The Wealth of Nations Adam Smith (best novels to read for beginners txt) 📖

of alloy. The mark of standard gold, therefore, is worth no more than about six hundred and seventy-one livres ten deniers. But in France this mark of standard gold is coined into thirty Louis-d’ors of twenty-four livres each, or into seven hundred and twenty livres. The coinage, therefore, increases the value of a mark of standard gold bullion, by the difference between six hundred and seventy-one livres ten deniers, and seven hundred and twenty livres; or by forty-eight livres nineteen sous and two deniers.

A seignorage will, in many cases, take away altogether, and will, in all cases, diminish the profit of melting down the new coin. This profit always arises from the difference between the quantity of bullion which the common currency ought to contain, and that which it actually does contain. If this difference is less than the seignorage, there will be loss instead of profit. If it is equal to the seignorage, there will neither be profit nor loss. If it is greater than the seignorage, there will indeed be some profit, but less than if there was no seignorage. If, before the late reformation of the gold coin, for example, there had been a seignorage of five percent upon the coinage, there would have been a loss of three percent upon the melting down of the gold coin. If the seignorage had been two percent there would have been neither profit nor loss. If the seignorage had been one percent there would have been a profit, but of one percent only instead of two percent. Wherever money is received by tale, therefore, and not by weight, a seignorage is the most effectual preventative of the melting down of the coin, and, for the same reason, of its exportation. It is the best and heaviest pieces that are commonly either melted down or exported; because it is upon such that the largest profits are made.

The law for the encouragement of the coinage, by rendering it duty-free, was first enacted, during the reign of Charles II1048 for a limited time; and afterwards continued, by different prolongations, till 1769, when it was rendered perpetual.1049 The bank of England, in order to replenish their coffers with money, are frequently obliged to carry bullion to the mint; and it was more for their interest, they probably imagined, that the coinage should be at the expense of the government, than at their own. It was, probably, out of complaisance to this great company that the government agreed to render this law perpetual. Should the custom of weighing gold, however, come to be disused, as it is very likely to be on account of its inconveniency; should the gold coin of England come to be received by tale, as it was before the late re-coinage, this great company may, perhaps, find that they have upon this, as upon some other occasions, mistaken their own interest not a little.

Before the late re-coinage, when the gold currency of England was two percent below its standard weight, as there was no seignorage, it was two percent below the value of that quantity of standard gold bullion which it ought to have contained. When this great company, therefore, bought gold bullion in order to have it coined, they were obliged to pay for it two percent more than it was worth after the coinage. But if there had been a seignorage of two percent upon the coinage, the common gold currency, though two percent below its standard weight, would notwithstanding have been equal in value to the quantity of standard gold which it ought to have contained; the value of the fashion compensating in this case the diminution of the weight. They would indeed have had the seignorage to pay, which being two percent their loss upon the whole transaction would have been two percent exactly the same, but no greater than it actually was.

If the seignorage had been five percent and the gold currency only two percent below its standard weight, the bank would in this case have gained three percent upon the price of the bullion; but as they would have had a seignorage of five percent to pay upon the coinage, their loss upon the whole transaction would, in the same manner, have been exactly two percent.

If the seignorage had been only one percent and the gold currency two percent below its standard weight, the bank would in this case have lost only one percent upon the price of the bullion; but as they would likewise have had a seignorage of one percent to pay, their loss upon the whole transaction would have been exactly two percent in the same manner as in all other cases.

If there was a reasonable seignorage, while at the same time the coin contained its full standard weight, as it has done very nearly since the late re-coinage, whatever the bank might lose by the seignorage, they would gain upon the price of the bullion; and whatever they might gain upon the price of the bullion, they would lose by the seignorage. They would neither lose nor gain, therefore, upon the whole transaction, and they would in this, as in all the foregoing cases, be exactly in the same situation as if there was no seignorage.

When the tax upon a commodity is so moderate as not to encourage smuggling, the merchant who deals in it, though he advances, does not properly pay the tax, as he gets it back in the price of the commodity. The tax is finally paid by the last purchaser or consumer. But money is a commodity with regard to which every man is a merchant. Nobody buys it but in order to sell it again; and with regard to it there is in ordinary cases no last purchaser or consumer. When the tax upon coinage, therefore, is so moderate as not to encourage false coining, though everybody advances the tax, nobody finally pays it; because everybody gets