CONCLUSION

THAT the importance of the monetary system of England was realized from very early times is shown by the fact that it was always recognized as coming within the prerogative rights of the sovereign. Though this point of view may have been encouraged by the king because it was possible to gain some pecuniary profits from his rights over the coinage, yet his powers of dealing with it were looked upon rather as a national duty than as a royal privilege, and it was mainly in the interests of the nation that its regulation was carried on. The principles put forward by Nicholas Oresme, a French economic writer at the end of the fourteenth century, were that the money belonged to the community, not to the prince, that though the prince could issue and regulate the currency yet it was not his property but that of the whole body that used it, and that consequently he had no right to make a profit out of it or to tamper with it. Down to the time of the Tudors these principles were on the whole maintained by the English sovereigns. Practically the only way in which the kings attempted to make private profits on the coinage was by seignorage charges, which were always regarded as their legitimate right, and which, though they were possessed of a high degree of elasticity, were not felt to be either a serious burden or a grievance. Depreciation of the coinage for royal profit was frequently a very serious evil in France, but in England it was only in the time of the Tudors, in the short period between 1545 and 1558, that the sovereigns attempted by depreciation of

the quality of the metal to solve their financial difficulties at the expense of the nation. The gradual reduction in the weight of the coins that was going on in the fourteenth and fifteenth centuries stands on a different footing altogether, and merely checked the fall of prices that would otherwise have resulted from the increasing scarcity of the coinage. The aims that the sovereigns put before them were to keep an adequate supply of good coins in the country and to maintain their monopoly, but in neither respect were their efforts attended with much success. They proved themselves quite unequal to the task of dealing with the complications and difficulties of the bimetallic system, with the constant opportunities for making illicit profits that it offered to false coiners and money-dealers, and they failed to realize the fact that the influx and efflux of the precious metals were regulated by economic laws which the legislation of the Government was almost powerless to affect. Thus not infrequently, but more especially in the time of the early Stuarts and at the beginning of the nineteenth century, the country was denuded of coinage; and, though it was a cardinal point of Government policy to keep a large stock of precious metals in the country, it was not known with any certainty what steps should be taken to gain a supply or to keep it after it had been obtained. Almost equal difficulties were found in maintaining the royal monopoly with regard to the coinage. Except for the baronial coinage of Stephen's reign and the irregular money struck during the civil war of the reign of Charles I., there was no open infringement of the royal monopoly, but secret coining was constantly going on, and at various times large quantities of base money were thrown on the circulation. The tokens issued by traders stand on rather a different footing, for they were never supposed to be legal tender, and were only issued to supply the deficiency of coins of small value. It was not until Government

realized its duties in this respect, and itself supplied a sufficiency of small coins, that it was possible to suppress these irregular issues entirely.

In modern times it has been recognized that with regard to the metallic currency the Government monopoly must be rigidly maintained, and that, in order to have an adequate supply of small coin, it is advisable to maintain the distinction, which was almost unknown in mediæval times, between legal tender coins and subsidiary coins. The coins which are used as unlimited legal tender must be current at what is practically their bullion value, if the monetary system of the country is to be established on a sound basis. The subsidiary coins, which are rated in terms of the legal tender money, are used only for internal trade, and, as they are legal tender only for small amounts, it is not necessary that their nominal value and their bullion value should correspond. The value of the English sovereign and of the American eagle is practically the same as the market value of the bullion contained in them, whilst both in England and America silver and bronze or nickel coins are in reality Government tokens, and the metal contained in them is worth considerably less than the nominal value at which they pass current. Yet, as they are coined only on Government account and to a very limited extent, and can only be used for purposes of internal trade-because in fact they are subsidiary onlythere is no fear of their driving out good coin. If there is a very marked difference between the nominal and bullion value of the coin, it is still possible to make a profit by counterfeiting, but the general custom of striking coins with milled edges has made counterfeiting and clipping a much more difficult and dangerous task than in former days. It is a generally accepted principle that there must be free coinage of the legal tender metal; both in England and the United States the Mint is bound to accept or buy at a fixed rate all gold that is brought in by individuals.

In the United States a minimum gold reserve must be kept in the Treasury by law, and if the reserve falls below the minimum the Government takes active steps to replace it; in England, if the supply of gold shows a tendency to decrease, the drain is counteracted by a rise in the rate of Bank discount, and the supply is regulated without Government intervention. The quantity of subsidiary coinage needed to supply the country with small currency is determined by the Government, which buys metal at the market price and issues coins to which it gives a nominal value, making a heavy profit on the transaction. In dealing with the subsidiary coinage the Government not only has to consider the quantity required but must provide a currency which will be found convenient by the people. The difficulty of keeping unpopular coins in circulation. has been proved over and over again. In England, for instance, four - shilling and five-shilling pieces are too unwieldy for general use, and the fourpenny piece was discontinued because it was so difficult to distinguish it from the threepenny piece, whilst in America it was only possible to use silver coin to any considerable extent by substituting silver certificates for the unwieldy dollars and half dollars. The circulation of foreign coins which was very general in former days. can hardly be regarded as an infringement of the royal monopoly, for both in England and America, when there was so frequently a scarcity of coins, the Government welcomed an influx of the precious metals in any form, and only regarded them as a difficulty if they were debased and drove good coin out of circulation.

Notwithstanding the attempts that were made to reintroduce a bimetallic system towards the close of the nineteenth century, nothing has been done to disprove the theory, put forward by the economists of the seventeenth century, that only one metal can be the standard of value in any one country. The history of five hundred years of

bimetallism shows that if there are two standards and the Mint ratio between them is not exactly the same as the market ratio, the undervalued metal will disappear from the circulation, and it is impossible for the Mint to follow sufficiently closely the fluctuations of the market ratio without bringing confusion into the currency. How far it would be possible to maintain a ratio, which would merely approximate to the market ratio, by universal international agreement is hardly a question for practical politics, because there seems to be no likelihood of getting international agreement on the subject. The special feature of the bimetallic system is the opening of the mints to the unlimited coinage of both metals, and at the present time the countries with the double standard of value, which is not exactly the same thing as bimetallism, refuse to give silver coin in exchange for standard silver bullion of equal weight, though they are all ready to give standard gold coins in exchange for bullion. Hence gold is now in practice, all over the Western world at least, the real standard by which values are measured.

Paper money was not recognized in the same way as coin as a Government monopoly. Paper money was issued first by private enterprise; it was not legal tender, and both its capabilities as an instrument of credit and its relations to the metallic currency were for a long time very imperfectly understood. The quantities in circulation, however, were soon so large that the Government was obliged to make some attempts at regulation, though acting at first more or less in the dark. Nearly three centuries of experience in paper money have led to the recognition of the following principles. (1) That the fundamental difference between paper and metallic currency is that paper money has no intrinsic value in itself, that it is entirely dependent for its value on public confidence, and that that confidence depends on the certainty of its ultimate convertibility into metal. This principle was not fully