Gold and the Gold Standard

CHAPTER II

Two Thousand Years of Gold Money in England

The English always manage to muddle through.—AUTHOR UNKNOWN, 1885.

England has had more experience with gold as standard money than has any other nation in the world, as well as a longer experience with gold monometallism. This chapter will explore briefly that experience down to 1821, when England’s monometallic gold standard came fully into operation.

Chronologically, this history of gold money in England may be divided conveniently into two periods: (1) from ancient times to the discovery of America, and (2) from that date, 1492, to 1821.

DEVELOPMENTS FROM ANCIENT TIMES TO 1492

Gold in the form of bullion and of foreign coins circulated in ancient Britain, along with silver and bronze.

The Britons made their first gold coins about 150 B.C., “taking for their model the coins then current in Gaul, which were themselves copied from those of Philip of Macedon.”1 Coins of gold, silver, and copper have been found in England, of a character that “cannot have been constructed upon any-model introduced subsequent to the establishment of the Romans in Britain.”2 The coins were Greek in origin, but apparently were struck in England. The probable explanation is that “either from commercial visits of the Phoenicians, or through the communications which must have taken place between Britain and Gaul, Grecian coins became known in the Island and were coarsely imitated by native artists.”3

Julius Caesar, when he invaded Britain about the middle of the first century B.C., found gold coins circulating in the island. Concerning the Britons he said:4 “They use either bronze or gold coins or instead of coined money tallie of iron, of a certain weight.” Gold coins, it is known, were struck by Cunobelin (Shakespeare’s Cymbeline), a king of Britons, in the first half of the first century A.D.5

Even for those early days in Britain there is evidence of debasements of gold coins. These British coins varied in weight from about 120 grains to 84 grains, gradually becoming lighter as time went on.6

After Caesar’s conquest of Britain, the influence of Roman art on these British coins became pronounced and British money was in large part superseded by Roman coins. A Roman edict ultimately demanded “that all money current in this island should bear the image and superscription of the Roman Emperor.”7 The Romans maintained their control of Britain until the fifth century and then abandoned the country entirely.

Very little is known about the coins of England from early in the fifth century until the eighth century. Kenyon believes that during that period some coins were struck there both of gold and of silver.8

According to Beowulf, the Anglo-Saxons of the ninth century used rings of gold and of silver to some extent as media of exchange and rough measures of value.

At the accession of William I (1066), silver was the principal money of England and continued to be so until early in the eighteenth century. The monetary pound at first weighed a pound of standard silver. According to Lord Liverpool,9

. . . the Pound in tale of the Silver Coins . . . was equal to the Pound weight of standard Silver, that is, the Tower Pound [of 5400 grains].. . . The Pound in tale, which was then also a pound in weight, was divided into twenty Shillings, and each Shilling into twelve Pence or Sterlings.10 The Pound weight was divided into twelve ounces, and each ounce into twenty pennyweights; so that each Penny or Sterling weighed one pennyweight or twenty-four grains.

After the end of the ninth century, no gold coinage took place either in England or in any of the neighboring countries until the time of Henry III. The gold bezants of the Greek Empire and the gold coins struck during the ninth and tenth centuries by the Arabic princes in Sicily were probably used more or less in mercantile transactions all over Europe, but they were not legal currency in England and were probably passed merely as bullion.

From the Reign of Henry III to the Discovery of America

Upon approaching modern times, we find that the first gold coin struck in England was the penny of pure gold made by Henry III in 1257. 11 It weighed 45 grains, or of a Tower pound. With its introduction, the practices were inaugurated of giving gold coins a fixed rating with the silver coins then in general circulation and of making them legally current at the official rating.12 This new gold penny was rated to pass as equivalent to 20 “sterlings,” or silver pennies, giving a gold-silver ratio of 10 to 1. It was called a penny because this word was then the common term for money in general. The French, or Norman, equivalent of penny was denier, and to this day the English abbreviation for penny is d.

The idea of the gold coinage in England in 1257, under Henry III, appears to have been derived from that of St. Louis of France.13 Neither in England nor in France, however, was the first gold coinage a success.14

In England the period was not a propitious one for a coin of a denomination so high as that of the gold penny. Times were hard and food prices were high. The Mad Parliament was about to meet. Late in the year 1257, after the coins had been in circulation only a few months, the city of London sent to the King a protest against these coins, to which the King responded by a proclamation declaring that no one was required to accept the coins and that anyone who should accept them was authorized to bring them to his exchange, where they would be redeemed in silver coins at their current value, with only a small charge15 for their redemption. Apparently not many of these gold pennies were struck. Nonetheless, they continued to be current and the records show that in 1265 their rating in terms of silver coins was raised from 20 pence to 24 pence.

After this premature gold coinage of Henry III, there is no evidence of any further coining of gold in England until 1343.16 The period of nearly a century, however, was one of great commercial expansion in Europe. Gold coins were being used in northern Italy, in France, and in Flanders, the countries with which England was conducting her principal commerce.17 It was, moreover, a period of scarcity of the precious metals, accompanied by declining commodity prices—an evil not remedied until the arrival of the new supplies of gold and silver acquired through the discovery of America.

In 1343, therefore, in order to facilitate foreign trade and to check falling prices by increasing the supply of money in the kingdom, the Council, after an examination before Parliament of a number of goldsmiths, moneyers and merchants, resolved that a single kind of gold money should be made both in England and in Flanders, if the Flemings were willing, and that the money should be current in both countries (to the exclusion of all other gold coins), on such conditions as should be determined by the King in Council. Following this resolution, an indenture was made authorizing three gold coins, the florin, the half florin, and the quarter florin. A florin was to be of the weight of two petit florins of Florence (108 grains) and of the same fineness (23 carats 3½ grains pure gold to ½ grain alloy) and was to be rated at 6 shillings. It was equivalent to 1½ solidi or aurei. This gold florin was made current in 1343.

This second attempt within a century, however, to produce a gold coinage for England failed. It was soon found that the gold coins at the official rating of 12.61 to 1, a rating copied from the one then prevailing in France, were undervalued in terms of silver coins and therefore did not continue in circulation. Accordingly, a proclamation was issued in July, 1344, providing that these gold coins should be taken thereafter only with the consent of the person to whom they were offered. The following month, another proclamation declared that they were to be accepted only according to their value as gold bullion.18

The date of the first official entry that has been preserved of gold’s being brought by the public to the mint for coinage is in 1345.19

With the facilitating of trade with Flanders and the remedying of the difficulties experienced with the underrated florin as its principal objects, the Government in 1344 introduced a new gold coin called a noble, which contained 138 grains of gold, i.e., 28.2 per cent more gold than the florin, and was rated at 6 shillings 8 pence, as contrasted with the florin’s 6 shillings.20 The regular coinage of gold now began.

In 1346 the noble was debased by about 7 per cent, to 128 grains; in 1353 it was again debased, this time also by about 7 per cent, to 120 grains; then, in 1414 it was debased by 10 per cent, to 108 grains. In 1460 its gold content was raised by about 11 per cent, from 108 grains to 120 grains, but its declared value was raised by about 43 per cent, i.e., from 6 shillings 8 pence to 8 shillings 4 pence,21 representing a further debasement of about 32 per cent.

Ten years later the noble was replaced by a coin called, from the emblem it bore, the angel. This coin was given the same declared gold value of 6 shillings 8 pence that the noble of the earlier mintages had had—a reduction of 30 per cent—but it was reduced in weight to 80 grains of gold, or by 33⅓ per cent, representing a debasement of 3⅓ per cent from the preceding coinage of 1460.

