Isaac Newton invented the legend of the fallen apple for his niece. The Law of the Corrupted Coin A Frenchman from Paris
Artem Efimov
Notes of an economic historian
Isaac Newton and the Great Recoinage of 1696
Sir Isaac Newton is known primarily as a great mathematician and a great physicist, the creator of systems of differential and integral calculus and the author of the basic laws of mechanics, including the law of universal gravitation. Few people know, however, that he still played a significant role in the development of the British monetary system, carrying out the "Great Recoining" of old handmade silver coins for new, machine-made ones. How England switched to new coins and what role Newton played in this, tells the historian Artem Efimov, host of the telegram channel "Piastres!" .
Sir Isaac Newton
John McGovern / Wikimedia commons
French from Paris
Almost on any modern coin there is a edge - a pattern on the edge. Now it is more of a decorative element, but in the 17th century, when the coinage became mandatory in England, it made great practical sense.
The fact is that counterfeiters often cut off the edges of the coins, and made new coins from the scraps. The edged edge solved this problem: cutting damaged the edge, it was immediately noticeable, and such a coin was no longer accepted. A very complex machine was required for the wrapping. There is a legend that it was invented by Sir Isaac Newton when he was in charge of the Tower Mint (1696–1727). Newton's activities as keeper of the mint is a separate interesting topic, more on that below. For the time being, we confine ourselves to a refutation: no, he did not invent the mill mill.
It was built in England by the Frenchman Pierre Blondeau in 1662.
In the 1640s, Blondeau served at the mint in Paris. In 1649, after the execution of the English King Charles I and the proclamation of the English Republic, he was invited to London in order to transfer the Tower Mint to machine production. Local moneymakers, defending hand coinage (the source of their profits), launched a campaign against Blondeau.
In 1656, the English fleet pulled off a brilliant operation to capture the Spanish "golden fleet", which was transporting a large cargo of silver from the New World to Cadiz. This silver was handed over to Blondeau, who, by means of his machines, minted it into English coins of excellent quality.
Oliver Cromwell, Lord Protector of the English Republic and patron of Blondeau, died in 1658. A political crisis followed, culminating in 1660 with the restoration of the monarchy (Charles II, the son of the executed king, took the throne). Blondeau fled to France, his cars were taken to Edinburgh. But very soon it became clear that the hand-minted money that returned was much worse than those that Blondeau had made, and the Frenchman was called back.
English silver penny minted in the reign of John the Landless (early 13th century)
It was then, in the era of the Restoration, that Blondeau began to roll coins: small ones - just notches, large ones - with the inscription “Decus et tutament” (“Decoration and Protection”).
Blondo worked for the brassage - a share from the coinage. For the production of silver coins, he received 3 pence per pound, gold - 12 pence per pound (1 pound = 240 pence).
Neither the Blondeau reform nor the Great Recoining of the 1690s under the leadership of Newton saved the English silver standard - in the 18th century England (more precisely, Great Britain) switched to gold. But English technical achievements in monetary matters made a great impression on the rest of the world - in particular, Peter I, being with the Great Embassy in London in 1698, visited the Tower Mint three times and, in all likelihood, talked with Newton there. There are suggestions that English money-making machines were tried to be introduced in Moscow as early as the 1650s, under Alexei Mikhailovich.
money from nothing
Alchemy and financial policy have a deep philosophical connection. The first readers of Marco Polo's book about a journey to China (XIII century) could not fail to notice that the paper money he described is, in fact, the embodiment of the dream of alchemists: base materials acquire the power of gold, values - credit - arise from obligations and agreements, from words - in fact, out of nothing.
In 1661, the Swedish king Charles X, on the advice of a certain Riga resident Johann Palmstruh, began to issue the first paper money in Europe - “credit dalers”. Their issue was controlled by the Stockholm Bank, headed by Palmstruh. The bank guaranteed the exchange of "credit dealers" for specie on demand. The enterprise collapsed already in 1668: the bank issued paper money for a much larger amount than it had coins. After that, the Riksdag - the Swedish parliament - took control of the issue of money from the king.
In 1716–1720, the so-called “Lou system” existed in France, based, in general, on the same “alchemical” principle: the creation of new money was represented by the creation of new values, new capital. When it was discovered that this new money was not backed by any real value, that money and capital are different things, the system collapsed, plunging France into a financial crisis. We will certainly talk about this in more detail.
Apparently, Sir Isaac Newton took up the work at the Royal Mint in the Tower with such enthusiasm precisely because he considered this work a continuation of the alchemical Great Work, to which he devoted almost more of his time and creative energy than to the development of differential and integral calculus. , the formulation of the theory of light and the discovery of the laws of mechanics.
Great Recoining
Newton became Keeper of the Tower Mint in 1696. He was over 50, he had already done everything: thirty years had passed since the development of differential and integral calculus, twenty years had passed since the theory of light and color, almost ten years had passed since the publication of the laws of mechanics and the law of universal gravitation. Recently, Newton experienced a severe nervous illness: depression, insomnia, indigestion, bouts of paranoia - probably the consequences of mercury poisoning during alchemical experiments or self-medication. Friends were looking for a sinecure for him so that the fragile genius could retire.
One of these friends was Charles Montagu, the first Earl of Halifax, president of the scientific Royal Society, Newton's Cambridge classmate, the de facto head of British public finance, the founder of the Bank of England - not the first central bank in the world, but the first truly effective monetary authority.
The finances of England were in a deplorable state in 1696. Since William III, the Stadtholder (head of government) of the Netherlands, the leader of European Protestants and the worst enemy of Louis XIV, took the throne in 1688 as a result of the Glorious Revolution, the country has been at war incessantly. It was expensive. The old coins minted before the introduction of machine coinage and milling in 1662 remained in circulation. These old coins were, as a rule, cut off at the edges, and craftsmen made new money from the scraps, also underweight. Plus counterfeiting: up to 10 percent of the coins in circulation were counterfeit. Silver as a commodity was more expensive than as English coins: they were bought up, melted down, taken to Amsterdam or Paris and sold there.
England entered this crisis as a comparatively backward European country: she did not possess the military might of France, the colonial might of Spain, or the economic might of the Netherlands; it was politically unstable, it was torn apart by religious conflicts, its silver currency was weak. A couple of decades later, the country (already Great Britain) emerged from the crisis as a powerful power with a stable currency - the first in the new history of Europe based on the gold standard.
English 1, 2, 3 and 4 penny coins, 1800
CNG Coin: British Royal Mint
The operation, known as the "Great Recoinage of 1696", began with the royal declaration of June 10 of this year, on the redemption from the population of old (pre-1662 issue) hand-minted coins at a commodity price of 5 shillings 8 pence per ounce of silver. The price was favorable enough to encourage the public to hand over old coins to the royal mints (in addition to the Tower, mints were established in Bristol, York, Exeter, Chester and Norwich), rather than to dealers who exported silver abroad. Over the next four years, the royal mints, under the general direction of Newton, issued coins for more than 5 million pounds sterling - one and a half times more than in the previous 35 years (since the introduction of machine coinage in 1662).
Strictly speaking, Newton did not invent anything fundamentally new at the Mint: all the principles had already been worked out, all the machines had already been installed and were functioning. The great scientist turned out to be a diligent administrator, a rational organizer: he managed to set things up in such a way that the mints worked with maximum speed and efficiency. By 1700, there were almost no old coins in circulation. During the same time, Newton, vested, among other things, with the powers of an investigator and prosecutor in cases of counterfeit money, secured the conviction and execution of 28 counterfeiters, including the legendary William Chaloner (about their confrontation there is a not particularly delightful book by Thomas Levenson "Newton and the Counterfeiter" 2009, recently translated into Russian and published by Korpus).
