cannot produce any difference between the Mint Price and the Market Price of Bullion: because, by the very meaning of the word Mint Price, however plentiful or however scarce Silver may be, an ounce of it in coin must always be exactly equal in weight or value to an ounce of it in Bullion On the other hand, a Depreciation of the coinage must inevitably produce a rise in the Market Price of Bullion above the Mint Price because, however plentiful or scarce Bullion may be, of an ounce of it in coin can never be equal in weight or value to an ounce of it in Bullion The case may be shortly stated thus-Guineas may rise to 28s. in silver, either from a Diminution in the Value of Silver: or from a Depreciation of the Silver Coinage. What is the test? It is to be found in the Market Price of Silver. If the Silver Coinage is Depreciated, the Market Price of Silver will rise above the Mint Price if it is a mere Alteration in the Value of Silver, it will not Evidently, however, both circumstances may take place. There may be an Alteration in the Value of the metals as well as a Depreciation in the Silver Coinage at the same time. And it is quite easy to devise a test in such a case; because the Depreciation in the Silver Coinage is measured by the difference between the Market and the Mint Price of Silver: and thus the Value of the Coinage being rectified, it is quite easy to see whether it has changed in its relation to Gold On Gresham's Law of the Coinage 11. We have now to notice a Law of fundamental importance in the Theory of the Coinage Aristophanes first noticed the fact at Athens that when a debased Coinage was issued along with a good Coinage, the good Coins all disappeared from circulation, and the debased ones alone remained This fact, which has been invariably observed in all countries and ages, was long the puzzle of financiers and statesmen. Formerly the Coinage in this country used to suffer very much from clipping and other bad practices. Repeated attempts to remedy the evil were made by issuing new Coin from the Mint without : withdrawing the debased Coin; but all these efforts were unavailing the good Coins invariably vanished from circulation, and the bad ones alone remained. Sir Thomas Gresham first explained the cause to Queen Elizabeth; hence we have called it Gresham's Law of the Coinage This Law is well expressed in an old pamphlet, thus "When two sorts of Coins are current in the same nation, of like Value by denomination, but not intrinsically, that which has the least Value will be current, and the other as much as possible hoarded," or exported. Which may be expressed more shortly thus Bad money always drives good money out from circulation The reason of this is plain. If full-weighted and depreciated Coins are allowed to circulate together, one of two effects must necessarily follow. Either those persons who have commodities to sell will make a difference in their nominal price according as they are paid in good or in light coin; that is, the light coin will be at a discount as compared with the good coin: or if there be a law to prevent this, and to make both to pass at the same nominal value, every one will endeavour to discharge his debt at the least possible expense. He will always try to pay his debts in the light coin. As values are always estimated by the weight of the metal, a law which declares that light coin shall be of the same value as heavy coin, is as great an anomaly as a law to declare that in Arithmetic three shall be equal to four. But the consequence is plain if the Law of this country declares that four ounces of silver shall be of the same value as three ounces, the possessors of the light coins always pay them away in preference to the heavy ones, and Bullion dealers collect all the full-weighted coins they can, and export them to foreign countries, where the coin passes at its full value. Thus the good coin quickly disappears from circulation, and the bad alone remains Moreover, no one will bring Bullion to be converted into Coin. During the degraded state of the Silver Coinage during the last century, the Market Price of Silver always exceeded the Mint Price. Smith says that the Market Price of Silver ranged from 5s. 4d. to 5s. 8d. per ounce before the recoinage in 1774; and the second Report of the Lords' Committee of Secrecy, in 1797, says-" But as the Mint Price of Silver Bullion has been, during the whole of the present century, considerably less than the Market Price of this precious metal, the Silver Bullion imported could not be converted into Coin, but, having left a quantity sufficient for the use of our manufacturers, must have been again exported, and did not contribute in the smallest degree to augment the Coin of this kingdom" It is from this principle that a Paper Currency is invariably found to expel a Metallic Currency of the same denomination. from circulation. And to show the generality of the principle, it was found in America that when a depreciated Paper Currency had driven all the Coin out of circulation, and a still more depreciated Paper Currency was issued, the more depreciated paper drove out the less depreciated paper from circulation What is a Pound ? 