1. In the first chapter we explained the circumstances which gave rise to the use of Money, and showed that many substances have been used to fulfil that function. But a metal of some sort has been found to possess the greatest advantages: and of these, gold, silver, and copper have been chiefly preferred.

Gold and silver, however, in a perfectly pure state are too soft to be used for this purpose, and it is necessary to mix some other metal with them to harden them, which is called alloy. By a chemical law, whenever two metals are mixed together, the compound is harder than either of them in a pure state.

Gold and silver in the mass are called Bullion, and as the laws of all countries in which bullion is coined into money define the quantity of alloy to be mixed with the pure metal, we shall use the word Bullion to mean gold or silver in the mass, mixed with such a proportion of alloy as is ordered by law, so as to be fit to be coined.

Some nations have used Bullion as money; but the merchants of these nations were obliged to carry about with them scales and weights, to weigh out the Bullion on each occasion.

Other nations adopt a more convenient practice. They divide the bullion into pieces of a certain definite weight, and affix some public stamp upon it to certify to the public that these pieces are of a certain weight and fineness, and they give them certain names by which they are commonly known. These pieces of bullion, with a public stamp upon them to certify their weight and fineness, and called by a publicly recognised name, and intended to be used for the purposes of commerce without further examination are called Coins.

This stamp, or certificate, of course, in no way affects the Value of the metal, or the quantity of things it will exchange for. Its only object is to save the trouble of weighing and assaying the bullion in commercial transactions. Nor can the Name of the Coin in any way affect its Value. Values, it is true, are estimated in the number of these pieces of bullion, or coins: but it is necessarily implied in the bargain that these coins contain a certain definite quantity of bullion.

It is also perfectly evident that if this . process of stamping Bullion, and so turning it into Coin, is done free of all expense, at the will of any one who chooses to present bullion and demand to have it stamped, and also without any delay, the value of the metal as bullion must be exactly the same as the value of the metal as Coin.

If, however, a charge is made for the workmanship, or if any tax is levied on changing the metal from one form into another, or if a delay takes place in doing so, there will be a difference between the value of the metal as bullion and as coin, and this difference will manifestly be the charge for the workmanship, the amount of the tax, and the amount of interest accruing during the period of delay.

These however are all fixed, or constant, quantities, which may be ascertained, and they form the limits of the variation of the metal in one form from its value in the other.

In the following remarks we shall assume that there is no charge for the workmanship, no tax upon it, and no delay in doing it, no obstruction, in short, of any sort to changing the metal from one form into the other.

Upon these assumptions, then, we have this fundamental principle of the Coinage -

Any quantity of Metal in the form of Bullion must be of exactly the same Value as the same quantity of Metal in the form of Coin,

In the case of the coinage of England no charge of any sort is made for coining Gold Bullion: but as a considerable delay may take place before any one who brings Bullion to the Mint can have it coined, the 7 and 8 Vict. (1844) c. 32. § 4 enacts that every person may take bullion of the standard fineness to the Bank of England, and that the Bank shall be obliged to give him Notes to the amount of £3 17s. 9d. for every ounce of such Standard Bullion. And as the holder of Bank Notes may demand legal coin for them at the rate of £3 17 s. 10 1/2d. per ounce: there is thus practically a difference of 1 1/2d. per ounce between Gold Bullion and Gold Coin.