The History of Currency, 1252 to 1896 Part 19

The total silver withdrawn from circulation up to the close of 1880 was 1,080,486,138 marks.

Of this amount 382,684,841 marks were delivered to the Mint for coinage into the new imperial silver coins.

The remaining 696,797,069 marks were melted into silver and produced 7,474,644 pounds of fine silver. Of this quant.i.ty 7,102,862 were sold up to May 1879. The balance of unsold silver still in the hands of the Imperial Government is 339,353 pounds of fine silver.

England.

Charles II. began his regulation of the currency by the proclamation of 29th January 1661, fixing the coins to be current and their tariff. This proclamation was followed by another, of 10th June 1661, against the export of gold or silver, and against buying or selling the metals at higher rates than were given at the Mint, a practice to which the proclamation attributed the scarcity of money. This edict proved of no avail, for, in spite of it, the gold coins were exported in such quant.i.ties that they were current more abundantly in foreign parts than in England. As the result of deliberation of the Privy Council, a.s.sisted by the Commissioners of Trade and officers of the Mint, who all attributed the export to the higher price of gold abroad, it was determined to raise the price of the gold coins to or near the value which they had on the Continent at the moment. Accordingly, by proclamation of the 26th August 1661, the value of the gold _unite_ was raised from 22s. to 23s. 6d., and other gold coins in proportion, the silver currency being left unaltered.

In referring to the Act for the free trade in gold and silver (_supra_, p. 162), mention has already been made of the motive of the legislator, namely, to increase the importation of the metals to the Mint. Exactly similar was the intention, as expressed in the preamble of the succeeding Act of 1666 (8 Charles II. c. 5), which abolished the right of seigniorage, thereby establishing free and gratuitous coinage in England--the principle of minting still in force in this country.[17]

[Sidenote: ENGLAND: CHARLES II]

The testimony of both Act and declaration as to the scarcity of money is confirmed by actual record. In the following year, 1667, there was a great scarcity of money, and _dollars_ and _pieces of eight_ were bought up by the goldsmiths and bankers for 4s. 3d. each, and instead of being brought to the Mint were at once exported to France for 4s. 10d. and to Ireland and Scotland for 5s.

According to the new indenture for the coinage of 1670, a slight reduction in the standard of the gold took place, the pound of crown gold (22 carats fine) being to be minted at a tale of 44, 10s. The scarcity of money still continued, however, and the separate experience of Ireland only corroborated that of England. The general statement of the case as to the fate of the coined money since the Act of 18 Car II., which inst.i.tuted free coinage, is thus put by Sir Dudley North, in his _Discourses upon Trade_: "I call to witness the vast sums that have been coined in England since the free coinage was set up. What is become of it all? n.o.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--the melting-pot devours it 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 quant.i.ties from Spain, the Mint commonly gives the best price, i.e.

coined silver for uncoined silver, weight for weight. Wherefore it is carried into the Tower and coined. Not long after there will come a demand for bullion to be exported again. If there is none, but all happens to be in coin, what then? Melt it down again; there's no loss in it, for the coining costs the coiners nothing. Thus the nation hath been abused and made to pay for the twisting of straw for a.s.ses to eat."

By the time of the accession of William III. the scarcity of silver had become so great as to cause a pet.i.tion from divers working goldsmiths in and about the City of London to the House of Commons (9th April 1690).

It stated "that upon search at the Customs they found that since last October entries had been made of 286,102 oz. of silver in bullion, and 89,949 _dollars_ and _pieces of eight_ for exportation by divers private persons, and they doubted not but it would appear that not only the East India Company, but also divers Jews and merchants, had of late bought up great quant.i.ties of silver to carry out of the kingdom, and had given 1-1/2d. per oz. above the value, which had encouraged the melting down of much plate and milled monies; whereby for six months past, not only the pet.i.tioners in their trade, but the Mint itself had been stopped from coining."

