KN asked in Social ScienceEconomics · 2 months ago

What does it mean if a metal is over or undervalued at the mint? ?

I'm reading a book which explains that at the end of the 17th century, gold was overvalued at the English mint. When gold from Brazil was shipped to England to be coined, it drove silver out of circulation ( I believe that is the result of arbitrage). 

England wanted both currencies to circulate so they could either: 

1. Increase the mint price of silver (through debasement)

2. Reduce the mint price of gold (this was the option they chose but it further drove silver out of circulation) 

I guess my additional questions are:

1. Did the English increase the face value of silver since the actual silver was reduced?

2. Does reducing the price of gold mean that it cost less silver to purchase gold? 

1 Answer

  • Oiy
    Lv 6
    2 months ago

    It was said in England long time ago such a theory that bad money will kill good money. Have you ever melt your coin down? If you have a two dollar bill now,you will get rich.

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