The King’s shilling
It’s quite difficult to give an equivalent figure for the 2012 worth of four shillings from 1545. Here, the 1545 four shillings becomes an approximate present day (2012) income of £1000. This makes the sum seem large, but if it had to be divided equally between say twelve people, they would each receive four silver pennies, which in 1545 was the equivalent of one day’s wages for a labourer. This is based on the equivalent ‘income value’, which measures a specific wage or more-general income and is thought to be the most reasonable method for what follows.
‘Heartstone’: the fifth book of the Matthew Shardlake stories by C. J. Sansom is set in 1545 and has Shardlake travelling from London to Portsmouth with a company of soldiers, he on a legal commission for Queen Katherine Parr and they to confront a French invasion fleet. Having stopped en-route at a village to buy some supplies, the soldiers offered ‘testoons’ as payment.
“It’s not silver! Shame on you, the King’s soldiers are trying to cheat us!” said one of the old women, furiously waving the coin at a soldier.
Testoons were newly minted coins with a face value of twelve-pennies and commonly called a ‘shilling’. The old woman knew that the testoon was minted as a debased coin – having a significantly lower silver content than ‘old shillings’ – and this knowledge was the cause of her fury.
Shardlake resolved the confrontation by saying “I’ll pay, in the old money. Then the soldiers can repay me, eight-pennies for a new testoon”. The transaction was completed for the agreed sum of four ‘old silver shillings’ and Shardlake handed the old woman twelve silver groats, which were equal to four old silver shillings.
Shardlake had paid ‘good money’ to the villagers and now found himself having to act as a money-changer to the soldiers. He had to decide the exchange rate between ‘old’ (silver) coins and ‘new’ (debased) coins if he were not to be left poorer by the transaction. He would accept a face value exchange rate parity for any denomination old silver coins offered by a soldier where the coins also had intrinsic value (silver content) parity.
A soldier wanting to change a newly minted testoon would be given 8 old silver pennies as the intrinsic value exchange rate and Shardlake would apply the same reduction in parity to any other ‘new coin’ that a soldier offered in exchange. If Shardlake had 12 newly minted pennies then he would give a soldier 12 new pennies for one newly minted testoon, as the face value and the intrinsic value had exchange rate parity.
A difficulty occurred when a soldier wanted to give Shardlake the same number of ‘new (debased) silver pennies’ as a soldier giving ‘old (sterling) silver pennies’ – claiming that the ‘new coins’ were issued by King Henry VIII and of equal value to the ‘old coins’ – a view the King was bound to support. The new coins did have the same ‘face value’ as the ‘old coins’ but their intrinsic value was quite different (the cause of the old woman’s anger).
The villagers economy was cash based and the old woman clearly understood that a stable village economy required stable cash. The value of coins was traditionally based on the weight of one sterling silver penny – a pennyweight (dwt). Stable cash required a shilling, or a testoon, to weigh 12 dwt, or a groat to weigh 4 dwt, or one pound (sterling silver) to weigh 240 dwt. In 1542 the King ordered The Mint to increase the copper content of the coinage, minting them as 2 thirds copper to 1 third silver (further debasing the coinage).
Defrauding the exchequer by debasing the coinage (usually by clipping) was a treasonable offence unless you were the King and could have them minted already debased. This adulteration of the coinage enabled more coins to be minted than the King’s holding of silver would normally allow, leading to The Great Debasement and rampant inflation. The consequences of coin debasement would have been well understood by the old woman, who probably intended to hoard ‘good money’. She knew that trading with the new coinage required the village to increase the prices of their merchandise if they were to keep the same level of income. Also, that the cost of any merchandise purchased by the village would increase, as inflation swept through all levels of the economy.
While coins functioned as a domestic medium of exchange between the villagers and the soldiers, precious metal coins are also ‘a store of value’ when coins are debased. If a particular kind of coin is worth more than another it will be hoarded rather than used for domestic transactions. Sir Thomas Gresham wrote of this in 1558, in what became known as Gresham’s law. As chief financial adviser to Queen Elizabeth I, he was instrumental in the withdrawal of the debased coins from circulation and the restoration of the intrinsic value of the coinage.
Gresham’s Law states that if a new coin (“bad money”) is assigned the same face value as an older coin containing a higher amount of precious metal (“good money”), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.
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