[Sidenote: ENGLAND: THE EXPORT IN 1690]

The pet.i.tion was referred to a committee of the Lower House, which reported on the 8th May that great quant.i.ties of silver had been exported, of which seven-eighths had been shipped off by the Jews, who would do anything for their profit. The reason for the exportation, too, was plain, for the French king, of late finding his money very scarce, had raised his coin 10 per cent., which was an encouragement to send silver to fill his coffers, and therefore the Jews exported it daily in very great quant.i.ties. The melting down of 1000 of milled money for exportation was attended with a profit of 25 ready money and upwards, silver being coined at the Mint at 5s. 2d. per oz., but at the time of exportation sold generally at 5s. 3-1/2d. The remedies proposed to the committee were either a prohibition of export or the enhancing of the English monies.

Not less than three measures were presented to the House for the prohibition of export--one of them by Sir Richard Temple--but were all lost; and, meanwhile, the exports to Holland and France continued. In November 1690 it was calculated that during the preceding sixteen months about 140,000 oz. had been exported.

In addition to this actual drain of coinage, the processes of culling, clipping, and counterfeiting, which had been going on through the reigns of Charles II. and James II., had resulted in an unexampled depreciation of so much of the coinage as remained. A large portion of the currency consisted of iron, bra.s.s, or copper-pieces plated, and such coins as were of good silver were worth scarcely one-half their current value.

This statement is more than borne out by quite reliable computations which were made in the process of the recoinage five years later. A medium lot of 5-1/2 bags, containing in tale 57,200 of the called-in currency, and which should have weighed 221,418 oz. 16 dwt. 8 grs., was found to weigh only 113,771 oz. 5 dwt. According to the accounts of Neale, then master and warden of the Mint, 4,695,303 dwt. 15 oz. 2 grs.

of the clipped silver money produced only 790,860 lbs. 1 oz. 19 grs., implying a depreciation in weight alone of over 47.75 per cent.

The process of stripping the country of currency was increased by the continual pouring out of money in aid of William's wars, and the loss in exchange on such large remittances made the evil only too apparent. The one or two millions yearly remitted to the Continent for the British armies were negotiated in Holland in a thousand ways to England's prejudice. Partisan statements were made that whereas in the beginning of the war the Dutch allowed 43 schillings for an English pound they gradually lowered the exchange to 28 schillings. Guineas, which were equal in value to 21s. 6d. in silver, rose to 30s.; and they would have risen to a still higher rate if the officers of the exchequer and the receivers of public revenue had not refused to receive them in payment at the increased value.

In 1695 the matter was taken up in the House of Commons, and a committee appointed. The report of this committee, which was never pa.s.sed, was based on the proposition of a reduction of standard. By Montague's influence the proposals were dropped, and it was not till the 22nd November that the Act for remedying the ill state of the coins pa.s.sed.

It is well known that the unwise determination of the Government of William III. to adhere to the pre-existing standard was due to the action and contrivance of Montague as Chancellor of the Exchequer, and to the influence of Locke's writings. By a subsequent series of Acts, based on the complaints of merchants representing the evils resulting from the unsettled price of gold, the price of the guinea was ordered to be gradually reduced from 30s. to 28s., 26s., and finally 22s., before 10th April 1696.

[Sidenote: ENGLAND: RECOINAGE OF 1696]

This great recoinage scheme was only completely accomplished in 1699, having occupied the greater part of four years, and after a long series of Acts and proclamations of, occasionally, very doubtful wisdom.

According to the accounts of the officers of the Mint, the new silver coin amounted in tale to 6,882,908, 19s. 7d. The worn and clipped money called in was estimated roughly at 4,000,000, on which the loss was about 2,000,000; the whole charge and loss being stated at not less than 2,700,000. It is significantly affirmed that, in a manner, all the called-in silver was found to consist only of pieces coined between the days of Edward VI. and 1662, a sure indication of the fate which had befallen the coinage issued since the Restoration.

Before the transaction was finally complete the last safeguard and complement of the system had been adopted, in fixing the relation of the gold coinage to the new silver issue. On the 22nd September 1698, a report was given in to the House of Commons, signed by four names, including that of John Locke, stating that the value of gold in Holland and the neighbouring countries was, as near as could be computed upon a medium, 15:1 in silver; and that, according to this value, the currency of the guinea at 22s. was too high, and occasioned a disproportionate importation of gold and an exportation of silver. The bringing down of the guinea to 21s. 6d. would make the value of English gold and coin very near 15-1/2:1 to silver, which, though not so low as the rate in Holland, would in their opinion be sufficient to correct the error.

