Adam Smith's Simplified Wealth of Nations, Book 1, Chap. 5: Coin Reformation


Book 1, Chap. 5c: Coin Reformation


31 In the English mint, a pound of gold is coined into 44.5 guineas.
  • At 252 pence a guinea, a pound of gold is worth 11,214 pence. [252*44.5]
    • An ounce of guinea therefore is worth 934.5 pence in silver. [11,214/12 troy ounces]
  • In England, no seignorage is paid on the coinage.
    • The mint will turn a pound of gold exactly into a pound of gold coin.
  • 934.5 pence is the mint price or nominal price of gold in England.
    • It is the amount of gold coin which the mint gives for a troy ounce of gold bullion.
32 Before the gold coin's reformation, an ounce of gold bullion was worth between 936-960 pence.
  • Its market price was above the mint price.
  • After the reformation, it seldom exceeded 931 pence an ounce.
    • Its market price was below the mint price.
  • The reformation raised the value of the gold and silver coins, probably proportional to all other commodities.
33 12 troy ounces of silver bullion is coined into 62 shillings [744 pence].
  • The nominal mint price of silver is therefore said to be 62 pence an ounce [744/12].
  • Before the gold coin's reformation, the market price of silver bullion was between 64-68 pence an ounce.
    • The most common price was 67 pence.
  • After the reformation, its market price fell to 63-65 pence an ounce.
  • The market price of silver bullion has fallen considerably since the reformation.
    • But it has not fallen so low as the mint price.
34 The nominal value of the English copper coin is very much above its real value.
  • The nominal value of the silver coin is somewhat below its own real value.
  • In the French and Dutch coins, an ounce of fine gold exchanges for 14 ounces of fine silver.
    • In the English coin, it exchanges for 15 ounces, or for more silver than it is worth.
  • But the real price of copper bars is not raised by the high nominal price of the English copper coin.
    • The real price of silver in bullion is not sunk by the low nominal price of the English silver coin.
  • Silver bullion still preserves its proper proportion to gold bullion for the same reason that copper bars preserve their proportion to silver bullion.
British coins


The Reformation Of The Silver Coin

35  After the silver coin's reformation, which happened in the reign of William III, the price of silver bullion stayed above the mint price.
John Locke
John Locke
  36 If the silver coin were brought back to its standard weight as the gold coin, a gold guinea would probably exchange for more silver coins than a guinea in bullion form.   37 The inconveniency might be less if the silver in the coin was rated higher to gold, in the same proportion as it is currently rated below gold, provided that:   38 934.5 pence worth of gold coin (its mint price) certainly does not have more than an ounce of standard gold.   39 A small seignorage on gold and silver coinage would probably increase the value of the gold and silver in coin above gold and silver in bullion, in proportion to the price of the seignorage.   40 Bullion prices fluctuate just like any other commodity.

But when the market price of bullion holds steadily above or below the mint price for several years, the cause is in the coin's state.

  41 Metal money is more or less an accurate measure of the amount of gold or silver in the money.

42 I define the money-price of goods as the amount of pure gold or silver for which they are sold, not the denomination of the coin.


Words: 1,315
Next: Chapter 6a: Components of Price