However, the technical success of the "Great Recoining" did not save the English silver standard. The dispersion of silver prices on the islands and on the continent remained too wide. In 1717, on the recommendation of Newton, King George I changed the official rate of gold to silver: one gold guinea was now valued at 21 silver shillings. This was another significant reduction in the price of silver, and it began to flow abroad with renewed vigor. The UK is effectively on the gold standard.
For Newton, as already mentioned, economics and finance were akin to alchemy - understanding the natural order of things and mastering the art of manipulating matter. His natural-philosophical, alchemical, theological, historical and economic studies developed into a system of the world in which everything develops from known principles according to known principles in accordance with the Creator's plan. A significant part of Newton's alchemical writings was acquired by none other than John Maynard Keynes - he, the great "alchemist of finance", as few people felt this deep system of Newton's views.
Biographers did their best - thanks to their stories, we know not only about Newton's scientific discoveries in the field of physics, astronomy, mechanics, mathematics ... But also about his personal life. Here are some interesting facts about the luminary, who lived in the 17th century and was far ahead of his time.
The apple tree has been a museum exhibit for a hundred years
Newton discovered his famous law of universal gravitation after an apple fell on his head - many people know this. But was it really so?
Rather, it is a fiction, - says the candidate of historical sciences Leonid Frolov. - Although, thanks to the memoirs of a friend and biographer of the scientist William Stackley, the apple tree in the garden of Newton's house was a museum exhibit for more than a hundred years and excursions were led to it.
Stuckley described how, in 1726, he and Newton drank tea under an apple tree. And Newton remembered that in the same situation he discovered the law of attraction. It was in 1666, when the University of Cambridge was closed due to the plague, and Newton went to his home in Lincolnshire.
I sat in the garden under my favorite apple tree, thinking. That's when the apple fell. Newton thought: why is the trajectory exactly like this - towards the center of the earth? "Naturally, because he attracts him. So, there is a force of attraction," the biographer quoted the scientist.
But the historian Richard Wastloff doubted: they say, in 1726, Newton was already 83 years old and he could hardly clearly remember his own conclusions 60 years ago. Moreover, in his writings he presented a completely different story.
Newton wrote the tale of the falling apple for his beloved niece Katherine Conduit in order to popularize the essence of the law. Katerina was the only one of her relatives whom the physicist treated with special warmth, even took her into the house for education after the death of her mother. And the only woman he ever approached.
According to biographers, the scientist remained a virgin until the end of his life. And the authoritative philosopher Voltaire at that time admitted:
"In my youth, I thought that Newton owes his success to his own merits ... Nothing of the kind: fluxes (used in solving equations - approx. ed.) and gravity would be useless without this lovely niece."
Myths about cats and drafts
There are other legends as well. Allegedly, Newton made holes in the door of the house for his two cats - so that they could freely enter and exit. And his beloved dog accidentally knocked over the lamp, and the manuscript of the last work of the scientist burned in the fire. In fact, he never kept animals.
Isaac Newton was twice elected to Parliament from the University of Cambridge. There is an anecdote that he only took the floor once. Everyone froze, anticipating that the luminary would say something very clever. And Newton simply asked to close the window, afraid of catching a cold from the draft. So this is not true either. The scientist was a conscientious parliamentarian, he went to all meetings. And the story about the window was probably composed by envious people.
Defeated the counterfeiters
Several ten-year-old Newton was the keeper of the Mint, and proved to be a class manager. At that time, there was a serious problem in England: they did not have time to mint a batch of silver coins, as they literally disappeared from circulation. And all because the value of coins was determined by their weight, and scammers came up with the idea of cutting off the edges. As a result, there were a lot of fakes, money was massively exported abroad, settled in chests, and was melted down.
Newton re-coined all the coins, and he came up with the idea of making notches on the rim - the so-called edge (by the way, it is also on modern coins). It worked! The trimming of the edges became noticeable. The counterfeiters were indignant and began to scribble denunciations against the "reformer". Newton showed integrity - he personally participated in the investigations, as a result, more than 100 scammers were hunted down and convicted. Some leaders were even executed.
Taught Peter I reforms
The Mint was visited by Peter I in 1698. He visited it three times, but no details about his meetings with Isaac Newton have been preserved. But it is known that a few years later a monetary reform was carried out in Russia, very similar to the English one.
Scheduled the end of the world for 2060
Few people know that Newton was also engaged in alchemy, occultism, and theology. And in addition to composing his famous laws, he deciphered the Bible. The 4,500-page manuscript is kept in the Jewish National Library of Jerusalem. In it, scientists discovered a kind of "Newton's last law": a prophecy about the end of the world. The scientist calculated the date mathematically, deciphering the Book of the Prophet Daniel (Old Testament). His prediction is 2060. What exactly will happen in 43 years? World war, then pestilence, because of which most of humanity will disappear. Will it come true? Thinking about it is scary, given that Newton has accurate predictions - for example, he correctly indicated the date of the state of Israel - 1948.
Was a long-liver
Newton was born into the family of a small but successful farmer. The father died without seeing his son. And the boy was born prematurely and so weak that they didn’t even want to baptize him: they thought he wouldn’t last long. However, Isaac, named after his father, not only survived, but also lived a very long life for the 17th century - 84 years. Almost did not get sick, until old age he retained thick hair and all his teeth except one.
As a child, he studied through a stump deck and was known as perhaps the worst student. And then he became the best! A revolution in consciousness happened after he was severely beaten by classmates. Newton decided that since he could not physically surpass others, he would become the smartest. And what heights he reached.
He often showed distraction. Somehow inviting guests, he went to the pantry for wine. There he was struck by another scientific idea. Newton rushed to the office, completely forgetting about the guests.
Became the first knight for science
Queen Anne knighted the 62-year-old scientist. Sir Newton became the first Englishman to receive a high title for scientific achievement. He acquired his own coat of arms and pedigree. By the way, Newton was always sure that his family goes back to the Scottish nobles of the 15th century. Historians got to the bottom of the scientist's ancestors - alas, they were poor peasants.
Isaac Newton was a cult figure in England even without a title. All London came out to bury him. Voltaire described the ceremony as follows: “First, the body was put on public display in a magnificent hearse, on the sides of which huge lamps were burning. Then they were transferred to Westminster Abbey, where they were buried among kings and prominent figures. At the head of the funeral procession was the Lord Chancellor, followed by all the king's ministers."
SPECIFICALLY
The most important discoveries
* The law of universal gravitation and the three laws of mechanics, which became the basis of cassistic mechanics.
* Theory of motion of celestial bodies.
* Theory of light and colors.
* Developed differential and integral calculus.
* Laid the foundations of modern physical optics
* Invented the refrigerator telescope, with which many important astronomical observations and discoveries were made.
25.12.2019 at 14:06 · VeraSchegoleva · 60
Sir Isaac Newton was born on January 4, 1643 in Lincolnshire, UK. This amazing man was a physicist, philosopher, inventor, alchemist and mathematician. Newton was the author of the book Philosophiae Naturalis Princiiaathematica, better known as Principia, in which he described the law of universal gravitation and laid the foundations of classical mechanics through the laws that bear his name.
Among his other scientific discoveries are works on the nature of light and optics (presented mainly in his work "Optics" and " Development of mathematical calculus“). Newton was the first to prove that the laws of nature governing the movement on and the laws governing the movement of celestial bodies are the same. He is often called the greatest scientist of all times and peoples, and his work is the culmination of the scientific revolution.
