11 Should silver money be altered?
I have therefore decided to explain now whether such a move would correct the damage experienced or cause all affairs of State to be subverted, everything going topsy-turvy. I personally believe that the latter will happen. Would that I were a false prophet! This approach, they say, is the way to safety and peace. Outsiders will not be enticed by its quality to lay their greedy hand on our silver and seek profit by diverting it to other nations. Meanwhile, our legal provisions are rendered powerless through fraud and ambition. It is a fact that Spanish silver money is better than that of its neighbors by at least an eighth part. Although they do not go into it, silver would be greater means of curing the king's financial needs, for, if from the exchange of base copper money of little value they bring into the treasury over six hundred thousand gold pieces, can we imagine what would happen if silver were debased? It is in great supply in Spain, and each year--incredibly--a greater amount is imported from the Indies.
There is the further advantage--that we have no need to get this metal from outsiders, as we do, at great expense, with copper. When they exchange their copper for our silver and gold, they gain a greater benefit--one is reminded of Glaucus and Diomedes. (1) Certainly, we could make a huge profit if the silver were debased by a third or a fourth. Consider, for example, that silver could be devalued in three different ways. First, its value can be increased while the coin remains intact. Then, a silver coin, now worth thirty-four maravedis, would by law increase to forty, fifty, or sixty. Second, the weight could be diminished. We currently strike sixty-seven silver pieces from eight ounces of silver. In this situation, we would strike eighty or even one hundred, and each coin would continue to have its earlier value of thirty-four maravedis. On examination, this approach differs little from the previous one, because in either case the weight of silver is lessened, and the value increased. The third way involves change by adding more copper, and this is the direction that the tricksters are going.
Today twenty grains of copper are mixed with eight ounces of silver; then they go further: Another twenty or thirty grains are mixed in. In this way, a profit of as much as six silver pieces on eight ounces of silver is made, because each grain equals in value about eight maravedis. Now if the yearly shipments from the Indies bring in a million silver marks, at least five hundred thousand gold coins would be added to the treasury annually by means of this debasing. And this income, if sold at a twenty-percent interest, would annually collect revenue in gold, and the profit from this sale would increase to ten million gold pieces, or, according to the Romans, four thousand sesterces. Once this type of fraud is introduced, if more copper is added--as seemly likely--profit will increase in direct proportion to the corruption of the metal.
We must recall that silver in Spain for some time has been stamped with the standard of purity of eleven karats (minters call them dineros, a standard of silver with twenty-four grains) and four grains, namely, with the admixture of no more that twenty grains of copper. This is established by law for the minters of the kingdom. Silversmiths follow the same rule in regard to bullion and unworked silver. This is the same silver that they work with in their shops and make into different vessels. The same has been true for many centuries for the old silver in our churches. There is also a law of John II, king of Castille, as promulgated in the 1435 Parliament of Madrid (petition 31)--the first law in La Nueva Recopilacion (bk. 5, title 22). Under these circumstances, I wish to ask these men who want to debase silver: Would their decree apply only to mints, or would it extend also to the workshops of the silversmiths? If they answer, "both places," confusion will certainly reign. The silver already worked will not remain at its previous price. It will also vary in relation to the time when it was made.
Moreover, experts in this field say that silver, debased with more copper, will not be fit for elegant craftsmanship because of its crudity. Should people wish to resist corruption in money and not extend it to silversmiths, they should always bear in mind that silver, both as bullion and as minted, must be of the same quality. Furthermore, silver, as bullion, will always necessarily be worth more than debased money, to the degree that the money has been debased. The complicated process has been going on for a great many years and only the destruction of the robbers and of the entire land will bring it to an end, as Tacitus maintains in a similar instance (Annals, bk. 20).
What, then, is to be done about silver already minted? Is it to be worth the same as new debased money? That would be unjust, because the old is better and will contain more silver. Everyone will prefer it to the new, given the choice. But will be it worth more? That would be fair but also confusing: With the same weight and stamp, some silver coins would be worth more and others, worth less. But if we wish to go back to an earlier state, and to exchange them for just as many new ones, as we indicated was formerly done in England, that transaction will be just as profitable for the king, as it was in the case of copper money. One must consider, however, if this is a new speculation: to exchange good money for bad. It is not profitable to try people's patience. Patience can become exasperated and wear out and can destroy everything else, as well as be self-destructive.
Now, what will become of gold money? That must be considered, too. And this issue will certainly confound the highest with the lowest, and turn upside down things better left undisturbed. Once again, the same problems will arise. But if gold is not debased, it certainly follows that a gold piece (which we call a corona) will not be valued at twelve silver coins but, rather, at fourteen or fifteen, in proportion to the debasing of silver. As silver is debased, commodities always become more expensive. Then foreigners and natives as well, conscious of the situation, will say: "Twelve new silver pieces contain no more silver than ten of the previous ones; I will subtract the same proportion from the goods I used to give as well." We explained above what will happen if controls are imposed. Furthermore, not all prices can be controlled. Commerce, when interfered with, is like milk that is so delicate that it is spoiled by the most gentle breeze. As a matter of fact, money--especially silver money, because of its quality--is the ultimate foundation of commerce. When it is altered, everything else resting upon it will necessarily collapse.
