The first nation to adopt the single gold standard by law was England.
This was really done in 1798, although the date usually assigned to it
is 1816.
The pound sterling was originally a pound weight of silver, divided
into twenty parts called shillings, and each of these into twelve parts
called pennies, or pennyweights. Gold made its first appearance in the
coinage of England in the reign of Edward III. (A. D. 1345). The ratio
of gold to silver fixed by royal decree in this coinage was about 12½
to 1.
From this period to the forty-third year of the reign of Elizabeth
there were nine debasements of the silver coinage accompanied by
changes in the gold coinage, but as these were arbitrary acts of
the reigning sovereigns they possess no scientific interest. In the
forty-third of Elizabeth (1601) the last debasement was made. The
pound weight of silver was then coined into sixty-two shillings, and
the pound of gold into thirty-three and one-half sovereigns of seven
pennyweights and four grains each, the ratio of gold to silver being
11 to 1. The silver coinage being henceforth unchanged, it becomes
possible to trace the commercial variations of the two metals and to
observe the ineffectual struggles of society and government to keep
both of them in use as legal-tender money.
Queen Elizabeth died two years later. Before her successor, James I.,
had been on the throne three years, gold had risen in value as compared
with silver, and the gold coins were exported to such an extent that it
was necessary to diminish their weight about 11 per cent. The ratio now
established was a little more than 12 to 1.
In the ninth year of the same reign the gold coin began to be exported
again, so that it was necessary to make a new change of ratio. This
time the ratio was fixed at 13 to 1. But this was too great an advance
in the rating of gold. An exportation of silver set in which caused
great inconvenience in the kingdom. Instead of readjusting the ratio
the King, in the year 1614, issued a proclamation prohibiting the
exportation of the precious metals. The proclamation had no effect. So
another one was issued in 1618 reaffirming the first one and forbidding
the melting of coin for the purpose of making plate, although a certain
amount might be used for repairing old plate and keeping it up to its
original standard. As the evil continued a third proclamation was
issued in 1622 and a fourth in 1624. None of these had any effect
except to make an historical record of the futility of attempts to
enforce a legal ratio which is different even in a slight degree from
the market ratio. It was customary during this period to pay a premium
of two pence for silver change to the amount of 20 shillings.
Soon after Charles I. began his reign he issued a proclamation on
the same subject, reciting the previous ones of his father and
acknowledging that they had been disregarded. In 1636 seven persons
accused of melting and exporting coin were arrested and fined £8,500
and imprisoned till the fines were paid, but even this example did not
put a stop to the practice. Silver was worth two or three pence per
ounce more than the mint valuation, and this fact dominated society
from the King on the throne to the beggar on the dunghill. But what
could not be prevented by royal proclamation and star chamber was
stopped by an unseen force. The price of gold was slowly rising, so
that about the beginning of the Commonwealth the ratio that King James
had established was identical, or nearly so, with the market ratio. The
exportation of the precious metals ceased until the reign of Charles II.
In 1663 gold had risen in value so that it was necessary to change the
ratio to 14½ to 1. This was an advance of about 8 per cent. since James
I.
Each time that a change was made in the gold coinage a new name was
given to the coin so produced, in order to distinguish it from its
predecessors. The coin that Charles II. now introduced was called the
guinea. It was ordered that this coin should pass for twenty shillings,
but it immediately became current in trade at a higher rate, passing
for twenty-one to twenty-two shillings. No attempt was made to enforce
the mint valuation or to prevent melting or exporting. Consequently
silver became in practice the only legal-tender money. Nobody would
offer a guinea to pay a debt of 20 shillings when it was worth 21
shillings. The guineas passed for what they were worth as bullion. That
was a time when the clipping of coin was much practiced, but it was no
advantage to clip a gold coin, since it was taken only at its bullion
value. The silver coins, however, passed by tale. Consequently they
alone were subjected to the clipping process. The evil became so great
that a recoinage of silver was necessary and was undertaken in the
reign of William III. This was a celebrated event in many ways. Both
Sir Isaac Newton and John Locke were concerned in it. In the year 1717
the guinea was made current by royal proclamation at 21 shillings in
silver, at which figure the ratio was about 15⅐ to 1. This was in the
third year of the reign of George I.
It was about this time, says Lord Liverpool, that a marked preference
was shown by the people for gold money rather than silver, on account
of its convenience in making large payments. This he ascribes to the
increase in the commerce of the country. As gold was slightly overrated
at the ratio of 15⅐ to 1, there was a tendency to export silver. Only
£584,000 of the latter metal was brought to the mint for a period of
eighty-three years down to the end of the century, and most of this
came from Spanish treasure ships captured in war. The only silver coin
retained in circulation was that which had been much worn. As these
light-weight pieces varied among themselves, the lightest ones were
selected to make payments, a condition which became worse and worse
until Parliament in 1774 passed an act limiting the legal tender of
silver coins to £25 in tale. For any sum above £25 they could be paid
by weight only. This act was to continue in force only two years, the
expectation being that some other remedy for the evil would shortly
be found. It was re-enacted from time to time till 1798, when another
clause was added providing that no more silver should be coined at the
mint, nor should any be delivered that had been coined, but that the
owners of such silver should be paid for it. In the following year
(1799) a brief act was passed making the act of 1774 perpetual. In
1816 the character of the British monetary system was formulated by an
act of Parliament on its present basis, the essential part of this act
being in the following words:
“XI. And whereas at various times heretofore the coins of this realm
of gold and silver have been equally a legal tender for payments
to any amount, and _great inconvenience has arisen from both those
precious metals being concurrently the standard measure of value and
equivalent for property_; and it is expedient that the gold coin made
according to the indentures of the Mint should henceforth be the
sole standard measure of value and legal tender for payment, without
any limitation of amount, and that the silver coin should be a legal
tender to a limited amount only, for the facility of exchange and
commerce;
“Be it therefore enacted, That from and after the passing of this
act, the gold coin of this realm shall be and shall be considered and
is hereby declared to be the only legal tender for payments, except
as hereinafter provided, * * * and no tender of payment of money
made in the silver coin of this realm of any sum exceeding the sum
of forty shillings at any one time shall be reputed a tender in law,
etc.”
This is a brief résumé of the experience and legislation of Great
Britain. It is important as showing that the single gold standard was
adopted on account of the “great inconvenience” of the double standard,
which had been in vogue previously. Of course, this “inconvenience”
had attracted the attention of learned men before 1798. John Locke had
shown that a double standard composed of two things of varying value
was an impossibility. He favored the single standard of silver, as did
the learned men who considered the same question in France a century
later.
It appears that the gold standard was adopted without any particular
design on the part of those who brought it about. They found, as a
matter of fact, that the monetary evils existing in 1774 could be cured
most readily by limiting the legal tender of silver. So they did it
for two years, and then for two years more, and so on, till 1798–99,
when they had become satisfied by the experience of twenty-five years
that the single gold standard was the right thing to put an end to the
“inconvenience.” Seventeen years later, the experiment having continued
to be successful, they passed the law which I have quoted. That law,
in substance, remains in force to the present time, and we may be sure
that it would not have lasted so long if it were not a good thing _per
se_.