Toward the end of the sixteenth century, Spanish coins, particularly the de a ocho reales, had become the international currency and held that position until eclipsed by the pound sterling in the nineteenth century. The pieces of eight was the immediate forerunner of the United States dollar.
The pieces of eight, called the Spanish dollar in the United States, was equal to eight reales, a Spanish monetary unit. Reales was a word for “royal” in Spanish. Today the monetary unit of account in Saudi Arabia is called the riyal, and in Oman and Yemen the monetary unit is the rial, both derivatives of the real. Spanish coins dominated Far Eastern trade, Mediterranean trade, and trade with the New World.
The Spanish real, a silver coin, came into existence in 1497 with the monetary reform of Ferdinand and Isabella, the Spanish monarchs who financed Columbus’s voyage to the New World. Originally, the real consisted of one-sixty-seventh of a mark of silver and was coined in multiples, quadruples, and octuples (the piece of eight reals), and in fractions of a real. The real was sometimes called a bit. The pieces of eight were eight bits. A fourth of a real equaled two bits, a half a real equaled four bits, and three-fourths of a real equaled six bits. The division of the dollar into bits lives on in the cheer-leading yell that can be heard at any high school football game, “Two bits, four bits, six bits, a dollar, all for the [name of team] stand up and holler.” Ferdinand’s and Isabella’s monetary reform set out to provide Spain with a unified coinage system. Charles V popularized the pieces of eight, equal to the Bohemian or Saxon thaler, which gave its name to the United States dollar.
Mints in Mexico City and Peru turned out vast quantities of Spanish reals. Mexico City boasted of the largest mint in the world, and minted a pieces-of-eight coin called the pillar dollar, because of its symbol on the obverse side denoting the Pillars of Hercules, the strait that opens the Mediterranean into the Atlantic Ocean. The dollar sign “$” may have originated from this symbol of the Pillars of Hercules with the “S” portion a reference to a banner hanging from one pillar.
Mexico, after winning independence from Spain in 1821, minted its own peso with a bit more silver than the old Spanish pieces of eight. The new Mexican peso was called the Mexican dollar in Far Eastern trade, where it was the most popular coin throughout the nineteenth century, competing with the U.S. silver trade dollar and a British silver trade dollar. Spanish pieces of eight and Mexican pesos were legal tender in the United State in much of the pre-Civil War era. Mexico remained on a silver standard while most of the world adopted the gold standard, and Mexican silver pesos remained important in Far Eastern trade. During the Great Depression of the 1930s Mexico abandoned the silver standard, just as the United States abandoned the gold standard.
With the loss of Mexican silver, and the European shift toward the gold standard after 1875, Spanish coinage receded into the background as international currency.