The stability of silver explains why the disadvantages from the alteration of copper money are not completely obvious. It acts as a restraint on copper money, because, as before, a silver piece is still exchanged for thirty-four maravedis of this new and debased coinage. Without this restraint, commerce would all but fail; everything would cost much more than before. Moreover, suppose that our only money is copper and that silver is not being transported from the Indies. All the evils described in the previous chapter would suddenly come upon us in one fell swoop. Silver wards off these evils, because it is honorable and there is a good supply of it in the country.
If this last reason seems weak, then a new and valid argument appears. All monetary income will be diminished to the degree that silver is changed. Someone who has an annuity of one thousand gold pieces will suddenly receive only eight hundred or fewer, depending on the degree of debasing of silver. Certainly, when payment is necessarily made in new money, a thousand gold pieces of new money will not have more silver and will not be more useful for living than eight hundred previous ones. And so, people, scarcely coping with previous taxes, will be oppressed by a new and very heavy one. Among those affected will be churches, monasteries, hospitals, gentlemen, and orphans--no one will be spared. Earlier, the point was clearly made that a new tax cannot be imposed without the people's consent.
We still have to respond to the arguments advanced for the other side. The king gains nothing by profiting at the expense of his subjects, nor may he seize the citizens' possessions by either sheer force, cunning, or deceit. One man's loss is another man's gain. There is no way around that fact. However, the previous argument asserted that silver was exported because of its excellence. I deny this statement outright, and point out that, although French gold pieces are somewhat better than ours and more valuable, ours are nonetheless found in that country in abundance. Two particular reasons explain this. First, Spaniards import the foreign goods they need, and since they cannot exchange an equal amount of their own goods for the imports, they have to pay money for the excess. Linen cloth, paper, books, metals, leather goods, trifles, different objects and, sometimes, grain are imported. Foreigners are under no obligation to give these goods free of charge, but they do so for other goods they need, and exchange them for money. Second, the king's yearly expenses and payments to foreigners reach three thousand sesterces, seven million a year. (2) Unless this sum were paid out to bankers with the authority to postpone payment, when the king needs it, it would not be at hand. Someone, however, may tenaciously insist that the excellence of silver serves the same purpose. I do not disagree, provided that my adversary understands that there is no way to keep foreigners from constantly making their money inferior to ours. In this way, they get their hands on our silver, which they certainly need more than life.
Is there, then, a way to correct the disadvantages that arise from the debasement of, and abundance of copper money? I have never believed that a concrete disadvantage may be corrected by a greater disadvantage, or a sin by a sin. Some cures are worse than the sickness. Furthermore, I am not aware of any cure for this illness, except the one that our ancestors constantly used in similar straits, namely: The value of the new money is reduced by half or by two-thirds. If that approach is not enough to heal the wound, the bad money is to be completely recalled and good money put in its place. It is, of course, only just that either solution makes the one who profited from the general disaster pay. But since I see this approach is not common--indeed never employed--it is preferable for those who are in possession of the money to suffer a loss. Otherwise, by continuing longer in error, we aggravate the causes of a stubborn illness. On the other hand, we can have recourse to devaluating money. This would involve general disaster for all.
It is clear that the pivots on which this entire issue turns are those two values of money that were explained in chapter 4. They must be mutually adjusted if we want things to be sound. That means that money should be legal, but if the values are separated (which, it seems, will happen if silver is debased) every possible evil will come upon the State.
We end with this point: In 1368, when a great part of France was under the English kings, the Prince of Wales, who was running affairs in France for his father, the king, levied a new tax on his vassals. He did this because his treasury was exhausted by the wars he was waging on behalf of Peter, the king of Castille. Very many refused to accept this new burden; others like those in Poitiers, Lemoges, and Rochelle agreed, on condition that the prince would not alter money for the next seven years. Jean Florischart, the French historian, relates this in his Contemporary History (vol. 1). This account makes it clear that princes have debased money, but that the citizenry have always disapproved of and rejected it as they could. It would be beneficial if our people would learn from this example and agree to financial subsidies when the king requests them, on condition that the prince promises that money would be stable for as long as they could demand.
(1) [When they met on the battlefield in the Trojan war, Glaucus exchanged his gold armor for Diomedes' bronze armor--Trs.]
(2) [Spanish text reads: "certainly exceed six million"--Trs.]
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|Title Annotation:||A Treatise on the Alteration of Money|
|Author:||de Mariana, Jesus|
|Publication:||Journal of Markets & Morality|
|Date:||Sep 22, 2002|
|Previous Article:||10 The major disadvantages derived from this alteration of money.|
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