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Final Answers
© 2000-2014   Gérard P. Michon, Ph.D.

  Coat-of-Arms of British economist 
 David Ricardo (1772-1823)

Money, Currency,
Precious Metals

TANSTAAFL:  "There ain't no such thing as a free lunch."
Robert A. Heinlein, in The Moon is a Harsh Mistress (1966).
Favorite quip of  Milton Friedman (b.1912; Nobel 1976).

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Money, Currency, Precious Metals

(2002-11-13) Earliest Currency
What was the World's first currency unit?  When and where?

Primitive economic exchanges may have been limited to simple bartering, but there was probably always some kind of preferred "commodity" of reference, against which the fairness of any barter could be evaluated.

Between those primitive exchanges and the modern notion of money (which is essentially a purely symbolic device to record economic transactions) there was a time when the very concept of money became clear and practical with the invention of a concrete device that would embody money for centuries:  coins.

Earliest Coins

Before coins were invented, there was a stage when metals became the precious commodity of reference.  This may have started early during the Bronze Age.  Possibly even earlier, since gold (or electrum "amber-metal", a natural alloy of gold and silver) is found in nature without any sophisticated mining or metallurgy.  The historical record shows that gold units were used for accounting in Egypt in the third millenium BC, while silver and/or grain was used in Mesopotamia.

Actual brass coins appeared in China, in the 11th century BC.  These had a variety of odd shapes; they were not round but there were unmistakably coins.

In the Western World, the invention of coinage is usually attributed to Cyges Mermnadae, king of Lydia from 680 BC to 652 BC, founder of the dynasty of the Mermnadæ (whose last king was the well-known Croesus).   Gold Stater 
 of Croesus Early Lydian coins were ovals of natural electrum (gold alloyed with 20% to 45% silver).  By the time of Croesus (561-546 BC), the two metals could be separated.  Croesus (or Kroisos) thus outlawed electrum and introduced two coins  (both called staters)  one of silver and one of nearly pure gold (98%).

The smaller gold stater was nominally 3/4 of the weight of the larger silver stater, but a gold stater could be traded for 10 silver staters, thus establishing an official gold/silver price ratio of  131/3  (see next article for other historical ratios).

Money Museum at Richmond  |  Ancient Mediterranean  |  Greek Coinage  |  Asia Minor  |  Lydia

 Most Recent Quotes from www.kitco.com
  (2003-11-09)  Precious Metals
  $ per troy ounce of 480 grains
  ( 1 ozt  =  31.1034768 g )

Current Precious Metal Prices (Monex)
24 Hour Gold Chart (Kitco)
10 Year Gold Chart (Kitco)

US $ / ozt Gold
(Au, 79)
(Pt, 78)
(Ag, 47)
(Pd, 46)
(Rh, 45)
19300 g/L
21450 g/L
10500 g/L
12020 g/L
12410 g/L
2003-10-13$375.20$729.00$4.97$210.00 $460.00
2003-11-07$384.30$759.00$5.07$207.00 $450.00
2003-12-05$406.00$789.00$5.46$199.00 $440.00
2004-01-09$426.20$851.00$6.46$207.00 $440.00
2004-01-30$402.00$834.00$6.23$230.00 $460.00
2004-03-26$422.10$910.00$7.71$289.00 $700.00
2004-04-02$421.40$895.00$8.12$304.00 $700.00
2004-05-14$376.70$796.00$5.71$241.00 $755.00
2004-06-04$390.60$830.00$5.78$239.00 $780.00
2004-06-18$394.80$807.00$5.96$228.00 $800.00
2004-07-09$407.40$813.00$6.45$223.00 $880.00
2004-10-19$419.30$836.00$7.09$215.00 $1180.00  
2005-01-14$422.00$853.00$6.58$182.00 $1315.00  
2005-04-08$426.00$858.00$7.14$197.00 $1430.00  
2006-11-07$626.10$1184.00  $12.61  $330.00 $4850.00  
2007-07-06$652.50$1308.00  $12.64  $366.00 $5940.00  
2008-07-22$967.80$1849.00  $18.49  $417.00 $9450.00  
2009-01-23$898.30$951.00$11.93  $196.00 $1000.00  
2009-08-14$947.60$1257.00  $14.71  $274.00 $1542.50  
2010-10-29$1080.80$1501.00  $16.19  $414.00 $2310.00  
2010-12-24$1384.40$1713.00  $29.22  $751.00 $2360.00  
2012-11-09$1730.80$1551.00  $32.63  $605.00 $1175.00  
2013-04-19$1406.50$1425.00  $23.29  $675.00 $1150.00  
2013-06-28$1235.30$1339.00  $19.66  $659.00 $1025.00  
2013-10-18$1317.40$1435.00  $21.96  $739.00 $1000.00  
DateNew-York Market Prices at Closing   ( USD per ounce )

