The History of Currency, 1252 to 1896 Part 1

The History of Currency, 1252 to 1896.

by William Arthur Shaw.

PREFACE

The purpose of this book is twofold--first and foremost, to ill.u.s.trate a question of principle by the aid of historic test and application; secondly, to furnish for the use of historical students an elementary handbook of the currencies of the more important European states from the thirteenth century downwards.

Little need be said as to this latter purpose. The total omission of the historic, reasoned, and consecutive study of currency history--the most important domain of practical economics--from the curriculum of every university in the land is matter for surprise and regret, and can only be attributed to the lack of an initiative and of a handbook.

As to the former purpose, there is no field of history so strewn with scientific (i.e. comparative and prophetic) possibilities as economic history; and in economic history there is no department in which the study of the experience of other times and nations is more necessary and resultful, lesson-full, wisdom-full, than the domain of currency. The verdict of history on the great problem of the nineteenth century--bimetallism--is clear and crus.h.i.+ng and final, and against the evidence of history no gainsaying of theory ought for a moment to stand.

Throughout mediaeval Europe and up to the close of the eighteenth century the currency of Europe was practically bimetallic--practically, because actually so without the prescription of a law of tender, and without the allowance of any theoretic grasp or conception of the practice as distinctively what nowadays we understand as bimetallic.

The conception of a law of tender is quite modern. And the evolution of the idea of such a law has gone hand in hand with the evolution of a conception of monetary theory on the part of the legislator--that is, with the bitter experience which for want of such a conception Europe endured for centuries. In all systems of jurisprudence money and minting appertains to the kingly office, and the development of the law of tender is to be traced in royal proclamations of the King in Council for long before it became the subject of parliamentary legislation. For centuries, such proclamations were issued, referring to a prohibition of export of the precious metals, banis.h.i.+ng foreign coins from the land, or, again, permitting their circulation, and, in that case, prescribing the rough tariff or rate according to which (foreign) coin for (native) coin they should be current. In such proclamations there is no idea of separating the two metals, gold and silver; there is no idea of a law of tender; there is no intention to declare a ratio; there is no conception of _bullion_ apart from coin. The two metals had grown to be the circulating and exchange medium; they were actually there, and all that had to be done was to keep them there. The advantage which was to be derived from a trade in bullion, and from an understanding of the effects of differently-prevailing ratios in different countries, was known only to the Jew and the Italian. They plied their trade in secret, and the legislator was only apprised of the result by suddenly finding a slipping away and dearth of coinage. Then the legislator altered the tariff, and gradually rose to the conception of the ratio as underlying this process of seduction. Then, as a further defence of a particular cla.s.s of coins, he imposed a limitation on the tender of such, so as to prevent bullion operations on it. This limitation was the first development of a law of tender. Throughout, from the thirteenth to the eighteenth century, both gold and silver had been actually employed in European commerce without any idea either of declaring or of restricting the tender, whether of the one or the other.

The final outcome of the application of the law of tender was the development of the modern monometallic system--a system in which alone lay the safeguard against the operation of the bullionist. It was only at the close of the eighteenth century that England evolved this system and flung away the last remains of that mediaeval ignorance which had brought with it such a dower of mishap. France has taken almost a century of further experience before arriving at the same point of development.

Another point. At the time that England was shaking off the mediaeval system France, too, was accomplis.h.i.+ng a reform of her money system. It stopped half-way. The old kingly prerogative of altering the coinage was taken away, the unit of the currency was declared definite and unchangeable, and the seigniorage on minting was abolished. So much was accomplished by her law of 1803. But no further application was made of the law of tender than to throw the sanction of legal enactment over that mediaeval system which had been the bane of France since first two metals found circulation in her bounds. As far as tender is concerned, there is no difference between the practice of the French monetary system in 1726 and that of 1803. The system was bimetallic in both cases--in the first case, legally by recognition and as resting on the royal jurisdiction; in the second case, legally by direct legislative or parliamentary enactment. The idea that the law of 1803 created a new system and a new heaven for France is doubly absurd. It was a continuation of a very old and a very danger-fraught system, with its roots deep in mediaeval ignorance and practice.

