The Great Re-coinage of 1696 was an attempt by the English Government under King William III to finally replace the hammered silver that made up most of the coinage in circulation, much of it being clipped and badly worn.
This was something that Charles II and James II needed to do but both had failed to do.
English currency was in disarray in the late 17th century and there were three main reasons for this :-
- Firstly, hand-struck (hammered) silver coins from prior to 1662 had been clipped around the edges and thus their intrinsic value (weight) had been reduced so much, that they were no longer a viable tender, especially abroad.
- Secondly, although the machine struck silver coins produced by the Royal Mint in the Tower of London (after 1662) prevented ‘clipping’ by an engraved, decorated and milled edge, they were instead forged
- casting from counterfeit moulds
- die stamping from counterfeit dies
- By 1696 forged coins constituted approx. 10% of England’s currency
- Thirdly, and most importantly, the new ‘milled’ English silver coins were more valuable as ‘silver bullion’ in Paris and Amsterdam than the face value in England
- Thus, vast quantities of coins were melted and shipped abroad
- In 1696 England was at war with France. This war was largely fought on the Continent and King William III and his armies required a constant flow of remittances from London. This created further ‘arbitrage’ opportunities
- Following Gresham’s Law, the good ‘milled’ coinage was hoarded and exported to this ‘arbitrage’ market, while the badly ‘clipped’ coinage remained in circulation
New Acts of Parliament were passed in order to create the Bank of England and protect national military security. This situation also triggered William Lowndes of the Treasury to ask the warden of the Royal Mint, Isaac Newton, for help.
- An example in the 1690s would be to clip silver coin, melt it into bullion and sell it on the Continent for gold coin, where silver fetched a higher price than in England.
- This gold coin would then be shipped back to England where the Royal Mint was paying a higher price for gold than other countries.
- This gold would be sold to the Mint for silver money and the arbitrager would make a profit.
- The result would be a shortage of silver coin for local commerce and an over-supply of gold.
Branch mints were established at Bristol, Chester, Exeter, Norwich, and York to assist with the work of re-coinage. In just five years (1696-1700), the value of silver struck was £5,106,019 compared to £3,302,193 coined in the preceding 35 years.
- Old ‘clipped’ coins were taken back by weight rather than face value
- This caused financial hardship for those in possession of them
- They could lose up to 50% of the value – a massive loss
- On 10 June 1696 a Proclamation was issued,
requiring all Receivers and Collectors of the Publick Taxes to take hammer’d Silver Money at five shillings and eight Pence an Ounce
However, the re-coinage was not a financial success.
- Silver coin production ‘tailed off’ by 1698
- Gold coins were flowing into the mint while silver coins were flowing to the commodity markets.
- It had proved impossible to maintain a system based on gold and silver because of the variation in the bullion values of each metal – a recurring theme from then onwards
- In practice, this usually meant that silver was worth more melted down into bullion
- Once again, Gresham’s Law asserted itself
- Some economists call this the “not so great” re-coinage of 1696
England eventually committed itself to a gold standard. The only way to maintain silver as coin was to reduce the silver content so that the coin’s nominal value was more than the bullion of the same weight.
- This didn’t happen until the Great Re-coinage of 1816 by George III