On Banco, Courant, and Coinage
However, once the bank has been established, constituted, and brought to stability, this complete equality and identity between the speciesthaler and the banco thaler ceases – both in the commerce among the bank’s own stakeholders and in their dealings with outsiders. A relationship then arises between the two types of thaler, which, although never excessively divergent, nonetheless deviates somewhat from the original equality or par. The banco thaler becomes a unit of account; the speciesthaler, coinage, and, like all coinage, a commodity.
For in the commerce of merchants, a multitude – indeed an infinity – of circumstances intervene, each exerting influence upon the determination of the relationship between the adopted unit of account (the standard used for comparing all objects of commerce) and that which, at any given moment, constitutes the object of negotiation. And the contracting parties agree that the recipient of the good shall have so much credited in banco, while the deliverer shall be debited correspondingly.
In such transactions, through the continual daily adjustment of mutual speculations according to prevailing conditions, silver does not retain a constant value; and if the whole – a Cologne mark of fine silver – does not always have the same worth in banco, then neither can the part – namely the speciesthaler, composed of 4/37 of such a mark – maintain a fixed value in banco. He who today deposits 1000 thalers in natura into the bank does not necessarily deliver, as one who at the time of the bank's founding did by subscribing a folium, exactly 1000 speciesthalers or 4000/37 Cologne marks of fine silver; rather, he delivers the value of 1000 banco thalers at the current rate of exchange, which may amount to somewhat more, somewhat less, or precisely 4000/37 Cologne marks of silver.
The daily intercourse among the inhabitants of one and the same locality, and with their nearest neighbors — the daily commerce and exchange — which is not conducted through entries and counter-entries in Banco, but rather by exhibition in natura, that is, through the presentation of the agreed-upon price of goods in the noble metal preferred as the equivalent for all such items, requires coinage: that is, portions of such metal which, as evidence that they indeed possess the properties prescribed by the minting authority, bear the stamp of said authority.
The mint master determines and prescribes what shall be regarded as one unit in the use of such coinage, and how many such units shall be struck from a given quantity of noble metal. And when the units upon which the coin is based and those employed in the bank’s reckoning bear the same name — for example, both being called a thaler — then one distinguishes these units, and the accounting conducted according to either, by the addition of the terms in Banco and in Courant; and the word Species always implies an inseparable and inherent reference to the concept of a bank.
Naturally, the minting authority — that is, the sovereign — will prescribe but one unit — nay, more precisely, he will only tolerate a single unit: just as, in accordance with sound policing regulations, there must be but one ell for measuring. For to what end should it serve, or what benefit could there be, in having two kinds of units — for instance, two types of thaler — one kind of which yields so and so many pieces per mark, and another kind which yields a different number from the same mark, thereby standing in a definite ratio to one another? What purpose could this serve, save to introduce unnecessary and grievously burdensome complications — nay, confusion?
If, in the consideration of any given coinage, one looks solely to the quantity of fine silver contained therein — setting aside all foreign alloy and all other circumstances — then each type of coin possesses a fixed ratio, determined by the weight of the fine silver it contains; and the valuation of such coin according to that ratio is what is called Pari.
Yet such valuation or equalization of different coin types according to Pari rarely takes place, whether in the exchange of one variety for another, or in the reduction of accounts expressed in one kind into another. And between Banco and Courant, no Pari exists in the strict sense, because — as has previously been shown — the Banco Thaler and the Species Thaler are not unalterably or wholly identical; in other words, because the Banco Thaler, as a unit of account, cannot be represented immutably by one and the same quantity of precious metal.
Apart from the differences inherent in the mixture of precious metal with alloy — both in quality and quantity — numerous other circumstances arise when coin types are compared among one another and when Courant is compared with Banco; most of these are temporal or situational factors — for example, that a certain coin type may, at a particular moment, be more or less serviceable for certain purposes. Therefore, deviations from Pari can in no wise cause surprise.
These deviations are diminished, and the price of a given coin type remains more consistent, both in large and small commerce, in proportion to how little the noble metal therein is adulterated with alloy, and in proportion to the extent to which, in the minting process, adequate care is taken to ensure the uniformity or identity of the individual pieces of any given coin type.
The coinage stamp is intended solely to render the use of scales, touchstones, and crucibles unnecessary; and in the commerce between nations — wherein it is solely the quantity of noble metal that is considered — the stamp carries weight only insofar as the foreign party places trust in the minting authority whose coin is offered.
It is therefore highly advisable to mint principally large-denomination courant coins, even pieces amounting to several marks, since the identity of individual coins is the more easily achieved and preserved the larger they are; and as for small courant coins, in the various gradations of the subdivision of the unit, to mint only so many as are necessary to facilitate minor exchanges: all according to the needs of domestic commerce and the quantity of currency required to sustain such transactions among the inhabitants of the state.
Payments of considerable sums in small coinage always have something improper about them — which, to be sure, cannot be outright forbidden — but which may be prevented if the minting authority issues a sufficient quantity of larger denominations, and of small coin — the Scheidemünze — only as much as is absolutely necessary, the need for which may safely be awaited, for when it does arise, it may be quickly and easily remedied.
