Julius Cæsar, who, in his government of the Gauls under Augustus, divided the year into fourteen months instead of twelve, because the Gauls paid a certain monthly tribute.—Dion Cassius, lib. 72.

[1 ] Traité Historique des Monnoyes de France, p. 190.

[2 ] Introduction, p. 30.

[1 ] Folkes’s “Table of English Coins,” p. 34.

[1 ] Harris on Coins, part ii. p. 3.

[1 ] Wealth of Nations, p. 423.

[1 ] There is, in the last volume of the “Cours d’Economie Politique” of M. Storch, a very instructive account of the paper money of the different continental states.

[1 ] See annexed Table No. V.

[1 ] On Money and Coins, part ii. p. 108.