It is desirable to trace out what effect such a charge would have. It would be--
'tantamount to an enhancement of the purchasing value of the coinage in the country of its currency. It immediately augments the value of the coinage as expressed in its exchange value for bullion, unless the weight of pure metal in the coinage be simultaneously reduced to the same extent as the amount of the seigniorage. The following may serve as a test example, and avoid the necessity for the use of fractions:--"What would be the effect of a seigniorage of 1 per cent, in a country where it is imposed for the first time?" It would be this: that whilst the pieces of current coin before the imposition of the seigniorage were exactly worth their weight in uncoined bullion of the same intrinsic fineness, they would, after its imposition, be worth 1 per cent, more than their weight in bullion of the like standard.'--_Mr. Hendriks' Evidence, Royal Commission on International Coinage_, p. 142.
The sovereign, thus diminished in weight, would still possess exactly the same purchasing power--within the limits of the country--as it previously had. Beyond those limits, as shown by the practice of the French mint authorities, it would still retain its value. It would not be, as the present sovereign now is, undervalued in consequence of the mint charges of other nations.
An objection may be, and has already been, made to the alteration--that such a change would be unfair to all those creditors who had made contracts in the old coin, and would be repaid in the new. This objection is sufficiently disposed of by the fact that, as mentioned before, the purchasing power of the new coin will be equal to that of the old.
If any doubt existed, a further security might be given under all circumstances, by adopting the plan recommended by Colonel Smith, the late Master of the Calcutta Mint. His proposal is, 'that the new sovereign shall be changeable for gold bullion at the present price.' This would cause the value of the new coin to remain equal with that of the present coin, exactly as the value of the existing silver coinage is maintained. The present shilling, even when of full weight, is by no means worth its weight in the metal of which it is made. The pound troy of standard silver is, and has been in England, since 1817, coined into sixty-six shillings. The value of the shilling, thus debased, is maintained at the proper level by the coin being limited, as a legal tender, to 42s. by tale. The result is obvious. Silver of the value of something like 18s. does service for 20s. What is more, this has been the case for years, and no one has ever been injured by it. And the same effect would surely follow if Colonel Smith's plan were carried out. If the holder of 100 sovereigns were to desire to convert them into gold, he would take them to the Bank of England, who would give, as now, a certain quantity of bar gold of standard fineness, at £3 17s. 10½d. per oz. The sovereign would, to a certain extent, become a 'token' coin; that is to say, each sovereign would, as the shilling is now, be worth something less than the stamped value. But it would, within the limits of the convention, that is, within the limits of the civilized world, be current exactly to the extent of its nominal value; and any one desiring to employ it beyond the limits of the Convention would be placed in exactly the position in which he is now, by simply taking his gold coins to the Bank of England and exchanging them for bar gold. A further advantage would arise from this diminution in weight of the sovereign. As the sovereign is worth a fraction over ten rupees in India, it follows that the internationalization of the English sovereign, and the reducing it by about twopence, to make it equal with twenty-five francs or five dollars, would immediately rectify the present difference between the British sovereign and the 10-rupee piece; and the rupee, the British florin, and the Australian florin would, in the international scheme of coinage, ultimately become absolutely identical, so far at least as gold coinage is concerned.[4]