The noble metals cannot be coined without the admixture of a baser and harder metal. This admixture, the entire process of minting, the institutions for coinage, and the employment of requisite personnel together give rise to considerable expenses; and that the minting authority should, by way of indemnification, slightly reduce the quantity of noble metal in a coin whose circulating value is to equal a certain sum — for instance, that a piece bearing the value of 1 Courant, i.e. 3/34 of a mark of fine silver, should not contain exactly those 3 parts, but somewhat less — this is not only equitable, but prudent, as a safeguard against melting down.
This deduction from intrinsic content — the so-called Schlagschatz — must, however, never be regarded as more than compensation; it must never become a manufacturing profit. The coarser the coin type, the smaller the permissible deduction from intrinsic value; and even for the smallest Scheidemünze, the Schlagschatz must never so exceed the cost of fabrication as to permit unauthorized coining, since with the ease of imitating the stamp, such pieces could be reproduced without being false in metal content.
There may, moreover, arise situations in which it is advisable to forgo the Schlagschatz altogether in magnanimity, and to reckon the cost of minting among the general expenses of state, whose reimbursement cannot be effected directly, and perhaps not at all. Such a case occurs when neighboring states, whose subjects engage in frequent and varied commerce with one another, have for years observed a common Münzfuß (coin standard), and have minted to an equivalent specification — and now one of them, in wishing to introduce a previously unrecognized Schlagschatz, would undertake a change in the coin standard. It is certain that the neighboring states would not accept such a change; they would not allow the newly minted coin to pass at par with their own; the subjects would find themselves in confusion; and such manifold inconveniences would arise for the minting authority, and such disorder in daily trade, that the advantage of the Schlagschatz would soon appear trifling — not to mention the many further disadvantages inseparably connected with even the slightest deviation from an established monetary standard.
Through meticulous and precise adjustment, Wippen is prevented; through fine and elegant coinage, Rippen is deterred — and likewise forgery. For rarely does an artist stoop to become a deceiver, and rarely is the deceiver an artist. Of these preventative measures, the latter — against Rippen — remains applicable even in the case of Scheidemünze, especially when the smaller denominations are rendered somewhat voluminous through ample alloying; the former — against Wippen — applies only to coarse coinage, and this is why, as stated earlier, it is advisable primarily to mint coarse coinage, and to strike small denominations only in cases of necessity.
As it thus lies largely within the power of the minting authority to forestall both these abuses — Wippen and Rippen — and, once they arise, to put a timely end to them upon detection; and since the mint stamp is intended to guarantee the intrinsic content: then, upon the necessity arising to call in coinage so degraded through Wippen and Rippen as to become intolerable, one may rightly raise the question — who is to bear the loss in the replacement of the recalled coinage with new and full-valued pieces: the minting authority, or the holder who delivers the decried coin for exchange?
And indeed, in a juridical resolution of this matter, consideration might, in regard to Wippen, lean toward the holder, for Wippen is not visible to the eye, and no one can guard himself against it; whereas in the case of Rippen, the consideration that it is plainly visible may support the side of the minting authority.
The present treatise — like the one concerning paper money, which likewise originates from my hand and appears in the 43rd issue of these Staatsanzeigen — has been committed to paper by me with reference to the controversy that has arisen concerning the current coinage and banking operations in Holstein.
Oeder.
My Notes on the above text.
Wippen: A form of coin degradation in which swindlers would file small amounts of precious metal from the edges of coins, reducing their weight without obvious visual change. This affected the intrinsic value of the coin.Rippen: Another method of coin tampering, where material was visibly scraped or shaved from the rim of the coin. This type of debasement was easier to detect than Wippen.
Scheidemünze: Small-denomination coins used primarily for everyday transactions. These contained less precious metal and were not intended as stores of value, but rather to facilitate small-scale commerce.
Schlagschatz (literally "coinage tax"): The seigniorage or margin retained by the minting authority during the production of coins. This represents the difference between the face value of the coin and its actual metal content, meant to cover production costs—not to yield profit.
Gepräge: The imprint or stamp on a coin, identifying its origin and serving as a guarantee of its weight and metal content. It had both a legal and symbolic trust function.
Münzherr (minting lord): The sovereign or authority with the right to issue coinage. This could be a king, prince, state, or other territorial ruler. The right to mint was an important expression of sovereignty.
Münzfuß (coinage standard): The monetary standard defining the ratio between the coin’s face value and its content of precious metal. Changes to the standard could have major implications for trade and public trust, especially in regions sharing a common standard.
Coin recall: The process by which old or degraded coins are withdrawn from circulation and replaced with newly minted coins. This was typically done when coins had become overly debased or lacked public confidence.
Staatsanzeigen: A governmental or semi-official journal (common in the German-speaking world in the 18th and 19th centuries) where officials, scholars, and reformers published essays on economic, administrative, or political issues—a kind of public policy forum.
Holstein: A duchy under Danish sovereignty during this period, with its own legal and economic administration. Monetary and banking controversies in Holstein are referenced in the text as the immediate context for this essay.