We bring to your attention a list of 10 interesting facts about Isaac Newton: a biography of the scientist and stories from his life and scientific activities. Great discoveries of a talented inventor.
10. Born prematurely
Isaac Newton was born on January 4 of the Gregorian calendar (which was introduced by England some time after other countries) about 13 weeks earlier than expected. As a child, he was too small, so he could not survive. He needed too much care, and for this reason he became a special person.
Being prone to illness, he spent most of his childhood at home, but this motivated him to develop his intellect and carry out his scientific research.
9. The anecdote about how the apple fell on Newton's head never actually happened.
We all know legend that Newton was lying under an apple tree when one of the fruits fell from the tree and hit him on the head, illuminating the scientist and motivating him to develop a theory about the force of gravity of the Earth. Such a story is just someone's fantasy and has nothing to do with what happened in reality.
Newton noted that he saw how an apple fell out of his window, but before that he had already considered the possibility of creating an element that carried out such an interaction between objects. The formulation of the law of universal gravitation could not be a random event, because it took a lot of time and effort to implement it.
8. The scientist stuttered
Perhaps this was due to his difficult childhood, but it is known for certain that Newton developed a stutter that accompanied him for most of his life. None of his contemporaries condemned him for this feature, and it did not affect his communication with people and position in society.
7. He believed in his exceptional mission
Newton was a very religious man, literally obsessed with biblical texts. There is a version that it was precisely because of his ardent faith in God that the scientist became a member of the Masonic Society. He deeply studied the Gospel and wrote a lot on this subject. He even calculated the exact date of the death of Jesus Christ (April 3). According to Isaac and his analysis of the Bible, the Last Judgment will come in 2060. The scholar also thought that God had chosen him directly to interpret a religious book..
6. The dog ruined 20 years of work
This is half the truth, which cannot be verified with reliable sources. While some claim that Newton had a dog, others say that the animal entered through the window and dropped a lit candle that completely burned down his laboratory, destroying 20 years of research that the scientist had stored in this room.
5. Came up with a way to counter counterfeiters
In Newton's time, the value of coins was equal to the amount of precious metal they contained. Because of this, there was an acute problem - scammers cut off small fragments of metal from the edges to make new coins from them.
The way out of this situation was found by Isaac Newton. His advice to the authorities was very simple - make small lines on the edges of the coins, because of which the cut edges will immediately catch the eye. This part of the coins is processed in the same way at the present time and is called edge.
4. He was an alchemist
Alchemy is a pseudo-science practiced mainly in the Eastern world and focuses on the purification and refinement of objects through various chemical processes.
Although Newton's name is associated with official science such as physics, at first, experimenting with nature, the Englishman tried to create gold from other materials, and although he wrote several books on the subject, none of them were published, since it was illegal at the time to create silver and gold using alchemy.
3. He died a virgin
Perhaps this is one of the least significant data compared to Newton's priceless scientific legacy, but there are suspicions that due to his strange habits, obsession with various ideas and eccentricity he has never had a romantic or sexual relationship with other women.
He did not marry and historians do not have any reliable data on any love affairs of Isaac Newton. Perhaps this is due to his ardent religiosity. It is also likely that his passion for science and the search for truth absorbed all the scientist's time, and there was no time or energy left for personal life.
In addition, historians and biographers have a theory that the scientist, because of his zealous attitude towards religion, considered carnal relations base, interfering with intellectual development. It is known that in his youth he had tender feelings for his childhood friend and neighbor, with whom he maintained warm relations until the end of his life and even sometimes helped her with money.
2. He has always been a strange person
There is an inevitable mystery in the great minds of history. We're trying to understand them so we can get an idea of how they got so great. We think that if we understand them, we will be like them, but the truth is that we are far from that.
According to another eminent modern scientist, Carl Sagan, Newton “ concerned with petty matters such as knowledge, such as whether light is a substance or an accident“, but these are just small illustrations of the bizarre personality of a physicist. Isaac performed dangerous experiments on his own body to satisfy his curiosity, and his obsessions frightened those around him.
At the same time, the scientist had a very quarrelsome character. We will not delve into the full history of his many quarrels, but Newton managed to ruin relations with a whole galaxy of famous and respected contemporaries: from Leibniz to Robert Hooke. They say that it was through the efforts of the physicist that, after the death of the latter, his only lifetime portrait was destroyed, so to this day we do not know what this outstanding scientist looked like. Once Newton managed to enter into open conflict with King James II.
And here is what Isaac Newton himself thought of himself, who, judging by the inscription on his monument at Trinity College, “ surpassed the mind of all people living on Earth»: « I have no idea how the world perceives me, but to myself I imagine myself only a boy playing on the seashore, who amuses himself by sometimes finding a pebble more colorful than others, or an interesting shell, while the vast and vast ocean of truth spreads out in front of me, remaining undisturbed».
1. Member of the House of Lords
Being a member of the House of Lords for a long time of his life, Newton always attended its meetings, but during this time he never made a speech. The only time he took the floor, the scientist only asked to close the window so that there was no draft.
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A fragment of a poster for an exhibition at the London Museum of the History of Science dedicated to the 300th anniversary of the publication of Isaac Newton's work "The Mathematical Principles of Natural Philosophy".
In the 18th century, England went from a rather poor country, whose economy was undermined by revolutions and wars, to a powerful state, mistress of the seas and a pioneer of the industrial revolution. Among the reasons that made this transformation possible, modern historians highlight the creation of a new type of financial system that allowed England to use the resources of the world economy for its development. An important role in this was played by scientists, the founders of science and philosophy of modern times.
Financial-centric Copernican system
Nicolaus Copernicus (1473-1543), the author of the work "On the rotations of the celestial spheres", containing the mathematical theory of the heliocentric system, was forced to devote most of his life to matters that had nothing to do with astronomy. As a canon of the Warmian chapter, Copernicus dealt with the administrative, diplomatic and even military problems of Warmia, the northeastern part of the Kingdom of Poland, for almost 30 years. In particular, he devoted a lot of time and effort to issues of monetary circulation.
Along with practical activities to normalize the issuance of coins, speeches on these issues at the diets and work in commissions, Copernicus wrote three works in Latin devoted to improving the financial system of the Kingdom of Poland and containing an analysis of various aspects of monetary circulation. In 1517, he wrote a draft of a treatise on money, called Meditations. In 1522, at the Diet in Grudziadz, which considered the issue of unifying the monetary system of the kingdom, Copernicus presented the essay "On the method of minting coins." And finally, in 1528, preparing for the Diet in Malbork, Copernicus completed an extensive "Treatise on Coinage", in which he summed up many years of reflection on the laws of monetary circulation.
Copernicus' long-term interest in this problem led to the fact that something strange was happening with money at that time. At the beginning of the 16th century, a stream of precious metals poured into Europe from the New World, which, while enriching individuals, for some reason did not enrich states. The prices for most goods in Europe increased several times, there was still not enough money, and if Spain could compensate for this shortage by plundering the colonies, then the governments of other countries, including Poland, increasingly resorted to reducing the content of silver and gold in the issued coins. . The result of such a policy was the depreciation of money and, as a result, a fall in production.
Analyzing the practice of spoiling money, Copernicus wrote in his Treatise: “Although there are countless disasters from which kingdoms, principalities and republics perish, in my opinion the four main ones are: discord, mortality, infertility of the soil and damage to the coin. The first three are so obvious that no one disputes them, but the fourth is recognized only by a few who go deeper; it entails the fall of the state not immediately and sharply, but gradually and secretly.
