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Working paper 417

John H. Munro, "The Coinages and Monetary Policies of Henry VIII (r. 1509-1547): Contrasts between Defensive and Aggressive Debasements", 2010-11-26
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Abstract: The renown or infamy of Henry VIII's Great Debasement (1542 - 1553), which the government of
his successor, Edward VI, continued for another six years after his death, has unfairly obscured his earlier
and far more modest coinage changes and public-spirited monetary policies. Furthermore, despite the
renown of and the ample literature devoted to the Great Debasement this unusual episode in early-modern
monetary history still lacks a fully accurate exposition and explanation. For example, did it begin in 1542
or 1544? How did it work, and why and how did it prove to be successful or profitable'. This study seeks
to provide such an accurate exposition and explanation, and thus to provide a proper contrast with Henry
VIII's earlier coinage changes and monetary policies while also providing a brief comparison with those
of Edward IV, whose debasements of 1464-65 were the last undertaken before those of Henry VIII.
The subject of coinage debasements remains an arcane subject, ill understood not only by students
of European history but also by many of the historians and economists who have published on topics in
monetary history. A major problem is that historians have not clearly asked one fundamental question: were
debasements fundamentally aggressive or defensive in nature? The second question to be asked is the nature
of the goals sought from debasement: were they fundamentally monetary or fiscal? The fiscal aspect of
coinage debasements is derived from the fact that in pre-modern western Europe minting was a princely or
government monopoly from which the prince or government derived a fee known as seigniorage. The central
thesis of this study is that aggressive' coinage debasements were undertaken primarily as fiscal policies to
increase mint profits: profits from an increased mint output and from a increased seigniorage rate. In most,
of not all cases, the fiscal motive was to finance warfare, even if indirectly. As this study shows, aggressive
coinage debasements worked best if the offending mint could lure coinage and bullion from not only
domestic but also foreign sources. Since neighbouring lands were thus affected and afflicted by such coinage
debasements, their rulers were so often forced to respond with retaliatory if purely defensive coinage
debasements, to protect their own mints and also their domestic money supplies from the effects of
Gresham's Law. Indeed, some variant of Gresham's Law can be found as an excuse for coinage debasements
in western Europe, especially from the fourteenth to sixteenth centuries so that it is often difficult to tell
from an ordinance whether a debasement is aggressive or defensive. The other defensive aspect of such
coinage debasement was the consequence of long-term wear and tear', clipping', sweating', counterfeiting,
and other factors that over time diminished the mean precious metal contents of the circulating coinage. The
result was that legal-tender coins lost their agio over bullion an agio justified by circulating coins at tale',
rather than measuring them, thus saving on transaction costs. The loss of that agio prevented bullion from
being delivered to the mints; and the consequences were another variant of Gresham's Law (as examined in
this paper).
In sum this paper explains why Henry VIII's two related coinage debasements of August and
November 1526 were purely defensive, and as such monetary policies, while the Great Debasement was an
aggressive fiscal policy, and one highly effective in financing Henry VIII's wars with France and Scotland.
The Great Debasement was not, however, medieval England's only aggressive debasement, for the same can
be shown of Edward IV's debasements of 1464-65. The proof for these assertions lies in the mint accounts
and the evidence for the mintage fees: low with purely defensive debasements; high with aggressive
debasements (a factor that would not have been true if aggressive debasements were monetary in their
motivations). Finally, this study also presents proof that the extent of inflation during the Great Debasement
(1542-1553) was less than that anticipated by monetary formulae, so that inflation did not nullify the
merchants' gains from spending debased coins (a reason some have cited to challenge the logic and utility
of medieval coinage debasements).

Keywords: coinage debasements, gold, silver, bullion, bullionist policies, mints, mint outputs, seigniorage, brassage, inflation, deflation, fiscal policies, warfare, taxation

JEL Classification: E31; E41; E42; E51; E52; E62; F33; H11; H27; N13; N23; N43