Luckily, the English had a really bright gentleman called Sir Isaac Newton who was Master of the Mint in 1699 (yes he was the guy who helped us understand gravity!). He made it high treason to debase currency, which meant that anyone caught could be severally punished.
As part of his job, he disguised himself as a barkeeper to snoop around to catch debasers, eventually convicting twenty-eight people. He also had expert engravers come in to design coins with beveled edges and detailed engravings so it was easy to tell when a coin was debased.
However, the people were shrewd. Rather than clipping the coins, they used files to take even smaller amounts of metal off the coins. Others placed a bunch of coins in a leather bag and shook the bag. The coins hitting against each other would create gold dust that could be collected. This was called sweating and was more difficult to catch because it emulated the process of the natural wear of coins over time.
There was a solution to the problem of debasing. It’s what the Chinese merchant did. A government could issue papers that could be redeemed at any time for gold or silver. A person could clip, file, or shake the papers as much as they wanted, but they are just going to get the same amount of gold back. If you destroy the paper then you get nothing.
This is the idea behind the gold standard. Coins of precious metal, like gold, were minted, but paper representing metal was used for day-to-day transactions.
The gold standard made it very easy to complete transactions across state or country borders because regardless of the money used to represent the gold, everyone knew what the currency would buy. The gold standard met all the criteria of a viable currency and most major economies in the world adopted it by the late 1800s.
“Will Cryptocurrency be the Money of the Future?”
- Listen to Cryptocurrency e-book podcast – read by Keith Dunford, Voice Over Productions
- Cryptocurrency ebook by Morgan Franklin Fellowship
- Read blog series – “Cryptocurrency – Money of the Future”
A Journey to Personal Financial Success
At Morgan Franklin Fellowship (MFF), we support the concept of financial freedom – by teaching participants how to save by paying themselves first, invest for their future and grow their net worth.
Learning how money works and how to talk about money with others are the first steps towards recognizing an individual’s lifelong financial goals. Our online programs, podcasts, blogs, and book reviews and resources are designed to help you learn the concepts, rules and vocabulary of money, finance and investing.
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Our Standards of Financial Literacy – Learning about money series is engaging, full of interesting information, and easy to navigate. Adapted from the National Standards for Personal Financial Education developed by the Council for Economic Education (CEE), this robust curriculum features six short lessons on such important topics as earning income, understanding the value of saving and using credit. When completed, this program lays the foundation for becoming an MFF Fellow.
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