Juan de Mariana (1536 – 1624) was a Spanish Jesuit scholastic of the School of Salamanca. Little known to many, Spain’s School of Salamanca was the source of a philosophical and economic renaissance that predates the Scottish Enlightenment, and Juan de Mariana’s work today is still often read and cited in both Spanish and English – albeit mostly among academics with a niche interest.

What we wish to do here is outline a few of the rules that Juan de Mariana spells out for coinage in his 1605 work “De moneta” (translated to “On the Coinage” in English). In the preface to a seemingly out-of-print edition published by the Universidad Francisco Marroquín, Eric Clifford Graf explains why Mariana’s short piece is so important:

“[…] Mariana’s attitude anticipates classical liberal and libertarian opposition to the inflationary shenanigans of central banks (cf. Jefferson, Rothbard, Huerta de Soto). “De moneta” also signals the wide dissemination, both within Spain and across Europe, of Mariana’s analysis of Habsburg monetary policy, which, in turn, supports the thesis that the School of Salamanca had greater impact than previously thought. […] Saddled by the enormous costs of global empire, courtly extravagance, and governmental corruption, many Castilians objected to the Habsburg policy of debasing the billon coins. Denuded of their silver content, stamped with artificially inflated face values, and mass-produced by way of an hydraulic invention installed at Segovia in the 1580s, the billon coins allowed the Habsburgs to implement a form of taxation without consent”.

“On the Coinage” is not written with a numbered list of rules  for policy makers in the way I have simplified in this article. Rather, it is structured more like Machiavelli’s The Prince – providing advice to royalty, just as Machiavelli’s work is addressed to a prince – and it is a fairly impressive (yet brief) historical account of the debasement of coin money by political rulers across Europe: often detailing the metallic mixes and percentages, how populations reacted to various debasements, and the economic consequences for such debasements. But “On the Coinage” also includes general guidelines, which we will refer to simply as “rules”. These rules aid in understanding the age-old practice of coin debasement – a topic highly applicable to inflation in modern banking today. Thus, Mariana’s work has broad implications and encompasses a great deal more than mere coin money. In fact, we might view Mariana’s rules as a general framework

1. of what a morally-acceptable monetary policy might look like for fiat currencies,
2. as a benchmark of to compare fiat currencies to, and
3. if a fiat currency may hold up badly when benchmarked with Mariana’s rules, why private alternatives to fiat currencies might look so attractive.

Note that the below rules are sometimes for princes and others for kings. This is merely how  Mariana uses these titles interchangeably in his writing. I have kept the title that he used in each case.

• Rule 1 – If a prince would like to impose a new tax (including by means of coin debasement), he must obtain the consent of the people.
• Rule 2 – If a prince would like to impose a new tax, he must “ask openly” and never cheat his subjects.
• Rule 3 – If a prince would like to impose a new tax, he must never tax an amount that would leave his subjects “reduced from a state of abundance and prosperity to a state of need”.
• Rule 4 – The king is permitted to make changes to the appearance of the coinage “provided that the value remains inviolate in accordance with the quality of the money and pre-existing law”. In other words, changing what is stamped on the coin is fair game for the king; the quality and weight is not. It is neither permissible for the king to suddenly mix a gold coin with brass nor to reduce its weight by “clipping” the coin.
• Rule 5 – A prince should not, by decree, set the legal value of a coin (what Mariana calls its “extrinsic” value) differently to its market value (what he also calls its “natural” and “intrinsic” value) and warns of negative economic consequences for doing so. But Mariana gives one minor exception that he believes justifies a minor deviation between the legal and market price: a “small amount that can be added to the value of the metal to cover the cost of minting”. 
• Rule 6 (a single exception to previous rules) – If necessary, only in a situation of dire life-or-death crisis, such as the need to fight off an enemy attack in war, and only if every plausible alternative has already been considered and is not possible, a prince may consider debasement by either changing the metallic mix or by “snip[ping] off a portion of the weight”. But if this is to happen, an immediate return to full pre-war metallic content must take place as soon as the war comes to an end. In this case, Mariana insists that “the bad money that necessity forced upon them be straightaway turned in and retired, and that the proper old coinage be restored in place of that bad one for those who were holding it in good faith”.

Mariana gives the example of Frederick Augustus II, who apparently found himself in such a military predicament and with no money to pay soldiers. Thus, Augustus used rawhide (animal skin), stamped it, and promised to exchange it for a certain value of gold after the predicament ended. According to Mariana, Augustus honoured his word, exchanging the rawhide-stamped low-value coins for the promised gold coins thereafter.

Conclusion

Mariana ends the piece with a solid economic analysis of how debasement ruins an economy and how ruining an economy by means of debasement necessarily leads to even lower tax revenue for the king in the long run. He concludes with a bit of wisdom – directly addressing royalty:

“I would like to give princes one last piece of advice: if you want your state to be a healthy one, do not touch the primary foundations of commerce—units of weight, measurement, and the coinage. A many-layered swindle lies hidden behind the appearance of a quick fix”.

References

• MARIANA, J. (2018): On the Coinage, Guatemala City, Universidad Francisco Marroquín.