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Great Depression Online Archive Issue:

The Drapier's First Letter

Great Depression Online
Long Beach, CA
April 29, 2008

Inside This Issue You Will Discover…

*** The Drapier’s Letters
*** Gresham’s Law
*** The Drapier’s First Letter
*** And More

The Drapier’s Letters

William Wood was an English retailer of iron goods.  Yet he had friends in high places.  For in 1722, he was granted a patent by the English Parliament to coin copper money for use in Ireland.

The Irish, however, weren’t too pleased about this patent.  For one thing, the Irish Parliament didn’t approve it.  Second, it left the Irish currency open to debasement.  Third, this was yet another instance of political and economic exploitation by the English.

Jonathan Swift, the famous satirist and political pamphleteer, took issue with William Wood’s copper money and wrote a series of scathing pamphlets to inflame public opinion in Ireland and defend the constitutional and financial independence of the Irish kingdom. 

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Swift wrote under the pseudonym M.B. Drapier – hence the seven pamphlets are collectively called The Drapier’s Letters. 

Gresham’s Law

Swift’s complaint against Wood wasn’t that there wouldn’t be enough money, but rather that there would be too many inferior copper coins introduced into the Irish economy.  He was rightly concerned that these lower grade coins would result in the disappearance of the more valuable silver coins from circulation.  Plus since the coins wouldn’t be minted under Irish authority, there would be no way for the Irish to control their quality and amount.

This is known as Gresham’s Law…which commonly stated is: “Bad money drives out good.” 

More specifically, if a circulating currency consisting of both “good” and “bad” money (both forms required to be accepted at equal value under legal tender law), the currency quickly becomes dominated by the “bad” money.

This was seen in the United States in 1965 when the quarter was first minted from a copper-nickel composition.  Before that quarters were comprised of silver.  But the Federal Reserve had inflated the U.S. currency so that the silver contained in a quarter had become more valuable than what a quarter was worth.

True to Gresham’s law, pre-1965 silver based quarters rapidly disappeared from circulation.

The Drapier’s First Letter

Swift shrewdly recognized that there was no legal requirement for the people of Ireland to accept payment with Wood’s copper coins.  He details this in the The Drapier’s First Letter, which was titled, To the Shopkeepers, Tradesmen, Farmers, and Common People of Ireland.

Below is an excerpt of The Drapier’s First Letter for your enjoyment.

---

I will now, my dear friends, to save you the trouble, set before you, in short, what the law obliges you to do; and what it does not oblige you to.

First, you are obliged to take all money in payments which is coined by the king, and is of English standard or weight, provided it be of gold or silver.

Secondly, you are not obliged to take any money which is not of gold or silver; not only the halfpence or farthings of England, but of any other country.

Thirdly, much less are we obliged to take those vile halfpence of that same Wood, by which you lose almost eleven pence in every shilling.

Therefore, my friends, stand to it one and all: refuse this filthy trash.  It is no treason to rebel against Mr. Wood.  His Majesty in his patent obliges nobody to take these halfpence: our gracious prince hath no such ill advisers about him; or if he had, yet you see the laws have not left it in the king’s power to force us to take any coin but what is lawful, of right standard, gold and silver.

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With the help of the Drapier letters, Wood’s patent was revoked in 1725, and Ireland avoided the consequences of plentiful cheap money…consequences that we’re now getting to fully appreciate courtesy of the Federal Reserve – and their endless supply of credit and debt based paper.

Sincerely,

M.N. Gordon
Great Depression Online

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