In his work “On the method of minting coins”, Copernicus comes to a fundamental conclusion: any attempt by the state to “save” on the issuance of full-fledged money and put light coins into circulation will necessarily lead to the displacement of “good” money by “bad” ones, since everyone will strive to pay off with light coins. , and hide the full ones. As a result, the state will be forced to continuously increase the production of surrogates, which will lead to the depreciation of money and the undermining of the economy, aggravated by the inevitable corruption in the exchange in the treasury of coins with different weights, but formally equivalent coins.
In the middle of the 16th century, the law according to which good money is replaced by defective money was rediscovered by the head of the treasury Thomas Gresham in England during the financial catastrophe that broke out there and is called in economics "Gresham's law" or "the law of damaged coin".
The discovery by Copernicus of the law of the corrupted coin was closely connected with the realization that money is turning from purely auxiliary instruments of commodity exchange into the “prime mover” of the economy. Money has its own laws of motion, you can not do with them as you please. Therefore, Copernicus studied the ratio of the value of various coins, put forward projects for their unification and withdrawal of damaged money from circulation, proposed to introduce state control over the minting of new coins and carry out this minting exclusively at the expense of the treasury.
Unfortunately, most of Copernicus' proposals were not accepted, and the introduction of individual ideas torn from the whole project turned out to be of little success. To some extent, the economic theories of Copernicus shared the fate of his heliocentric system, which gained recognition only after the creation of new physics in the 17th century and the discovery by Isaac Newton of the law of universal gravitation.
This attitude towards the ideas of Copernicus is not surprising. Indeed, some of them, for example, the requirement that the state should not try to profit from the production of money, seemed to the contemporaries of the scientist no less absurd than the hypothesis about the movement of the Earth. In addition, despite repeated discussions, an acceptable way to remove damaged coins from the population has not been found. It remains unclear at whose expense the financial reform should be carried out, especially considering that the state, “in theory”, should not profit from the exchange of money.
Apparently, in the time of Copernicus, these problems could not be solved, since they required radically new views on the economic functions of the state. Such views began to form in Europe in the 17th century, and the necessary conditions for reforms “according to Copernicus” (an acute financial crisis and a government ready for bold steps) appeared only in the last years of the 17th century, in England.
Union of scientists and politicians
In 1688, the Glorious Revolution took place in England. The cruel and hated by the British King James II was overthrown, and the country turned into a constitutional monarchy. This liberalization, however, weakened the institutions of power, which, in particular, led to a financial crisis caused by the massive deterioration of coins, primarily silver shillings, which constituted the bulk of cash.
The reason for the damage was the poor quality of coinage. For example, there was no ribbed rim on them, which made it possible to cut off some “surplus” from the coins and, after rubbing the place of the cut with mud, put them into circulation. This operation was punished by the gallows, but the temptation to get a little rich was great, and the new regime was still weak to cope with the mass of pests. As a result, thousands of people, together with the counterfeiters who flourished under these conditions, devalued the money in circulation.
Trying to cope with this disaster, the British government for the first time in the world set up a machine coinage of high-quality shillings with the prescribed amount of silver. But such coins, firstly, were few, and secondly, they were immediately withdrawn from circulation and hidden or, having been melted into ingots, they were exported abroad. Only damaged coins remained in circulation, which led to the collapse of trade and production. In accordance with the law of the damaged coin, it was impossible to carry out the sanitation of the monetary system by gradual measures. It was necessary to somehow immediately replace all the cash, in any case, its silver part. (Gold coins, of course, were spoiled and counterfeited less frequently.)
Meanwhile, the situation deteriorated rapidly. Mass bankruptcies began in 1694–1695. Panic was brewing in the country, aggravated by the fact that England at that time was at war with France, where the deposed King James II was. His return was becoming real, which terrified most of the English.
To save the country, it was necessary to carry out a monetary reform as soon as possible. Four people took up the solution of this grandiose problem in 1695: Charles Montagu (Earl of Halifax) - Chancellor of the Exchequer, John Somers - head of the Whig party, since 1697 - Lord Chancellor of England, John Locke - doctor, philosopher, theorist of parliamentarism, commissioner for affairs of trade and colonies, Isaac Newton - the author of the great "Mathematical Principles of Natural Philosophy".
In 1696, Newton was appointed custodian, and in 1699 director of the Mint of England. Newton held this position for more than a quarter of a century, taking an active part in the development and implementation of the country's financial policy. In 1705, for services to the state, Newton was elevated to a knighthood by Queen Anne.
An interesting detail. Archives relating to Newton's management of the Mint were not discovered until the 1920s. In the late 1930s, they wanted to put them up for auction in London, but they were classified, since the information contained in the documents about the orders at the Mint could help German intelligence. In other words, the rules established by Newton continued to operate in the issuance of money into the twentieth century.
In the middle of the 19th century, Thomas Macaulay, in his History of England, wrote that the creators of the monetary reform, known as the Great Recoinage, had an exceptionally fruitful combination of statesmanship with scientific depth and courage of thought. Macaulay's words can be regarded as a description of the most important features of the political elite of England in modern times. Of course, England was ruled not by scientists, but by politicians. However, the “grafting” of scientific thinking, carried out in the 17th century, allowed politicians to be guided not only by common sense, which is good only in ordinary situations, but also to look for and find solutions that are far from obvious, and sometimes simply paradoxical.
Returning to the authors of the reform, it should be noted that they were all members of the Royal Society of London, which at that time represented a unique place - in fact, a club in which scientists and politicians could communicate on equal terms. At the same time, Montagu, Newton and Somers at various times acted as president of the society. Their personal relationships also played an important role in the joint work of the reformers. Montague was a friend and student of Newton; Somers and Locke had a long-standing, tested friendship.
By weight or by face value?
One of the most difficult problems that the reformers had to solve was determining at whose expense money should be exchanged. At first glance, since the whole society was interested in the normalization of monetary circulation, every resident who had money had to pay for the exchange.
Therefore, at first a project was put forward, according to which the treasury assumed all the costs of re-minting coins, and it was proposed to exchange old money for new ones by weight, that is, at the real value of the delivered silver. However, such an exchange was ruinous for the population. A person received an amount of money 1.5–2 times less than the amount handed over, meanwhile, the amount of his debts and taxes remained the same. Only large creditors (primarily banks) and officials who receive a fixed salary would benefit from the exchange by weight. The impoverished population would again begin to spoil the money, which happened after the re-coining in the 16th century.
To avoid such a scenario, it was decided to exchange money at face value, that is, each old shilling was exchanged for a new one. Moreover, the full payment for such an exchange (it was Newton who insisted on this extremely important point) was to be borne by the government. The reformers managed to convince the government and parliament of the need for such a step. And already at the end of 1695, the parliament passed a law ordering citizens to hand over to the treasury all the old cash they had in a short time (within a month).
It is important to pay attention to the following. The exchange of money at face value cost almost 3 million pounds, which at that time was equal to the income of the treasury for one and a half to two years. Thus, in order to save the ruined state, it had to pay the population a monstrous amount of money, most of which had to be borrowed from English and Dutch bankers. The development of such a reform project required a truly "Copernican revolution" in the views on the role of finance in the economy.
To appreciate the courage of the reformers, we can recall that, speaking in 1992 in the Supreme Council, Yegor Gaidar said that compensation for depreciated deposits would require an amount equal to the budget revenue for 6 quarters. The size of this amount made a huge impression on the deputies, but it was precisely this amount on a relative scale that the state paid the British at the end of the 17th century.