These repeated debasements were in large part attempts to solve two currency problems: (1) the differences continually arising between official gold and silver ratings and the market-value ratios of the two metals and (2) the fact that both gold and silver coins were for a large part of the time in a bad condition as a result of abrasion, sweating, clipping, boring, scraping, and counterfeiting. Furthermore, since the ratings of gold and silver coins were frequently different in some of the Continental countries from what they were in England, there was a continual draining of the better preserved coins and of the undervalued metal out of one country and into another—the coin and the metal always tending to move from the places where they were cheap to the places where they were dear; in other words, always seeking the best market. In pursuance of this principle, the bad money was always driving out the good money.

Summarizing an excellent account of the period 1300 to 1492, in Europe, Shaw says:22

The characteristics of this period are perfectly well defined, and repeat themselves with almost faithful and exact similarity of recurrence in the several states comprising the Europe of that date. In brief, such characteristics were those of (1) a period of commercial expanse, necessitating an increasing currency and advancing prices; (2) a period of stationary production of the precious metals, necessitating a struggle among the various states for the possession of those metals; (3) a period of endless change in the ratio between gold and silver, necessitating continual revision of the rate of exchange.

DEVELOPMENTS FROM 1492 TO 1821

The story of gold money in England from the discovery of America until near the end of the seventeenth century can be told briefly. This was a time of quasi bimetallism, in which both gold and silver coins were continually minted and enjoyed the same legal rights as money.

Silver Predominant over Gold for Two Centuries of Quasi Bimetallism

Generally throughout these two centuries the ratios were favorable to silver. Silver money, therefore, dominated. The condition of the coins, however, both silver and gold, was usually bad.23 Accordingly, Gresham’s law24 worked in two ways: (1) The overvaluing of silver by the mint ratios resulted in a great predominance of silver coins in the circulation; and (2) the bad state of most of the silver and gold coins resulted in the exportation, melting, and hoarding of the better coins of both metals and in the retention in active circulation of the coins that were most defective by reason of having been clipped, sweated, filed, washed, and bored. The Government in its efforts to remedy this situation resorted frequently to recoinages involving a progressive debasement of both gold and silver money. The deterioration of the monetary standard was especially pronounced during the latter part of the reign of Henry VIII, throughout the reign of Edward VI, and again later, from about 1660 until near the end of the century. Sir Dudley North in his Discourses upon Trade, published in 1691, said:25

I call to witness the vast Sums that have been coyned in England, since the free Coynage was set up; What is become of it all ? no body believes it to be in the Nation, and it cannot well be all transported, the Penalties for so doing being so great. The case is plain, it being exported, as I verily believe little of it is, the Melting-Pot devours all....

And I know no intelligent Man who doubts, but the New Money goes this way.

Silver and Gold, like other Commodities, have their ebbings and flowings: Upon the arrival of Quantities from Spain, the Mint commonly gives the best price; that is, coyned Silver, for uncoyned Silver, weight for weight. Wherefore is it carried into the Tower, and coyned ? not long after there will come a demand for Bullion, to be Exported again: If there is none, but all happens to be in Coyn, What then ? Melt it down again; there’s no loss in it, for the Coyning cost the Owners nothing.

Thus the Nation hath been abused, and made to pay for the twisting of straw, for Asses to eat.

Much of the currency that remained in circulation consisted of iron, brass, or copper pieces plated, and such coins as were of good silver were worth scarcely one-half their current value.26

Such was the situation that led to the,famous recoinage of 1696 to 1699,27 to the plans for which the philosopher John Locke contributed much.

Gold Predominant over Silver for a Century

In the recoinage of 1696 to 1699 the gold-silver ratio was raised from about 15 to 1 to approximately 15½ to 1, making it unduly favorable to gold and thereby stimulating a heavy importation of foreign gold coins into England and their minting into British money; likewise, stimulating a heavy exportation and melting down of the undervalued British silver coins.28

This recoinage changed England’s bimetallism to a monetary system dominated by gold from one dominated by silver, and such it continued to be until the suspension of specie payments near the end of the eighteenth century.

From 1702 to 1717, according to the reports of Sir Isaac Newton, Master of the Mint, the gold coined at the mint represented a value approximately thirty-two times that of the silver coined. To meet this situation and the resulting inconvenience to the public caused by a lack of small silver coins, Newton recommended a reduction in the gold-silver ratio from 15½ to 1 to approximately 15.21 to 1, and the recommendation was adopted. Although this brought a real improvement in the currency and an increase in the supply of silver money, monetary troubles continued.

The process of culling and exporting the heavier silver coins persisted, and by 1760 the silver coinage was in so imperfect a state that the crown pieces had almost entirely disappeared, although they had been minted since 1695 to the amount of over £1½ million sterling. Of the half crowns, minted to the value of £2⅓ million sterling, only defaced and impaired specimens remained current, while shillings and sixpences had lost every sign of impression. In discussing this experience, Shaw says:29

The idea that bimetallic action replaces one good metal by another, an equal weight of one metal for that of the other, a good undepreciated coinage of silver for a good undepreciated coinage of gold, or vice versa, is not borne out by a single instance in history. Bimetallic action always substitutes the less for the greater, whether weight or value, the more depreciated for the less, or the depreciated for the perfect standard coin.

The mint ratio, therefore, during the first three-quarters of the eighteenth century was favorable to gold and unfavorable to silver, thereby attracting the yellow metal into the circulation of England and repelling the white metal. At the same time, however, the gold coins were rendered so defective by continual clipping, boring, sweating, and filing that such gold coins as continued to be in good condition were melted and exported.30

To solve this problem, the House of Commons on May 10, 1774, passed a resolution that declared:

. . . considerable quantities of old silver coin of this realm, or coin purporting to be such, greatly below the standard of the Mint in weight, have been lately imported into this kingdom, and it is expedient that some provision should be made to prevent the practice.

The lower house, therefore, prohibited the importation of light silver coin into the kingdom and ordered the confiscation of it in case of discovery, while further providing

that no tender in the payment of money made in the silver coin of the realm, of any sum exceeding the sum of £25 at any one time, shall be reputed in law or allowed to be a legal tender within Great Britain or Ireland for more than according to its value by weight, after the rate of 5s. 2d. per oz of silver, and no person to whom such tender shall be made shall be any way bound thereby or obliged to receive the same in payment in any manner than as aforesaid; any law, statute, or usage to the contrary notwithstanding.

This limitation on the legal-tender quality of silver money by tale was the beginning of the end of bimetallism in England.

The Paper Pound

Between 1793 and 1797 gold coins of the denominations of one guinea (21 shillings), a half guinea, and a third of a guinea were in general circulation. There were no coins representing a pound sterling, but the equivalent of a pound was recognized as 123¼ grains of gold fine. The coinage of gold at the mint was free and gratuitous. Although the exportation of English gold coins and of gold obtained from the melting down of these coins was forbidden by law, the law was extensively flouted. At times when gold was moving out of England, there developed a premium on legally exportable bullion and foreign gold coin. This premium was small. Referring to it, Bosanquet, in his Practical Observations Concerning the Report of the Bullion Committee, said in 1810, “The conscience of the exporter and the value of a false oath [regarding the origin of the gold being exported] are correctly stated by the Committee at 4½ per cent.”