12. Sir Robert Peel once asked the question, "What is a Pound?" and he found many who could give him no answer. We have now to explain how a certain weight of Gold Bullion has come to be called a Pound The original Measure of Value in all the countries of Western Europe, France, England, Scotland, Italy, Spain, was the Pound weight of Silver Bullion. No coin of this actual weight was ever struck but the Pound weight was divided into 240 coins called Pence, Denarii; twelve of these Pence were called a Shilling, or Solidus; and, therefore, 20 Shillings, or Solidi, actually weighed a Pound of Silver Bullion : Now let us denote the Pound weight of metal, in the form of Bullion, by the symbol-lb: and the Pound weight of metal, in the form of Coin, by the symbol-£; then we have Now, if the Pound weight of metal were divided into more. than 240 pieces, it is clear that the greater number of pieces would still be equal to the Pound in weight: and if we denoted 240 pieces by the symbol-£, irrespective of their weight, we should have the 1 lb = £1 the number of pieces above 240 Now this is what has been done in the Coinage of all the countries above-mentioned. The sovereigns of these various countries were frequently in want of money to pursue their various extravagances. As they could not increase the quantity of the metal, they adopted the fraudulent plan of surreptitiously cutting the Pound weight of Bullion into a greater number of pieces. But they still called them by the same name. By this means they gained an illusory augmentation of wealth. As they could not increase the quantity of the metal, they, at various periods, falsified the certificate, while they still called the Coins by the same name. Thus the quantity of Bullion in each penny was diminished The consequence of this was manifest. As 240 pence were still called a Pound in money, or £, whatever their weight was: and as more than 240 pence were coined out of the Pound weight of Bullion, or lb.: the £, or Pound of metal in Coin, began to vary from the lb. or Pound of metal in Bullion. Edward I. began this bad practice in 1300, and coined 243 pence out of the Pound weight of metal: in 1344 Edward III. coined 266 pence out of the Pound of metal in 1412 Henry V. coined the Pound into 360 pence and so it gradually crept up, until Elizabeth, in 1601, coined the Pound weight into 744 pence Thus we have manifestly— As there are 12 ounces in one Pound weight of Bullion, it is evident that each ounce was coined into 62 pence; and as the value of Bullion is measured by the ounce, the Mint Price of Silver was said to be 58. 2d. the ounce In Scotland this Depreciation of the Coinage began about the same period as in England, but it proceeded to much greater lengths. In 1306 Robert Bruce coined the Pound weight into 252 pence; in 1451 James II. coined the Pound weight into 760 pence, or £3 4s.; and this Depreciation was increased until at last, in 1738, the Pound weight was coined into 8,928 pence, or £37 48.: and thus the Pound Scots became equal to twenty pence In France and Italy the Depreciation proceeded twice as far as in Scotland: the French Livre and the Italian Lira became at last only equal to 10d. The French livre, which is now called a franc, has been adopted as the basis of the decimal system of coinage; and the original solidus has now dwindled to the sou, or halfpenny 13. Henry III. endeavoured to introduce a Gold Coinage, but it failed. In 1344, however, Edward III. reintroduced it, and since then Gold has been permanently coined in England. But the Gold coins were always ordered to circulate at a fixed ratio with respect to Silver: and as the ratio fixed by the Mint seldom agreed with the ratio of gold and silver in the open market of the world, the Gold Coinage constantly disappeared, in accordance with Gresham's hitherto undiscovered law. In the reign of Charles II. the African Company brought home a large quantity of Gold from the Guinea coast. He coined this Gold into pieces which he called Guineas, which were intended to be of the value of 208. in Silver, so as to represent the Pound. But the Mint rating did not correspond with the Market Value of Gold and Silver, and the Silver Coinage became exceedingly debased, so that Guineas rose to 288. and 30s., and rapidly disappeared. This was to a certain extent rectified by the great recoinage of the Silver Money in 1697: but still a considerable error prevailed. In 1717, Newton, Master of the Mint, reported to Parliament that the true Value of the Guinea was 20s. 8d. in Silver. Nevertheless, Guineas were declared to be current at 21s.; and then, in the language of the Mint, Gold was fixed at £3 17s. 10d. per ounce Gold and Silver Coin were then declared to be legal tender for debts to any amount. But as Gold was overrated by 4d. in the £, and Silver was underrated by the same amount, merchants, in the course of the last century, universally adopted the plan of paying their debts in Gold, in preference to Silver, as being the cheaper medium. And, in accordance with Gresham's Law, the Silver coins were exported, as being below their true value in this country. Gold thus became the recognised measure of Value in England, though the exchanges were reckoned in Silver: and for exactly the opposite reason, Silver became the recognised measure of Value in France At the great recoinage in 1816, this custom was adopted as Law and Gold was declared to be the only legal measure of |