However, this benefit became apparent only after the completion of the money exchange.
Meanwhile, the exchange, which began in 1696, was immediately on the verge of collapse, since the Mint was not able to quickly recoin all the cash. England was left without money at all, and the fact that the inevitable catastrophe was avoided is entirely the merit of Newton.
At the head of the Mint
Arriving at the beginning of 1696 at the Mint, Newton found that it was in a terrible state. The blame for this lay with director Thomas Neal, who, thanks to his connections, turned his position into a sinecure. Due to the connivance of Neil (he was only able to be dismissed in 1699), drunkenness, duels and thefts reigned in an institution where special discipline should prevail. Therefore, immediately after the appointment of the Keeper of the Mint, Newton, in order to restore order, achieved literally dictatorial powers from Parliament, including the right to create its own prison and detective police.
Settling in the Tower, where the Mint was then located, Newton worked like a man possessed, giving sleep no more than four hours a day. He analyzed in detail and improved each stage of the production of money, which made it possible to increase their output by almost ten times. At the same time, in addition to London, temporary mints were opened in five more cities. One of them was in Chester from 1696 to 1698. This court was led, and very successfully, by Edmond Halley, a friend of Newton, an astronomer and mathematician, a member of the Royal Society of London.
By the end of 1697, the most acute cash shortage was eliminated, and England was saved. But soon Newton had to save the Mint he reconstructed, by that time the best in the world.
After the completion of the Great Recoining, the annual volume of money issue could be reduced by at least an order of magnitude. The colossal production capacity of the Mint turned out to be excessive. Therefore, in order to keep expensive machines busy, Newton began to take orders for the production of fine quality silver coins for international trading companies, primarily the Anglo-Dutch East India Company.
There was nothing unusual about this. In small volumes, the Mint fulfilled orders for the production of machine-made coins before. Unusual were the ever-increasing volumes of orders, as well as the price - a few percent below the European average - at which England exchanged silver coins for gold and other equivalents of monetary value.
The reasons for such a financial policy, pursued since 1699 by Newton and Chancellor of the Exchequer Montagu, lay in the specifics of international trade of that time. The fact is that India, China and other countries of the East traded with Europe mainly for cash silver, which was then considered the main world currency. Therefore, in trade with such countries, those companies that, having large cash reserves and often paying inflated prices, were able to penetrate the markets of the East and establish control over trade routes, had advantages.
In the 17th and 18th centuries, such trade was conducted by several monopoly companies that concentrated in their hands the bulk of the world's trading capital. It was to these companies that the Mint sold money at a discounted price, thereby tying it to the British economy and receiving ever more generous loans from them.
I wrote above that the Great Recoining required huge loans, including external ones. It would seem that after putting things in order in finances, England should have strived to get rid of debts as quickly as possible. In fact, a policy was pursued, as a result of which the public debt of England grew continuously and by the middle of the 18th century became the largest in the world, causing many to fear and fear that the country's economy would burst like a soap bubble. But in European business circles, there were no such fears. In 1782, England, having suffered a defeat in the war with the North American colonies, turned to the leading banking houses of Europe with a request for a loan of 3 million pounds sterling. These houses immediately offered her $5 million.
As a result, the following scheme emerged. From the New World to Europe there was a powerful flow of precious metals. Part of this flow fell into the Mint and, having turned into coins, entered the banks of trading companies in order to then go to the East. Back to Europe, there was a flow of goods, and to England also loans, which played a decisive role in its technical re-equipment during the industrial revolution. Steam engines could be created in other countries, but the money to equip many factories with them was only in England, which drew funds from the economies of all of Europe.
By the end of the 18th century, even inveterate skeptics began to recognize that the public debt of England is its main wealth, a guarantee of stability and greatness. The key to the reliability of this debt, especially at an early stage of its formation, was the Mint and its financial policy.
And again the scientist
At the beginning of the 19th century in England they began to forget that the prosperity of the state cannot be achieved by ruining its own people. "Forgetfulness" was facilitated by the introduction of machines, which made it possible to use even the labor of children, pay pennies for work and continuously increase the length of the working day. As a result, the standard of living of the working class in England, which had become one of the highest in the world by the end of the 18th century, was rapidly falling, and the country was heading towards a social explosion.
In 1848, when a wave of revolutions swept through Europe, the Parliament of England passed a bill to reduce the working day in industry by an hour and a half while maintaining the same wages. This reduction meant an increase in hourly wages and was seen by many economists as the end of the competitiveness of English goods. In fact, the bill was the beginning of the recovery of the British economy by increasing the capacity of the domestic market and did not at all reduce its position in the world market.
The implementation of the new economic policy required a noticeable increase in the money supply and, as a result, an increase in the productivity of the Mint. In 1850, the famous astronomer John Herschel, son of the great astronomer William Herschel, was appointed its director. Apparently, this appointment seemed strange to some. It was then that the historian Thomas Macaulay reminded the British of the role that the union of politicians and scientists played in saving the country at the end of the 17th century.
Original taken from sobiainnen in
Pleased with the level of readers of the analytical blog "Learn Sobyanin". Recently posted my article "Strategic planning in the USA: military power, breakthrough technologies and the dollar" in collaboration with M.M. Shibutov http://sobiainnen.livejournal.com/47897.html The article was republished in full on more than fifteen analytical resources and blogs - RELGA, Blog-book Octopus, IAC MSU, Central Asian Thick Journal, Center for Strategic Estimates and Forecasts, LJ Guralyuk, LJ Otyrba, LJ skalozub52, LJ "For the Eurasian Union!", LJ Mikhail Chernov and others.
Isaac Newton. Painting by William Blake, 1805
Two added very important meanings. I was pleased with the blogger Anatoly Aslanovich Otyrba http://otyrba.livejournal.com/191805.html (St. Petersburg economist, writes good articles in the scientific and Russian business press). In developing the idea of the succession of the US conceptual and strategic dominance in the financial sphere to the British Raj, he gave a link to the article by Julius Lvovich Mentsin "The Mint and the Universe", which is reproduced in full below. And the illustration of the blog-book Octopus http://www.peremeny.ru/books/osminog/5850, where the article was posted a day earlier than the blog of Anatoly Otyrba, accentuated THE SAME THOUGHT - by William Blake's painting "Isaac Newton" - "strategic Anglo-Saxon architect being" (Bretton-Wood 1944 - USA might, Isaac Newton - Rule, Britain!, Anglo-Saxon leadership continuity). This is truly the right saying at our East Faculty of Leningrad State University / St. Petersburg State University: "The world is not small - the layer is thin!".
I thank Anatoly Aslanovich Otyrba and Oleg Viktorovich Davydov, editor-in-chief of "Octopus", for valuable additions of meanings. I thanked Julius Lvovich Mentsin over the phone, but I would like to publicly thank you here again for this article and other similar articles, for example, on the role of Nicolaus Copernicus. Sincere thanks to all of you, dear fellow analysts, scientists! To all those who supported this first of a series of articles on strategic planning in the countries of the Caucasus and Central Asia, to which the United States refers as an active screenwriter and an influential force in the Caspian-Central Asian region.
