Gold Standard = Fiat In Disguise: A Case for Bimetallism

Copyright 2002 J.N. Tlaga

In his occasional paper THE RETURN TO GOLD 1925, Cambridge University scholar, Donald E. Moggridge, tells us that it was Sir Isaac Newton, who, back in 1717, set the price of gold at 77 shillings 10 and 1/2 pence per standard ounce (22-carat, .9167 fine), a price that endured for two hundred years.

In reality, Sir Isaac, serving as Master of the Mint, recommended that the gold coin of the realm (Guinea) be valued at 20 shillings 8 pence (which corresponded with 76 shillings 7.6 pence per 22-carat ounce), but Parliament rejected his odd number and set the guinea at 21 shillings even ( This of course compelled Sir Isaac to increase his mint price of gold by 1 shilling 2.9 pence in order to make 89 guinea coins out of two troy pounds of 22-carat gold at Parliament’s price. Thus it was Parliament, not Sir Isaac, who set the price of gold at 77s 10.5d, which was destined to preside over the rise and fall of an aberrant monetary system known as gold standard.

Pound Sterling, England’s monetary unit, containing 20 shillings, with 12 pennies (pence) to each shilling, was obviously a misnomer. It has been over seven hundred years since the last time 240 pennies were made out of each troy pound of sterling silver (37/40 or .925 fine). From the times of Edward I on, English kings had been making more and more pennies out of the same troy pound of sterling silver. In times of Elizabeth I, one troy pound of sterling silver was already yielding 744 pennies, or 62 shillings. The silver content of one penny became so small, that the smallest coin made out of sterling silver was Threepence (1/4 shilling), whose weight was a bit short of the weight of the original silver penny Alfred the Great inherited from Charlemagne (slightly less than 2/3 of US silver dime). “One-Third Pound Sterling” would thus be more appropriate name for “Pound Sterling”.

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via Gold Standard = Fiat In Disguise.

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