Faking It

Of the many manifestations of state corruption and chicanery, I think one of my favourite examples is the horrible British bimetallic two pound coin:

Although the coin outwardly pretends to be a mixture of gold and silver it is of course a fake, being in reality an almost worthless amalgam of copper, nickel, and zinc. Even if it were a mixture of real silver and gold, the stupidities of a specie-based bimetallic currency are well documented on Mises.org. This coin, therefore, is not only a monument to the ongoing rampage of statist monetary inflation but also a monument to Gresham's Law, which even Aristophanes in classical Greece suspected made bimetallism a useless monetary standard.

So how much of a monument to British state monetary inflation is this revolting fake silver and gold two pound coin? Let's go for the silver angle first. It's all in that word, pound, still symbolised in the '£' sigil of the Latin Libra symbol for the letter 'L'. This represents a Tower Pound, which is 5,400 grains of silver, so the two pound coin is pretending to represent 10,800 grains of silver. The modern pound is 7,000 grains (16 ounces), so let's work out what the two pound coin should be worth, in a modern silver price:

(I'm afraid Mathematics isn't my greatest strength, so if there are any holes in my calculations below, please do let me know.)

(Silver @ £5.92 per oz) * (16) * (10,800/7,000) = £146.13 pounds

So the British state, in its many guises from the Henry VIIIth onwards, has got the British pound down to 1.37% of its original silver value. It's taken them a while to do it, but with the EU's officially mandated target of monetary supply growth of at least 4.5% per annum, expect it to go under 1.0% in around eight years or less, which will be an achievement to be proud of for whichever Chancellor manages it.

Seeing as this is a bimetallic coin, which is based upon an original two pound gold British coin of 1820, which weighed 0.4708 Troy ounces in gold, let's see if it gets any better looking at it from a golden point of view, after heroes like Sir Isaac Newton introduced a gold standard once earlier British governments had corrupted the silver standard. Now if I've got this right, a Troy pound is 5,760 grains, which is divided into 12 Troy ounces. A standard gold price ounce is 437.5 grains compared to a Troy ounce of 480.0 grains, so we have to do some further mathematical jiggery pokery. Let's see if my maths has improved:

(Gold @ £315.87 per oz) * (0.4708) * (480.0/437.5) = £163.16 pounds

So this time the British government has done even better, since coming off the Newtonian gold standard; they have devalued the pound to just 1.23% of its reborn pristine golden value. Assuming a money supply growth figure, again, of 4.5% per annum, expect the inflated pound to go under 1.0% of its original value in less than five years.

Outstanding.

I wish they would just make these bimetallic two pound coins out of orange and green plastic and then we would all know where we really stood in relation to the counterfeit currency in our pockets; if they stamped them with the head of Homer Simpson it would be even better:

Now that really would be a currency to collect. We could have Bart in yellow and red, for the new pound coin, and Marge in blue and pink, dressed as Britannia, for the new fifty pence coin; the cartoonic possibilities are endless.