Bank Notes and Deposit Currency

The paper money of England in 1797 consisted of bank notes—those of the Bank of England, which circulated for the most part in London and the vicinity, and those of the “country” banks, which circulated chiefly in their respective communities. Notes were redeemable in specie on demand, but were not legal tender.

There were no restrictions on the receipt of deposits by banks in England and their circulation by means of bank checks; and during the latter half of the eighteenth century and the early nineteenth century the use of deposit currency was increasing.31

England was on a de facto paper-money standard from 1797 to 1821, although in 1816 she enacted the legislation that 5 years later placed her squarely on the gold standard. England’s 24 years’ experience with a paper-money standard are important to the student of money for two reasons : (1) They represent an experiment with a managed paper-money standard by an advanced nation, and (2) they gave rise to the so-called bullion controversy, in which David Ricardo was an active participant, and to the Bullion Report, which gave the world a classic presentation of certain monetary theories, which at the time were understood by very few persons, but which later became the world’s “orthodox” philosophy of money.32

Our present study of the gold standard is not’ concerned with this paper-money-standard period, except to the extent of noting briefly how the preceding metallic-money standard broke down and how the new gold standard was born.

In February, 1793, England declared war on France. After beginnings favorable to England and her allies early in 1793, the tide of war turned, and during the next few years the French were almost continually victorious. By 1797, England’s allies had made separate treaties of peace with France, and England faced Napoleon alone. The military situation looked black. The internal economic situation during these 4 years was also unfavorable.

Other factors that contributed directly to the suspension of specie payments were (1) the heavy demands made by the Government upon the Bank of England for advances with which to meet war expenditures—many of which required the transfer of large sums to the continent; (2) the pull on British gold and silver resulting from a return of France to a specie basis after her disastrous paper-money inflation with the assignats and mandats. During the early years of this inflation, specie had flowed in large quantities to England from France and other neighboring countries for safety. With the conclusion of the French Revolution, the restoration of law and order, and the return of France to a bimetallic currency, much of this specie was drawn home again; (3) the uncertain political situation in Britain, which contributed to heavy demands on the Bank of England for specie.

By the spring of 1795, exchange in London on the principal Continental cities reached the gold-export point and a strong outward movement of specie to Paris, Hamburg, and Lisbon took place. This gold drain so reduced the reserves of the Bank of England that the directors notified Pitt in February, 1797, that the situation was desperate. The Prime Minister responded on February 26 with a council resolution providing that

the Directors of the Bank of England should forbear issuing any cash in payment until the sense of Parliament can be taken on that subject and the proper measures adopted there-upon for maintaining the means of circulation and supporting the public and commercial credit of the Kingdom ...

Under this resolution the redemption of Bank of England notes in specie was suspended and the nation went over to a depreciated paper-money standard, which continued until 1821. Some gold and silver coins, most of which were apparently very defective, continued in circulation, usually at premiums in terms of bank notes, although both the Bank of England and the Government made repeated efforts to prevent such premiums.33

Throughout most of the period of the suspension there were heavy exports of both gold and silver coins,34 and the scarcity of silver coins in particular caused great inconvenience to the public.

Lord Liverpool’s Letter to the King

At the time of suspension in 1797, as we have seen, the coins of the realm were in a bad state, particularly the silver coins, of which the good ones had been exported and melted down in large quantities, and of which the poor ones remaining in circulation were badly clipped, sweated, and worn. To meet this situation, a committee of the Privy Council was appointed in 1798 to inquire into the state of the coins and to make recommendations for its improvement.

The most important member of this committee was the first Earl of Liverpool, who, in cooperation with George Chalmers, drafted a report for the Privy Council in that year. This Letter to the King was not published until 1805, 35 by reason of the fact that Liverpool had been ill for several years. He died in 1808. The letter contained valuable historical and descriptive material concerning British money, a very able discussion of the principles of money, and a program for monetary reform.36

Here are strong and well-reasoned recommendations for the discontinuance of bimetallism and for the definitive adoption of a single gold standard. Lord Liverpool said :

Coins should be made of metals more or less valuable [e.g., copper, silver, and gold], in proportion to the wealth and commerce of the country in which they are to be the measure of property.

In very rich countries, and especially in those where great and extensive commerce is carried on, Gold is the most proper metal.. . . In such countries Gold will in practice become the principal measure of property, and the instrument of commerce, with the general consent of the people, not only without the support of law, but in spite of almost any law that may be enacted to the contrary; for the principal purchases and exchanges cannot there be made, with any convenience, in Coins of a less valuable metal.37

Briefly summarized, Liverpool’s recommendations for England were38

First, That the Coins of this realm, which are to be the principal measure of property and instrument of commerce, should be made of one metal only.

Secondly, That in this kingdom the Gold Coins only have been for many years past, and are now, in the practice and opinion of the people, the principal measure of property and instrument of commerce.

. . . Silver and Copper Coins should continue to be subservient to, and representative of, these Gold Coins, as they are at present....

According to the plan I have proposed, the new Silver Coins will not be legal tender for any sum exceeding the nominal value of the largest piece of Gold Coin in currency.

Liverpool recommended that silver coins should contain less than their full value of silver bullion, i.e., should be token coins. If it should be found necessary, in order to prevent counterfeiting, he submitted the question as to

whether it may not be advisable, that the Legislature should vest in Your Majesty, or such others as may be authorized by Your royal licence, (these will probably always be the Directors of the Bank of England,) the sole right of carrying Silver to your Mint to be coined: Your Majesty will thus have it in your power to limit and regulate the quantity of Silver Coins, which may at any time be sent into circulation ...

Gold Standard Legally Adopted

In 1816 the old Currency Committee of the Privy Council, of which Lord Liverpool had been a member, was still in existence, although during the war the committee had refrained from making any recommendations. The war having ended with the battle of Waterloo in June, 1815, the committee was asked for a report, which it made in May, 1816, and in which it adopted Lord Liverpool’s original proposals. It recommended a monometallic gold standard, continuing the existing weights and denominations of gold coins, with the coinage of gold free and gratuitous. Silver coins, it recommended, should thereafter be made subsidiary, slightly underweight, and with their legal-tender quality limited to 2 guineas.

Parliament promptly adopted the committee’s recommendations in the Gold Standard Act of 1816 (Act 56, George III, chap. 68). The preamble of this act declared:

Whereas the silver coins of the realm have, by long use and other circumstances, become greatly diminished in number and deteriorated in value, so as not to be sufficient for the payments required in dealings under the value of the current gold coins, by reason whereof a great quantity of light and counterfeit silver coin and foreign coin has been introduced into circulation within this realm, and the evils resulting,therefrom can only be remedied by a new coinage of silver money . . . And whereas at various times heretofore the coins of this realm of gold and silver have been usually a legal tender for payments to any amount, and great inconvenience has arisen from both these precious metals being concurrently the standard measure of value and equivalent of property, it is expedient that the gold coin made according to the indentures of the Mint should henceforth be the sole standard measure of value and legal tender, for payment, without any limitation of amount, and that the silver coin should be a legal tender to a limited amount only, for the facility of exchange and commerce.

Provision was made for the withdrawal from circulation and the prompt recoinage of the old silver coins.

