The Age of Copper
To this next came in course the brazen age,
A warlike offspring, prompt to bloody rage,
Not impious yet.
—Ovid, Metamorphoses I:125-27, translated by Dryden
Chapter 4 described a substantial technological change that occurred around 1550, making coins more immune to counterfeiting. As the innovation diffused across Europe, governments sought to dissociate the metallic currency from its intrinsic content, a possibility already contemplated in theory. Governments issued copper coinage, initially as a substitute for small change. For a time it circulated at much more than its intrinsic content. Variations of these experiments occurred across Europe. Some of these experiments sought to improve the efficiency of the money supply mechanism by implementing a version of Adam Smith’s thought experiment (see page 101). The orists soon drew lessons about both the viability and the dangers of fiat currency.
The coinage of pure copper
The sixteenth century saw the emergence of a technology for producing coins with high fixed costs and a large and standardized output. Aside from residual variations due to the imperfection of hand-produced dies, coins were round, sharply imprinted, and nearly identical. These characteristics presented high barriers to counterfeiting. It became possible for governments to produce pure copper coins whose intrinsic content was considerably lower than their face value.
Several countries experimented with the new technology by using it for small change.1 Spain2 began issuing token copper coinage in 1596, for reasons of efficiency, but soon embarked on a large-scale fiat money experiment that lasted several decades. England issued its first copper coinage in 1613 (Spufford 1988a, 372), but remained leery of token coinage and kept its coins nearly full-bodied. France, which first experimented with mechanized minting of small change in 1577, vacillated, and started down the road of large-scale token issues without following through. Several other countries experienced episodes of replacement or displacement of large coins by token coinage. In Russia, this resulted from an outright policy decision to replace silver with overvalued copper coins, whereas the German experience resulted from a lack of adequate small coinage, ultimately met by states vying for seigniorage revenues. 3 Some of these experiments created large inflations. We examine them in turn.
Use of copper was a response, not to shortages of silver, but to possibilities opened by new coin making technologies and new monetary theories. Others have noted the prominence of copper in seventeenth century monetary history, but explained it differently. Spooner (1972, 41) wrote that “it was not possible, actually, for silver alone to meet the total monetary demand. As a result, copper achieved exceptional success, promoted almost to the status of a precious metal. … There was a temptation, and perhaps an obligation, to use [coins of pure copper] when bullion was relatively scarce.” Our interpretation of the seventeenth century “Age of Copper” differs. Policy makers were free to choose whether or not to use copper, and different policy makers made different choices. At least in Castile, for a number of years, they managed to substitute inconvertible tokens for silver coins without causing inflation. But ultimately inflation caused the Castilian authorities to restore more full-bodied coins.
Experiments in many countries
The next five chapters describe a sequence of experiments with token copper coins. The earlier experiments were ultimately judged to have failed, because they replaced the problem of shortages of small coins with a greater evil of a surplus of coins that caused inflation. The failures were associated either with an inadequate appreciation of the importance of making token coins convertible, or a lack of resources to make them convertible. In response to those failures, governments abandoned token coins for many decades. Nevertheless, as chapters 16 and 17 will describe, the British government came to allow private citizens to issue tokens, some of which were convertible. These chapters describe the interaction of private and government measures to supply small coins in Britain, and how in important respects the private market taught the government the standard formula. Chapters 17 and 18 will tell how the standard formula ultimately prevailed, and how its triumph was connected with the rise of the gold standard and the demise of bimetallism.
1 There had been occasional issues of pure copper coinage before. We noted the example of Venice on page 180. The Spanish Low Countries minted pure copper coins in 1543. The value of the copper represented around 20% of the face value (Recueil des Anciennes Ordonnances des Pays Bas 1907, 448, for the coin specifications, Parenti 1939, 57* for copper prices). Curiously, the reason given for this innovation was the widespread counterfeiting of existing billon denominations.
2 Or more precisely, Castile. The kingdom of Aragon, while part of Spain, had its own monetary system, and it was not affected by the events in neighboring Castile.
3 Although the new minting technology was not clearly a factor in the German and Russian cases, both showed governments to be grappling with the consequences of circulating fiat coinage.