My mate Lee Rotherham has a book out
Having taxed his kingdom into penury and borrowed more than he could
pay back, Henry VIII flailed around looking for a way of raising more
cash so that his extravagant spending could continue unabated.
coinage was in silver. Even during the height of the Crown’s
difficulties in the previous century, monarchs had (in the main) avoided
tampering with the amount of silver in the coins. Currency was, give or
take a small fraction, what it was worth at face value, and everyone
whether buyers at home or merchants abroad knew the value of English
It had been tried before, the last time being
undertaken by Edward IV, but that had been back in 1464-5 and on a
different scale. Henry himself had tinkered back in 1526. This time,
however, the process would last a decade and well into the next reign
(indeed, with the separately-run Irish coinage the policy would last
until Elizabeth’s accession).
Its impact was serious. Inflation
followed, as people doubted the intrinsic value in any coin. The
relative value of gold in relation to silver coins tumbled, leading to a
flight of the former and an influx of the latter. Bad money drove out
surviving good. Specie not species, ie demanding payment in a recently
minted coin which had less silver in it. Not payment in chickens. Face
values of newly minted coins were not respected overseas, meaning that
English merchants who used them operated at a loss. Crown debts became
worth less than private debts, since the Government’s agents could force
payment on creditors in a specie of their choosing.
Not for nothing
was it known as the Great Debasement. One economist has suggested that
over one and a quarter million pounds of the real value of the bullion
was lifted by the mint, as four fifths of the silver value and a quarter
of the gold were removed. In a sense, it was the Quantitative Easing of
its times. As stealth taxes go, it proved an enduring spectre on
private wealth in England and Ireland for decades, requiring major
monetary reform to overcome.
Lesson from history: If you run an
extended deficit and blow all your savings, sooner or later you will run
out of ways to pay for it.
from "A Fate Worse than Debt" by Lee Rotherham
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