Looking at how the prices of precious metals vary from day to day, it's hard to believe that gold and silver were once a stable basis for defining currency.  Both metals were sometimes used simultaneously, with a  fixed  ratio of the price of a weight of gold to the same weight of silver.  Such historic ratios were much lower than what the current market values of gold and silver imply.  Here's what we've gleaned, mostly from  Histoire de la monnaie  by Jean Rivoire (PUF, 1989):

Historical Ratios of the Price of Gold to the Price of Silver
Menes (1st Egyptian Dynasty, 3100 BC)
Croesus Mermnadae (6th Century BC, Lydia)13.33
Augustus (Early Imperial Rome)12.50
Charlemagne (AD 781)12.00
Louis IX of France  (1266)  9.00
Edward III (14th Century England)11.57
Jean le Bon (14th Century France)11.11
Isaac Newton (Royal Mint, 1717)15.21
Napoléon Bonaparte ("Franc Germinal", 1803)15.50
US Coinage Act of 187316.00
Late 2003» 75
Mid 200450 to 70
Late 2012» 50

 1 kg Gold Ingot The depreciation of silver made the commercial ratio between gold and silver go out of control late in the 19th century:  It was 16 in 1873, 18 in 1876, 20 in 1886, 33 in 1900, 38 in 1910...  This left gold as the sole money standard until the reference to precious metals was dropped entirely.

Brief History of Gold   |   Periodic Table of Chemical Elements

(2009-08-11) The Medieval monetary system  (units of account)
Charlemagne replaced the gold standard with silver, at a 12 to 1 ratio.

Exactly like the  Ancien Régime  French monetary system  (itself  decimalized  in 1795 and stabilized by Napoléon in 1803)  the traditional British coinage system came from the Medieval monetary reform of  AD 794,  implemented by  Charlemagne  and the  Monogram of Charlemagne 
 (Karolus)  Anglo-Saxon King  Offa of Mercia  (who established the reputation of English coins for centuries to come).  When the silver-based monetary system of Charlemagne and Offa was instituted, three popular Roman currency names were retained  (libra, solidus, denarius)  and so were their  initials...

Charlemagne's Monetary System   ("Lsd")
L, £, F240 d  libra livre (*)Pfundpound sterlingquid
s12 d  solidus sol, [ sou, 1715 ][ Groschen ]shillingbob
 4 d      [ groat, 1273 ] 
 3 d    [ liard, 1656 ]   
d1 d  denarius denierPfennigpenny 
 ½ d    maille, obole   
 ¼ d    pite, poge, pougeoise  farthing 
(*)   The monetary  livre  originally introduced by Charlemagne is known to scholars as  Livre parisis  (pound of Paris).  Once the King of France seized Anjou and Touraine in 1203, it was gradually superseded, as a unit of account, by the  Livre tournois  (pound of Tours)  which was so named because its basic coin  (denier tournois)  was originally minted by the Abbey of Saint-Martin at Tours.  The  livre tournois  was  80%  of the  livre parisis  (henceforth worth  25 sols tournois )  which the monetary reform of Louis IX (1266) should have made obsolete...  Yet, the parisis system lingered on for four more centuries:  It was only abolished in 1667  (the term "livre tournois" wouldn't be officially shortened to "livre" until 1720.)

