Tuesday, June 13, 2023

The lower limit to silver's usefulness in coinage

A detectorist in Suffolk, England recently found a beautiful halfpenny minted some time between 1625-1649, during the reign of King Charles I. This coin, captured in the video below, illustrates an important feature of coinage: the lower limit to silver's usefulness as a monetary metal.

As you can see, the halfpenny is tiny compared to the fingers holding it, which would have made it difficult to count, handle, and transfer. Storing it away in a pocket or purse would have been a nuissance, since it might have gotten lost in the folds.

The root of the problem is that silver has always had a relatively high value-to-weight ratio, (i.e. it is good at "condensing value," as I once described here) and so attempts to embody lower denomination coins with silver don't function very well, since what is required for low denominations is a material that dissipates rather than condenses. Silver change is just too damn small.

According to the Portable Antiquities Scheme, this particular halfpenny – which is in great shape – weighs 0.27 grams and has a diameter of 10 mm. Compare that to a U.S. dime, already annoyingly small, which weighs 2.3 grams and has a diameter of 18 mm. Doing the calculation for you, a modern dime weighs almost ten times (!) as much as a Charles I halfpenny.

How much was a halfpenny worth in 1625? In short, I'd describe it as the dollar bill of its day.

In England, one penny could buy a penny loaf of bread, the weight of which was regulated by law. In Sheppard and Newton's The Story of Bread (1957), a loaf weighing 4 pounds would have cost 5 pennies in London in 1625. These days, a loaf sold in a grocery aisle usually weighs around 1 pound, so putting things into a modern context, a single 1625 penny was capable of buying one modern-day loaf of bread, and so a halfpenny was worth half a modern-day loaf. Given that a loaf currently retails at Walmart for around US$2 to US$2.50, that means a halfpenny was equivalent to a dollar bill, give or take.

As the dollar bill of its day, a halfpenny would have served a crucial role in England's day-to-day commerce. But being so delicate, it must have done a poor job of it. Even worse would have been the silver farthing, England's smallest coin, worth a quarter-penny, or half a halfpenny. "A still more egregious case [of too small coins] was that of the silver farthings the Royal Mint issued in 1464. Weighing only three troy grains each, these were 'lost almost as fast as they were coined,'" writes George Selgin in Good Money.

How to solve silver's inability to serve as a good medium for lower-denomination coinage? Here's one of the attempts made by the minting authorities:

Halfpenny of King James II, 1687. Source: Yale University Art Gallery

This James II halfpenny is what is called token coinage. Minted out of tin, which had a very low value, a token coin such as this one was worth far more than the amount of tin residing in it. What gave it its value isn't the metal within, but James II's promise to repurchase the coin at its stipulated rate of a half-penny's worth of silver.

Unlike Charles I's feather-light 0.3 gram halfpenny, James II's halfpenny had some heft to it. Weighing in at 10.11 g, which is equal to two modern American quarters, there was no losing track of this beast. The tin halfpenny would certainly have served as a more durable dollar bill of its day than a Charles I silver halfpenny.

Alas, while tokens such as James II's tin halfpennies solve the too-small problem, they introduce a new problem: counterfeiting. Because the amount of metal in a halfpenny was so cheap relative to the face value of the halfpenny, it would have been very profitable for fraudsters to manufacture fakes. Which is indeed what happened. By the middle of the 18th century, close to half of all the farthings and halfpennies, all of which were token coins by then, were counterfeits, according to Selgin (pg 20).

To counter the counterfeiters, James II's 1687 halfpennies have a strange feature on them: a small copper plug. In the image above this plug has fallen out, but this link illustrates what a complete coin would have looked like. By adding a plug to the coin, mint officials were trying to increase the complexity and thus the cost of manufacturing fakes, thus reducing their attractiveness to fraudsters. In concept, we can think of these plugged halfpennies as a clumsy predecessor to Canada's toonie, which has a nickel outer rim and an aluminum-bronze central plug.

Alas, James II's tin halfpennies never worked out. The tin was quick to erode and the copper plug was prone to falling out. If the solution to silver's lower limit was to make token coinage, better to manufacture those tokens out of a tougher substrate like copper. By the 1690s, England's tin halfpenny experiment had ended.

No comments:

Post a Comment