In consequence of this report the Commons resolved that, under the Act 7 and 8 William III. chap. 19, no person was obliged to take guineas at 22s. a piece. The price then fell to 21s. 6d., at which rate they were received by the officers of the revenue. With the exception of this merely declaratory tariffing of the guinea, it is to be borne in mind that this recoinage of William's reign was carried out on the principle enunciated by Montague, and backed by the authority of Locke, namely, that of a retention of the old standard, although in the face of a clearly established advance in the value of silver, and in face of quite irrefutable answers to all Locke's arguments. Momentarily the scheme succeeded; the adverse exchange was instantly redressed, while the renewal of the coinage and the ratio of 1698 was sufficiently above the continual ratio to turn the flow of gold, as doubtless was the (unexpressed) design in adopting it. According to Burnet the packet-boat from France seldom came over during the following winter without bringing 10,000 _louis d'or_, and often more. "The nation was indeed filled with them, and in six months a million of guineas was coined out of them. The merchants in fact said that the balance of trade was then so much turned to our side that whereas we were wont to carry over a million of our money in specie, we then sent no money to France, and had at least half that sum sent over to balance the trade."

[Sidenote: ENGLAND: EFFECTS OF THE RATIO OF 1698]

The circulation of French and other foreign gold became so great that on the 5th February 1701 the Council issued a proclamation that the _louis d'or_ and Spanish _pistole_ should not pa.s.s for above 17s. Such action at once brought those coins to the Mint, and nearly 1-1/2 millions were coined out of them.

It was not seen at the moment that the establishment of this ratio so favourable to gold was _pari pa.s.su_ unfavourable to silver. The idea was entertained that the French gold came over to bribe English members, i.e., on mere political causes. The hypothesis was needless as it was incorrect. Gold came over because it was higher priced in England than abroad through the ratio of 1698, and for the same reason silver left the country to pay for the gold. The one movement was the essential counterpart of the other, and made itself at last only too visible.

As early as the seventh year of Anne's reign--only nine years after the completion of this great recoinage, it was found necessary to give further encouragement to the coinage of silver by offering a premium on every ounce of foreign coins which should be brought to the Mint within a limited time. The premium was not to exceed 2-1/2d. per oz., and the time limited was from the 17th April to the 1st December 1709.

Such a measure has been already noticed in the history of France; it was indeed a design frequently employed there under the t.i.tle of _Surachat_, and it always proved as futile as the Government of Anne found it to be.

As the drain continued, representations were made by the officers of the Mint to the Treasury, and in 1717 the House of Commons requested these representations to be laid before it (December 20th). On the same and following day a remarkable speech was made by a member, Mr. Aislabie, who took notice of the great scarcity of the silver species, and proposed the remedy of lowering the gold species. On the second day he was seconded by Mr. Caswall, who suggested that the overvaluation of gold in the current coins of Great Britain had caused the export of great quant.i.ties of silver species, "and to that purpose [i.e. the purpose of his argument] laid open a clandestine trade, which of late years had been carried on by the Dutch, Hamburgers and other foreigners, in concert with the Jews and other traders here, which consisted in exporting silver coins and importing gold in lieu thereof; which being coined into guineas at the Tower, near 15 pence was got by every guinea, which amounted to about 5 per cent.; and as these returns might be made five or six times in a year considerable sums were got by it, to the prejudice of Great Britain, which thereby was drained of silver and overstocked with gold." He concluded by proposing to lower the price of guineas and all other gold specie.

[Sidenote: ENGLAND: SIR ISAAC NEWTON'S REPORT, 1717]

His speech was received with applause, and the House unanimously pet.i.tioned the King to call the guinea down to 21s., and other gold species in proportion. To this George I. immediately acceded, and the proclamation to that effect _verbatim_ was issued on the following day, 22nd December 1717.

