I certainly agree gold is “a lousy general medium of exchange”, and there
are many puzzles I think surrounding both the gold standard itself and the
popular misconceptions about gold use associated with it – puzzles within
the province of history of economic thought.

As I recall, John Locke believed God created silver as the proper vehicle of
exchange – a point already made by such as Ibn Khaldun centuries earlier. 
However, I share the view with many, I think, that Locke was nevertheless in
good part himself responsible for the collapse of silver usage, and the
ascent of gold during the 18th century.  The key acts being the abolition of
seigniorage in 1666, and Locke’s later instance that that measure was
retained during the recoinage of 1697.

This, coupled with other measures, led to the subsequent flight of silver
coin overseas or to the melting pot.  I have come across two different views
about the thought behind this measure.  One is that put up recently by
Sargent (Big Problem of Small Change) which is essentially that Locke was a
well meaning idiot.  (A section in the book is actually headed: “Locke,
Genius or Idiot?”).  The other was put up by Alexander Del Mar during the
controversies of the later 19th century.  Del Mar thought the abolition of
seigniorage had been a monetary crime, by international merchants, against
the interest of British citizenry.

Adam Smith wrote at the very height of the problem (government silver issue
ceased in Britain for practical purposes between 1758 and 1816, copper 1754
to 1797).  He certainly was critical of the position taken by Locke, making
such moves a “vulgar prejudice” of the “mercantile system”, and calling for
the reintroduction of seigniorage.  But I wonder, what more he might have
said, amongst friends, after a glass or two of wine?  Where would he stand
between Sargent and Del Mar?

Rob Tye