The Utility of Coinage, and of the Charge of its Execution

No mention has hitherto been made of the value that money derives from the impression and coinage. I have merely pointed out the various utility of gold and silver as articles of commerce, wherein originates their value; and considered their fitness to act as money, as part of that utility.

Wherever gold and silver act as money, they must of course be constantly passing from hand to hand.

Most people buy or sell several times a day; judge, then, what inconvenience must ensue, were it necessary to be always provided with scales to weigh the money paid or received; and what infinite blunders and disputes must arise from awkwardness or defective implements. Nor is this all; gold and silver can be compounded with other metals without any visible alteration.

The degree of purity can not be exactly ascertained, without a delicate and complex chemical process. The transactions of exchange are wonderfully facilitated, when the weight and standard of each piece of money are denoted by an impression, that nobody can mistake.

Metals are reduced to an established standard, and divided into pieces of an established weight, by the art of coining.

The government of each state usually reserves to itself the exclusive exercise of this branch of manufacture; whether with a view of gaining somewhat more by the monopoly, than it could, if every body were at liberty to practise it, or to hold out to the subjects a more solid security, than any private manufacturer could offer, which is more frequently the motive.

In fact, though governments have too often broken faith in this particular, their guarantee is still preferred by the people to that of individuals, both for the sake of uniformity in the coin, and because there would probably be more difficulty in detecting the frauds of private issuers.

The coinage unquestionably adds a value to the metal coined; that is to say, a lump of silver, wrought into a dollar, is better than an equal weight of bullion of like standard; and for a very simple reason.

The fashion given to the metal saves the person, that takes it in course of exchange, all the charges of weighing and assaying, among which the loss of time and labour must be reckoned; just in the same manner as a coat ready made is worth more than the materials it is to be made of. Even if the business of coining were open to all the world, and government confined itself to fixing the standard, the weight, and the impression, that each piece should possess, still the holders of bullion would find it answer to pay a premium to the coiner, for coining their bullion into money; otherwise, they would have some difficulty in effecting an exchange, and would, perhaps, lose more on the exchange, than it would cost to have the bullion converted into coin.

But the additional value, thus communicated to the precious metals by the coinage, must not be confounded with that, which bullion, as an article of trade, receives from the cir- cumstance of its employment as money. The latter value at- taches to the whole stock of gold and silver in existence; a silver tankard is of greater value, because that metal is em- ployed as money, whereas, the additional value accruing from the coinage is peculiar to the specific portion coined, exactly as its fashion is peculiar to the goblet; and is wholly indepen- dent of the value, that the commodity, silver, derives from its various utility.

In England, the whole. expense of coinage is defrayed by the government; the same weight of guineas’s delivered at the mint in return for a like weight of bullion of the legal standard. The nation, in quality of consumer of money, is gratuitously presented with the charges of coining, which are levied by taxation upon them in their other character of payers of taxes. Yet gold, in the shape of guineas, has an evident advantage over bullion; not that of being ready weighed, for people are often at the pains of re-weighing, but that of being ready assayed. Consequently, it has happened sometimes, that bullion has been carried to the mint, not to be converted into coin, but merely to have the standard ascertained, and certi- fied to the foreign or domestic purchaser. 249 For guineas are a better article of export than bullion, inasmuch as bullion, bear- ing the certificate of assay, is preferable to bullion without any such certificate. On the contrary, for the purposes of im- portation into England, gold bullion answers every purpose of guineas ready coined, and is of just the same value, weight and standard being alike; for the mint makes no charge for converting the bullion into coin. Foreigners have, in fact, an object in keeping back the guineas, which have already received the certificate of assay, and remitting bullion to England to obtain a like gratuitous certificate. This system, therefore, makes it an object to export the coined metal, but holds out no encouragement to its reimportation.

The mischief is somewhat palliated by an accidental circumstance, which never entered into the calculation of the legislature. There is no other mint in England, but that of the metropolis, which is so completely overloaded with business, that it can not re-deliver the metal coined till many weeks, and often months, after it is brought for coinage. 251 The consequence is, that the owner, who leaves his bullion to be coined, loses the interest of its value during the whole time it remains in the mint. This operates as a small tax on coinage, and raises the value of the coin somewhat above that of bullion.

The value would be exactly the same, if bullion and guineas were taken without distinction, weight for weight.

All the other governments of Europe derive from the coinage a revenue more than equal to the charges of the process. 252

The exclusive privilege of issuing money which they have most properly engrossed, together with the severe penalties denounced against private coiners, would enable them to raise the profit of the business very high by the limi- tation of their issues; for the value of money, like that of ev- ery thing else, is always in the direct ratio to the demand, and in the inverse ratio to the supply. In fact when silver in the shape of coin is so rare and dear, that 18 dollars in coin will purchase the weight of 20 dollars of equal fineness in the shape of bullion, it is an indication that the public attaches the same value to 15 oz. 12 dwt. of coined, as to 17 oz. 6 dwt. 16 grs. of uncoined metal. Wherefore, the government can, by its coinage, in such case, give to 9 dollars, the value of 10 dollars, and make a profit of 10 per cent. But, if the coin become more abundant, and more of it be necessary in ex- change for bullion, it may perhaps be necessary to give 95 dollars in coin for the weight of 100 dollars in bullion= in which latter case, the government can make a profit of no more than 5 per cent upon the purchase and conversion of bullion into coin.