During the period of the suspension, the bank note depreciated to a maximum discount of approximately 27 per cent in terms of gold in 1813, and then, after 1815, rapidly rose toward par. Commodity prices in England had risen about 40 per cent by 1814 and then had declined.39

By the fall of 1816, the premium on gold for a short time reached a figure below 1 per cent, and the bank directors, in preparation for resumption of gold payments, slowly began to take positive action for increasing their stock of gold. In December they decided to experiment, in order to find out how much gold the public would demand if specie payments were resumed. Under authority of a provision in a law of 1797, they began to feel their way by offering to redeem, on demand, notes of small denomination that had been issued before certain specified dates. Few notes were presented for redemption. Encouraged by this fact, in the fall of 1817 they offered to redeem, on demand, in gold, notes of all denominations bearing dates of issue prior to January 1, 1817. This offer led to heavy demands for redemption and was soon withdrawn.

Although gold coins of 20 shillings had been coined as early as 1489 and “sovereigns” had been minted from time to time in the past, dating back as early as 1485, during this long period the sovereign had been of comparatively little importance. For about a century and a half the guinea had been England’s most important gold coin.40 An act of 1817 now replaced the guinea and its gold fractions by a new sovereign (and a half sovereign) representing 20 shillings to the sovereign and containing 123.27 grains of standard gold ( fine), i.e., 113.00 grains of fine gold.

The Gold Standard Goes into Operation

Early in 1819 both houses of Parliament appointed secret committees to consider the question of resumption. The two committees finally agreed in recommending that the bank, after February 1, 1820, should be required to redeem notes in gold bullion on a specified scale of declining prices for gold, which would culminate in full cash payment not later than May 1, 1823. This provision for returning to full redemption over a period of time through a system of graduated rates never came into effect. Before February, 1820, the gold premium had entirely disappeared and on May 1, 1821, cash payments at parity were fully resumed.

Thus, after a paper-money regime of approximately a quarter of a century, England found herself back upon a metallic-money standard—but now upon a gold standard and not upon the legal bimetallic standard she had left in 1797.

On the basis of the legislation of 1816 and 1817, England’s gold standard functioned after the return to specie payments in 1821 until the outbreak of the First World War, in 1914. Throughout this long period of 93 years, specie payments in gold were maintained, there was free coinage of gold, and the yellow metal moved out of England and into England without legal restrictions, going out when exchange reached the gold-export point and coming in when it reached the gold-import point. The system was highly automatic. There were no important changes in Britain’s monetary standard for these three generations, except those incident to changes in the value or purchasing power of gold itself—a subject that will be discussed later.41 There were many significant developments in the nation’s banking and credit systems, notably those centering in the Peal Act of 1844, but these developments do not fall within the scope of this book.

The gold standard in England from 1821 to 1914, therefore, calls for very little historical discussion. Generally speaking, it functioned in an orthodox way, accompanied by many important developments in the bank-note and deposit-currency structure, which do not concern us here. Its significant features will be considered in Chaps. V to VII, in connection with the discussions of the theory and functioning of the gold standard. Concerning this gold-standard history, one can quote without much qualification Carlyle’s well-known aphorism, “Happy the people whose annals are blanks in history books.”

SELECTED BIBLIOGRAPHY

ANDRÉADÈS, A.: History of the Bank of England, P. S. King & Son, Ltd., London, 1909.

BULLION COMMITTEE: Report from the Select Committee on the High Price of Bullion. Ordered by the House of Commons to be Printed 5th June, 1810, London. [See also Cannan, Edwin, Editor.]

CAESAR, GAIUS JULIUS: The Gallic War, trans, by H. J. Edwards, Loeb Classical Library, G. P. Putnam’s Sons (Knickerbocker Press), New York, 1919.

CANNAN, EDWIN, EDITOR: The Paper Pound of 1797–1821, a reprint of the Bullion Committee Report, P. S. King & Son, Ltd., London, 1919.

CARLILE, WILLIAM WARRAND: The Evolution of Modern Money, Macmillan & Company Ltd., London, 1901.

DEL MAR, A. : A History of the Precious Metals, George Bell & Sons, Ltd., London, 1880.

FEAVEARYEAR, A. E.: The Pound Sterling—A History of English Money (with Bibliography), Clarendon Press, Oxford University Press, New York, 1931.

GRUEBER, H. A. : Handbook of the Coins of Great Britain and Ireland in the British Museum, British Museum, London, 1899.

HAWKINS, EDWARD: The Silver Coins of England, Edward Lumley, London, 1841.

HAWTREY, R. G. : Currency and Credit, Longmans, Green and Company, New York, 1930.

———:The Gold Standard in Theory and Practice, Longmans, Green and Company, New York, 1927.

International Monetary Conference of 1878: Report, Government Printing Office, Washington, D.C., 1879.

JACOB, WILLIAM: An Historical Inquiry into the Production and Consumption of the Precious Metals, 2 vols., John Murray, London, 1831.

JEVONS, W. STANLEY: Investigations in Currency and Finance, Macmillan & Company, Ltd., London, 1909.

KEMMERER, EDWIN WALTER: Money, The Macmillan Company, New York, 1935.

KENYON, ROBERT LLOYD: The Gold Coins of England, Bernard Quaritch, London, 1884.

LEAKE, STEPHEN MARTIN: An Historical Account of English Money, 2d ed., W. Meadows, London, 1745.

LIVERPOOL, CHARLES JENKINSON, 1st Earl of: A Treatise on the Coins of the Realm; in a Letter to the King, E. Wilson, London, 1880.

MCCULLOCH, J. R., EDITOR: Old and Scarce Tracts on Money, P. S. King & Son, Ltd., London, 1933.

MARTIN, JOHN BIDDULPH: Seigniorage and Mint Charges, Journal of the Institute of Bankers, V, 1884.

NEWTON, SIR ISAAC: Representations on the Subject of Money, 1711–1712 and 1717, published in J. R. McCulloch’s Old and Scarce Tracts on Money, P. S. King & Son, Ltd., London, 1933.

NICHOLSON, J. SHIELD: A Treatise on Money and Monetary Problems, 3d ed., A. & C. Black, Inc., London, 1895.

NORTH, SIR DUDLEY: Discourses upon Trade, 1691. Reprinted and edited by Jacob H. Hollander, Lord Baltimore Press, Baltimore, Md., 1907.

PALGRAVE, R. H. INGLIS, Editor: Dictionary of Political Economy, 3 vols., Macmillan & Company, Ltd., London, 1926.

———: The Gold Coinage, Journal of the Institute of Bankers, V, 1884.

RUDING, ROGERS : Annals of the Coinage of Great Britain and Its Dependencies from the Earliest Period of Authentic History to the Reign of Victoria, 3d ed., 3 vols., John Hearne, London, 1840.

SHAW, W. A.: The History of Currency 1252-1894, 2d ed., G. P. Putnam’s Sons (Knickerbocker Press), New York, 1896.

SILBERLING, NORMAN J.: British Prices and Business Cycles 1779–1850, The Review of Economic Statistics, Prel. vol. V (1923), Supplement 2.

SNELLING, THOMAS : A View of the Gold Coin of England from Henry the Third to the Present Time, T. Snelling, London, 1763.

WALKER, FRANCIS A.: International Bimetallism, Henry Holt and Company, Inc., New York, 1897.

YOUNG, JOHN PARKE: European Currency and Finance, 2 vols., Government Printing Office, Washington, D.C., 1925.

 

 

42KENYON, ROBERT LLOYD, The Gold Coins of England, p. 1.

43HAWKINS, EDWARD, The Silver Coins of England, p. 9.

44Ibid., pp. 9-10.

45CAESAR, GAIUS JULIUS, Commentarti de bello Gallico, Bk. V, Chap. 12.

46HAWKINS, EDWARD, op. ciu, pp. 14-15.

47KENYON, op. ciu, p. 1.

48HAWKINS, op. cit., p. 16.