In addition to this--and quite as demonstrably--there was no conception of a theory of bimetallism in 1803, nor any conception of a bimetallic function to be performed for the good of the human race by bimetallic France. This is a conception of the schools, and bred of later needs and hopes and fears. The modern theory of bimetallism is almost the only instance in history of a theory growing not out of practice, but of the failure of practice; resting not on data verified, but on data falsified and censure-marked. No words can be too strong of condemnation for the theorising of the bimetallist who, by sheer imaginings, tries to justify theoretically what has failed in five centuries of history, and to expound theoretically what has proved itself incapable of solution save by cutting and casting away.

Such a verdict as this of history, negative as it is, must strike many a serious mind with dismay. The following of bimetallism would not be what it is were it not for the despair of any other remedy for the situation at the moment. We are thereby left apparently hopeless and remediless.

But the first step to the discovery of a true and possible remedy, if any exists, can only be the casting away of the false and impossible.

The difference between the monetary problem of the seventeenth century and that of to-day lies in this, that while there has been continuity of history and development there has been a change of needs and circ.u.mstance. The danger of arbitrage transactions to the mediaeval legislator lay in the fact that they stripped the country, which suffered from them, not, or not merely, of a bullion reserve, but of her actual currency, and rendered even internal trade impossible. He accordingly tried to arrest the drain by threatening imprisonment and death.

To-day the safety and supply of the internal currency of the various states is provided for by a monometallic system or by note issue, while, conversely, trade in the precious metals has become free, and bullion flows automatically from land to land in accordance with the dictates of a now rightly-conceived theory of international trade. Just so far the monetary problem has changed--becoming a question of the evolution of a stable international exchange system. The theoretic pretensions of bimetallism have correspondingly widened, but on any ground, wide or narrow, the only material for the study, comprehension, and judgment of such pretensions lies in the actual experience of Europe during the past five centuries.

A few words of more particular explanation are necessary.

1. To the student of money and monetary standards the perpetually recurring phenomena of reductions of the unit and standard weights and contents of coins will present no difficulty. Three causes underlay the process--(1) the practice of alloying, (2) the compet.i.tive and dishonest action of governments, (3) the ideal nature of the unit itself, which permitted, literally, anything in the way of arbitrary manipulation (compare, e.g., the very different depreciations of the English s.h.i.+lling and the French sou, being both descendants of the solidus; or again, of the French livre and the Italian lire, being both descendants of the libra).

2. A second and much greater difficulty is presented by the confusion of nomenclature. It is often difficult to determine what particular piece is meant by a given name, or, if the ident.i.ty of the piece can be fixed, its period may still be uncertain. In French numismatic history, for instance, the term florin d'or or denier d'or is used in doc.u.ments quite generically for the more specific florins d'or a l'agnel, a l'ecu, aux fleurs de lis, a la ma.s.se, moutons d'or, etc. This quite indeterminate use of the word "florin" (= denier = "piece," or generally, "coin") may possibly explain the crux to be found on pages 3, 9, 301, and 399 of the text (infra.), where florins d'or are mentioned in French history more than seventy years before the first authentic minting of the gold florin at Florence.

3. With regard to the figures of the ratios there is great difference and divergence among the various authorities. The declared ratio may be of a double nature--(1) mercantile, as calculated on the purchase price of gold and silver in the open market; (2) legal, as settled by law in the terms prescribed for Mint purchase and issue. The former is comparatively simple, but it is not until a quite recent date, the opening of the eighteenth century, that it is statistically determinable. The table of the commercial ratio (pp. 157-9 infra.) is taken from Soetbeer, and was by him calculated on the Hamburg exchange and London market rates. The competing figures of the commercial ratio drawn up by Ingham in his Report to the Senate of the United States (4th May 1830), and by John White, of the same date (see _United States Report of the International Monetary Conference of 1878_, pp. 583, 647), I regard as comparatively untrustworthy.

With regard to the legal or Mint ratio (see infra., tables, pp. 40, 69-70, 157) there is the greatest discrepancy, and I print the figures with much trepidation and every mental reserve. The differences in the results arrived at by the various authorities are due to the difference in method of calculation, according as the issue price or the purchase price at the Mint is taken (i.e. with or without allowance of seigniorage and remedy), or according as the pure or gross content of the piece is calculated from (i.e. with or without allowance for alloy).

