ALLAMA IQBAL EXPLAINS: Minting Rights
By: Abbas Ali
In this chapter, we want to discuss a question whose decision depends upon previous economic principles; however, the beginner should remain warned that this is a very complex question, and to understand its complete meaning, well-known scholars use wrong reasoning. Therefore, before entering this difficult field, one should save oneself and know the difficulties that have defeated veteran logicians and writers. A scholar writes that the writer who touches the dangerous topic of money is always under threat because mistakes are waiting for him to attack like lions and tigers. Keeping in view the apprehension, we will start with an explanation of the economic terms of this discussion. To understand this complex topic, this seems the easiest and safest way. A beginner must commit to the perfect meaning of every sentence and term; otherwise, he cannot understand completely the purpose of this important economic discussion.
In every country, it is legally decided how many coins should be minted from the un-minted money or from a specific amount of gold or silver. For example, according to the present law of England,1869 coins can be minted from 40 pounds of gold, which are known as sovereign. The price of the quantity of coins into which any quantity of un-minted money is divided is known as the inscribed price of that quantity. From this definition, until any coin is legally of full weight, its value is always equal to its weight as un-minted money. However, it is obvious that after a period of daily use, the weight of the coins decreases from their legal weight. Generally, during buying and selling, people do not care about the weight of a coin. Due to this process, it is possible that because some coins have been in use for a long period of time, their weight might decrease, and during buying and selling, their value will be considered the same as set legally. For example, suppose that a coin contains 16 Aana of silver and is accepted for 16 Aana. It is possible that due to excessive use, its weight decreases and its silver remains equal to 15 Aana; however, in buying and selling, it is accepted as 16 Aana. During common buying and selling, the weight of the coins does matter; however, when they are exchanged against un-minted money, the effect gets revealed. Because in this case, only the quantity of un-minted money will be provided that is equal to the quantity contained in the coins. If, due to excessive use, their weight decreases below the legal weight, then obviously, to obtain a specific quantity in exchange, we will have to give a greater number of coins. Therefore, the quantity of coins commonly used, which is equal to the weight of un-minted money, is known as the market price of the said quantity of coins. And because, due to a loss of weight, against a specific quantity of un-minted money, a greater number of commonly used coins are to be paid, the market price will obviously be higher than the inscribed price. For example, suppose the inscribed price of silver is 5 shillings and two pence per ounce, and the market price is 6 shillings. It means that the 6 shillings of the commonly used coin are equal to the weight of the quantity of un-minted money, whose weight must be equal to 5 shillings and two pence if their weight has not decreased below the legal weight due to excessive use. Therefore, obviously, the market price of un-minted money being greater than the inscribed price of a coin is a proof of the lesser value of the coin. From this explanation, two principles are developed about coin-minting:
- When the market price of un-minted money increases more than its inscribed price, it not only proves that the value of the coin has decreased, but it also becomes known to which level the value of the coin falls. In other words, we can say that the market price of un-minted money minus the inscribed price of the un-minted money is equal to the weight that has been wasted due to excessive use of commonly used money.
- From the definition of inscribed price, the following principle is derived as a conclusion: the changing of the inscribed price of un-minted money indicates a loss in the legal weight of the coins. If a person says that the inscribed price of un-minted money can be different in different circumstances, He is absolutely wrong. If one mound of wine kept in a container is distributed into many containers, will the quantity of the wine increase? Absolutely not. Getting divided into many parts cannot make any difference in its quantity.
After the above explanation, let us approach the real purpose. You might know that the government has a special minting rights fund, which is known as the minting rights. By this, we mean the quantity of un-minted coins that the government takes as the cost of the coinage. For example, suppose two Aanas are the cost of minting one rupee. To deduct the two Aanas, the official mint will put only silver worth 14 Annas in one rupee coin and get its cost of coinage. However, we should remember that minting rights are of two types:
- When the minting right is equal to the cost of coinage. In this case, the government has no profit because, as much as the government incurs the cost, it gets the same. In certain countries, there are no minting rights. For example, the mint of England puts a complete 20-shilling worth of gold in a pound. In some other countries, the people have the right to either pay the minting fee or, as the law may prevail, exchange their pieces of gold or silver for coins. Therefore, in England, regarding the golden coin, the people have the right to exchange their pieces of gold against the pounds from the mint without paying the minting fee. Before 1894, the people of Hindustan too had the right. Due to some special expediency, which will be discussed later, the mint of this country is closed for its people, and the government mints coins only to the extent that will suffice the needs of this country.
- When the minting right is greater than the cost of coinage. In this case, the government earns a profit by minting coins. For example, in our Hindustan, one rupee is accepted for 16 Aanas, although it contains silver worth 11 Aanas only. Hence, the government earns a profit of 5 Aanas per rupee. According to the same theory, in one paisa, there is copper, perhaps worth more than seven shells. We will discuss both methods, respectively.
In the first case, the question arises as to whether the value of any coin should be equal to the quantity of the un-minted money that coin is comprised of or whether the minting cost should be included in the previously mentioned quantity. In other words, we can say if 2 Aanas are the minting cost of one rupee, then after making a rupee with silver worth 14 Anas, should we set its value equal to 16 Anas or make a coin comprised of silver worth 16 Aanas and set its value equal to 16 Aanas? Obviously, in the first case, the government will get its minting cost of 2 Aanas; however, in the second case, where the rupee contains silver worth 16 Aanas, the government will not get anything as a minting cost. It is a debatable issue. Some scholars say that the government should not take any minting rights; in other words, for the sake of minting costs, making a coin work at a higher value than its real value is economically harmful. However, in the opinion of some other scholars, there is no harm in taking the minting right equal to the minting cost. Following are their arguments:
to be continued…….
Ilm-ul-Iqtisad
Part-3 Chapter-4
Haq-e-Zarab
