<p>It is generally accepted that it was a miscalculation. He was working with faulty data because in other countries gold was bit overvalued relative to unique situation in Britain (see <a href="https://www.jstor.org/stable/3020836?seq=5" rel="nofollow noreferrer">Fay 1935</a>). He was however, concerned with accuracy only based on the evidence.</p>
<p>There wasn't any deeper reason behind it as you suggest. Historical evidence suggests that Newton attempted to get the correct exchange, didn't got it right on the first try and when silver started to leave country there was no political willingness to correct it and eventually it accidentally pushed UK into gold standard. There is no evidence that this was intentional on Newton's part. In fact Fay mentions he attempted to correct it but didn't managed so and even though first it raised concerns in some circles, mercantilist factions within UK did favor gold, even though Newton was master of the mint he didn't had complete free hand to just do whatever he wanted.</p>

CC BY-SA 4.0
2024-07-07T21:36:41.013Z
2024-07-07T21:36:41.013Z
1muflon1
<p>To my knowledge, one major reason was to expel the counterfeit &quot;silver&quot; coins out of the economy (and/or to discourage the minting of counterfeit silver coins), which Newton estimated to be around 20% of all silver coins in circulation. Here's a good article on the topic: <a href="https://www.herobullion.com/isaac-newton-saved-british-coinage/" rel="nofollow noreferrer">https://www.herobullion.com/isaac-newton-saved-british-coinage/</a></p>

CC BY-SA 4.0
2024-07-07T13:37:29.510Z
2024-07-07T13:37:29.510Z
Stephen Webb Hansen
<p>This is a question of economic history, specifically about one specific event that caused the British to adopt the <a href="https://en.wikipedia.org/wiki/Gold_standard" rel="nofollow noreferrer">gold standard</a>.</p>
<p>Reading about the gold standard one often encounters statements like this.</p>
<blockquote>
<p>Great Britain accidentally adopted a de facto gold standard in 1717 when Sir Isaac Newton, then-master of the Royal Mint, set the exchange rate of silver to gold too low, thus causing silver coins to go out of circulation.</p>
</blockquote>
<p>To my understanding what Newton did was to change the exchange rate (of the <a href="https://en.wikipedia.org/wiki/Bimetallism" rel="nofollow noreferrer">Bi-metallic</a> system) between gold and silver from 1:20 to 1:21 i.e. making one gold guinea coin no longer equal to 20 silver shillings but 21 shillings instead. This gave gold a slight <em>edge</em> compared to silver so most people started buying gold instead of silver effectively creating the gold standard.</p>
<p>The question is why did he do this?
I'm looking for a historical reference, a book, or an article that deals with this question. Is it even known, or can his reasoning be somehow extrapolated from the historical records that we have?</p>
<p>There are several explanations I managed to find online</p>
<ul>
<li>
<ol>
<li>He performed chemical experiments on silver and gold and based on some <em>objective</em> physical properties of mass, malleability, ductility etc. decided that the right ratio is 1:21</li>
</ol>
</li>
<li>
<ol start="2">
<li>Britain and Europe in general had a trade deficit with China which made it beneficial because the Chinese used a copper-silver bimetallic system which effectively allowed the British to sell the Chinese their silver on their market and to substitute it with gold because of the <a href="https://en.wikipedia.org/wiki/Brazilian_Gold_Rush" rel="nofollow noreferrer">Brazilian gold rush</a>.</li>
</ol>
</li>
<li>some combination of the two or some other deeper reason...</li>
</ul>
<p>Again, I would like to find a serious article or book that deals with the explanation of the (effective) adoption of the gold standard. Everything I have is a combination of Wikipedia and Encyclopedia Britannica articles and an elementary ability to string facts together.</p>

<monetary-policy><exchange-rates><economic-history><china>
Why did Newton choose to devalue silve with respect to gold and (effectively) create the gold standard?
Alexandar Ruño
# Why did Newton choose to devalue silve with respect to gold and (effectively) create the gold standard?

(Asked by: username_0 on 2024-02-13)

This is a question of economic history, specifically about one specific event that caused the British to adopt the [gold standard](https://en.wikipedia.org/wiki/Gold_standard).

Reading about the gold standard one often encounters statements like this.

> Great Britain accidentally adopted a de facto gold standard in 1717 when Sir Isaac Newton, then-master of the Royal Mint, set the exchange rate of silver to gold too low, thus causing silver coins to go out of circulation.

To my understanding what Newton did was to change the exchange rate (of the [Bi-metallic](https://en.wikipedia.org/wiki/Bimetallism) system) between gold and silver from 1:20 to 1:21 i.e. making one gold guinea coin no longer equal to 20 silver shillings but 21 shillings instead. This gave gold a slight *edge* compared to silver so most people started buying gold instead of silver effectively creating the gold standard.

The question is why did he do this?
I'm looking for a historical reference, a book, or an article that deals with this question. Is it even known, or can his reasoning be somehow extrapolated from the historical records that we have?

There are several explanations I managed to find online

* 1. He performed chemical experiments on silver and gold and based on some *objective* physical properties of mass, malleability, ductility etc. decided that the right ratio is 1:21
* 2. Britain and Europe in general had a trade deficit with China which made it beneficial because the Chinese used a copper-silver bimetallic system which effectively allowed the British to sell the Chinese their silver on their market and to substitute it with gold because of the [Brazilian gold rush](https://en.wikipedia.org/wiki/Brazilian_Gold_Rush).
* some combination of the two or some other deeper reason...

Again, I would like to find a serious article or book that deals with the explanation of the (effective) adoption of the gold standard. Everything I have is a combination of Wikipedia and Encyclopedia Britannica articles and an elementary ability to string facts together.

**Tags:** monetary-policy, exchange-rates, economic-history, china

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## 2 answers

### Answer by username_1 on 2024-07-07. Score: 0

It is generally accepted that it was a miscalculation. He was working with faulty data because in other countries gold was bit overvalued relative to unique situation in Britain (see [Fay 1935](https://www.jstor.org/stable/3020836?seq=5)). He was however, concerned with accuracy only based on the evidence.

There wasn't any deeper reason behind it as you suggest. Historical evidence suggests that Newton attempted to get the correct exchange, didn't got it right on the first try and when silver started to leave country there was no political willingness to correct it and eventually it accidentally pushed UK into gold standard. There is no evidence that this was intentional on Newton's part. In fact Fay mentions he attempted to correct it but didn't managed so and even though first it raised concerns in some circles, mercantilist factions within UK did favor gold, even though Newton was master of the mint he didn't had complete free hand to just do whatever he wanted.


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### Answer by username_2 on 2024-07-07. Score: 0

To my knowledge, one major reason was to expel the counterfeit "silver" coins out of the economy (and/or to discourage the minting of counterfeit silver coins), which Newton estimated to be around 20% of all silver coins in circulation. Here's a good article on the topic: <https://www.herobullion.com/isaac-newton-saved-british-coinage/>


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