49KENYON, op. cit., p. 3.

50LIVERPOOL, CHARLES JENKINSON, 1st Earl of, A Treatise on the Coins of the Realm in a Letter to the King, p. 35.

51The origin of the word sterling is uncertain. It probably has reference to a Norman penny having a star (steorra) on one side.

52The reintroduction of gold money into the circulation of Europe after its nearly complete absence for about eight centuries is a fact of importance in the world’s subsequent economic history. It can be traced largely to the influence of the Crusades, and the contacts they effected between the West and the gold-bearing and gold-money-using East—notably Byzantium. The resulting growth of trade between the West and the East and its need for a more convenient medium of payment than silver were conducive to the reintroduction of gold money in the West. This new western coinage of gold appeared almost simultaneously in the commercial cities of Italy and in France and Germany. The first of these gold coins was apparently the florin, issued by the Republic of Florence in 1252. In the same year gold coins were issued in Genoa. The French series of gold coins was begun in 1254 by Louis IX, probably having been a result of the Sixth Crusade, which he had led 5 years before. About the same time, Emperor Frederick II minted a gold coin at Naples.

53LIVERPOOL, op. cit., p. 45.

54SHAW, W. A., The History of Currency, 1252-1894, p. 11.

55KENYON, op. cit., pp. 14-15.

56Ibid.

57RUDING, ROGERS, Annals of the Coinage of Great Britain and Its Dependencies, vol. I, p. 216.

58KENYON, op. cit., pp. 16-17.

59KENYON, op. cit, pp. 16-17.

60RUDING, Op. cit., vol. I, p. 61.

61SHAW, op. cit., p. 44; also, Kenyon, op. cit., pp. 18-19.

62SHAW, op. cit., p. 44.

63SHAW, op. cit., p. 13.

64Cf. pp. 38 and 46.

65esham’s law is a term applied by H. D. McLeod in 1858 to the principle that when two kinds of money are in circulation side by side and one is inferior to the other, the inferior one under certain conditions will drive the superior one out of circulation. The discovery of the law is often attributed to Sir Thomas Gresham, who was an adviser to Queen Elizabeth on the reform of the currency. However, the principle was known, as we have seen, long before Gresham’s time, and there is no evidence that he contributed anything new to the formulation of the law. For a fuller statement of the law, see pp. 135-136, note.

66NORTH, SIR DUDLEY, Discourses upon Trade, pp. 29-30.

67SHAW, op. cit., p. 223.

68Cf. RUDING, op. cit., vol. II, pp. 40-51.

69SHAW, op. cit., ppJ 226-227.

70SHAW, op. cit., pp. 231-233.

71Ibid., pp. 234-235.

72Bullion Committee Report, p. 151; also, Sir John Lubbock, On the Country Clearings, Journal of the Statistical Society, vol. XXVIII (1865), pp. 361ff.

73On this subject see CANNAN, EDWIN, The Paper Pound; also, KEMMERER, EDWIN WALTER, Money, Chap. II.

74See RUDING, op. cit., vol. II, pp. 96, 107, 108, and 110.

75See SHAW, op. cit., p. 241.

76LIVERPOOL, op. cit.

77J. R. McCulloch said of this letter, “A more comprehensive and elaborate exposition of the principles on which the coinage should be conducted than is perhaps to be found in any other publication.” (In PALGRAVE, Dictionary of Political Economy, vol. II, p. 616.)

78LIVERPOOL, op. cit., p. 162.

79Ibid., pp. 170, 178, and 187.

80SILBERLING, NORMAN J., British Prices and British Cycles, 1779-1850, The Review of Economic Statistics, Supplement, 1923.

81 For the interesting story of the changing ratings of the “guinea” in terms of silver, following down the progressive debasements of the silver coins from 1670 through the coinage reform of John Locke in 1698 and that of Sir Isaac Newton in 1717, when the guinea was rated at 21 shillings, where it remained until 1816, see Guinea in Palgrave’s Dictionary of Political Economy.

