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Restrictions Placed on Ireland's Token Use
 | By Michael D. Greaney, World Coin News
October 23, 2008 |
We can, at this point, pause for a while in relating all the crimes of Thomas Wentworth, Lord Deputy of Ireland, and tell about some of the good he actually accomplished, particularly in the numismatic realm. True, he had a definite interested motive, but that does not detract from the objective good of what he managed to do. Sometimes even a tyrant or a homicidal maniac can come up with a good idea.
The Volkswagen, for example, resulted from Hitler's belief that ordinary Germans should be allowed to own automobiles. People who signed up to pre-purchase cars financed the construction of the factory with payroll deductions. Unfortunately, the facilities were diverted to war use (remember "The Thing," the Volkswagen military vehicle that put in a brief reappearance as a gimmicky consumer auto in the 1960s?) but in the late 1940s, survivors or their heirs were allowed to apply their previous payments toward the purchase of the first consumer Volkswagens. The point is that you don't have to be a good person to come up with a good idea. (Of course, on the other hand, just because you're a good person doesn't mean that your ideas are good.)
In any event, one very bad idea on the part of James I Stuart had been to turn the provision for an adequate and sound currency into a money-making venture by granting a royal patent for the minting of base metal farthings. At first glance this would seem to be something of a paradox, for isn't issuing currency the same as creating it out of nothing? Doesn't issuing a currency automatically generate a profit for the issuer? No - and this is where a significant number of monetary theorists come to grief.
As every coin collector knows, coinage in the west evolved as a means of verifying the weight and fineness of lumps of precious metal. This was a very great convenience, for who wanted to go through the process of having to weigh the metal and test its fineness every time you engaged in a commercial transaction? Governments - sovereigns - got into the business of issuing coins as an expedient, and because (presumably) you could trust your government to tell the truth. In addition, standardizing and institutionalizing weights, measures, and the currency makes for a well-functioning social order, which is one of the chief jobs of government. Who, after all, wants to argue endlessly whether my pound and your pound, or my nickel and your nickel are equal?
The illusion that issuing a currency is the same as creating money came about for a very simple reason. Issuing a currency, obviously, is a simple certification process. The issuer certifies that a particular coin contains a specific weight and fineness of metal, or that a certificate can be exchanged for such-and-such a value of goods or services, and will be honored at that value by the issuer.
The issuer, of course, has to have the assets in the form of goods or services available in order to make good on the currency. A "bank of issue," for example, "buys" loans from borrowers, and prints certificates or makes demand deposits to pay for them. The borrower spends this money (or why borrow it?), and (eventually) repays the loan, in essence "buying back" his or her original loan, kicking in "interest" as the bank's fee for providing the service of supplying a currency that other people will accept.
In an economy in which interest rates were not artificially manipulated or set by the State, all interest rates on newly-created money of this sort would consist of a reasonable fee to the bank for providing the service (to meet its costs and show a just profit), and a "risk premium" pegged to the bank's expectation of the likelihood of getting its money back. This latter is a form of "self insurance" for the lender. Lenders know a certain percentage of loans are going to go belly-up, but they don't know which ones (or, obviously, they wouldn't make those loans!), so risky borrowers have to pay more for the privilege of having the bank "generalize" their individual purchasing power in the form of currency.
When it comes to precious metal coins, the issuer first has to purchase the material out of which the coins are made. Throughout history, the predominant method of paying for the costs of minting has been to make the coins using metal worth slightly less than the face value of the coin. Called "seniorage" or "agio," most numismatic manuals and guides describe this as the "profit" to be made from minting. This is incorrect. Seniorage is a way of embodying a "hidden tax" in the currency itself to defray the costs of minting.
The alternative is to use tax monies to do the same thing, as the United States attempted to do when it established its first mint, and put the full value of metal into the coin. Initially, the United States practiced "free coinage" of gold and silver, meaning that anyone who brought gold or silver to the mint could have as much of it turned into legal tender coin as he or she wished. Coincidentally, this service was provided at no direct cost (the indirect cost was the taxes each citizen paid, some of which were used to run the mint), unless someone wanted coin right away, in which case a small fee was charged.
As long as the issuer of a currency will honor it at the face value, and the value remains stable over time, the currency will be stable. It doesn't matter in that case what the material is out of which the currency is made. What matters is whether the issuer makes good on the promise to deliver wealth to the specific amount conveyed by the currency.
When the issuer debases the currency, however, he or she is in essence stealing from people who use the currency by breaking the promise conveyed by the currency. Henry VIII Tudor was a past master at this technique of transferring purchasing power from the users of the currency to the issuer. James I Stuart, presumably inadvertently, pulled the same stunt even as he attempted to restore a sound currency to Ireland by issuing his royal patent to strike base metal farthings.