When the coinage of money is not executed gratuitously, and especially when it is paid for at a monopoly-price, it is a mat- ter of perfect indifference to the state, whether or not its coin be melted down or exported, for it can neither be melted down or exported, without having first paid the coinage in full, which is all that is lost by melting or exportation. 253 On the contrary, the export of such coin is quite as advantageous as that of any other manufactured commodity whatever. It is a branch of the bullion trade; and unquestionably, a coin, so well executed as to be difficult to counterfeit, accurate in the weight and assay, and charged with a moderate duty on the coinage, may acquire a currency in different parts of the world, and yield the government, that issues it, a profit of no contemptible amount.

Witness the gold ducats of Holland, which are in request throughout all the north of Europe, at a higher rate than their intrinsic value as bullion; and the dollars of Spain, which are all coined at Lima and Mexico, and have been executed with so much regularity and integrity, as to pass current as money not only all over Spanish America, but likewise in the United States and in several parts of Europe, Africa, and Asia. 254 The Spanish dollar is a remarkable instance of the value at- tached to the metal by the process of coinage. When the Americans of the Union determined on a national coinage of dollars, they contented themselves with simply re-stamping those of the Spanish mint, without varying their weight or standard. But the piece thus restamped would not pass cur- rent with the Chinese, and other Asiatics, at the same, rate; 100 dollars of the United States would not purchase so much of other commodities as 100 dollars of Spain. The American Executive, nevertheless, continued to deteriorate the coin by giving it a handsome impression, apparently wishing to avail itself of this method of checking the export of specie to Asia. For this purpose it was directed, that all exports of specie should be made in dollars of its own coinage, hoping in this way to make the exporters give a preference to the domestic products of its own territory. Thus, after wantonly depreciat- ing the Spanish dollar, without prejudice, it is true, to the specie remaining current within the territory of the Union, it went on further to enjoin its use in the least profitable way, viz., in the commercial intercourse with those nations that set the least value on it. The natural course would have been, to suffer the value exported to go out of the country in the form that might offer the prospect of the largest returns. Self-inter- est might have been safely relied on in this particular. 255 If, in the latter case, the government, with a view to increase the ratio of its profit, instead of purchasing bullion itself, were simply to charge a seignorage, say of 10 per cent upon the bullion brought to the mint for coinage, none at all would be brought for that purpose by individuals, who would have to pay 10 per cent for an operation, which added 5 per cent only to the value of the metal. Thus the mint would have nothing to coin either on public or private account; and the govern- ment would find a high ratio of profit incompatible with an extended amount of coinage.

Whence it may be concluded, that the duty or seignorage upon coinage, which has been so frequently discussed, is an abso- lute nullity; for that governments can not fix their own ratio of profit upon the execution of the coinage, but that it must depend upon the state of the bullion market, which again is regulated by the relative supplies of coined and uncoined metal, and the demand for them at the time being. It is to be observed, that, to the public at large, in its capacity of consumer of coined bullion, it is a matter of perfect indif- ference, whether the coin be dear or cheap; for, so long as its value is not subject to sudden fluctuations, it will pass cur- rent for as much as it has been taken for.

But what are we to think of the wisdom of the Spanish gov- ernment, which was enabled by the confidence in its good faith in the execution of its coinage, to export dollars with a profit, and sell them abroad at an advance upon their intrinsic value; and yet thought fit to prohibit so advantageous a traffic, which would have furnished a vent to a product of the national soil, worked up by domestic industry for an ample recompense?

Though a government be the exclusive coiner of money, and is by no means bound to coin gratuitously, it can not with justice deduct the expense of coinage from its payments, in discharge of its own contracts. If it has engaged to pay a million, say for supplies advanced, it can not honestly say to the contractor: “We bargained to pay a million, but, we pay you in specie just coined; and therefore shall deduct 20,000 dollars, more or less, for the charges of coinage.” In fact, all pecuniary engagements, contracted by government or individuals, virtually imply a prom- ise to pay a given sum, not in bullion but in coin.

The act of exchange, wherein the bargain originated, is effected with the implied condition, on behalf of one of the contracting parties, to give a commodity somewhat more valuable than silver bul- lion; namely, silver in crown pieces, or coin of some denomina- tion or other.

The virtual contract of a government is to pay in coined money; and, in consequence of that implied condition, it obtains a greater quantity of goods, than it will, if the bargain be to pay in bullion. In this instance, it offers the charge of coinage into the bargain at the time of concluding the contract, and thereby obtains better terms, than if it is in the habit of paying in bullion.

The charges of coinage should be deducted from the metal brought to the mint to be coined, at the time of its re-delivery in a coined state.

These considerations lead us to the necessary conclusions, — that the manufacture of bullion into coin increases the value of the metal, in the ratio of the additional convenience resulting to the community, from the circumstance of coinage, and not an item further, whatever charges or duties the state may attempt to saddle it with; 256 that a government, by monopolising the business of coining, may make a profit to the whole extent of this accession of value; that it can not possibly advance this profit any further, in its discharge of engagements, fairly and freely entered into; and that it can not do so with regard to prior engagements, without committing an act of partial bankruptcy.

Moreover, it is evident that, in all dealings between individuals, the public authority has still less power, by means of the im- pression of its die, to make the commodity, acting as money, pass for more than its intrinsic value, plus the value added by the fashion it receives. Vain will be any enactment, that the stamp impressed shall give to an ounce of silver a specific or determi- nate value; it will never buy more goods than an ounce of silver, bearing that impression, is worth at the time being.