Starting with Nero in AD 64, the Romans continuously debased their silver coins until, by the end of the 3rd century, hardly any silver was left.

A debasement of coinage is the practice of lowering the intrinsic value of coins, especially when used in connection with commodity money, such as gold or silver coins, while continuing to circulate it at face value. A coin is said to be debased if the quantity of gold, silver, copper or nickel in the coin is reduced.

Debasement is a practice of governments, and in government debasement, governments make their debased coins legal tender, which is not something private minters can do given that the practice cannot be easily engaged in without a government requiring that people accept debased coins.[1]

Examples

Roman Empire

In Roman currency, the value of the denarius was gradually decreased over time as the Roman government altered both the size and the silver content of the coin.[2] Originally, the silver used was nearly pure, weighing about 4.5 grams. From time to time, this was reduced. During the Julio-Claudian dynasty, the denarius contained approximately 4 grams of silver, and then was reduced to 3.8 grams under Nero. The denarius continued to shrink in size and purity, until by the second half of the third century, it was only about 2% silver, and was replaced by the Argenteus.

Ottoman Empire

Weight of akçe in grams of silver and index.[3]

YearSilver (g)Index
1450–600.85100
1490–15000.6880
16000.2934
17000.1315
18000.0486

Effects

Debasement lowers the intrinsic value of the coinage and so more coins can be made with the same quantity of precious metal. If done too frequently, debasement may lead to a new coin being adopted as a standard currency, as when the Ottoman akçe was replaced by the kuruş (1 kuruş = 120 akçe), with the para (1/40 kuruş) as a subunit. The kuruş in turn later became a subdivision of the lira.

Methods

An administrative method to debase currency if for the mint to start issuing coins of a certain face value, but with less metal content than previous issues. There will be an incentive to bring the old coins to the mint for re-minting – see Gresham's law. A revenue, called seigniorage, is made on this minting process.

A 16th or 17th century hoard of coin clippings discovered in Derbyshire and recorded in the Portable Antiquities Scheme.

When done by an individual, precious metal was physically removed from the coin, which could then be passed on at the original face value, leaving the debaser with a profit. This physical debasement was effected by several methods, including clipping (shaving metal from the coin's circumference) and sweating (shaking the coins in a bag and collecting the dust worn off).

Until the mid-20th century, coins were often made of silver or (rarely) gold, which were quite soft and prone to wear. This meant coins naturally got lighter (and thus less valuable) as they aged, so coins that had lost a small amount of bullion would go unnoticed. Modern coins used as currency are made of hard, cheap metals such as steel, copper, or a copper-nickel alloy, reducing wear and making it difficult and unprofitable to debase them.

Coin clipping

Shears used for coin clipping in the 17th century

Clipping is the act of shaving off a small portion of a precious metal coin for profit. Over time, the precious metal clippings could be saved up and melted into bullion or used to make new coins.[4][5]

Coin clipping was usually considered by the law to be of a similar magnitude to counterfeiting, and was occasionally punished by death,[4][6][7] a fate which befell English counterfeiters Thomas Rogers and Anne Rogers in 1690.[8] Even among pirates, clipping coins was considered a serious breach of trust. Henry Avery's pirate fleet attacked the treasure ship Gunsway in 1695 and netted one of the largest pirate captures in history. When fellow pirate William May's crew were found to have traded clipped coins to Avery's crew, Avery took back nearly all the treasure he had shared with May and his men and sent them away.[9]

Coin clipping is why many coins have the rim of the coin marked with stripes (milling or reeding), text (engraving) or some other pattern that would be destroyed if the coin were clipped. This practice is attributed to Isaac Newton, who was appointed Master of the Royal Mint 1699.[10] Although the metal used in most modern fiat coins has insignificant intrinsic value, modern milling can be a deterrent to counterfeiting, an aid to the blind to distinguish different denominations, or purely decorative.

Sweating

Modern example of a sweated silver coin

In the process of sweating, coins were placed in a bag and shaken. The bits of metal that had worn off the coins were recovered from the bottom of the bag.[11] Sweating tended to wear the coin in a more natural way than clipping, and so was harder to detect.[12]

Plugging

If the coin was large, a hole could be punched out of the middle, and the face of the coin hammered to close up the hole.[13] Or the coin could be sawn in half, and a plug of metal extracted from the interior. After filling the hole with a cheaper metal, the two halves would be welded back together again.[14] Verbal references to plugged quarters and plugged dimes eventually yielded the common phrase "not worth a plugged nickel" (or 'plug nickel', or even a plugged cent), emphasizing the worthlessness of such a tampered coin.[15]

  • "Debasement" is also sometimes used to refer to the tendency of silver or gold coins to be "shaved", that is, to have small amounts shaved off the edges of the coins by unscrupulous users, thereby reducing the actual precious metal content of the coin. In order to prevent this, silver and gold coins began to be produced with milled edges, as many coins still do by tradition, although they no longer contain valuable metals. For example, the U.S. quarter and dime have milled edges. Coins that have traditionally been made purely of base metals, such as the U.S. nickel or the penny, are more likely to have unmilled edges.
  • By analogy, "debased currency" is sometimes used for anything whose value has been reduced, such as "Stardom is an utterly debased currency" [16]

See also

References

  1. ↑ Wenzel, Robert (26 August 2011). "Another Anti-Gold Howler from Nouriel Roubini". Economic Policy Journal.
  2. ↑ "This infographic shows how currency debasement contributed to the fall of Rome," Insider.
  3. ↑ Malanima, Paolo (2009). Pre-Modern European Economy: One Thousand Years (10th-19th Centuries). BRILL. p. 198. ISBN 9789004178229. Retrieved 19 June 2014.
  4. 1 2 Cooper, George (2008). The origin of financial crises. Harriman House. p. 46. ISBN 9780857190376. Archived from the original on 15 January 2013.
  5. ↑ Redish, Angela (2000). Bimetallism: an economic and historical analysis. Cambridge University Press. p. 54. ISBN 0-521-57091-3.
  6. ↑ See for example the English Treason Act 1415.
  7. ↑ Allen 2009, p. 71.
  8. ↑ "Thomas Rogers, Anne Rogers". Proceedings of the Old Bailey. October 1690. Retrieved 3 June 2019.
  9. ↑ Jameson, John Franklin (1923). Privateering and Piracy in the Colonial Period by J. Franklin Jameson. New York: Macmillan. pp. 165–171. Retrieved 26 June 2017.
  10. ↑ Great Britain. Treasury. Information Division (1986). Economic Progress Report. Information Division of the Treasury. Archived from the original on 23 August 2017.
  11. ↑ Sherwood 1893, p. 70.
  12. ↑ Allen 2009, p. 72.
  13. ↑ Sherwood 1893, p. 70–71.
  14. ↑ Sherwood 1893, p. 71.
  15. ↑ "The meaning and origin of the expression: Not worth a plugged nickel". Phrase Dictionary. Archived from the original on 10 April 2016.
  16. ↑ Kirk, David (23 November 2003). "Star no longer a big enough word for peerless Wilkinson". Telegraph.

Further reading

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