The  monetary reform of Charlemagne  enacted a fixed  12 to 1  ratio in the price of gold to the price of silver  (by weight).  That's the ultimate reason why a shilling was worth  12d  in British currency before decimalization...

The intention of Charlemagne's reform was that basic coins of the same weight in either metal  (denier d'argent  and  sou d'or )  were equally suited as a currency standard.  This idea begat stable fixed ratios among the various Medieval units of account, but the pressures of trade in precious monetary metals soon changed the purchasing power of different actual coins.

Actually, gold coins were so valuable that the common man hardly ever saw them.  The original Roman gold solidus  (which had replaced the  aureus  in AD 312)  was either hoarded or used to pay  soldiers.  That's the origin of the word;  soldiers  were people compensated with  solidi.

For several centuries following Charlemagne's monetary reform, the daily economic life of most Europeans was based strictly on  silver currency.  The French use the same word  (argent)  for  silver  or  money...

(2009-08-11)   French currency   (1266-1795)
Saint Louis  (Louis IX)  and the  Ancien Régime  monetary system.

The monetary domination of silver in Europe began to diminish when Louis IX of France started a reform inspired by the  Islamic monetary system,  which he had discovered personally during the seventh crusade  (1248-1254).

Traditional Islamic bimetallic currency  (AD 697, revived in 2001)  is based on two famous coins:  the  (22-karat)  gold dinar and the  silver dirham.  By the standard of  Umar Ibn al-Khattab  (Caliph from AD 634 to 644)  10 dirhams weigh the same as 7 dinars.  Monetary gold alloy  (22 k)  has a density of 18.5  (silver is 10.5).  The modern dirham (25 mm, 3.00 g) is thus 4.4%  thicker than the dinar (23 mm, 4.25 g).
 Ecu d'or 
 Louis IX, 1266  

In 1266,  Saint Louis  revived gold currency by introducing the  first  French gold coin, dubbed  écu d'or  (containing 4.08 g of pure gold)  while silver currency would henceforth relate to a new silver coin, the  gros d'argent  (4.52 g of pure silver, introduced at a value of  1 sol tournois)  which would soon be adopted by the Germanic world, under the  name of  Groschen  (for  12 Pfennig).  Neither metal was rigidly tied to the  livre tournois  (itself divided into  20  sols  or  240  deniers )  which would serve only as  monnaie de compte  (unit of account).

Equivalences were thus changed at will by royal ordinances, dubbed  mutations  (according to  Jérôme Blanc, there were 85 wartime mutations from 1337 to 1417).  Such was the framework of the  Ancien Régime  monetary system between 1266 and 1795.  The  ecu d'or  itself  was introduced in 1266 at  10 sols tournois  and last minted as a gold coin in 1691, for  114 sols tournois.

Until 1667, the  livre parisi  and its submultiples were also used, which were worth exactly 25% more than their  tournois  couterparts.

In day-to-day operations, French subjects used actual coins  (monnaie blanche, monnaie de marché, monnaie d'échange, espèces sonnantes et trébuchantes)  according to a rapidly evolving system which would only crystallize in the 17-th century around three reference coins with a stable equivalence in units of account  (as nominal  mutations  subsided):

  • Gold coin:   louis d'or  worth  10  livres  (1640).
  • Silver coin:   écu blanc  worth  60  sols  or  3  livres  (1643).
  • Copper coin:   liard  worth  3  deniers  or  ¼  sol  (1656).

The French revolution brought this to an end with  decimalizarion  (1795)  at least officially.  Yet, my father  (born in 1907)  saw fit to teach me that a  sou  was worth  5 centimes  (20 sous to a franc).  His older sister  (born in 1906)  remembered that copper  liards  were still circulating in the French countryside during her early childhood;  She seemed to recall that three of those could be exchanged for a sou  (the synonym  sol  was no longer used at that time).  According to the above, the exchange rate should have been  four  liards to a sou...

