The Great Recoinage of 1696 : Charles Davenant's Developments in Monetary Theory

The English Great Recoinage of 1696 was one of the great monetary events in history. The English currency, a bimetallic standard based on the weight and fineness of the coinage, was debased in order to pay troops in the Netherlands during the Nine Years War. By 1695 almost 50% of the specie content was missing from coinage in circulation, causing a monetary crisis. The May 1695 actions of demonetisation of England's debased coinage and the issuing of new full-weight coin were instrumental in the creation of the British Gold Standard. This national monetary standard became the International Gold Standard during the nineteenth century. Charles Davenant, an author of economic tracts, politician and civil servant, was an important voice during the recoinage policy formulation period. Davenant's theory of paper credit and his model of the circular flow of income provide a reasoned and critical analysis of the English monetary system in the 1690s and the potential impact of policy options being entertained by the Crown. This paper attempts to look beyond the traditionally studied debate between John Locke, Isaac Newton and William Lowndes; into the deeper theoretical and political concepts behind the final decision to recoin the English currency. In this paper the impact of Davenant's monetary theory and his submission to Lord Godolphin on the action to recoin will be investigated and placed within the wider context of the 1694-1695 Commission on the Coinage