According to the article by Yu.L. Mentsin. There is a rule in military strategy - "compromise is worse than defeat", because. defeat mobilizes and forces radical and total rearmament and restructuring of military affairs, while compromise consolidates the status quo insufficient for victory. Here the experience of Great Britain is extremely interesting - of the three proposals for financial reform, the most radical provisions were taken from the proposals of William Lound, Isaac Newton and John Locke (the second and third were called by the state from the world of science). The exchange of money cost the treasury of the British crown 2.7 million pounds, which was then almost one and a half of its annual income. The state decided not to shift the cost of minting new coins and exchanging money onto the shoulders of the population, and allowed everyone to enrich themselves. Moreover, in the future, Britain offered the banking houses of Europe a very favorable for Europeans and unfavorable for Britain exchange rate of silver money for a golden guinea, which made it possible for European bankers and merchants who were trading with colonies in Asia and America to get rich. As a result of such a "unprofitable" operation, the UK economy solved its problems in a matter of years and became the undisputed leader in Europe in terms of attracting investments, the standard of living of the population, and the pace of economic development. The trust of the population and the faith of external players in the success of Britain, as it turned out, are very expensive!
As I know, a number of Moscow and St. Petersburg think tanks and groups are now working on similar complex and ultra-efficient financial strategies that will allow the Eurasian Union to quickly solve the current difficult financial problems of Russia and its allies and become a world leader. God grant our colleagues success and attention of the highest Russian authorities in this work. For the rearmament of the Armed Forces, for the development of Eastern Siberia and the Far East, oh, how big money is needed. Yes, and to improve the standard of living of the population of Russia, Belarus and Kazakhstan, other potential members of the Eurasian Union is also an important task. And this also requires a lot of money.
In the photo: November 20, 2007, Queen Elizabeth II of Great Britain and all the people of her country and the Commonwealth countries celebrate 60 years of marriage with Lord Philip Mountbatten.
Mentsin Yu.L. Mint and the Universe. Newton at the origins of the English "economic miracle". Great Recoining, or monetarism in English. Newton and Marx. Mystery of the golden guinea. The public debt of England and the industrial revolution. At the base of the English "financial pyramid". // Issues of the history of natural science and technology. 1997. No. 4.
http://krotov.info/history/17/1690/1696menz.html
Library of Priest Yakov Krotov.
MENTSIN Yuliy Lvovich, Ph.D. Phys.-Math. Sci., Senior Researcher, State Astronomical Institute. PC. Sternberg (GAISh) Moscow State University. M.V. Lomonosov, head of the Museum of the History of the University Observatory and SAI.
Notes are embedded in the text and are enclosed in curly brackets.
Part 1 (under the cut). Newton at the origins of the English "economic miracle". Great Recoining, or monetarism in English.
http://sobiainnen.livejournal.com/49288.html
“It was in England that decisive steps were taken. Everything there went naturally, as if by itself, and this is the most fascinating mystery that the world's first industrial revolution conceived, which marked the biggest gap in the history of modern times. So why England? "
F. Braudel. "The Dynamics of Capitalism".
In the XVIII century. England has gone from a relatively backward and poor country, whose economy was also undermined by revolutions, wars and turmoil, to a powerful power with the most advanced and rapidly developing industry in the world.
The mystery of this "economic miracle" has long worried historians. But if earlier they saw the main cause of the English industrial revolution in technology - the invention and introduction of machines into production, then more and more attention has recently been paid to the analysis of the socio-political and demographic conditions that prevailed then in the country, the creation of a communications network in it, the situation in the world markets, etc. (see, for example, works -). At the same time, the financial system of England is of particular interest to researchers. Thus, it is emphasized that it was the creation of this system, which had amazing flexibility and reliability, that allowed British banks for many decades to operate with funds, the volume of which far exceeded the real possibilities of the national economy, and, thanks to this, provide domestic entrepreneurs with significant loans at very moderate interest rates. In turn, it was precisely this generous crediting of production that made possible its radical modernization, including the massive introduction of expensive steam engines. (see about this, ,).
But how, in fact, did England manage to create this mechanism for financing the economy and then, for a long time, maintain its uninterrupted operation? In answering this question, in my opinion, it is important to analyze the event that became a kind of prologue to the English "financial revolution" - the monetary reform of 1695-97, during which all spoiled and false silver coins.
Isaac Newton (1643-1727), appointed Warden in 1696, and in 1699 Director (Master) of the Royal Mint, took an active part in the preparation and implementation of this reform, called the Great Recoinage. Newton held the post of Director without change until 1725, and at the same time, for his great services to the state, he was elevated to knighthood by Queen Anne until 1705. In his retirement, he secured the appointment of his son-in-law, John Conduit (1688-1737), the husband of Newton's niece C. Barton, to the post of Director, who by that time had already served as Deputy Director for several years. Thus, the succession of management was ensured, and we can rightfully speak of almost 40 years of "Newton's era" in the management of one of the most important financial institutions in England.
It should be noted that both Newton's participation in the monetary reform and his leadership of the Mint are among the least studied aspects of the scientist's multifaceted activities. This is partly due to the fact that the necessary archival documents remained unknown for a long time, and partly due to the lack of serious interest in this topic among researchers. In fact, Newton's biographers see in his activities as head of the Mint only work to solve administrative and economic problems. This work, emphasizes R. Westfall, demanded enormous dedication from Newton, but in its importance and complexity it was incommensurable with his scientific achievements. In addition, biographers are forced to state that as an administrator, Newton did not always behave with dignity, showing despotism, intolerance and cruelty, especially when fighting personal opponents.
(Archival documents related to Newton's management of the Mint were discovered only in the 20s of our century and were even exhibited in 1936 at an auction in London. However, their partial publication became possible only in the post-war years due to fears that the content contained in them, information about the procedures in the production of money can be used by German intelligence.This publication was carried out in a number of his works by the Director of the Mint J. Craig, and it is these works that are the fundamental source for modern researchers of Newton's work.)
In principle, there is no reason to doubt the conclusions of historians. Suffice it to recall how Newton behaved in disputes about scientific priority. At the same time, one should not forget the appalling state of anarchy in which the Mint was at the time of Newton's arrival. In an institution that was supposed to be distinguished by special discipline, drunkenness, fights and theft reigned, including the theft of coins, which the employees themselves then sold to counterfeiters. It is not surprising, therefore, that in the fight against corruption, theft and counterfeiting of money, Newton was forced to be firm, as well as to seek the expansion of his administrative and legal powers, including the creation of his own prison at the Mint and a police force investigating all kinds of financial crimes and violations throughout the country. . In fact, the Mint under Newton, together with the then established branches in a number of other cities, turned into a kind of empire, characterized by a degree of centralization and control that was achieved by Great Britain only by the middle of the 19th century. .
Newton's biographers are generally unanimous that, while reorganizing the Mint, he showed, especially in the first years of his work, amazing activity, which can hardly be explained by the scientist's industriousness alone. So, G.E. Christianson notes that the Mint became, in effect, Newton's "secular religion." But is it not possible in this case to assume that the solution of current problems, which has so disappointed historians with its routine, was subordinated, in Newton's eyes, to the task of achieving some special goal, apparently only guessed by him and a narrow circle of his like-minded friends. Analyzing the activities of Newton as head of the Mint, it is important to take into account the fact that the creation of the English financial system was inextricably linked with a radical rethinking of the role of money in the economic life of society.
So, for example, it was necessary to understand that the main goal of the state's financial policy is not to fill the treasury at any cost, but to create conditions for the continuous improvement of lending mechanisms that make it possible to effectively involve more and more capital dispersed in society in production. In other words, it was necessary to see money not only as a simple intermediary in trading operations, but also as a powerful research tool that allows you to detect and use concealment or social resources that are not yet available.
(The main reason for the amazing success of the English economy of the 18th century was precisely that, thanks to the creation of unprecedentedly powerful and mobile lending mechanisms, it, the economy, managed to use the "energy" of the movement of first European, and then world capital. More on this issue will be discussed below.)