The report for which the House had called two days earlier, and which was produced on the 21st December, was the celebrated report made some months before by Sir Isaac Newton as master of the Mint, at the demand of the Commissioners of the Treasury. It is a doc.u.ment deserving the careful attention of every student of currency history. Newton reviews the ratio in each of the then commercial nations, and shows the effect of difference of ratio in producing export and disturbance of one or other metal. "Gold in Spain and Portugal is of sixteen times more value than silver of equal weight and alloy; at which rate a guinea is worth 21s. 1d. net; this high price keeps their gold at home in good plenty, and carries away the Spanish silver into all Europe. So that at home they make their payments in gold, and will not pay in silver without a premium. Upon the coming in of a plate [silver] fleet the premium ceases or is but small, but as their silver goes away and becomes scarce the premium increases and is most commonly about six per cent."

In France the ratio was 15:1, and the guinea therefore worth 20s.

8-1/2d. In Holland it was worth 20s. 7-1/2d., in Italy, Germany, Poland, Denmark and Sweden, from 20s. 7d. to 20s. 4d. "In China and j.a.pan the pound weight of fine gold is worth but 9 or 10 lbs. weight of fine silver, and in East India it may be worth 12 lbs., and the low price of gold in proportion to silver carries away the silver from all Europe."

"If gold were lowered only so as to have the same proportion to the silver money in England, which it hath in the rest of Europe, there would be no temptation to export silver rather than gold to any part of Europe, and to compa.s.s this last there seems nothing more requisite than to take off about 10d. or 12d. from the guinea."

[Sidenote: ENGLAND: THE STATE OF COINAGE IN 1760]

In a subsequent report of the 21st September 1717, Newton stated that, since the beginning of 1702 to September 1717, the gold coined at the Mint amounted to 7,127,835, while the silver within the same period only amounted to 223,380, of which 143,086 had been brought to the Mint in response to the premium offered; in 1709 and 1711, of their own free will, the goldsmiths had only brought a matter of 21,220 to the Mint. In the House of Lords, early in the following year, it was proved that during the year 1717 the East India Company had exported nearly 3,000,000 oz. of silver.

The immediate purpose of the above proclamation of 22nd December 1717 was for a time thwarted by a speculative h.o.a.rding of silver in expectation of a further calling down of the gold species; and it was to cut the ground from under this speculation that in January 1718 both Houses declared their determination not to alter the standard of gold and silver coins in the kingdom, and proceeded in place of such alteration to prepare a bill for preventing the melting down of the coins of the kingdom.

It is demonstrable, even from Sir Isaac Newton's own figures, that the calling down of the guinea to 21s., though largely, was not completely effective in destroying the profit of arbitrage transactions with Holland. With the guinea at 21s., the ratio was still 15-14295/68200 while in France and Holland the ratio was 15 or under. That the process of culling and exporting the heaviest silver specie still continued is proved by the state of silver coinage twenty years later, when shillings were found to be deficient in weight, by between 6 and 11 per cent., and sixpences between 11 and 22 per cent., and all species so scarce as to threaten greatest confusion in every branch of trade. At the accession of George III., 1760, the silver coinage was found in so imperfect a state that the crown pieces had almost entirely disappeared, though minted since 1795 to the amount of over a million and a half sterling.

Of half-crowns, likewise minted to the value of 2,329,370, only defaced and impaired specimens remained current, while shillings and sixpences had lost every sign of impression. Up to 1763 only a matter of 5791 in silver had issued from the Mint--practically no coinage at all.

Gradually however, owing to the force of wider principles at work, the matter of the ratio righted itself. Ever since 1756 the value of gold had been rising all over Europe. In 1759 the continental ratio was still calculated at 14-1/2, as compared with 15-1/5 in England; but by 1773 the continental ratio had overtaken the English, and the market price of standard silver had risen to 5s. 2d. per oz.--the English Mint rate. In the greatly depreciated state of the silver coinage--three-fourths of it was said to be base--even the approach of a fair ratio acted prejudicially on gold. Already, in 1771, the export of gold to Holland had become noticed, and it was a.s.serted that the gold coins had never before been so deficient. They were sent over to Holland, and there filed and returned and put into circulation--a bimetallic phenomenon that always recurs in a currency containing two differently depreciated elements.

