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What is Debasement?

King Henry VIII, abuser of seigniorage?

Debasement is deliberately issuing coins of inferior metal value at the same face value. For instance, England’s Henry VIII undertook a policy of coinage debasement to save money. Essentially this means taking in all the coins and reissuing them with less valuable metal but at the same designation. Under Henry VIII and his son Edward VI, the sovereign coin fell in weight between 1544 and 1549, from 12.96g to 10.98g and from a finesse of 23 carats to 22 carats [source: The Royal Mint]. Likewise, the crown took away 83% of the silver in the penny yet still issued coins carrying the worth of ‘one penny’. By doing this they made a ‘stunning yield’ of £1.27 million (Knafo).

This difference in value between the price of the metal in a coin and the value the coin is given by the issuer (traditionally a state’s sovereign) is called ‘seigniorage’.