To a certain extent, Newton's reconstruction of the Mint can be compared with Galileo's improvement of the telescope. In both cases, previously known devices turned into tools that help shape radically new worldviews and economies. If earlier the production of money was considered a purely auxiliary action, then under Newton it became, in fact, the dominant feature of the economic life of England. This reorientation of the British economy will be discussed in more detail below. At the same time, I will pay special attention to the analysis of the monetary reform of 1695-97, which served as a kind of model for the subsequent development of the financial system of England.
Great Recoining, or monetarism in English
Among the many diseases that tormented in the last decades of the XVII century. the economy of England, the most terrible, according to contemporaries, was the systematic deterioration of silver coins, which then made up the bulk of cash. The technical prerequisite for this damage was the imperfection of the minting of coins, most of which were made by hand. Their shape and size did not always correspond to the standard, and, in addition, they did not have the ribbed rim that we are used to, which made it possible to discreetly cut off some "surplus" from the coins and, after wiping the place of the cut with mud, put the damaged money back into circulation. The gallows was supposed to be for this "operation", but the temptation to get rich a little was too great, so thousands of people, together with ordinary counterfeiters who flourished in such conditions, successfully depreciated the money in circulation.
In his History of England, Thomas Macaulay wrote that this massive defacement of coins, affecting the interests of almost all segments of the population, was a greater evil for the country than any treason. The continuous depreciation of money made a normal business life impossible, because everyone was afraid of deceit, although at every opportunity he himself sought to pay with defective coins. Therefore, scandals and fights regularly broke out in the markets, in workshops and offices. As a result, trade curtailed, and production fell into decline. (Quoted by).
It cannot be said that the government was inactive in this situation. In addition to expanding the use of purely police measures in England, for the first time in the world, machine minting of high-quality coins with the prescribed silver content was established. However, these highly valued new coins could not force the old ones out of circulation. Everyone tried to pay off with old, defective coins. New coins were withdrawn from circulation, melted down into ingots, and, despite strict customs control, they were exported abroad in increasing quantities, including in England only damaged, depreciated money remained.
Since this problem could not be solved by gradual measures, in order to save the economy, it was necessary to somehow immediately replace all the cash in circulation. Generally speaking, in previous centuries such operations were carried out repeatedly. Getting into a similar situation, the government resorted to the withdrawal of all damaged money and their re-minting into new, full-fledged coins. However, it was not at all clear whether it would be possible to carry out such re-coining on the scale of the entire state at the end of the 17th century, given the degree of development of the money economy. In addition, the experience of previous recoins (the last one was carried out in England in the middle of the 16th century) was rather disappointing. Having only a short-term stabilizing effect, the exchange of money placed a heavy burden on the treasury and literally ruined the population, for whom old coins were exchanged for new ones by weight.
As a result, a person received an amount 1.5-2 times less than what he had before. Meanwhile, the amount of debts and taxes remained the same. As a rule, prices did not decrease either, because traders, especially small ones, preferred to reduce sales in response to a decrease in demand. Thus, only large creditors (especially banks) and state officials who received a fixed salary turned out to be the winners, and the impoverished population soon began to spoil the money again.
On the other hand, despite the possibility of failure, the reform could no longer be delayed. The position of England continued to deteriorate, which was also facilitated by the war with France that began in 1689. Prices and public debt skyrocketed, and the economy collapsed. The situation became especially critical in 1694-95. Mass bankruptcies began in the country, in some places panic arose. Under these conditions, the death of the constitutional monarchy that had been established in England as a result of the "glorious revolution" of 1688, and the secondary restoration of the House of Stuart, with mass repressions that would then inevitably follow, became quite probable. The exchange of money became inevitable, so heated discussions began in parliament and government about the most acceptable ways to carry out the reform. It was necessary to find a solution that would, if possible, combine the interests of the treasury, the population, big capital and foreign, primarily Dutch, creditors of the state.
And so, in the search for such a solution, Isaac Newton played an important role, to whom the government of England specifically turned for advice. It should be emphasized that such a clear recognition of the authority of scientists in solving state issues was not accidental and was based on old traditions dating back to Francis Bacon. At the same time, interest in the work of scientists from politicians and religious figures especially intensified during the Restoration era, when the continuous hostility between the king and parliament, as well as between various churches and confessions, caused a crisis of confidence in existing institutions and gave rise to an ideological vacuum in the country, to fill which it was it is necessary to find some fundamentally new and, at the same time, credible global benchmarks.
It is under these conditions that the philosophy of nature of scientists-mechanists, their methods of setting up experiments, the rules for conducting scientific discussions, etc., begin to be regarded as a long-awaited path to solving the most burning socio-political and religious problems, as a way out of the chaos in which in the XVII in. all of Europe plunged, including England, which survived the civil war and continued to be in a state of social tension.
(For more on the connections of natural science with socio-political problems in Europe and, in particular, in England in the 17th century, see.)
Newton's contemporaries perceived the scientific achievements of scientists not only and even not so much as a simple increase in positive knowledge about the laws of nature, but as proof of the ability of man to establish on Earth the same unshakable order that scientists had already discovered in the sky. It is not surprising, therefore, that many English statesmen of this era were seriously interested in science, and scientists (R. Boyle, E. Halley, J. Locke, I. Newton, etc.) were often appointed to high posts, introducing into the political life of the country characteristic of scientific research openness of discussion, depth of analysis, courage and novelty of approaches in solving problems.
One of the most striking examples of such a community of scientists and politicians was the monetary reform under consideration, the authors of which, in addition to Isaac Newton, were the philosopher, ideologist of parliamentarism, doctor, member of the Royal Society of London John Locke (1632-1704) and a student, and later a close friend of Newton, from 1695 Chancellor of the Exchequer Charles Montagu (Lord Halifax) (1661-1715). The general, so to speak, political leadership in the development of the concept of reform was carried out by Locke's longtime friend, the head of the Whig party, since 1697 the Lord Chancellor of England, in 1699-1704. President of the Royal Society John Somers (1651-1716). The source material for the discussions - they took place at parliamentary hearings and even in the press - was the money exchange project, prepared on the instructions of Montagu by the secretary of the treasury, William Lowndes.
In order to better understand the significance of this project, as well as the essence of its subsequent changes, it is necessary to take into account the fact that the main problem of the reform was its enormous cost. Therefore, when drawing up and discussing the draft, it was first of all necessary to decide at whose expense the reform would be carried out, and since all sections of society were interested in the normalization of monetary circulation, it would seem that every resident of the country who had money had to pay for the reform. In other words, the exchange of money should have been carried out in the same way as it was done in former times: the treasury assumed the costs of re-minting, and the population was exchanged for old coins for new ones by weight, i.e. at the real value of the delivered silver.
However, as noted above, the replacement of coins according to their weight ruined the population and, as a result, further undermined the economy of the state. That is why Lound proposed to exchange money not by weight, but by face value, which would cost the treasury, according to his calculations, 1.5 million pounds sterling. At the same time, in order to partially compensate for these huge, at that time, expenses, it was proposed to devalue the pound sterling by 20% at the same time (by reducing the silver content in it), and also to oblige the population to pay half the cost of coinage.
J. Locke spoke out in the discussions as a sharp opponent of devaluation, which could undermine the confidence of England's foreign creditors and cause serious damage to domestic banks. At the same time, Locke proposed to temporarily leave the damaged coins in circulation, reducing their value to the value of the silver actually contained in them. In turn, Newton considered devaluation inevitable, however, putting forward a radical proposal that the exchange should be carried out in the way Laund proposed, but not completely at the expense of the treasury. As for the rise in prices, inevitable in the course of devaluation, Newton suggested that a special ministry be set up to control them.