La complexité monétaire en France sous l'Ancien Régime  by  Jérôme Blanc  (1995)
Monnaie de compte et monnaie de marché  by  Baudouin  (2006-08-10)

(2009-08-11) British coins before decimalization day  (Feb. 15, 1971)
The monetary reform of 1971 left the  pound  and  shilling  unchanged.

As inherited from the Medieval system of  Charlemagne and Offa,  the main traditional subdivisions of the British  pound sterling  (slang: quid)  were the  shilling  (slang: bob)  and the penny.  12 pence to a bob, 20 bobs to a quid.   QED ;-)

In 1971, the old British penny  (still abbreviated "d"  for denarius )  was replaced by a  new penny  (abbreviated and pronounced "p")  worth  2.4 d.

1 pound(£ 1)  =  240 d  =  100 p
1 shilling( 1/- )  =  12 d  =  5 p

Most other monetary units named after popular coins did not survive the decimalization, as their values were not even a whole number of newpence.  One exception is the  florin  (2 shillings = 10 p = 24 d)  which actually circulated until 1992.  Curiously, it had been introduced by the Victorians in 1849 as a first step toward decimalization  (10 florins ro the pound).  Decimal versions of the shilling and the florin (5p and 10p) were minted  (marked "new pence")  ahead of full decimalization and circulated as early as 1968.

Ordinary Pre-Decimal British Coins
(¼ d)
20 mm
(½ d)
26 mm
31 mm
21 mm, dodecagon
19 mm
silver alloy
(12d = 5p)
25 mm
silver alloy
"two bob bit"
(24d = 10p)
25 mm
Cu-Ni alloy
Half Crown
32 mm
silver alloy

 British farthing (0.25 d)

 British penny (1d)

 English shilling (12d = 5p) 
 [with trick lighting]


The  Guinea, worth 21 shillings  (5% more than a pound)  is now only of passing historical interest.  The new version of the  crown  is a gold coin with a face value of  £5  minted only on special occasions.  The sovereign is the main British  gold bullion  coin, bearing a nominal face value of  £1.

British Coins before the Florin, vs. French Coins of the Ancien Régime  by  Kelley L. Ross
Guide to British pre-decimal denominatios  by  Chris Perkins
Wikipedia :   Decimal Day (15 February 1971)   |   Pre-decimal coinage   |   Pound sterling
History of the British Penny:  c.600- | 1066- | 1154- | 1485- | 1603- | 1714- | 1901-1971 | modern

(2005-01-16) Money Exchange Rate
European exchange rates, on the day the  Euro  was born...

The conversion factors between national currencies vary daily.  However, there was one recent event which froze the exchange rates for the currencies of 11 European nations.  According to the terms of the Maastricht treaty, 11 of the 15 nations of the European Union made their national currencies a fixed multiple of a new monetary unit, the "euro", born on New Year's day of 1999.  (These 11 currencies were phased out in 2002.)  The new euro replaced the former ECU, the European Currency Unit  (whose acronym matched the name of an ancient monetary unit, but did not please the Germans).  The exchange rates of the 11 currencies were frozen at whatever the ECU was worth in terms of the old units on December 31, 1998, at 1 pm (legal time in France and Western Europe) according to the report published by the EEC commission at that precise time.

The EEC also published the values of the ECU/euro in terms of certain currencies not irrevocably tied to the euro, at the exact time the euro was so "defined"; these are listed without highlighting in the table below  (for good measure, the value of an ounce of gold is also given, based on the  $287.75 / ozt  price in the  London Bullion Market on the day the euro was defined).  The 3-letter ISO symbols listed in the last column have been in use since 1989.  (Usually, the first two letters denote a country, and the third one is the initial of the currency's name.)

