on this at 5 per cent. would amount to £6,500,000. This apparently heavy charge is justified by the fact that it is desirable to have a currency possessing, or at least based on, value. The expense of a metallic currency is, however, combined with its weight, a strong reason for the great developments of representative money and credit in modern times, with the result that gold and silver are hardly ever used in large domestic transactions, all such payments being made by cheques, which are cleared off against one another. For a full account of the modern organization of credit, see the
article Banking.
6. Historical Outline of Depreciations.—The earliest systems of currency whose progressive debasements it is possible in any degree to trace are those of the various Greek states, though even here many details remain in obscurity. The Roman currency system is comparatively better known; while for the mediaeval currencies from the time of Charlemagne (800 A.D.) elaborate materials are available, which naturally increase in bulk and precision as we approach more modern times. The general treatment of the history of coins belongs to Numismatics (q.v.) but the history of monetary depreciations is important in connexion with the theory of money as illustrating the value of sound economic knowledge.
Until coinage became a state function a continued debasement was impossible, since it was open to any one to refuse the money offered in payment if it was not up to the proper standard. When, however, coinage became a function of government strong motives for debasement soon presented themselves. (1) The cost of coinage falling on the state, and being generally defrayed by a seigniorage, led to the idea that this seigniorage could be made more profitable by making it larger, while the existence of any deduction veiled the injustice of a charge exceeding the expense incurred in the operation of coining. (2) The position of most Governments was that of debtors, and as a debasement favoured all debtors at the expense of all creditors it was only natural that rulers, ignorant of the ultimately ruinous effects of a series of debasements, should seek to relieve themselves without exciting the odium incurred by the levy of heavy taxes. A more pressing case than the foregoing, and one where more justification exists, is that of a severe social crisis, when large numbers of the community are burdened with debt, and a depreciation of the monetary standard seems the simplest mode of escaping from so critical a situation. Whatever may be the inducements to enter on the perilous course of tampering with the monetary standard, a long experience has incontestably proved its disastrous effects. One of the great causes of the weakness of France during the “hundred years' war” was the extremely debased state of its currency, and the dread of further reductions in the value of the coins.[1] Lord Macaulay has given a graphic picture of the evils which England suffered from its depreciated silver currency towards the end of the 17th century.[2] And a debasement brought about by design possesses a further element of evil by creating a belief that similar devices will soon be again resorted to. So manifest are the evils that result from debasement that it may be reasonably hoped that all civilized Governments have abandoned the practice for ever; though, unfortunately, similar bad effects are produced by the over-issue of inconvertible paper currencies, and this is still an expedient adopted under the pressure of difficulties. “It is proper to observe that coins may be debased in three different ways—(1) by diminishing the quantity or weight of the metal of a certain standard of which any coin of a given denomination is made; (2) by raising the nominal value of coins of a given weight and made of a metal of a certain standard, that is, by making them current or legal tender at a higher rate than that at which they passed before; (3) by lowering the standard or fineness of the metal of which coins of a given weight and denomination are made, that is, by diminishing the quantity of pure metal and proportionally increasing the quantity of alloy.”[3] The last of these methods is the most dangerous, since the detection of it is more difficult, as it is so much easier to discover the weight than the fineness of the metal in a coin; but all of them produce the same results and are adopted for the same reasons.
Greek Depreciations.—The first debasement of coinage known to us on good evidence is that of the Athenian coinage by Solon in 594 B.C.[4] ln order to obviate the severe distress of that period in Attica, he reduced the quantity of silver in the coins more than 25 per cent., so that 138 new drachmæ (the standard Athenian coin) were only equivalent to 100 pieces of the older coinage. This proceeding was perhaps justified by the critical state of things previously existing, and was a decided success. It is probable that another debasement of the gold coinage took place at Athens in 408 B.C. during the strain of the Peloponnesian War, though doubts have been cast on the reality of this debasement.[5] It may, however, be said that generally the Greek cities fairly maintained the standard of money, though some states were notorious for dishonesty in this respect. The existence of an electrum coinage is no proof of a tendency to debasement, since it was regarded as a separate substance, and issued at its cost value, allowing for the expense of coining. As remarked before, this comparative honesty in relation to the coinage may be partly explained by the small extent of the Greek states, so that a debased coinage was unable to circulate beyond the boundaries of the issuing state. The keen perceptions of the more advanced Greek thinkers and their teachings on this subject may have also contributed to the same result.[6]
Roman Depreciations.—The earliest Roman coinage was composed of an alloy of copper (æs), and this continued unaltered up to the time of the First Punic War. Silver was introduced in 269 B.C., the proportion between it and the older copper being fixed at 250:1.[7] The copper currency was first debased during the Punic wars at the most critical period of the Hannibalic invasion—“the Romans had debased the silver and copper coin, raised the legal value of the silver currency more than a third, and issued a gold coinage far above the value of the metal.”[8] Soon after this period the copper money, whose successive debasements are recorded by Pliny,[9] seems to have been reduced to the position of a subsidiary currency, so that it is not really a case of debasement of the standard. The silver denarius which at first was d of a Roman pound, had been debased to th of a pound. In 91 B.C. a number of plated denarii were issued at the rate of one for every seven silver pieces issued. This proceeding, which was simply for political purposes, was proposed by Drusus, but in 84 B.C. a proposal for calling in these plated pieces was passed, and was extremely popular. It is probable that a slight debasement took place under Sulla, and one of the Cornelian laws seems to state the so-called fiat theory of money.[10] The denarius was lowered under Nero to th of a pound, while the later period of the empire is a scene of continual tampering with the currency. The gold aureus was at first th of a pound, but at the time of Augustus it was only th, while under Constantine it had come to be only d. The comparison of Hellenic with Roman monetary history seems to show that a considerable number of small states, all issuing coins, are less likely to meddle with the standard than the mint of a single large empire. It also proves the value of an acquaintance with monetary theory, if we can judge by contrasting the views of the Greek thinkers with those of the Roman lawyers.[11] A few words of caution may here be added against the danger of a careless comparison of values, as expressed in ancient or even mediæval money with those of modern times. It is extremely hard to accept the
- ↑ J. E. T. Rogers, Historical Gleanings, i. p. 97.
- ↑ Hist. of Eng., ch. xxi.
- ↑ Lord Liverpool, Coins of the Realm, p. 37.
- ↑ Grote, Hist. of Greece, part ii. ch. 11.
- ↑ Ib., vol. iii. p. 116, note 1.
- ↑ For a full discussion of this point, see Lenormant in Contemp. Rev., February 1879.
- ↑ Mommsen, Hist. of Rom. (Eng. trans.), i. p. 458.
- ↑ Ib., ii. p. 173.
- ↑ H. N., xxxiii. ch. 13.
- ↑ Mommsen, iii. pp. 413–414; Lenormant, op. cit.
- ↑ Compare, for instance, the passage previously cited from Aristotle with the following:—“Quia non semper nec facile concurrebat ut, cum tu haberes quod ego desiderarem, invicem haberem quod tu accipere velles, electa materia est cujus publica ac perpetua æstimatio difficultatibus permutationum æqualitate quantitatis subveniret; eaque materia forma publica percussa usum dominiumque non tam ex substantia præbet quam ex quantitate.” Paulus, Dig., xviii. 1, 1.
