The Great Debasement

The Great Debasement (1544–1551) was a currency debasement policy introduced in 1544 England under the order of Henry VIII which saw the amount of precious metal in gold and silver coins reduced and in some cases replaced entirely with cheaper base metals such as copper. Overspending by Henry VIII to pay for his lavish lifestyle and to fund foreign wars with France and Scotland are cited as reasons for the policy's introduction. The main aim of the policy was to increase revenue for the Crown at the cost of taxpayers through savings in currency production with less bullion being required to mint new coins. During debasement gold standards dropped from the previous standard of 23 karat to as low as 20 karat while silver was reduced from 92.5% sterling silver to just 25%. Revoked in 1551 by Edward VI, the policy's economic effects continued for many years until 1560 when all debased currency was removed from circulation.

Background

In the 16th century, after suffering from the effects of the Black Death, Europe was in the middle of an economic expansion due in part to increased trade and newly discovered deposits of precious metals from the New World. However, England was suffering with financial difficulty. In the 1540s, Henry VIII began a campaign of excessive overspending of government money on his lavish lifestyle and to pay for wars with France and Scotland.^[1] In order to fund these, Henry had already raised great sums through the Dissolution of the Monasteries, selling off the Crown's land, and by raising taxes; however, more money was still required. In May 1542, Henry issued a secret indenture whereby he ordered that the amount of gold and silver within the country's coinage be secretly reduced and for the previously unsuccessful Testoon coin to be reproduced. For the next two years the newly minted debased coins, including the reintroduced Testoon, were stockpiled in Jewel Tower in the Palace of Westminster, while production of coins at the current standard continued.^[2] By May 1544, a lack of bullion arriving at the mint prompted the government to issue the secret indenture and allow the debased coins to enter into general circulation. Two months later, in July 1544, merchants of the Low Countries discovered that newly minted silver groats had become debased and begun offering a lower price for them. The introduction of these debased coins caused coins at similar face value but with higher precious metal content to disappear from circulation, in line with Gresham's law.

Further debasement under Henry VIII

Gold and silver standards continued to drop under Henry VIII: in 1545 gold was reduced to 22 karat and again to 20 karat in 1546. Silver content also dropped numerous times from the previously fine silver (92.5%) to 50% in 1549 and again to 33% in 1546. Copper was used as a substitute for silver in the coins.^[3] Henry's stockpiled testoons were covered in a thin layer of silver which had a tendency to wear off, particularly over the protruding nose of his portrait, revealing the copper underneath, so much so that Henry was nicknamed Old Coppernose.^[4]

Debasement under Edward VI

After Henry VIII's death in 1547, nine-year-old Edward VI was crowned king. The debasement policy continued under Edward; however, in 1548 an attempt was made to improve fineness by increasing gold fineness to 22 karat (a standard that became known as crown gold), at the cost of reducing coin size. Silver content, by contrast, reached a new low of just 25% in 1551. The debasement policy was officially revoked in October 1551, and silver fineness was returned to the pre-debasement standard of 92.5% fine silver.

Coins

Over the course of the seven years that the debasement occurred, gold and silver content in coins fluctuated, as well as the coins' weights. During debasement the following coins circulated.

Sovereign
Half sovereign
Angel
Half-angel
Quarter-angel
Crown
Half crown
Testoon
Groat
Half groat
Penny
Halfpenny
Farthing

Penny

During debasement the silver content of the penny dropped by more than 83%.^[5]

	1509–1526	1526–1544	1544–1547	Ref.
Weight	12 gr	10	10 gr	^[6]
Fineness	11 oz 2 dwt	11 oz 2 dwt	6-4 oz	^[6]

Groat (fourpence)

1544 the fineness of the silver was steadily debased from the normal .925 fine down to .333 fine.

	1509–1526	1526–1544	1544–1547	Ref.
Weight	48 gr	42 gr	40 gr	^[6]
Fineness	11 oz 2dwt	11 oz 2dwt	6-4 oz	^[6]

Angel

	1509–1526	1526–1544	1544–1547	Ref.
Weight	80 gr	80 gr	80 gr	^[6]
Fineness	23 ct	23 ct	23 ct	^[6]

Half Sovereign

Half-sovereigns were produced in four different standards.

	Standard 1	Standard 2	Standard 3	Standard 4	Ref.
Issue date	1544–1545	1545–1546	1546–1551	1549–1550	^[7]
Weight	6.48 g	6.22 g	6.22 g	5.49 g
Fineness	23 karat (.958)	22 karat (.916)	20 karat (.833)	22 karat (.916)

Sovereign

Sovereigns like that half sovereigns were also produced in four different standards.

	Standard 1	Standard 2	Standard 3	Standard 4	Ref.
Issue date	1544–1545	1545–1546	1546–1547	1549–1550	^[8]
Weight	12.96 g	12.44 g	12.44 g	10.98 g
Fineness	23 karat (.958)	22 karat (.916)	20 karat (.833)	22 karat (.916)

Restoration under Elizabeth I (1558–1603)

By the time Elizabeth I came to power in 1558, the quality of England's coinage had already greatly affected both confidence in the monarchy as well as the country's trading relations, with foreign merchants refusing to accept the debased currency as payments. In concert with her advisers William Cecil and Thomas Gresham the queen became convinced that these problems could be solved by restoring England's coinage to its previously high standards, by removing debased currency from circulation. Coins with higher fineness were often hoarded, while debased legal tender currency was used to pay debts, a concept that in the 19th century would be referred to as Gresham's Law, though it was not formulated as such by Gresham. In preparation for the removal of debased coinage, the government enacted a law which forbid "good" coinage from entering foreign markets and ended the legal tender status of all debased currency.

In 1560, under the instructions from the queen, Thomas Gresham withdrew all debased coinage from circulation and had the withdrawn coins melted down and replaced with newly minted coins with high fineness. An estimated £50,000 was gained by the crown in the process. In 1561 milled coinage was introduced into England by French moneyer Eloy Mestrelle replacing the often crude hammer struck coins.

References

^ Robinson, Bruce (17 February 2011). "An Overview of the Reformation". BBC. Retrieved 3 April 2017.
^ "The Testoons of Henry VIII". AMR Coins. Retrieved 2 April 2017.
^ Li, Ling-Fan (2009). After the Great Debasement, 1544-51: Did Gresham's Law Apply?. London School of Economics. p. 9.
^ Owen, James (19 December 2012). "Old Coppernose – Quantitative easing, the medieval way". Royal Mint. Retrieved 3 April 2017.
^ Knafo, Samuel (2013). The Making of Modern Finance: Liberal Governance and the Gold Standard. Taylor & Francis Ebooks. p. 78. ISBN 9781134066155.
^ ^a ^b ^c Mackie, John Duncan (1963). The Earlier Tudors, 1485-1558. OUP Oxford. p. 606. ISBN 978-0198217060.
^ "Tudor Half-Sovereign". Royal Mint. Retrieved 3 April 2017.
^ "Tudor Sovereign". Royal Mint. Retrieved 4 April 2017.

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