Reorganizing UK coinage

Started by UK Decimal +, September 12, 2009, 03:18:44 AM

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UK Decimal +

Unless I'm wrong, wasn't it George IV who reformed the monetary system to give the coins their proper value in silver, etc?

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

BC Numismatics

Bill,
  That may have been the case when King George IV was Prince Regent (1811-20),but the coins of Great Britain had been in a very poor state from around 1750 though.

Aidan.

UK Decimal +

Can you tell me more please Aidan?   This is a subject that interests me.

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

BC Numismatics

Bill,
  The shortage of British coins after the end of the 1750's was pretty dire,but it got worse after 1785,which is why the 18th. Century traders' currency tokens were introduced into circulation.

Aidan.

UK Decimal +

I understand that Maundy money is 'generally accepted to be valid' (I hesitate to use the words 'legal tender') from 1822, because that is when it became 'proper' silver.   What about previous issues?   Can you comment?

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

BC Numismatics


UK Decimal +

Already read them, that's why 1822 stands out.   Why are earlier ones 'not valid'?

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

andyg

Coincraft's 1997 Standard catalogue (a book I recommend) has this to say;
During the period up to 1820 the small silver coinage was primarily used as circulation coinage, from 1822 onwards the coins were minted mainly for the provision of sets of maundy.  1822 also marks the year from which sets were issued without a break up to the present day.

Figleaf

#8
This is a very complicated question. Bear with me.

First, you need to understand inflation. In the faraway land of Pogostick, they make only one good. Loaves of bread. The population of Pogostick is 100 and each Pogostickian needs 100 loaves a year to survive, which they buy 10 times a year. Each year, 10 000 loaves are produced, so all Pogostickians can just survive. There is no foreign trade, but there is a fleet of one warship. The currency of Pogostick is the pogo. There are 100 silver coins of 1 pogo in circulation. A loaf of bread costs 1 pogo. The economy of Pogostick is in complete equilibrium.

One day, the warship enters port. It has captured another ship and, just before the ship sank salvaged enough silver to mint another 100 silver pogo coins. Every Pogostickian feels rich, but when they go to buy bread, its price has risen to 2 pogo, because there's not more bread to go around.

The week after, a great invention allows the production of loaves to double to 20 000 breads a year. The greedy bakers expect a windfall profit, except they see the price of a loaf fall back to 1 pogo, because the quantity of bread may have increased, but the money supply remained the same.

The point to understand is that prices depend on the relation between money supply and economic size or change in money supply and economic growth. Hold on to that thought. (to be continued)

Peter

P.S. Technical supplement: in economic terms, I have used Fischer's Equation of Exchange, MV=PT, first holding V and T constant and changing M to show changes in P, than holding V and M constant and changing T to show changes in P.
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Figleaf

#9
Now apply that knowledge to economic history and relate English history to that of Western Europe. Until the Treaty of Westfalia in 1648, much of Europe was at war. The Austrian Habsburgs were fighting the Turks and the Swedes, the Spanish Habsburgs were fighting the French and the Dutch , the English themselves (war of roses) and the Austrian Habsburgs the Russians the Turks. As a result, people got killed, stuff got destroyed. Less goods, same money supply. Inflation. Bad coins.

England is a fringe power in this time. It has neither the fertile land of the Holy Roman Empire or France, nor the resources of Spain or Sweden. It's just very poor. Its best bet is its strongest point. Trade. Trade (and a bit of piracy) enable Elizabeth I to reform the coinage Henry VIII left in a shambles.

From 1648 to the Spanish and Austrian wars of succession, Western Europe was largely at peace. Trade flourished. The economy grew. Coins were silver or gold and full value. The economy grew much faster than the supply of new silver and gold. Deflation. Around 1700, London sources speak of "silver famine", meaning not enough coins to go around. Newton comes in as mint master and cranks up production (the great recoinage), but even Newton couldn't make new silver and gold out of thin air. Silver famine was an international problem.

A first step to a solution is found in tradable paper. London catches up with Amsterdam, where bank accounts and shares were already commonplace. Amsterdam develops forward markets in agricultural products, such as tulip bulbs. A number of scandals occur as humanity starts to learn how financial markets work: the South Sea bubble, the Black tulip bubble, the Asiento scandal... New wars keep growth at bay.

