As I reported in July, for the first time this year the Royal Mint received no new orders to produce 1p and 2p coins . The Treasury says this is because enough are in circulation already – but others know the writing is on the wall and one day, the coins will cease to exist.
That could transform the way our currency works – making it in effect denominated in multiples of 5p instead of 1p. And it would be a wise move: most sensible countries have done something similar to coins that are so worthless, people sooner throw them away than pocket them.
That hasn’t stopped some being up in arms over the prospect. They say the change would be a slippery slope towards a cashless society – and an eradication of rights therewith.
A new book on the history of cash offers ample reasons why a citizenry should be suspicious when the state meddles with money.
In Money, economist David McWilliams walks us through time from the day the first gold coin was minted to the modern incarnation of money, Bitcoin. "Money has proved to be one of the most seductive and enduring ideas of the past five millennia," McWilliams argues. He shows how a society can live and die on the strength of its currency.
When a government is on the brink, there is no clearer sign than the deteriorating health of its currency
Most modern progress owe its success just as much to inventors and scientists as to the monetary systems they grew up in, argues McWilliams: the reorganising of civilisation from agrarian communities into market-orientated towns and cities was brought about by giving ordinary folk a common and practical means by which to trade, while Gutenburg would not have got far with his printing press were it not for advances in 14th-century German lending markets which sprung up not long before: "Each breakthrough in the application of money – such as the rate of interest, the introduction of coins, or the use of balance sheets – led to further innovations, one development acting as a launchpad for another."
When a government is on the brink, there is no clearer sign than the deteriorating health of its currency. Among the biggest instigators of the French Revolution, argues McWilliams, was Scottish economist John Law, who during his spell as Controller General of Finances in France, oversaw the collapse of Paris’s highly speculative financial markets, wiping out the savings of middle-class Frenchmen; while the savings of ordinary Germans also vanished under extreme hyperinflation in Weimar Germany, proving fertile ground for the emergence of Nazism in the Thirties.
Money innovations can be transformative when they’re done right – and catastrophic when done wrong. The florin coin, which emerged in 13th-century Tuscany, was so popular it became the de facto reserve currency of medieval Europe, and established the region as a global trading hub. But a millennium earlier, in 260AD, Roman emperor Gallienus, under pressure from declining tax revenues, opted to debase the denarius, which had contained 60 per cent silver, to just four per cent. Minting these worthless coins precipitated hyperinflation and led to widespread panic among ordinary Romans, crippling the empire – a big mistake. Gallienus was later assassinated.
Which brings me back to British copper coins – coins that are so worthless, the Royal Mint has long since stopped making them from actual copper, because their scrap value would now be so much higher. Do we really want to keep on with these counterfeit coppers – and might we suffer the same fate as Gallienus? I hope not.
Money: A Story of Humanity by David McWilliams (Simon and Schuster, £25) is out now
