Having taxed his kingdom into penury and borrowed more than he could pay back, Henry VIII flailed around looking for a way of raising more cash so that his extravagant spending could continue unabated.
The coinage was in silver. Even during the height of the Crown’s difficulties in the previous century, monarchs had (in the main) avoided tampering with the amount of silver in the coins. Currency was, give or take a small fraction, what it was worth at face value, and everyone whether buyers at home or merchants abroad knew the value of English coin.
It had been tried before, the last time being undertaken by Edward IV, but that had been back in 1464-5 and on a different scale. Henry himself had tinkered back in 1526. This time, however, the process would last a decade and well into the next reign (indeed, with the separately-run Irish coinage the policy would last until Elizabeth’s accession).
Its impact was serious. Inflation followed, as people doubted the intrinsic value in any coin. The relative value of gold in relation to silver coins tumbled, leading to a flight of the former and an influx of the latter. Bad money drove out surviving good. Specie not species, ie demanding payment in a recently minted coin which had less silver in it. Not payment in chickens. Face values of newly minted coins were not respected overseas, meaning that English merchants who used them operated at a loss. Crown debts became worth less than private debts, since the Government’s agents could force payment on creditors in a specie of their choosing.
Not for nothing was it known as the Great Debasement. One economist has suggested that over one and a quarter million pounds of the real value of the bullion was lifted by the mint, as four fifths of the silver value and a quarter of the gold were removed. In a sense, it was the Quantitative Easing of its times. As stealth taxes go, it proved an enduring spectre on private wealth in England and Ireland for decades, requiring major monetary reform to overcome.
Lesson from history: If you run an extended deficit and blow all your savings, sooner or later you will run out of ways to pay for it.
from "A Fate Worse than Debt" by Lee Rotherham
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