A real solution is found during the wars of Napoleon. While France has been unable to overcome the scandal of Law's bank, Britain's bank of England issues paper money in restricted quantities and so creates the liquidity (the word originates in this meaning around 1700) Wellington needs to beat Napoleon. Even in 1811, a Merthyr token proclaims: "TO FACILITATE TRADE CHANGE BEING SCARCE". When Napoleon is at last defeated, attention is turned to the major lesson of the war: money can be created and destroyed, but not at will. The equilibrium between goods and money must be maintained. This lesson means that there is a way to let the economy grow faster than the gold/silver supply.

A report of the Privy Council in May 1816 recommends that gold should be the only standard, i.e. silver coins should be token coins only. This makes sense. If you can adapt the money supply to production by issuing or redeeming paper, you need only silver token coins for convenience. In 1810, the machinery of the Mint was completely refurbished and ready for the coinage act of 1816, which made all silver coins lightweight token coins. The system was completed with the Act for the Resumption of Cash Payments of 1819, allowing free trade in bullion and gold, but that needs not concern coin collectors.

To sum up: after the coinage act of 1816, only the state could mint and melt silver coins. The state became responsible for controlling inflation by controlling the money supply. Anyone could mint and melt gold coins. This was a measure of confidence only: if you don't trust the note, you can exchange it for familiar gold. As states became more familiar with controlling the money supply, that mechanism was phased out. The remaining silver in coin was just as unnecessary and also slowly phased out.

Until decimalization, all coins from 1816 were legal tender in te UK, up to a fixed amount. As the silver content in coins slowly receded, high silver content coins were taken out of circulation. Copper coins likewise disappeared when bronze was introduced. This explains why Ice Torch and I saw Victorian pennies and Georgian silver in circulation until decimalization. From 1816, coins in Britain were no longer the big factor of the money supply. The task was taken over by gold, paper and finally electronics.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

UK Decimal +

Thank you very much for that, Peter.

The last three paragraphs are what I was looking for, but the earlier part makes it all fall into place.

Yes, I remember well the Victoria coins and others with a high silver content.

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

UK Decimal +

#11
I also remember when it was announced that the farthing was to be demonetised.   Oxo Cubes cost a penny farthing each at the time and I was very worried and asked my mother "how will people be able to buy Oxos?".

Bill.
Ilford, Essex, near London, England.

People look for problems and complain.   Engineers find solutions but people still complain.

tonyclayton

I recall the Trebor Chews were five for a halfpenny.
I only had a farthing left from my pocket money, and the sweet shop only let me have two chews.

A week later I had another farthing, and successfully asked for the other three chews in that I had already paid for half of one.

The real reason for the farthing staying in use was that bread prices were controlled, and a one pound loaf was fixed at something plus a halfpenny, so a half pound loaf required a farthing.

When my father-in-law retired as Chief Cashier of a bank in Bradford he found a bag of 88 farthings at the back of his till. That made one shilling and tenpence, or about 9p
now.  He paid in the 1/10 and gave me the farthings.

I used to have a double florin that someone had paid in to their account, and that was in about 1966!

tonyclayton

Going back to the original question, prior to 1817 silver coin was the standard and gold coins fluctuated in value.  A shilling had a shilling's worth of silver, while the guinea, originally 20 shillings, varied as high as 30s until finally settling at 21s.

When the recoinage took place we moved to a gold standard, and to enable silver to be obtained in sufficient quantities the standard (i.e. weight) of the silver coins was reduced, so the new shilling contained LESS than a shilling's worth of silver.

After the First World War the price of silver rose, forcing the mint to reduce the silver content to 50%.  This proved acceptable to the population, so when we had to repay the US in silver after Lend-Lease in WW2 the switch to cupronickel was not the problem that it would have been if the change had been made in 1815.

Eventually even the USA found the price of silver rising too rapidly, with particular demand for photography (I believe the annual demand for photographic purposes exceeded the world production rate), and they too switched to a base metal coinage.

As to demand for photography, that has somewhat changed with the advent of the digital camera.