A debasement of coinage is the practice of lowering the intrinsic value of coins, especially when used in connection with commodity money, such as gold or silver coins, while continuing to circulate it at face value. A coin is said to be debased if the quantity of gold, silver, copper or nickel in the coin is reduced.
In Roman currency, the value of the denarius was gradually decreased over time as the Roman government altered both the size and the silver content of the coin.[1] Originally, the silver used was nearly pure, weighing about 4.5 grams. From time to time, this was reduced. During the Julio-Claudian dynasty, the denarius contained approximately 4 grams of silver, and then was reduced to 3.8 grams under Nero. The denarius continued to shrink in size and purity, until by the second half of the third century, it was only about 2% silver, and was replaced by the Argenteus.
Weight of akçe in grams of silver and index.[2]
| Year | Silver (g) | Index | |
|---|---|---|---|
| 1450–60 | 0.85 | 100 | |
| 1490–1500 | 0.68 | 80 | |
| 1600 | 0.29 | 34 | |
| 1700 | 0.13 | 15 | |
| 1800 | 0.048 | 6 |
Debasement lowers the intrinsic value of the coinage and so more coins can be made with the same quantity of precious metal. If done too frequently, debasement may lead to a new coin being adopted as a standard currency, as when the Ottoman akçe was replaced by the kuruş (1 kuruş = 120 akçe), with the para (1/40 kuruş) as a subunit. The kuruş in turn later became a subdivision of the lira.
See also: Coin counterfeiting and Counterfeit money.
An administrative method to debase currency is for the mint to start issuing coins of a certain face value, but with less metal content than previous issues. There will be an incentive to bring the old coins to the mint for re-minting – see Gresham's law. A revenue, called seigniorage, is made on this minting process.
When done by an individual, precious metal was physically removed from the coin, which could then be passed on at the original face value, leaving the debaser with a profit. This physical debasement was effected by several methods, including clipping (shaving metal from the coin's circumference) and sweating (shaking the coins in a bag and collecting the dust worn off).
Until the mid-20th century, coins were often made of silver or (rarely) gold, which were quite soft and prone to wear. This meant coins naturally got lighter (and thus less valuable) as they aged, so coins that had lost a small amount of bullion would go unnoticed. Modern coins used as currency are made of hard, cheap metals such as steel, copper, or a copper-nickel alloy, reducing wear and making it difficult and unprofitable to debase them.
Clipping is the act of shaving off a small portion of a precious metal coin for profit. Over time, the precious metal clippings could be saved up and melted into bullion or used to make new coins.[3] [4]
Coin clipping was usually considered by the law to be of a similar magnitude to counterfeiting, and was occasionally punished by death,[3] [5] a fate which befell English counterfeiters Thomas Rogers and Anne Rogers in 1690.[6] Even among pirates, clipping coins was considered a serious breach of trust. Henry Avery's pirate fleet attacked the treasure ship Gunsway in 1695 and netted one of the largest pirate captures in history. When fellow pirate William May's crew were found to have traded clipped coins to Avery's crew, Avery took back nearly all the treasure he had shared with May and his men and sent them away.[7]
Coin clipping is why many coins have the rim of the coin marked with stripes (milling or reeding), text (engraving) or some other pattern that would be destroyed if the coin were clipped. This practice is attributed to Isaac Newton, who was appointed Master of the Royal Mint 1699.[8] Although most modern fiat coins have no value, modern milling can be a deterrent to counterfeiting, an aid to the blind to distinguish different denominations, or purely decorative.
In the process of sweating, coins were placed in a bag and shaken. The bits of metal that had worn off the coins were recovered from the bottom of the bag. Sweating tended to wear the coin in a more natural way than clipping, and so was harder to detect.
If the coin was large, a hole could be punched out of the middle, and the face of the coin hammered to close up the hole. Or the coin could be sawn in half, and a plug of metal extracted from the interior. After filling the hole with a cheaper metal, the two halves would be welded back together again. Verbal references to plugged quarters and plugged dimes eventually yielded the common phrase "not worth a plugged nickel" (or 'plug nickel', or even a plugged cent), emphasizing the worthlessness of such a tampered coin.[9]