82 See pp. 188–194.

• 1For a brief discussion of the origin, nature, and definition of money, see Edwin Walter Kemmerer, Money, pp. 3-16.
• 2“If a man have destroyed the eye of a freedman, or have broken the bone of a freedman, he shall pay one mina of silver” (§198). “If a doctor have operated . . . he shall receive ten shekels of silver” (§215). “The wage of an artisan . . . five Sĕ of silver, of a brickmaker . . . five Sĕ.. . . ”(§274).
• 3Cf. RIDGEWAY, WILLIAM, The Origin of Metallic Currency and Weight Standards, pp. 57-58.
• 4For an interesting discussion of the cow unit in different countries and its influence in determining coined units of value, ancient and modern, see Ridgeway, op. cit., pp. 112-115 and 124-154.
• 5CARLILE, WILLIAM WARRAND, The Evolution of Modern Money, p. 31.
• 6KENYON, op. ciu, p. 1.
• 7obviously, it is impracticable in a book such as this to do more than to touch briefly on the more elementary facts and principles. Where important controversial questions are involved, the best we can do is to follow a highly responsible recent authority and to refer the reader to the selected bibliography at the end of the chapter, in which a number of the principal studies (some of them containing extensive bibliographies) are cited.
• 8Like the names of many other monetary units of later times (i.e., pound, peso, lira), the mina and the shekel were originally concepts of weight. The mina was an ancient Babylonian unit of weight, and shekel (Hebrew, shegal) meant “to weigh” and equaled of a mina.
• 9BULLOCK, CHARLES JESSE, Economic Essays, p. 508.
• 10ROSTOVTZEEF, M., The Social and Economic History of the Hellenistic World, p. 1291.
• 11DUBBERSTEIN, W. H., Comparative Prices in Later Babylonia, American Journal of Semitic Languages and Literatures, January, 1939, pp. 20ff.
• 12Pictures of a number of these very early coins, including one of a gold coin of Croesus, are given by William Atherton DuPuy in The Geography of Money, The National Geographic Magazine, December, 1927, pp. 744-768.
• 13RIDGE WAY, op. cit., pp. 204-205.
• 14RIDGEWAY, in Sir John Edwin Sandys’s A Companion to Latin Studies, p. 441.
• 15BURNS, op. cit., p. 160.
• 16BURNS, A. R., Money and Monetary Policy in Early Times p. 157.
• 17Ibid., p. 24.
• 18The principle of Gresham’s law appears to have been known in ancient Greece. Aristophanes, writing about 405 B.C., said in Frogs, “In our Republic bad citizens are preferred to good. Just as bad money circulates while good money disappears.” For a brief explanation of Gresham’s law, see pp. 135-136, note.
• 19RIDGEWAY, op. cit., p. 339.
• 20The history of the Roman as is both intriguing and controversial. Concerning it there is a voluminous literature.
• 21Cf. pp. 128-130.
• 22GAIUS PLINIUS SECUNDUS, Historia Naturalis, Bk. XXXIII, 3.13.
• 23It is interesting to note that our word money has its origin in early Roman times. Money then was coined in a temple of Juno on Capitoline Hill in Rome. One of Juno’s many names was Moneta, a word cognate with Latin monete (to warn). Moneta was guardian of finances (as well as the protector of the female sex). Our words money and mint are cognate with Moneta.
• 24The Roman pound contained 12 ounces and the ounce was divided into 24 scruples. It is usually equated with 5,057 grains Troy. See Louis C. West, Gold and Silver Coin Standards in the Roman Empire, Numismatic Notes and Monographs, No. 4 (1941), pp. 6 and 34.
• 25MATTINGLY, HAROLD, The First Age of Roman Coinage, Journal of Roman Studies, Vol. 19, pp. 20 and 23.
• 26MATTINGLY, HAROLD, Roman Coins, pp. 18 and 27.
• 27Ibid., p. 17.
• 28MATTINGLY, Roman Coins, pp. 5-6.
• 29BURNS, op. cit., p. 151.
• 302Silver was the principal money of Palestine during the early years of the Christian Era. Gold and bronze coins, however, also circulated there. Christ, for example, directed the twelve disciples, “Provide neither gold, nor silver, nor brass in your purses” (Matt. 10:9). The Greek word for silver is the word translated “money” in the passage “For the love of money is the root of all evil” (I Tim. 6:10). All the references to money that occur in the New Testament have been gathered together by West, op. cit., pp. 47-48.
• 31These gold coins were probably not rated as so many silver denarii, but were bought and sold at market prices. “The aureus of Julius Caesar of ¼ pound . . . is the direct predecessor of the imperial aureus of Augustus, which was tariffed at 25 denarii.”—Mattingly, Roman Coins, p. 25.
• 32Cf. pp. 135-136, and KEMMERER, Modern Currency Reforms, pp. 329-330.
• 33BURNS, op, cit., p. 154.
• 34Ibid.; also, MATTINGLY, Roman Coins, pp. 14 and 24.
• 35JACOBS, WILLIAM, An Historical Inquiry into the Production and Consumption of the Precious Metals, vol. I. See, also, Walker, Francis A., Inter’ national Bimetallism, pp. 16-24.
• 36Ibid., p. 18.
• 37RAPER, MATTHEW, An Inquiry into the Value of the Ancient Greek and Roman Money, in J. R. McCulloch’s Old and Scarce Tracts on Money, p. 552.
• 38See p. 29, note; also, RIDGEWAY, in Sandys, op. cit., pp. 451-452.
• 39SILBERLING, NORMAN J., British Prices and British Cycles, 1779-1850, The Review of Economic Statistics, Supplement, 1923.
• 40For the interesting story of the changing ratings of the “guinea” in terms of silver, following down the progressive debasements of the silver coins from 1670 through the coinage reform of John Locke in 1698 and that of Sir Isaac Newton in 1717, when the guinea was rated at 21 shillings, where it remained until 1816, see Guinea in Palgrave’s Dictionary of Political Economy.
• 41See pp. 188–194.
• 42The gold standard in its “orthodox form” is a product of the nineteenth century. Its roots, however, go deep into the past. This chapter will explore briefly this early history of gold as money, i.e., as a commonly accepted medium of exchange.
• 43The earliest references I have been able to find in recorded history to the use of one of the precious metals as a medium of exchange—in these cases, passing by weight—are in the Code of Hammurabi, King of Babylon. They refer to silver in about the year 1870 B.C.
• 44Gold, by reason of its beauty, its world-wide distribution, the facility with which it could be obtained from the streams by crude methods of “panning,” and the ease with which it could be “worked,” probably had a wider use as a medium of exchange in very ancient times, and among primitive peoples in modern times, than any other metal.
• 45In Homeric times values in Greece were reckoned in terms of the cow. According to Ridgeway, “. . . weighing was first invented for traffic in gold, and since the weight-unit of gold is found regularly to be the value of a cow or ox . . . the unit of weight is ultimately derived from the value in gold of a cow.” Our English word pecuniary, which is derived from the Latin pecus, meaning “cattle,” is a monument to this development. Copper was early used as money. The first oboi was apparently a copper spike or skewer, six of which made a drachma, meaning “handful.”
• 46In Homeric times values in Greece were reckoned in terms of the cow. According to Ridgeway, “. . . weighing was first invented for traffic in gold, and since the weight-unit of gold is found regularly to be the value of a cow or ox . . . the unit of weight is ultimately derived from the value in gold of a cow.” Our English word pecuniary, which is derived from the Latin pecus, meaning “cattle,” is a monument to this development. Copper was early used as money. The first oboi was apparently a copper spike or skewer, six of which made a drachma, meaning “handful.”
• 47Even for those early days in Britain there is evidence of debasements of gold coins. These British coins varied in weight from about 120 grains to 84 grains, gradually becoming lighter as time went on.
• 48Thanks to the careful studies made by classical scholars over many generations, we know today much more about the money of classical times than the ancients knew. There are, however, many gaps in the chronology of the coins that have come down to us, and the story that these coins tell is far from complete. It is still full of controversial questions concerning which the modern literature is voluminous, but progress in their solution is being, made continually.
• 49The earliest references I have been able to find in recorded history to the use of one of the precious metals as a medium of exchange—in these cases, passing by weight—are in the Code of Hammurabi, King of Babylon. They refer to silver in about the year 1870 B.C.
• 50About the beginning of the fourth century B.C., we find a case of monetary debasement suggestive of our American debasement of 1933 to 1934. Dionysius, Tyrant of Syracuse, who had borrowed heavily from his citizens and was being hard pressed for repayment, directed that all the coins in the city should be brought to him, under penalty of death. He then restamped the coins and gave to each drachma the value of two drachmas. By this debasement he was enabled to pay off the original loan and, at the same time, repay the money that he had ordered to be brought to the mint.
• 51Shortly after the death of Alexander, the unified Attic monetary system, which prevailed throughout most of his empire, began to disintegrate. Concerning what followed, down to the time of the conquest of the Greek world by the Romans, M. Rostovtzeef says : [Alexander’s] successors continued his coinage but each for himself in his own name: Coinage was one of the signs and symbols of political independence, it was a powerful instrument of political influence and propaganda, and it yielded a substantial revenue. With the further disintegration of his empire, coinage became ever more diversified, each sovereign State, whether a monarchy or a city, minting its own money.
• 52Coinage was originally of the nature of a seal or hallmark punched on a nugget of metal as a guarantee of its quality or its weight. The beginnings of coinage appear to have been made in the countries of the eastern Mediterranean early in the eighth century B.C. Sennacherib, King of Assyria (705-681 B.C.), said, “I built a form of clay and poured bronze into it as in making half-shekel pieces.”