Under royal patent, the profit to the issuer depends on striking as many coins as possible, regardless of actual need. Naturally it wasn't long before supply far exceeded demand. With Ireland handy as a dumping ground, the country was soon inundated with a flood of tokens, matched only by the numbers of counterfeits that quickly appeared. As James Simon reported:
As too large quantities of the above mentioned copper farthings were probably sent over from England by the patentees, or their agents, the lord deputy Wentworth and council found it necessary to stop such an evil, and to issue a proclamation the sixteenth of September, 1634, whereby it was ordered, that no person should be forced to take farthing-tokens, and that none should pay above two pence in farthings, in any one payment.1
Simon fortunately quotes the proclamation in full ... a courtesy that will not be repeated here, but the opening gives a good indication of the contents of the whole:
By the Lord Deputy and Council.
Wentworth.
Whereas divers complaints have been made unto us the lord deputy from several parts of this kingdome, concerning the stop and refusall of farthing tokens, proceeding as well from the abuse in counterfeiting the same, as in causing the same to pass in payment either for commodities, or for wages to workmen and labourers, in greater quantities then was intended, which abuses are become a great burthen and grievance to his majesties people in many parts of the realme, for the remedy and reformation whereof, and to the end that the said farthing tokens may be used onley for exchange in small summes, but not to be put upon any in great payments: These are therefore in his majesties name to publish and declare, that it is utterly unlawfull and expresly contrary to his majesties letter patents and proclamations, that any such farthing tokens should e inforced upon any poore labourers or workmen, or any other person or persons in any payment, either of great or lesser summes, and it is further declared, that no person should pay above two pence in farthings to any other person at any one time; and also it is by these presents declared, that it is unlawfull for any man to buy or barter for any farthings, at, or for any lesser rate then they are usually vented by his majesties patents, to whom the sole making thereof is granted, and upon whom the rechange thereof lyeth: All persons being hereby to take notice, that whensoever they shall bring unto Edward Lake, agent for the said patentees, (wo is resident in the city of Dublin) any sum of lawfull farthings, he, the said Edward Lake, will pay unto them the like summe in silver, according to the covenant with the patentees.2
The proclamation goes on to describe various penalties for counterfeiting, "such censure, by losse of ears, or other corporal punishement, as by the court of castle chamber heere in this kingdom shall bee thought meete." The Lord Deputy then gave an order that every official (and appends a long list specifying all such officials) was responsible for arresting anyone they might suspect of being counterfeiters, as well as authority to seize all counterfeit tokens and minting machinery.
One of the farthings causing all these problems was the oval variety of the Maltravers issue, the fifth major type of the tokens issued under royal patent. James Simon mistakenly states that Henry, Lord Maltravers, and his co-grantee Sir Francis Crane issued only the later "Rose Farthings." On the contrary, as authorities now believe, they issued tokens of a design almost identical to those of previous holders of the patent.
Except for the oval planchet, then, these Maltravers farthings are virtually identical with the round variety. They bear a crown over crossed scepters on the obverse and a crowned harp on the reverse. The obverse legend reads, "CARO : D : G : MAG : BRI," while the reverse legend reads, "FRA : ET HIB : REX." In case there's any doubt about what all the abbreviations stand for, it's "Charles, by the Grace of God of Great Britain/France and Ireland, King."
Interestingly, the rulers of England who laid claim to the throne of France - which they would not surrender until the end of the 18th century - always called themselves "King of France," while the actual kings of France until the French Revolution identified themselves as "King of the French." Apparently in the minds of the French, people were more important than actual territory.
The oval variety, which some authorities have speculated were struck especially for Ireland, run about five times the prices of the round variety. They begin at $16 in Very Good and go up to around $160 in Extremely Fine.
While the higher price reflects a presumably greater scarcity, the one thing that the farthings were not in the first third of the 17th century in Ireland was scarce. In a classic example of Gresham's Law, that bad money drives out good, there was a continual flood of gold and silver out of Ireland, being replaced with vast quantities of the farthings and their various imitations. This was a matter of great concern to the Lord Deputy, for how could he expect all the various groups in Ireland to pay their taxes, bribes, loans, gifts, fines and all the other ways that he had devised to move money out of the pockets of the Irish and into those of himself and the king if there wasn't enough cash on hand to facilitate the transactions? It was all very well to say that people shouldn't or couldn't use the farthings in quantity, but in the absence of a sound central bank and a well-organized commercial banking system, just what were they supposed to do in order to meet the demands of commerce?
