Short answer: Coin clipping is a method of debasement of gold or silver coins by shaving off a bit around the perimeter. The underweight “clipped” coin can then be passed off for face value and the remaining metal melted down for profit.
Below: A stack of 2 different 2 reales coins, from Chile 1812 (beneath) and Seville 1737 (atop). Both should be about 27 mm diameter, but the Seville one has been clipped.
Until the 20th century, most coins derived their value from their precious metal content, in either gold or silver. Gold and silver are relatively soft metals, and coins would wear gradually with circulation, losing some of the material from their edges and faces over time. There was an active debate in the Middle Ages as to whether money should be counted by weight or by the face values of the coins. In general, a well-worn coin might be refused, or only be accepted at a discount based on its actual remaining weight.
Coin clippers could artificially simulate this wear by shaving off a thin portion of the perimeter of the coin and passing off the remainder. If the design of the coin did not extend to the very edge, it could be very difficult to determine if a coin was undersized. Hammered coins were somewhat irregular in size and shape anyway, so it could be difficult to tell if a coin had been altered without a scale and an accurate set of weights.
Below, a Medieval Edward I English “long cross” silver penny, 1282-1289
For example, English silver pennies were made with a short cross on the reverse until the mid-1200s. This made it difficult to judge where the edge of the coin should lie, making it too easy for coin clippers to remove some of the silver. The “long cross” type, such as on the coin shown above, had the cross extending fully to the edge, making it easier to judge if the coin had been altered. Even so, you can see that the coins were somewhat irregular, and could be struck weakly, or off-center during the hammering process. Even if one had another penny of the exact same type for comparison, it would have been difficult to tell by eye if one had been altered.
The punishments for being caught coin clipping were severe. It was often treated as comparable in severity to counterfeiting, and could warrant a death sentence. Nevertheless, the potential profits were great enough that coin clipping did happen, with examples known dating back to ancient times.
Other similar methods for reducing the metal content of coins included “sweating” coins, by placing them in a bag and rubbing them together to collect the dust, or “plugging” coins by removing a small section and replacing it with base metal. I’ve heard of chemical leeching to remove some of the metal from coins, but don’t have a reference at the moment as to how it would have been done.
One major method to combat coin clipping was milled edges. Coins would have a series of fine grooves around the perimeter which could be examined to easily determine whether material had been removed, by honest wear or by debasement. Modern milled edges were introduced under mint master Isaac Newton (yes, the same guy) in the 1600s. Some ancient coins also had grooved edges as an anti-counterfeiting measure, though I don’t know what technique was used to add the grooves.
Modern coins tend to have milled edges if they were originally made of silver, regardless of the alloy used now. So the US dime, quarter and half dollars have milled edges, because they had been made of silver from 1964 and earlier, while the penny and nickel have smooth edges because they were already made of base metal. (Oddly, the 35% silver WW2 era nickels still had smooth edges.) A few modern coins which were originally base metal had milled edges, such as the bronze Japanese 10 yen series (right). They were switched to smooth edges a few years later (left) as the milling served no practical purpose.
The supply side for clipped coins can be explained by greed, in spite of the risks. But what about the demand side? Why would someone accept a clipped coin, or even a badly-worn coin as payment? Sargent and Velde explain in “The Big Problem of Small Change” that many countries in the Middle Ages had chronic shortages of smaller denominations. A group of small coins could easily substitute for a large one, but not the other way around. (Unless one literally cut coins in halves or quarters to make change, which was done. See the halved “short cross” penny, below.)
Small coins were more expensive to make per unit value than large ones, and were often underproduced. Chronic shortages forced people to accept even underweight or clipped coins as payments, because good coins were so scarce. In a sense, coin clippers were responding to an economic need for small change by partially devaluing the coin supply with ones which were light enough to circulate without being hoarded, but heavy enough to still be accepted. If full-weight small coins had been plentiful, coin clippers would have had great difficulty passing off the products of their efforts.
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