• 53I have in my possession a gold daric, one of the oldest and most famous gold coins in history. It is made of almost pure gold and is about the weight of our late American $5 gold piece. It looks like a roughly molded gold nugget and bears a crude stamp of an archer with his bow and spear. The coin was made during the reign of Darius the Great of Persia, about 500 years before Christ. Only about two generations before this, in the reign of Croesus, which began 561 B.C., there circulated in Asia Minor the coins of which Herodotus said, “The Lydians were the first people, so far as I know, to adopt a gold and silver coinage.”
• 54Many of the early coins were made of electrum—a natural alloy, consisting of about three parts of gold to one part of silver, which was found abundantly in Lydia and which caused that country to be known as the land of gold. Because of the difficulty in separating the gold from the silver, the ancients regarded electrum almost as a distinct metal. Early coins of pure gold in Asia Minor were probably made from placer gold obtained from the valley of the Oxus or from the Ural Mountains. The electrum coins were ancient examples of what in modern times is called symmetallism.
• 55Bronze Money. In Italy, as elsewhere, one of the first forms of metallic money consisted of unstamped bullion. But here, unlike the situation in some other places, where gold was readily available, the first metal to circulate was bronze. Originally, the bronze circulated in the form of a rough lump (aes rude), the lumps varying in weight, shape, and size, and bearing no stamp. Later it was hammered into the form of a bar, known as an as (meaning “unit”) in order to give it a convenient form for bartering the metal, which was in demand for the making of tools, weapons, and utensils. As time went on, the conventional length of this bar became a foot (the length of a man’s foot), which, with the conventional diameter, gave the bar a convenient weight of about 1 pound. The bar was later marked off into 12 thumbs, or inches. Since these bars (asses) varied considerably in weight, the custom gradually developed of passing them by weight instead of by tale. The weight of metal then became the important consideration, and the unit of value became the pound of bronze, the as libralis, while the 12 thumb divisions, or inches, became 12 ounces.
• 56The first gold coin to circulate in Hellas proper was the aforementioned Persian daric or stater (meaning “to weigh”), which weighed about 130 grains and which enjoyed an extensive circulation for several centuries. It was never debased and was “practically the only gold coin for about 200 years, as well in Asia Minor and the mainland of Greece as in the Persian Empire.” It was known in Palestine during Biblical times.
• 57In those early times, gold coins and silver coins circulated for several centuries under a dual standard. Gold gained in importance at the time of Alexander the Great, under the stimulus furnished by the large amount of gold produced in his Pangean mines.
• 58It was inevitable that this clumsy coinage should soon give way to the more convenient silver. Accordingly, during the course of the Pyrrhic War, Rome struck her first silver coins, didrachmas (double drachmas) and rare divisions of the didrachma. After defeating Pyrrhus and getting control of all southern Italy, shortly before the First Punic War, the Romans obtained there large supplies of silver, which they used in part for the Roman silver coin that was struck in Campania. This coin was the denarius (meaning “every ten”), and was probably equivalent to a didrachma. It was rated at 10 asses and divided into four parts, called sestertii. Although this silver coinage in Rome itself was struck about 268 B.C., it was not until about a half century later that silver became the dominant standard and the sestertius replaced the as as the unit of reckoning.
• 59In the Greek world there were, on occasions, official ratings of the coins of one metal in terms of those of the others. Ratings were changed from time to time and recoinages were made, to prevent a cheaper or overrated metal from driving out of circulation a dearer or underrated one, under the force of what we now call Gresham’s law.
• 60Early in the fourth century B.C., the silver coinage of Rhodes was supplemented by an issue of gold staters, and this double issue of gold and silver continued unbroken until after the death of Alexander the Great in 323 B.C.
• 61Bronze Money. In Italy, as elsewhere, one of the first forms of metallic money consisted of unstamped bullion. But here, unlike the situation in some other places, where gold was readily available, the first metal to circulate was bronze. Originally, the bronze circulated in the form of a rough lump (aes rude), the lumps varying in weight, shape, and size, and bearing no stamp. Later it was hammered into the form of a bar, known as an as (meaning “unit”) in order to give it a convenient form for bartering the metal, which was in demand for the making of tools, weapons, and utensils. As time went on, the conventional length of this bar became a foot (the length of a man’s foot), which, with the conventional diameter, gave the bar a convenient weight of about 1 pound. The bar was later marked off into 12 thumbs, or inches. Since these bars (asses) varied considerably in weight, the custom gradually developed of passing them by weight instead of by tale. The weight of metal then became the important consideration, and the unit of value became the pound of bronze, the as libralis, while the 12 thumb divisions, or inches, became 12 ounces.
• 62About the beginning of the fourth century B.C., we find a case of monetary debasement suggestive of our American debasement of 1933 to 1934. Dionysius, Tyrant of Syracuse, who had borrowed heavily from his citizens and was being hard pressed for repayment, directed that all the coins in the city should be brought to him, under penalty of death. He then restamped the coins and gave to each drachma the value of two drachmas. By this debasement he was enabled to pay off the original loan and, at the same time, repay the money that he had ordered to be brought to the mint.
• 63Weighing bronze was, however, inconvenient, and the practice developed toward the close of the regal period of placing upon the asses an authoritative stamp certifying their weight, so that again they could pass by count. There are early records of 2-pound bars and also of bars of ½ and ¼ pound. The earliest coin marks on the bars that we have preserved are crude drawings of animals. According to Pliny, “King Servius first stamped bronze.. . . It was stamped with the impressions of animals, whence it was termed pecunia ...”
• 64Long after the as libralis ceased to circulate, it was used as a unit of account, in terms of which people thought and expressed monetary values even when payments were actually made in the standard silver money. In contracts then it appears to have been called the as grave, to distinguish it from the current as.
• 65Bronze Money. In Italy, as elsewhere, one of the first forms of metallic money consisted of unstamped bullion. But here, unlike the situation in some other places, where gold was readily available, the first metal to circulate was bronze. Originally, the bronze circulated in the form of a rough lump (aes rude), the lumps varying in weight, shape, and size, and bearing no stamp. Later it was hammered into the form of a bar, known as an as (meaning “unit”) in order to give it a convenient form for bartering the metal, which was in demand for the making of tools, weapons, and utensils. As time went on, the conventional length of this bar became a foot (the length of a man’s foot), which, with the conventional diameter, gave the bar a convenient weight of about 1 pound. The bar was later marked off into 12 thumbs, or inches. Since these bars (asses) varied considerably in weight, the custom gradually developed of passing them by weight instead of by tale. The weight of metal then became the important consideration, and the unit of value became the pound of bronze, the as libralis, while the 12 thumb divisions, or inches, became 12 ounces.
• 66Silver Money. Silver in the form of ingots and of foreign coins, notably those of the Greeks, Etruscans, and Sicilians, circulated in Italy during part of the bronze-standard period just described. According to Mattingly, the aes grave of Rome and Italy, which we have previously mentioned, represented “only a short stage of transition from the early use of uncoined bronze as a measure of value, to the Greek use of silver money . . . ” Rome, learning the use of silver and of token bronze from the Greeks of southern Italy, was led to give at least the form of a coinage to the bronze that she was accustomed to use for trading with the Italian peoples.
• 67The as of bronze, which developed as a commodity-money unit of value very early in Roman history and was first coined about 300 B.C., played an important part in that history for centuries. According to Mattingly, “The bronze coinage was paramount from the beginnings down to c. 245 B.C.. . . ”While from 245 B.C. to 217 B.C. it played an equally important part with silver, after 217 B.C. silver dominated, and during the second century the bronze coinage became increasingly subsidiary.
• 68In the year 217 B.C. the as was reduced to a standard of 1 ounce and was retariffed at the rate of 16 instead of 10 to the denarius, while the denarius itself was debased. About the beginning of the second century B.C., “the Roman coinage enters on a long period of quiet and orderly movement with little of external change to mark it.” This situation continued during the early centuries of the Empire, during which, however, silver met increasing competition from gold. The yellow metal finally superseded silver as the dominant standard, just as silver had previously superseded bronze. To this story we shall now turn.