Not that there was much commerce to worry about among the native Irish. By the 17th century there had been a 300 year policy on the part of England to stifle or shut down Irish trade. As Mac Manus declares, "The systematic ruthlessness with which Ireland's trade and industries were wiped out by England, has, like the Irish Penal Laws, no parallel in the history of any other subject land."3
To be perfectly honest, the only reason Ireland was singled out was due to its position as England's primary colony. The growth of mercantilism demanded colonies in order to be able to increase the imports of gold and silver and raw materials in exchange for exports of finished goods. By the 17th century, the pamphlet war over free trade v. mercantilism, epitomized by the literary quarrel between Edward Misselden and Gerald de Malynes, rivaled that over usury. It was Ireland's misfortune to be governed by a country that, despite all the debates, ended up run on the principles of mercantilism - and which the English seem to have believed with the utmost sincerity, rivaling today's worshipers of socialism and capitalism. As Wentworth wrote in 1634:
... all wisdom advises to keep this kingdom [Ireland] as much subordinate and dependent on England as possible; and, holding them from the manufacture of wool (which unless otherwise directed, I shall by all means discourage), and then enforcing them to fetch their cloth from England, how can they depart from us without nakedness and beggary?4
The whole thing seems to have been started by one Tobias Gentleman, "fisherman and mariner," who in 1614 published a pamphlet of which I will give only a brief summary of the title, England's Way to Win Wealth.5 Being a seaman, Gentleman's recommendation was to develop England's fishing industry in competition with that of Holland. This was followed in 1620 by a number of papers by John Keymer, with whom Gentleman had consulted (and ridiculed), also proposing emphasis on fishing on the grounds that it would bring gold and silver into England. Although each one was directing his efforts toward the same end and recommended the same general program, each called the other a few less than polite names, and that seemed to end the matter.
In 1621, however, Thomas Mun contributed a pamphlet titled, A Discourse of Trade.6 Master Mun's position was that free trade with the East Indies, not fishing, was a boon to all countries involved in the trade. He advocated that government support increased trade with the East Indies by lifting barriers to trade. This would increase the flow of precious metals into all countries (although where the endless supply was to come from was not entirely clear). With barriers to free trade lifted, the money supply would take care of itself.
In 1622 Mun's production called forth a response from Edward Misselden, Free Trade, or, The Means to Make Trade Flourish.7 Misselden's position - despite what we would assume from the title - was that "free trade" meant restrictions on exports or imports as required by mercantilism. This would increase the supply of gold and silver, presumably the basis of a country's prosperity. The reason why gold and silver were flowing out of the country was not England's lagging behind the continent in efficiency and productivity, but because the king wasn't setting the proper value on the currency.
Mun didn't respond (at least right away; he would wait until 1664 to publish his next pamphlet, England's Treasure by Forraign Trade8), but the cudgels were taken up by Gerard de Malynes. In 1622 de Malynes fired off a response to Misselden titled, The Maintenance of Free Trade.9 De Malynes asserted that it wasn't free trade that caused problems, but wars and the stupid policies of princes. Not surprisingly, Misselden had dedicated his treatise to Charles, at this time Prince of Wales, while de Malynes dedicated his pamphlet to James I, hinting that the king was misled by evil counselors (like Misselden?) and that this was the source of England's economic problems.
De Malynes then got really radical. He asserted that it was attempting to set an arbitrary or artificial value to the currency that was causing problems such as the flow of gold and silver out of England. He claimed that in international trade, gold and silver coin was (effectively) nothing more than a commodity, to be valued not at what it cost, but at what it would buy. Trade being carried on by means of commodities, gold and silver coin as a commodity, and bills of lading, international trade was self regulating - if you didn't interfere by setting prices for commodities ... including gold and silver coin. Given free trade, all commodities would flow out of the country and bring in others when there was a surplus, and flow in when there was a scarcity, but only as long as the State kept its hands off.
Misselden didn't take that lying down. In 1623 he returned fire with a small pamphlet with a large title, The Circle of Commerce, or, The Ballance of Trade, in Defence of Free Trade: Opposed to Malynes Little Fish and his Great Whale, and poized against them in the Scale, Wherein also, Exchanges in generall are considered: and therein the whole Trade of this Kingdome with forraine Countries, is digested into a Ballance of Trade, for the benefite of the Publique.10 (It's actually a bit longer than that, but I had to cut it short; you get the idea.) Contrary to the usual practice of the time, when actually naming names might get you challenged to an (illegal) duel, Misselden went after de Malynes hammer and tongs, calling him, among other things, a "quacksalver"11 and a madman12 for offering a single cure-all (and that presumably not even a good one) for England's economic problems.