[Sidenote: ENGLAND: STATE OF THE COINAGE IN 1774]

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 subst.i.tutes the less for the greater, whether weight or value, the more depreciated for the less, or the depreciated for the perfect standard coin. In this particular instance, 1774, the depreciation of silver had been the result of the action of a too high ratio from 1717 onwards; the depreciation of gold was effected in a much less time between 1770 and 1773, simply because the already depreciated state of the silver causing that differentiation of value, which is the bullionist's opportunity, happened to coincide with a natural rise of the value of gold all over the Continent. The result, therefore, of fifty years of bimetallic regime left England with a currency depreciated in both its limbs, in both gold and silver, and as deficient in the quant.i.ty current as in the weight of the individual pieces. This is not in keeping with the theory of bimetallism as developed to-day, according to which the transition from one coin to the other would only be made at the point of equation, and the subst.i.tuted metal would equalise that displaced. This is theory. The facts of the situation in 1774 are not theory but history, and tell a different tale.

"The evil was so great," says Lord Liverpool, "that the Government found it necessary to take this difficult subject into their immediate consideration. On this occasion I addressed a letter to a n.o.ble Lord, who was then Chancellor of the Exchequer, suggesting what appeared to me the proper remedy for this evil. I proposed that, with a view to the general reform of the coins of the realm, all the deficient gold coins should in the first place be called in and recoined, and that in future the currency of the gold coin should be regulated by weight as well as by tale, and that the several pieces should not be legal tender if diminished below a certain weight. Your Majesty was pleased to approve of this advice and to propose to your Parliament, on 13th January 1774, the calling in and recoining of all the deficient gold coins; and the Chancellor of your Exchequer opened the whole of this plan to the House of Commons, who approved of the measure, which was carried into immediate execution without any complaint and with great success. The defects which had previously existed in this species of coins were thereby removed, and the regulation, then established, of weighing the gold coin has been the means of preserving it at nearly the state of perfection to which it was then brought."

[Sidenote: ENGLAND: RECOINAGE OF 1774]

The resolutions of the House of Commons on which this recoinage depended were pa.s.sed on the 10th May 1774. After stating the depreciation existing in the gold coinage the House a.s.serted--(3) that it has been a practice to export and melt down the new and perfect gold coin soon after it is issued for private advantage, to the great detriment of England; (4) that while pieces of gold coin, differing so greatly in weight, are allowed to be current under the same denomination and at the same rate and value, great quant.i.ties of the new and perfect pieces will continue to be exported and melted down, and, there is reason to apprehend, will be recoined into pieces the most deficient that are allowed to be current."

The House then goes on to adopt the principle of limiting the depreciation to be allowed on any single coin, i.e. of making the coins current by weight as well as tale within the limits allowed.

The House next turned its attention to the silver element of the currency. At the outset it was met by the patent fact that the depreciated silver coinage had been made the handle or lever, or _point d'avantage_, in all the operations against gold. "Whereas," is the recital of the Act of 14 George III. c. 42, "considerable quant.i.ties 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," etc. The Act therefore decrees the prohibition of importation of light silver coinage into the kingdom, and its confiscation in case of discovery as such. "And be it further enacted ... 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."

The importance of this latter epoch-making clause is vital. It is the first enactment of a law of tender in the history of English monetary legislation, and it was the first step towards the shaking off the incubus of that mediaeval currency system which was even then only coming to be understood in all its fatal perniciousness. For statesmanship, the only parallel to it is that Act of Henry III. of France, which proved so shortlived in its adoption (see _supra_, pp. 87-88). It was the first step in the evolution of that system of a safeguarded currency which was finally constructed in 1816.

This Act prohibiting the importation of light silver was renewed in 1776 for a further two years, and was again, in 1778, continued until the 1st day of May 1783, and from thence to the end of the next session of Parliament. On the 21st June 1798 the Act, being then expired, was revived and further continued to the 1st day of June 1799 by a new statute, and on the 12th July 1799 the Act was made perpetual by statute of 39 Geo. III. c. 75.