Adam Smith's Simplified Wealth of Nations, Book 4, Chapter 6b: Gold in Coinage

Chapter 6b: Gold in Coinage

17 The goldsmiths trade is very big in Great Britain. 18 It is the same case with the coin. 19 If the people who carry their gold and silver to the mint paid for the coinage, it would add value of those metals in the same way as fashion adds to the value of plate. 20 French seignorage raises the value of the coin higher than the quantity of pure gold it contains. 21 In many cases, a seignorage will remove all the profit of melting down the new coin. 22 The law for encouragement of the coinage by rendering it duty-free, was first enacted during the reign of Charles II for a limited time. 23 Before the recent recoinage, there was no seignorage. 24 If the seignorage was 5% and the gold currency was only 2% below its standard weight, the bank would have gained 3% on the bullion price. 25 If the seignorage was only 1% and the gold currency 2% below its standard weight, the bank would have lost only 1% on the price of the bullion. 26 If there was a reasonable seignorage while the coin contained its full standard weight, whatever the bank loses by the seignorage, they would gain from the bullion's price. 27 When the tax on a commodity is so moderate as not to encourage smuggling, its merchant does not pay the tax though he advances it to government. 28 A moderate seignorage would not increase bank expences. 29 When the government defrays the expence of coinage, it incurs some small expence. 30 Bank directors would probably be unwilling to impose a seignorage which promises them no gain, but only pretends to insure them from any loss. 31 The revenue allotted by Parliament for defraying the cost of coinage is only £14,000 a year. 32 Some of the foregoing reasonings might have been more properly placed in the following chapters of Book I: But as the law for the encouragement of coinage originates from those vulgar prejudices of the mercantile system, it is more proper to put them in this chapter.
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