Misselden didn't really offer anything new in his treatise, confining himself to restating his former position and ridiculing de Malynes for his idea that gold and silver functioned as commodities in international trade. "Everybody knew" that gold and silver were real money, and would always be real money. If gold and silver were flowing out of the country and trade stagnating, it was because the king needed to set the value of the gold and silver coin at a higher rate. Misselden made a tactical error at this point, and dedicated his pamphlet to the earl of Middlesex, Lord Treasurer of England.
De Malynes responded, evidently getting in the last word, with his pamphlet, The Center of the Circle of Commerce, or, A Refutation of a Treatise, Intituled The Circle of Commerce, or The Ballance of Trade, lately published by E.M13 (evidently de Malynes wasn't going to risk either a duel or a suit for libel). De Malynes definitely trumped Misselden by dedicating this latest effort to the Prince of Wales, not some underling.
Proceeding a bit more politely than Misselden (OK, a lot more politely), de Malynes pointed out that setting an artificial value on anything hampered trade, stifled productivity and creativity, and caused gold and silver to flow out of the country instead of reaching an equilibrium. Then de Malynes stated something so obvious that people kept missing the point for a few more centuries. He tried to get across the notion that a unit of measure is not the same thing as the thing that is measured. A yard simply measures cloth, it is not itself cloth. Similarly, a Shilling measures the amount of gold, silver, or other item of value, but is not itself the gold or silver - or vice versa. If more money is needed to finance productive projects and trade, it will be there, but only if the State doesn't set artificial restrictions on how much money can exist or try to put an artificial value on it.
Evidently Misselden didn't have an answer to this, for he seems to have taken his ball and gone home. He may even have choked to death on his own bile - you really have to read his pamphlets to get a sense of his hysteria against and evident hatred of de Malynes. Amusingly enough for us, but perhaps not so delightfully for de Malynes, "E. M." comes across as truly unhinged.
Unfortunately, de Malynes seems to have won the battle and lost the war. Trade between England and other countries, especially Ireland, was carried out on strict mercantilist principles for the next couple of centuries. This ensured the great dearth of silver coinage throughout virtually the whole of the 18th century as Great Britain strove unsuccessfully to maintain bimetallism against the silver standard prevalent on the continent outside France and throughout the East Indies.
It never seemed to occur to Wentworth, subsequent lord deputies, lord lieutenants, prime ministers, parliaments, kings, queens and so on, that if you followed policies based on wringing as much gold and silver out of a country as possible, that country (especially if it got its supply of gold and silver from you in the first place) wasn't going to have any - as proved to be the case. Forbidding the Irish to engage in foreign trade except with England also ensured that there was no alternative source of gold and silver, thereby creating Misselden's vicious "circle of trade." As Wentworth declared, "Regard must be had to those points wherein the trade of Ireland comes to interfere with that of England, in which case Irish trade ought to be declined so as to give way to the trade of England."14
Things became so chaotic in England that Ireland was called on once again to try and prop up the English economy. Wentworth sponsored a bill, the Navigation Act of 1637, which attempted to create jobs and spur productivity by requiring all goods moving in and out of Ireland had to go on English ships. This didn't do much of anything for England, while Ireland's shipbuilding industry disappeared along with the continental trade. As Dean Swift later declared, "Ireland is the only kingdom I ever heard or read of either in ancient or modern story, which was denied the liberty of exporting its native manufactures and commodities wherever it pleased."
ENDNOTES
1James Simon, An Essay on Irish Coins (1810), p. 45.
2Ibid., pp. 111-112.
3Seamus Mac Manus, The Story of the Irish Race (1921), p. 483.
4Strafford's Letters.
5These early pamphlets typically had very, very long titles, describing the contents in full.
6London, printed by Nicholas Okes for John Pyper.
7London, printed by John Legatt for Simon Waterson.
8London, printed by "J.G." for Thomas Clark.
9London, printed by "J.L." (probably John Legatt) for William Sheffard.
10London, printed by John Dawson for Nicholas Bourne.
11Ibid., the 71st page mis-numbered as 91. Misselden's case is made wholly by example and ad hominem attack, while that of de Malynes is by Scholastic argument, suggesting that Misselden was a Puritan, while de Malynes was Catholic; Misselden bases everything on his personal interpretation of various examples that he himself selects (positivism), while de Malynes states his premises and builds a syllogism (the scientific method, which Misselden ridicules without refuting).
12Ibid., p. 48.
13London, printed by William (or VVilliam) Jones for Nicholas Bourne - a publisher who was evidently making a very nice profit selling both men's productions!
14Strafford's Letters.
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