Front Page Titles (by Subject) Composite Legal Tender. - Money and the Mechanism of Exchange
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Composite Legal Tender. - William Stanley Jevons, Money and the Mechanism of Exchange 
Money and the Mechanism of Exchange (New York: D. Appleton and Co. 1876).
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Composite Legal Tender.
We have seen that with a single metal currency there is inconvenience in making small or large payments, according as the metal chosen is dear or cheap. If two or more series of full-weight coins be issued in different metals, and allowed to vary in relation to each other, the difficulty of calculation intervenes. If they both be made legal tenders at a fixed ratio, the currency will tend to become composed alternately of one or the other metal, and money-changers will make a profit out of the conversion.
There yet remains another possible system, in which coins of one metal are adopted as the standard of value and principal legal tender, and subordinate token coins of other metals are furnished for the purpose of subdivision, being recognized as legal tender only for small amounts. The values of these token coins now depend upon that of the standard coins for which they are legally exchangeable, and care is taken to make their weights such that the metallic value will always be less than the legal value. No profit can ever be made by melting such coins, or removing them from the country, and their ratio of exchange with the principal coins is always a simple ratio fixed by law.
The composite legal tender rises naturally out of the double standard system; for, as we have seen, if, under the latter system, gold be overvalued at the legal rate, all full-weight silver coins will be withdrawn and exported by degrees, so that there will remain practically a token currency of light silver. Lord Liverpool, having in his thorough investigation of the subject of metallic money observed the superior convenience of the composite legal tender to the double legal tender, advocated its adoption in England in the most conclusive manner. His arguments will be found in his admirable "Treatise on the Coins of the Realm in a Letter to the King" (Oxford, 1805), and his recommendations, as carried into effect in 1816, are the foundation of our present monetary system.
A composite system of currency has frequently existed in one country or another without being specially designed or recognized. It comes into existence whenever coins of gold and silver are current at rates fixed by law or custom, but the silver coins are reduced by abrasion or clipping below the corresponding weight. From the year 1717, when the guinea was fixed at 21s., until the present system was instituted in 1816, the English currency was based theoretically upon the double standard system. Practically, however, the silver coins were so scarce and worn that they served but as tokens. The tradesmen's copper tokens, too, being always of light weight, and exchangeable by custom for a certain proportion of silver coins, formed the third term in the series. But Lord Liverpool appears to have been the first to apprehend and explain the principles on which such a composite system worked, and there can be no doubt that the system, as he expounded it, is the best adapted for supplying a convenient and economical currency.
Most of the leading nations have now adopted the composite legal tender in a more or less complete form. France, Belgium, Switzerland, and Italy still adhere to the double standard in theory, but have reduced all coins of less value than five francs to the footing of token money, by reducing the fineness of the silver from 900 parts to 835 parts in 1000, or by 7¼ per cent., and by limiting the amount for which they are legal tender. The copper money of France had previously been restricted as a legal tender to sums below five francs in any one payment. In the United States, when metallic currency was generally employed, the double standard system existed in theory, but was reduced to a composite standard by the excessive overvaluing of the gold money. Moreover, by a law of 21st February, 1853, the smaller silver coins were reduced in weight, and made legal tender only for sums not exceeding five dollars. The silver three-cent pieces, and the several copper, bronze, or nickel coins, issued from the United States' mints, were also token money with various limits as regard legal tender.
The new German monetary system is perfectly organized as a composite legal tender.
The English System of Metallic Currency
I now come to describe in more detail the system of metallic currency which has existed in England for more than half a century, and which seems to be the best of all as regards the principles on which coins of three different metals are combined into composite legal tender. The legal regulations under which the English coinage is issued and circulated, can be ascertained with ease and certainty, thanks to the Act of Parliament (33 Victoria, ch. 10), which Mr. Lowe caused to be passed to simplify and consolidate the statutes on the subject.