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By Root 1192 0

not understand this, and endeavor to find an answer to the riddle. But at this point, just because of their lack of acquaintance with the theory of value and prices, their inquiry takes a peculiarly unlucky turn. They do not inquire how the exchange ratios between money and other economic goods are established. This obviously seems to them quite a self-evident matter. They formulate their problem in another way: How does it come about that three twenty-mark pieces are equivalent to twenty thalers despite the fact that the silver contained in the thalers has a lower market value than the gold contained in the marks? And their answer runs: Because the value of money is determined by the state, by statute, by the legal system. Thus, ignoring the most important facts of monetary history, they weave an artificial network of fallacies; a theoretical construction that collapses immediately the question is put: What exactly are we to understand by a unit of value? But such impertinent questions can only occur to those who are acquainted with at least the elements of the theory of prices. Others are able to content themselves with references to the "nominality" of the unit of value. No wonder, then, that these theories should have achieved such popularity with the man in the street, especially since their kinship with inflationism was bound to commend them strongly to all "cheap-money" enthusiasts.

It may be stated as an assured result of investigation into monetary history that at all times and among all peoples the principal coins have been tendered and accepted, not by tale without consideration of their quantity and quality, but only as pieces of metal of specific degrees of weight and fineness. Where coins have been accepted by tale, this has always been in the definite belief that the stamp showed them to be of the usual fineness of their kind and of the correct weight. Where there were no grounds for this assumption, weighing and testing were resorted to again.

Fiscal considerations have led to the promulgation of a theory that attributes to the minting authority the right to regulate the purchasing power of the coinage as it thinks fit. For just as long as the minting of coins has been a government function, governments have tried to fix the weight and content of the coins as they wished. Philip VI of France expressly claimed the right "to mint such money and give it such currency and at such rate as we desire and seems good to us"[11] and all medieval rulers thought and did as he in this matter. Obliging jurists supported them by attempts to discover a philosophical basis for the divine right of kings to debase the coinage and to prove that the true value of the coins was that assigned to them by the ruler of the country.

Nevertheless, in defiance of all official regulations and prohibitions and fixing of prices and threats of punishment, commercial practice has always insisted that what has to be considered in valuing coins is not their face value but their value as metal. The value of a coin has always been determined, not by the image and superscription it bears nor by the proclamation of the mint and market authorities, but by its metal content. Not every kind of money has been accepted at sight, but only those kinds with a good reputation for weight and fineness. In loan contracts, repayment in specific kinds of money has been stipulated for, and in the case of a change in the coinage, fulfillment in terms of metal required. [12] In spite of all fiscal influences, the opinion gradually gained general acceptance, even among the jurists, that it was the metal value—the bonitas intrinseca as they called it—that was to be considered when repaying money debts. [13]

Debasement of the coinage was unable to force commercial practice to attribute to the new and lighter coins the same purchasing power as the old and heavier coins. [14] The value of the coinage fell in proportion to the diminution of its weight and quality. Even price regulations took into account the diminished purchasing power of money due to its debasement.