• 69It was inevitable that this clumsy coinage should soon give way to the more convenient silver. Accordingly, during the course of the Pyrrhic War, Rome struck her first silver coins, didrachmas (double drachmas) and rare divisions of the didrachma. After defeating Pyrrhus and getting control of all southern Italy, shortly before the First Punic War, the Romans obtained there large supplies of silver, which they used in part for the Roman silver coin that was struck in Campania. This coin was the denarius (meaning “every ten”), and was probably equivalent to a didrachma. It was rated at 10 asses and divided into four parts, called sestertii. Although this silver coinage in Rome itself was struck about 268 B.C., it was not until about a half century later that silver became the dominant standard and the sestertius replaced the as as the unit of reckoning.
• 70Contemporaneously with the circulation of bronze and silver in Rome and other Italian cities during early times, there was a circulation by weight of gold in the form of nuggets and of foreign coins. This gold was used principally in the larger transactions. Although destined ultimately to supplant both bronze and silver as the basic monetary metal, gold was in this territory the least important of the three, prior to the beginning of the Christian Era. Evidence that there was a substantial circulation of gold as early as the fourth century B.C. is found in the fact that there was a law at that time requiring that a certain tax be paid in gold.
• 71In the year 217 B.C. the as was reduced to a standard of 1 ounce and was retariffed at the rate of 16 instead of 10 to the denarius, while the denarius itself was debased. About the beginning of the second century B.C., “the Roman coinage enters on a long period of quiet and orderly movement with little of external change to mark it.” This situation continued during the early centuries of the Empire, during which, however, silver met increasing competition from gold. The yellow metal finally superseded silver as the dominant standard, just as silver had previously superseded bronze. To this story we shall now turn.
• 72No further gold coins were minted by Rome for over a century and a half, until the time of the Roman conquests under the great generals Sulla, Pompey, and Julius Caesar. These generals in the field issued the gold coins under authority of the government at Rome. Much of the metal for making them came to the generals in the form of loot, and many of the coins in turn probably went to the soldiers as rewards. Sulla coined an aureus (meaning gold) of 168 grains and later one of 140 grains. Pompey continued coining it at 140 grains. Julius Caesar reduced it to 126 grains. After his death the Senate authorized the ordinary moneyers to coin gold, but coining at Rome was soon superseded by the provincial issues of the triumvirs and their subordinates.
• 73When, as a result of debasements, coins of different weights were in circulation together in sufficient quantities, Gresham’s law operated, and the lighter weight coins drove the heavier ones out of circulation. A person who could discharge a debt with the same number of lightweight aurei as of heavyweight ones, naturally paid it with the lightweight ones and kept or melted down the heavier ones. Likewise, when the market prices of commodities were the same whether payments were made in lightweight coins or in heavyweight ones, the purchaser would pay with the lightweight ones. It was merely a case of buying in the cheaper market. To the extent that the merchants and others in selling goods made allowance for the differences in the weight of the coins by quoting lower prices when payment was to be made in the heavier coins, a dual standard developed and standard coins of different weights then circulated side by side.
• 74Augustus gave gold a place above silver. He reduced the aureus from the 126-grains weight given it by Julius Caesar to 122.9 grains. “Gold and silver are both struck almost pure [at a ratio of 12½ to 1]. . . . Brass and copper are struck much more carelessly . . . , i.e., not on ä carefully adjusted weight for each piece, but at so many to the pound.” From Augustus to Nero the system was not changed, but the weight of the aureus was gradually reduced administratively, with an accompanyng reduction in the denarius. From the reign of Nero through the reign of Diocletian, the monetary situation throughout the Empire was confused and debasements were common. The reigns of Claudius and Nero witnessed much counterfeiting and a wide circulation of privately made tokens, which were usually of lead. Diocletian made two reductions in the weight of the aureus in the year 312, and Constantine the Great put through a monetary reform that fixed the gold content of the aureus at about 70 grains, representing a debasement of approximately 38 per cent since the time of Nero. Thereafter, until the Empire in the West came to its end in 476, gold apparently grew in relative importance and was the imperial money par excellence, although the silver denarius and its fractions continued to hold a high place in the business of the Empire.
• 75Under the financial strain of the Second Punic War (218-201 B.C.), Rome for the first time minted gold coins. They were minted out of gold bullion taken from her treasury. The weights of these coins were based on the scruple, which was one twenty-fourth of the old Roman ounce and equaled 17½ grains. There were coins, of one, two, and three scruples, respectively, with the approximate weights that would correspond to $1, $2, and $3 of United States gold coin prior to 1933. The Romans officially rated these gold pieces in terms of silver at a rate of 20 sestertii to a scruple of gold, a rating so high that apparently the gold coins were treated as tokens. The issue was short-lived.
• 76The third factor was that the supply of the precious metals available for money declined in a large part of Europe during the Dark Ages. Widespread looting of occupied territories during the wars of the early Christian Era and subsequently by the conquering Germanic peoples of the North had scattered widely and thinly the accumulated gold and silver treasure of classical times. The yields of the gold and silver mines also declined, partly because the mines were bled white by tenant operators who were little concerned with the conservation of the mines’ resources, partly because most of the labor in the mines was inefficient convict and slave labor, and partly because there was destruction and looting of the mines by the invading barbarians.
• 77No further gold coins were minted by Rome for over a century and a half, until the time of the Roman conquests under the great generals Sulla, Pompey, and Julius Caesar. These generals in the field issued the gold coins under authority of the government at Rome. Much of the metal for making them came to the generals in the form of loot, and many of the coins in turn probably went to the soldiers as rewards. Sulla coined an aureus (meaning gold) of 168 grains and later one of 140 grains. Pompey continued coining it at 140 grains. Julius Caesar reduced it to 126 grains. After his death the Senate authorized the ordinary moneyers to coin gold, but coining at Rome was soon superseded by the provincial issues of the triumvirs and their subordinates.
• 78Under the financial strain of the Second Punic War (218-201 B.C.), Rome for the first time minted gold coins. They were minted out of gold bullion taken from her treasury. The weights of these coins were based on the scruple, which was one twenty-fourth of the old Roman ounce and equaled 17½ grains. There were coins, of one, two, and three scruples, respectively, with the approximate weights that would correspond to $1, $2, and $3 of United States gold coin prior to 1933. The Romans officially rated these gold pieces in terms of silver at a rate of 20 sestertii to a scruple of gold, a rating so high that apparently the gold coins were treated as tokens. The issue was short-lived.
• 79Coinage in Europe during the early Middle Ages was practically limited to silver and copper, except for a temporary minting of gold in the Carolingian period. Silver provided the principal currency of western Europe. The aureus of Constantine, however, continued to circulate until the downfall of the Eastern Empire in 1453, and from this gold unit various coinages of mediaeval and modern Europe were descended.
• 80During the period of the suspension, the bank note depreciated to a maximum discount of approximately 27 per cent in terms of gold in 1813, and then, after 1815, rapidly rose toward par. Commodity prices in England had risen about 40 per cent by 1814 and then had declined.
• 81Although gold coins of 20 shillings had been coined as early as 1489 and “sovereigns” had been minted from time to time in the past, dating back as early as 1485, during this long period the sovereign had been of comparatively little importance. For about a century and a half the guinea had been England’s most important gold coin. An act of 1817 now replaced the guinea and its gold fractions by a new sovereign (and a half sovereign) representing 20 shillings to the sovereign and containing 123.27 grains of standard gold ( fine), i.e., 113.00 grains of fine gold.
• 82On the basis of the legislation of 1816 and 1817, England’s gold standard functioned after the return to specie payments in 1821 until the outbreak of the First World War, in 1914. Throughout this long period of 93 years, specie payments in gold were maintained, there was free coinage of gold, and the yellow metal moved out of England and into England without legal restrictions, going out when exchange reached the gold-export point and coming in when it reached the gold-import point. The system was highly automatic. There were no important changes in Britain’s monetary standard for these three generations, except those incident to changes in the value or purchasing power of gold itself—a subject that will be discussed later. There were many significant developments in the nation’s banking and credit systems, notably those centering in the Peal Act of 1844, but these developments do not fall within the scope of this book.