Page:Encyclopædia Britannica, Ninth Edition, v. 16.djvu/754

726 on this at 5per cent. would amount to 6,500,000. This apparently heavy charge is justified by the fact that it is desirable to have a currency possessing, or at least based on, value. The expense of a metallic currency is, however, combined with its weight, a strong reason for the great developments of representative money and credit in modern times, with the result that gold and silver are hardly ever used in large domestic transactions, all such payments being made by cheques, which are cleared off against one another. For a full account of the modern organization of credit, see the article. 6.Historical Outline of Depreciations.—The earliest systems of currency whose progressive debasements it is possible in any degree to trace are those of the various Greek states, though even here many details remain in obscurity. The Roman currency system is comparatively better known; while for the mediaeval currencies from the time of Charlemagne elaborate materials are available, which naturally increase in bulk and precision as we approach more modern times. The general treatment of the history of coins belongs to (q.v.) but the history of monetary depreciations is important in connexion with the theory of money as illustrating the value of sound economic knowledge. Until coinage became a state function a continued debasement was impossible, since it was open to any one to refuse the money offered in payment if it was not up to the proper standard. When, however, coinage became a function of government strong motives for debasement soon presented themselves. (1)The cost of coinage falling on the state, and being generally defrayed by a seigniorage, led to the idea that this seigniorage could be made more profitable by making it larger, while the existence of any deduction veiled the injustice of a charge exceeding the expense incurred in the operation of coining. (2)The position of most Governments was that of debtors, and as a debasement favoured all debtors at the expense of all creditors it was only natural that rulers, ignorant of the ultimately ruinous effects of a series of debasements, should seek to relieve themselves without exciting the odium incurred by the levy of heavy taxes. A more pressing case than the foregoing, and one where more justification exists, is that of a severe social crisis, when large numbers of the community are burdened with debt, and a depreciation of the monetary standard seems the simplest mode of escaping from so critical a situation. Whatever may be the inducements to enter on the perilous course of tampering with the monetary standard, a long experience has incontestably proved its disastrous effects. One of the great causes of the weakness of France during the &ldquo;hundred years' war&rdquo; was the extremely debased state of its currency, and the dread of further reductions in the value of the coins. Lord Macaulay has given a graphic picture of the evils which England suffered from its depreciated silver currency towards the end of the 17th century. And a debasement brought about by design possesses a further element of evil by creating a belief that similar devices will soon be again resorted to. So manifest are the evils that result from debasement that it may be reasonably hoped that all civilized Governments have abandoned the practice for ever; though, unfortunately, similar bad effects are produced by the over-issue of inconvertible paper currencies, and this is still an expedient adopted under the pressure of difficulties. &ldquo;It is proper to observe that coins may be debased in three different ways—(1)by diminishing the quantity or weight of the metal of a certain standard of which any coin of a given denomination is made; (2)by raising the nominal value of coins of a given weight and made of a metal of a certain standard, that is, by making them current or legal tender at a higher rate than that at which they passed before; (3)by lowering the standard or fineness of the metal of which coins of a given weight and denomination are made, that is, by diminishing the quantity of pure metal and proportionally increasing the quantity of alloy.&rdquo; The last of these methods is the most dangerous, since the detection of it is more difficult, as it is so much easier to discover the weight than the fineness of the metal in a coin; but all of them produce the same results and are adopted for the same reasons.

1em

