Money, Currency and Crisis by van der Spek R. J.; van Leeuwen Bas;

Author:van der Spek, R. J.; van Leeuwen, Bas;
Language: eng
Format: epub
Publisher: Taylor & Francis Group

9Money in England from the Middle Ages to the

nineteenth century

Nick Mayhew

Introduction

This book deals with fundamental questions about the nature of money, and our answers may have implications both for contemporary economics and for the way we study the past.

In this chapter, I will argue that the contrast between ‘commodity’ and ‘fiat’ money has been exaggerated. Precious metal coins are a liquid means of exchange, making them significantly different from bullion. Coins have more in common with other forms of money, including fiat moneys, than with bullion or other commodities. The essential money-ness of money lies in government action creating money and supporting it by law. 1

Accordingly, there is clear a distinction between coined money and bullion, illustrated by the fact that coins typically command a face value greater than their intrinsic value. For gold and silver coins, that premium – usually about 5 or 10% over their intrinsic content – reflected the cost of making the coins plus a seignorage charge, which people paid for the convenience of coin. Governments reinforced the desirability of coin by accepting – indeed, requiring – it in payment of tax.

Ultimately, with government support, anything – with or without commodity value – can serve as money, 2 although obviously such government support could only float a currency as far as its own writ can. Beyond the boundaries of the coin-issuing state, any currency only has value in line with its intrinsic content, or for the purposes of buying goods or services within that coin-issuing state. In short, a distinction needs to be drawn between the domestic and the international functioning of any currency. Historians have tended to focus on exchange rates – the international value of currencies – perhaps neglecting the importance of the domestic circulating means of exchange. The domestic economy and price structure were determined by the government valuation of money.

Evidence in support of these propositions will be drawn from the history of the English currency. I hope to show that bullion-based money was no more immune to monetary problems than fiat money. Concentrating too much on the physical form which money takes can divert attention from how money actually behaves. It also has implications for modern historical practice. Converting nominal prices to their silver-weight equivalent may facilitate international price comparison, and an understanding of intrinsic content does inform our understanding of currencies. But this paper seeks to demonstrate that the widespread practice of converting prices or wages to equivalent weight of silver in order to compare standards of living is both philosophically and historically unsound.

Much comparative work on international price and wage history has involved the conversion of different currencies to their silver weight, 3 and this process is also thought to simplify comparison over time when intrinsic content may have varied. 4 However, this methodology extracts the raw historical data from its context, distances historians from the usual practice of the time, and can lead to a fundamental misunderstanding of the nature of money.

Moreover, while an appreciation of the intrinsic content

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