Unfortunately, we do not know exactly how the disputes over the ways of carrying out the reform proceeded. It is only known that the final draft, which Montagu, as head of the treasury, successfully defended in Parliament, was not a compromise "golden mean", but a paradoxical symbiosis of the most radical proposals of Lound, Locke and Newton. Thus, the idea of a rapid exchange of money at face value was taken from the first, in order to avoid further damage to coins, from the second, the rejection of devaluation in order to preserve the inviolability of the national monetary unit, and, finally, from Newton, the idea of exchanging money was taken entirely at the expense of the treasury. Moreover, the latter was motivated by the fact that all the costs of exchanging money should be borne by the government, wittingly or unwittingly bringing the country to a crisis.
At the end of 1696, the Parliament of England adopted a package of laws that ordered citizens to hand over all the spoiled money they had to the treasury within a set and very short period of time and after a while receive new, full-fledged coins in return (at face value!) At first, when exchanging money, there was an acute and extremely difficult for the economy shortage of cash, since the Mint could not cope with the sharply increased workload at all. However, after Newton took over the leadership in 1696, the production of money was rapidly increased almost tenfold.
(This result was achieved just by putting things in order and modernizing some technological processes, and thanks to a significant expansion of the production capacities of the Mint, including the creation of its branches in a number of cities (the Essex branch was led by astronomer E. Halley), the construction of mobile machines for minting money, etc.)
By the end of 1697, the cash shortage, which literally paralyzed trade, was eliminated and the business life of England resumed in full. At the same time, the treasury, collecting taxes from the ever-increasing trade turnover, was able to fully compensate for the losses incurred during the exchange of money within a few years. Thus, the reform, carried out in the interests of the ordinary population and business circles, turned out to be beneficial for the government as well.
To avoid misunderstandings, it should be emphasized that the exchange of money on such a grandiose scale could not do without excesses and abuses. So, some banks close to government circles profited from this operation, and a considerable number of people did not have time or could not exchange their money on time and, as a result, suffered losses, although, it must be admitted, when exchanging money by weight, these losses were would be much more. On the other hand, it is important to remember that the authors of the reform were sober and state-minded people. Therefore, the exchange of money at face value was not a manifestation of their altruism or the desire to make amends for the miscalculations of the government. Rather, we are dealing with the birth of a fundamentally new and unusually bold financial policy aimed at stimulating the national economy.
The exchange of money cost the treasury 2.7 million pounds, which was then almost one and a half of its annual income. Of course, before there were wise rulers who understood that for the sake of the prosperity of the state, one should not ruin one's people with exorbitant requisitions. However, putting forward a project according to which the devastated treasury had to pay a huge amount of money to the population in order to save itself, required a truly "Copernican revolution" in ideas about the role of money in the economic life of the state.
(The government of England had to borrow funds for the reform from large bankers and merchants who sought to normalize the country's money circulation, as well as from the Netherlands (England's main creditor and trading partner), interested in the stability of the pound sterling.)
In order to better understand the courage and unusualness of the Great Recoining, it makes sense to recall some, much later episodes of Russian history. Thus, it is well known that the main drawback of the manifesto on the abolition of serfdom in Russia was the introduction of a ransom for land. In an effort to shift the costs of emancipating the peasants onto themselves, the Russian government obliged the former serfs to pay huge (due to the accumulation of interest) and literally ruining their taxes ("redemption"), which were canceled only after the revolution of 1905. Meanwhile, already at the end of 60 -s. 19th century Prominent Russian economist V.V. Bervi-Flerovsky, in his articles, urged the government of Alexander II to at least reduce the redemption payments, explaining in detail that soon, due to the growth in consumption and the revitalization of the business life of the peasants now crushed by taxes, the treasury will receive much more than it initially loses. To the authorities, however, such a proposal seemed so wild that its author was declared mentally ill. Subsequently, Bervi-Flerovsky left Russia forever.
In the mid 70s. of the last century D.I. Mendeleev put forward a proposal to free the Russian oil fields from excise duties. Based on a deep study of domestic and foreign experience, Mendeleev explained to the Minister of Finance M.Kh. Reitern that these excises (their value was only 300,000 rubles a year) are stifling the nascent industry. The rejection of them will be rewarded by the rapid development of the oil fields and will result in multimillion-dollar incomes. Reitern originally referred to these proposals as "professor daydreams". However, later he nevertheless listened to the advice of a scientist and canceled the excise tax, which gave impetus to the rapid development of the oil refining industry and soon allowed Russia to abandon the import of American kerosene.
Apparently, the decision of the Minister of Finance to follow the recommendations of Mendeleev was largely influenced by the modest amount of excise tax and, therefore, a small degree of risk. In those cases, when it comes to large-scale projects affecting the economy as a whole, any proposals to limit the revenues of the treasury in the name of the future prosperity of the country are perceived by statesmen as yet another "dreams" that are completely unrealizable in real life.
(In one of his speeches, Yegor Gaidar explained to the deputies of the Supreme Soviet of the USSR that full compensation to citizens of their depreciated deposits would require an amount equal to 6 quarterly budgets of the country. The magnitude of this figure made a huge impression on the deputies. Meanwhile, the treasury income for 6 quarters is Thus we are dealing with a sum equal in magnitude (on a relative scale, of course) to that which the British had to pay in the course of the reform of the late seventeenth century.)
In principle, such a reaction can be understood. Indeed, any attempt to follow the advice of theorists in an undermined financial system will inevitably lead to the formation of budget "holes", which can be plugged either by printing unsecured money or by means of huge foreign loans. At the same time, in both the first and second (albeit to a lesser extent) cases, we will get an outbreak of inflation, which will quickly nullify all efforts to improve the economy.
When analyzing the problems faced by the authors of the Great Recoinage project, it is important to take into account that the threat of inflation exists even when the economy uses metal money instead of paper money. So, in the XVI century. due to the huge influx of silver from South America, prices for basic products rose on average in Europe by 3-4 times. At the same time, the economy of Spain - the main colonial power of that time - was literally ruined by this flow of silver, turning warriors, peasants, artisans into adventurers, idlers and spendthrifts, whose easily obtained money enriched not their own country, but Dutch merchants.
It is clear that a similar final (albeit on a smaller scale) was possible in England. Of course, the issuance of full-fledged money to the population, instead of spoiled ones, could intensify trade and, as a result, increase tax revenues to the treasury. However, the purchasing power of the collected silver was significantly lower. After all, if prices did not fall when demand fell after the exchange of money (by weight!) in the middle of the 16th century, then what could prevent prices from rising when effective demand increased?
In the best case, merchants could simply keep the previous denominations of prices or even lower them somewhat, but if full-weight coins were used, this would still mean a fall in the value of silver on the domestic market. In turn, the result of such a fall could be an outflow of silver abroad, which would undoubtedly worsen the already difficult external economic situation of England, which at that time was at war with France. Thus, it is understandable why the initial drafts of reform were much more moderate and uncompromising in nature, and Newton also proposed, as a temporary measure due to the ongoing war, the introduction of state price controls.
Nevertheless, in the end, a risky and burdensome option for the treasury was adopted for the exchange of money, which, it would seem, should only worsen the economic situation of the country. Therefore, although we do not know what prompted the authors of the reform to take this step, we have the right to raise the question: why, in fact, the Great Recoinage not only did not ruin the English economy, but also became the starting point of its heyday?
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