Debasement is the practice of lowering the value of currency. It is particularly used in connection with commodity money such as gold or silver coins. A coin is said to be debased if the quantity of gold or silver is reduced.

Examples

For example, the value of the denarius in Roman currency gradually decreased over time as the Roman government altered both the size and the silver content of the coin. Originally, the silver used was nearly pure, weighing about 4.5 grams. From time to time, this was reduced. During the reign of the Claudio-Julian Emperors, the denarius contained approximately 4 grams of silver, and then was reduced to 3.8 grams under Nero. The denarius continued to shrink in size and purity, until by the second half of the third century, it was only about 2% silver, and was replaced by the argenteus.

Reasons for debasement

The main reason a government will debase its currency is financial gain. By reducing the silver or gold content of a coin, a government can make more coins out of a given amount of specie, thus, in effect, "creating money"

Effects of debasement

Debasement lowers the value of the coinage, causing inflation. Over time, it may even lead to a new coin being adopted as a standard currency, as when the Ottoman Akçe was replaced by the Kuruş (1 kurus = 120 akçe), with the para (1/40 kurus) as a subunit. The Kurus in turn later became a subdivision of the Lira.

Other uses of the term

"Debasement" is also sometimes used to refer to the tendency of silver or gold coins to be "shaved", that is, to have small amounts shaved off the edges of the coins by unscrupulous users, thereby reducing the actual silver content of the coin. It was to prevent this that silver and gold coins began to be produced with milled edges, as many coins still do by tradition, although they no longer contain valuable metals. For example, the U.S. quarter and Dime, but not the Nickel or the Penny, which contained, respectively, nickel and copper, and thus had no danger of shaving.

By analogy, "debased currency" is sometimes used for anything whose value has been reduced, such as "Stardom is an utterly debased currency" in this article [1] (http://www.telegraph.co.uk/sport/main.jhtml?xml=/sport/2003/11/23/srstar23.xml)