December 31, 1998 at noon GMT1 euroin euros  »ISO
ounce (troy) of gold  246.63 
pound sterling, livre sterling 0.7054551.4175248598GBP
Irish Pound, livre irlandaise0.7875641.2697380784IRP
(former ecu)
US dollar, dollar américain, $ 1.16675 0.8750816370USD
Swiss franc, franc suisse, FS 1.60778 0.6219756434CHF
Canadian dollar, dollar canadien 1.806130.5536700016CAD
Deutschemark, DM 1.95583 0.5112918812DEM
guilder, florin néerlandais2.203710.4537802161NLG
markka, mark finlandais 5.945730.1681879265FIM
French franc, franc français, FF6.559570.1524490172FRF
Danish krone, couronne danoise 7.448780.1342501725 DKK
Norwegian kroner, couronne norvégienne 8.871400.1127217801NOK
Swedish krona, couronne suédoise 9.488030.1053959568SEK
shilling, shilling autrichien13.76030.0726728342ATS
franc belge, FB 40.33990.0247893525BEF
franc luxembourgeois 40.33990.0247893525LUF
yen 132.8000.0075301205JPY
peseta, peseta espagnole 166.386 0.0060101210ESP
Portuguese escudo, escudo portugais200.482 0.0049879790PTE
Greek drachma, drachme grecque
(parity frozen on 2000-12-31)
franc CFA 655.9570.0015244902XAF
lira, lire italienne 1939.270.0005156580ITL

Note that the British unit, the pound sterling, which was one of the important currencies defining the ECU, was not one of the original 11 currencies out of which the euro was born (4 countries of the European Union were not originally part of "Euroland": Great Britain, Denmark, Sweden, and Greece).  Greece became the 12th nation to join the Eurozone, as of January 1, 2001.  The exchange rate of the drachma was frozen at 340.750 drachmas to the euro on December 31, 2000 (2 years after the euro's introduction).

The US dollar exchange rate with the euro started fluctuating even before the euro was officially born:  On December 31, 1998, during the few hours that followed the announcement of the 11 frozen exchange rates with the euro, and the statement that the euro was "originally" worth $1.16675, the Wall Street Stock Exchange in New York rated the euro as high as $1.1755.  On the next business day (Monday, January 4, 1999), the euro was an "official" unit and opened at $1.1747 in Australia, which is, therefore the actual "introductory rate" of the euro against the US dollar; as the business day progressed around the world, the exchange rate reached $1.181.  It approched 1.2$ in the following days, and fell back at $1.154 on monday, January 11, 1999  (when this writer got tired of watching).

Notice that the economists who defined the euro made the same mistake as physicist of past centuries in defining a new unit in terms of old ones, whose disappearance was scheduled...  It would have been more farsighted to state that a French Franc (FF or FRF) was  exactly  0.152449 of a euro, since the euro would be the only unit making sense to future generations.  Instead, the euro was defined as 6.55957 FF, which now makes the euro value of a French Franc equal to an awkward 0.1524490172374...

In the more precise world of metrology, this is as bad as having the meter defined as either "3 pieds & 11.295936 lignes"  (as was done in 1795 and 1799) or as 39.37 British inches (as was done in 1866 and 1893).  Both definitions are now obsolete, but the latter survives to this day within the so-called "US Survey" system.  The correct approach would have been to enact as exact, for each obsolescent unit, some rounded decimal fraction of the new unit.  (For example, since January 1 1959, an inch is now defined as exactly equal to 25.4 mm.)

(2004-06-09)   Currency in Circulation Worldwide
How much of the major currencies [coins & paper] is in circulation now?

The following summary was gleaned from the various sources quoted below:

Amount of the Major Currencies in Circulation
CurrencyAmount$ EquivalentDate
EUREuro 640 000 000 000770 000 000 0002000
USDUS Dollar 600 000 000 000600 000 000 0002000
YENJapanese Yen 80 000 000 000 000600 000 000 000 2000

 Come back later, we're
 still working on this one...

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