Gold in Coinage

¹⁷ The goldsmith’s trade is very big in Great Britain.

Most of the new plate that they sell is made from old plate melted down. Thus, the addition made to the whole plate of the kingdom cannot be very great. It could require only a very small annual importation.

¹⁸ It is the same case with the coin.

Nobody imagines that the annual gold coinage of more than £800,000 a year for 10 years, was an addition to the money in the kingdom.

If the process of coinage is made free by the government, the coin’s value can never be much greater than the value of uncoined metals, even when the coin has its full standard weight of gold and silver. This is because it will only require the trouble of=

• going to the mint, and
• a delay of a few weeks to get those metals coined.

But most of the coin in every country is almost always worn or degenerated from its standard.

Before the recent reformation, it was much worn in Great Britain. The gold coin was more than 2% below its standard weight. The silver coin was more than 8% below its standard weight.

If 44 guineas and a half, containing a pound weight of gold, could buy little more what a pound weight of uncoined gold could, 44 guineas and a half lacking some weight, could not buy a pound weight. Something must be added to make up the deficiency.

The current market price of gold bullion was then 11,448 pence and sometimes 11,520 pence. It was not the same with the mint price of 11, 214 pence.

When most of the coin was this degenerated, 44 guineas and a half, fresh from the mint, would purchase no more goods than other ordinary guineas. Because when they came into the merchant’s coffers, they were confounded with other money. They could not be distinguished without more trouble than the difference was worth.

Like other guineas, they were worth no more than 11,214 pence.

If thrown into the melting pot, they produced a pound weight of standard gold without any sensible loss. It could then be sold between 11,448 pence and 11,520 pence in gold or silver. There was a profit in melting down new coined money. It was done so instantaneously that no precaution of government could prevent it. These operations of the mint were like the web of Penelope. The work done in the day was undone in the night. The mint was employed to replace the best part of the coin which was daily melted down It did not make daily additions to the coin.

19 If the people who carry their gold and silver to the mint paid for the coinage, it would add value of those metals in the same way as fashion adds to the value of plate.

Gold and silver would be more valuable coined than uncoined. The seignorage would add to the bullion the whole value of the duty, if it was not exorbitant. The government has the exclusive privilege of coining. No coin can come to market cheaper than those of the government. The duty would be exorbitant if it was very much above the real value of the labour and expence needed for coinage. If the duty were exorbitant, false coiners at home and abroad might be encouraged by the great difference between bullion value and coin value. They would create so much counterfeit money. It would reduce the value of government money. In France, the seignorage is 8%. No sensible inconveniency arose from it. The dangers risked by a false coiner and his agents are too great for the sake of a profit of 6% or 7%.

²⁰ French seignorage raises the value of the coin higher than the quantity of pure gold it contains.

By the edict of January 1726, the mint price of fine gold of 24 carats was fixed at 740 livres 9 sous and 1 denier 1/11, the mark of 8 Paris ounces.

The French gold coin makes an allowance for the seignorage by containing=

• 21 carats and 3/4 of fine gold
• 2 carats 1/4 of alloy

The mark of standard gold is worth no more than 671 livres 10 deniers. But in France, this mark of standard gold is coined into 30 Louis d’ors of 24 livres each, or into 720 livres.

The coinage increases the value of a mark of standard gold bullion, by between 671 livres 10 deniers, and 720 livres; or by 48 livres 19 sous and 2 deniers.

²¹ In many cases, a seignorage will remove all the profit of melting down the new coin.

In all cases, it will reduce this profit. This profit is from the difference between the quantity of bullion the currency should contain and the quantity it actually does contain.

“If this difference is less than the seignorage, there will be loss instead of profit.”

“If it is equal to the seignorage, there will neither be profit nor loss.” If it is greater than the seignorage, there will be some profit, but less than if there was no seignorage.

For example, if there was a seignorage of 5% before the late reformation of the gold coin, there would have been a loss of 3% in its melting.

If the seignorage was 2%, there would have been neither profit nor loss. If the seignorage was 1%, there would have been a profit But the profit will be 1% only instead of 2%.

Wherever money is received by tale and not by weight, a seignorage is the most effectual preventative of the melting down and exportation of coin. It is the best and heaviest pieces that are melted down or exported because it is upon such that the largest profits are made.