As a matter of fact, hardly any two authorities or sets of calculations agree. See, for instance, duplicate sets of figures for Holland in Appendix 1. to Schimmel's _Geschiedkundig overzicht_; or again, compare Soetbeer's figures with those deduced by Kohler in his _Grundliche Nachricht_; or by Dr. Arnold Luschin, in the _Proceedings of the Congres International de Numismatique_, 1880, p. 443; or with those deducible from Le Blanc's tables (infra., Appendix VI.). It is to this difference that must be attributed the discrepancy in the statement of the ratio by the French Mint authorities in 1640 (see text, infra., p. 92 and note, ibid.). The difficulty of calculating the European Mint ratio at any moment can be judged from the experience and statements of persons so widely apart as Sir Isaac Newton in England, Mirabeau and Calonne in France, and Morris and Hamilton in the United States (see infra., pp.

172-3, 229-30, and 251).

With regard to the scope of the present work, it is confined entirely to the history of metallic currency and standard. There is no reference to the paper-money experience of any country, not even America or Austria.

Such a subject must form matter for a separate treatment. The account of Austrian money is, therefore, to be found in Appendix v., under Germany, and on the effects of the latest Austrian reform (as also of the latest development in India and the United States) no opinion whatever is expressed. I content myself with the simple statement of fact and event.

In appending a list of the authorities used, it is difficult to overcome the feeling of humiliation which has come to me from the contrast of the ephemeral, slight, and unworthy treatment of monetary history to-day, with the grand, solid, scholarly works which the eighteenth century produced. With the exception of Soetbeer's magnificent labours, without which the present work would have been simply impossible as far as the statements of production and relativity of the precious metals are concerned, and of the similar historic work of M. Ottomar Haupt, the literature of this subject to-day is light and polemic and transitory to a nauseating degree.

GENERAL

_Authorities._

J.D. Kohler Grundliche Nachricht von dem Munzwesen insgemein. Helmstadt, 1739 and 1741.

Third edition (Leipzig, 1781), enlarged and attributed to Von Praun.

Budelius De monetis et re numaria (with twenty-four other treatises). Coloniae Agrippinae, 1591.

Melchior Goldast Catholicon rei monetariae sive leges monarchichae generales de rebus numariis, etc. Frankfort, 1620.

Almanach des Monnaies. Paris, 1784.

Munze und Munzwissenschaft (Oec. Techn. Encyc. xcvii.).

Nicole Oresme Traite de la premiere invention des monnaies, and--

Copernicus Traite de la monnaie, both re-edited by Wolowski. Paris, 1864.

Jean Bodin Descours sur le rehauss.e.m.e.nt et diminution tant d'or que d'argent et le moyen d'y remedier [en reponse] aux paradoxes du sieur de Malestroict (appended to Bodin's Six Livres de la Republique.

Lyons, 1593).

H.C. Dittmer Geschichte der ersten Gold-Ausmunzungen zu Lubeck im 14 Jahrhundert (Zeitschrift der Vereins fur Lubeckische Geschichte), Heft. i. 885.

J.G. Hall On European Mediaeval Gold Coins (Numismatic Chronicle). Third Series, vol. ii. pp.

212-226.

P. Joseph Historisch-kritische Beschreibung des Bretzheimer Goldguldenfundes vergraben um 1390, nebst einem verzeichniss der bisher bekannten Goldgulden vom Florentiner Geprage. Mainz, 1883.

K.T. Eheberg uber das altere deutsche Munzwesen und die Hausgenossenschaften. Leipzig, 1879.

Neueste Munzkunde Leipzig, 1853.

A.H. Smith Encyclopaedia of Gold and Silver Coins of the World. Philadelphia, 1886.

A. Soetbeer Edelmetall--Produktion und Werthverhaltniss zwischen Gold und Silber, seit der Entdeckung Amerika's bis zur Gegenwart. Gotha, 1879.

" Materialien zur Erklarung und Beurtheilung der wirthschaftlichen Edelmetallverhaltnisse und der wahrungsfrage. Berlin.

A. Soetbeer Litteraturnachweis uber Geld--und Munzwesen.

Berlin, 1892.

F. Altes Traite comparatif des monnaies, poids et mesures. 1832.

G.K. Chelins Ma.s.s and Gewichtsbuch. 1830.

Gerhardt Tafeln, etc. Berlin, 1818.

Doederlein Commentatio Historica de Nummis. 1729.