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Debasement
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. 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.
Throughout Thai history, the silver content of the Siamese currency was quite pure, hovering around 0.900 fineness ever since its adoption in 1238 AD. There were various debasements of the silver content of these coins. Initially, the composition was 0.900 fineness, which was debased to 0.800 in 1915. In 1918, during World War I, silver prices surged, leading to a change in the composition to 0.650. In 1919, the silver percentage dropped further to 0.500. After the war, in 1919, the composition returned to 0.650. In 1917, the price of silver rose and exceeded the face value of silver coins. The coins were then melted down and sold. The government solved this by changing the pure silver coin to alloy. Rama VI eventually forbade exports of Siamese coins. In 1918, the usage of 1-baht coins was nullified and 1-baht banknotes were introduced. Coins were recalled and kept as a national reserve, while the lower denominated silver coin were sill minted, which was seen when Rama VII coin was produced in two silver coin: 50 Satang and 25 Satang in 0.650 fineness.
After World War II, the silver content of the coin was debased to 0.030, and was subsequently depegged from silver after 1962.
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.
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).
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Debasement
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. 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.
Throughout Thai history, the silver content of the Siamese currency was quite pure, hovering around 0.900 fineness ever since its adoption in 1238 AD. There were various debasements of the silver content of these coins. Initially, the composition was 0.900 fineness, which was debased to 0.800 in 1915. In 1918, during World War I, silver prices surged, leading to a change in the composition to 0.650. In 1919, the silver percentage dropped further to 0.500. After the war, in 1919, the composition returned to 0.650. In 1917, the price of silver rose and exceeded the face value of silver coins. The coins were then melted down and sold. The government solved this by changing the pure silver coin to alloy. Rama VI eventually forbade exports of Siamese coins. In 1918, the usage of 1-baht coins was nullified and 1-baht banknotes were introduced. Coins were recalled and kept as a national reserve, while the lower denominated silver coin were sill minted, which was seen when Rama VII coin was produced in two silver coin: 50 Satang and 25 Satang in 0.650 fineness.
After World War II, the silver content of the coin was debased to 0.030, and was subsequently depegged from silver after 1962.
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.
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).