Recoinage Theories

Faced with a critical silver shortage, the Secretary of the Treasury, William Lowndes, believed the most pressing problem facing the English currency at the end of the seventeenth century was its physical scarcity. He favoured devaluation – raising the face value of the standard silver coin on the grounds that the market ‘price’ of silver bullion had risen. In his 1695, Report Containing an Essay for the Amendment of the Silver Coins, based on extensive historical research, Lowndes stated: ‘The Value of the Silver in the Coin ought to be Raised to the foot of Six Shillings Three Pence in every Crown, because the Standard Silver in Bullion is Risen (from divers necessary and unnecessary Causes, producing at length a great scarcity therof in England) to Six Shillings Five Pence an Ounce… That whensover the Extrinsic of Silver in the Coin hath been, or shall be less than the Price of Silver in Bullion, the Coin hath been, and will be Melted down.’[1] This would, he believed, restore equilibrium to England’s international balance of payments and also increase the amount of money in circulation.

Lowndes’ theory built on the work of Josiah Child and other prominent East India Company investors, as well as the Master of the Mint, Thomas Neale, who had earlier put forward or sponsored similar bills[2]. Indeed, the only person who questioned the need to recoin silver at all was, Gilbert Heathcote, governor of the new Bank of England.[3] The philosopher John Locke, however, disagreed strongly with Lowndes’s proposed method of recoinage. In a report commissioned by the Chancellor of the Exchequer, Locke argued that: ‘an Ounce of Silver will always be of equal value to an Ounce of Silver; nor can it ever rise or fall in respect of itself: An Ounce of Standard Silver can never be worth an Ounce and a Quarter of Standard Silver; nor one Ounce of uncoined Silver, exchange for one Ounce and Quarter of Coin’d Silver... Silver is the Measure of Commerce by its quantity, which is the Measure also of its intrinsick value.’[4]

Locke believed that fixing the face value of the coin to the ‘intrinsick value’ of its metal content was the only possible way of preserving trust in every day exchange and existing debts and credits, avoiding any unseemly redistribution of wealth, and also protecting international trade. To his mind, copper coins and paper money were fraudulent (damaging the economy by obscuring value), and gold was irrelevant - silver should be preserved as the standard of price that determined the value of all other commodities in the economy, and therefore its value should never vary.

Newton sided largely with Lowndes against Locke, arguing that the face value of the silver coin must be brought into line with the higher market price of bullion. He differed from Lowndes by suggesting a reduction of weight (not a raising of face value), alongside strategic interventions. So, he recommended withdrawal of clipped coins in stages of denomination and age, an addition of 25 per cent to the face value of good silver left in circulation, and corresponding reduction by a fifth of the weights of silver coin issued for the future. Newton perceived there would be issues with tax revenues, landlords, creditors, and those on fixed incomes, as well as a rise in commodity prices, but the latter could be mediated by a Government Price Control Board for the period of the war, operating through the Livery Companies of London. The former, Newton seems to have believed, was the price that property paid to protect trade.[5]

In the end, Parliament sided with Locke and ordered a full melting down and reissuing of all silver coin, plate, and bullion in the country according to the old, Elizabethan silver standard. This was an immensely risky undertaking in the middle of a costly foreign war and difficult domestic situation and has traditionally been taken to be a misstep of monetary policy in the path of innovation towards modern paper money and financial exchange. Silver continued to pour out of England, ultimately necessitating a shift towards a gold standard in 1717.

One modern Deputy Master of the Mint, John Craig, author of several of its histories, went so far as to call the Great Recoinage ‘a social crime.’ But, as the historian Stefan Eich argues, the decision that ‘silver is silver’ – that its value could not be altered according to the whims of the market or political intervention – provided much-needed stability during a period of intense debate about natural and unnatural exchange and the frightening, invisible power of international markets.