Originally posted on Tuesday, August 20th, 2013
One of the key recurring themes presented in the work of Lehrman Institute president and founder Lewis E. Lehrman is that policy simply must be evaluated based upon actual performance in “the laboratory of human history.” Lehrman profoundly demonstrates the impact of this in his most recent book, Money, Gold, and History, which he debuted at the Cato Institute on July 18th. (This presentation was aired by CSPAN’s BookTV on August 11th and will rebroadcast on August 24th as part of its “Top Nonfiction Authors and Books” series.
John Locke, courtesy of Wikipedia
The history of money and, in particular, of the gold standard, is a rich one. Preceding Lehrman — and treating in extensive detail with some of the subject’s older aspects — is the notable A History of Gold and Money: 1450 – 1920 , (NLB, 1976, Verso edition 1984) by historian Pierre Vilar. It is indeed a treasure trove.
One extraordinarily compelling sample (p. 218-219):
If the debate of 1694 is particularly well remembered, this is because it laid the basis for the long-term stability of the pound sterling and its relationship to the gold standard and because the protagonist of a fixed standard, in this case, was one of the most outstanding Englishmen of his time, the philosopher John Locke. Isaac Newton also participated in the debate.
Locke’s arguments have been used on many subsequent occasions down to the present day. Doctor and famous philosopher though he was, Locke had been deeply involved in politics throughout the Restoration period and after the 1688 Revolution, of which he was both an influence and the leading theoretician. In his own business, he had already had frequent contact with the work of the Board of Trade, the governmental body most concerned with the English economy. In 1691, a year after his Essay Concerning Human Understanding, he wrote an initial treatise on money and rates of interest, and this was followed in 1695 by another on the monetary reforms then in progress, Further Considerations Concerning the Raising of the Value of Money, and by many speeches in Parliament and other writings.
His main opponent was Lowndes, the Secretary of the Treasury, who was responsible for formulating the government’s monetary policy, and who advocated devaluation. Lowndes rejected various other solutions: for example, he did not want the content of circulating currency reduced, because he believed it was deceitful to circulate coin which had an identical weight and appearance, but contained less silver. His idea was that if silver bullion on the international market was rated at 77 pennies an ounce, when officially it was worth only 62, it would be correct and possible to bring the legal price into line with the market price. …
Locke’s objection to the proposal was that money had value only as an object; if a value was arbitrarily given, the proportions would be changed on paper, while the economic reality would remain unchanged. ‘I confess myself not to see the least Reason why our present mill’d Money should not be at all altered in Fineness, Weight or Value. I look upon it to be the best and safest from counterfeiting, adulterating or any ways being fraudulently diminished, of any that ever was coined. It is adjusted to our legal Payment, Reckoning and Accounts to which our Money must be reduced. The Raising of its Denomination will neither add to its worth, nor make the Stock we have more proportionate to our Occasions, nor bring one Grain of Silver the more into England, or one Farthing Advantage to the publick.
Locke won the dispute, the English State withdrew the silver in circulation and issued only coins with the full weight. The cost was £2,700,000, and this was recovered by collecting taxes in good coin and issuing paper money drawable on the Bank of England; creditors who had lent silver coin while it was losing value, were repaid in good money and they were also well satisfied. But for a long time afterwards the operation was a matter of debate. Sixty years later, Sir James Steuart was still scoffing at the English for having happily sacrificed £2,700,000 for the mere satisfaction of avoiding a lowering of their monetary standard. With the Napoleonic wars and the accompanying inflation, the controversy started up again.
Recent Comments