Tzarist Russia’s Paper Money

Of the European countries only Sweden beat Russia to the punch on the issuance of government-sanctioned paper money inconvertible into precious metal. Perhaps it is no accident that Russia first saw paper money under Catherine the Great (1762– 1795), whose wars broke the power of Turkey and made Russia a player among the powers of Europe. The first issue of paper money, called roubles-assignats appeared in 1768 to help finance the first Turkish war. Russia termed its paper money assignats before the French issued their own more-famous assignats during the French Revolution, which fueled one of the great hyperinflation episodes in history.

The government created two note-issuing Assignation Banks to issue the notes. The supply of assignats swelled as Catherine fought a second Turkish war and wars with Sweden, Poland, and Persia. For the first two decades the bourse exchange rate between assignat rubles and silver rubles traded close to par. Toward the end of the century the assignat rubles were trading at a 30 percent discount, and fluctuated around that level until the Napoleonic struggles increased the government’s dependence upon paper money. By 1811 a silver ruble equaled 3.94 assignat rubles. The victory over Napoleon brought some improvement in confidence but the trading range remained between 3 and 4 assignat rubles per silver ruble for the following three decades.

Between 1839 and 1843 Russia, under Nicholas I, reformed its currency and issued new silver notes convertible into silver at a fixed rate. The assignat rubles were traded for the new silver notes at a rate of 3.5 to 1.

During the Crimean War (1854) the supply of paper rubles doubled and Russia suspended convertibility of its silver notes. The value of the ruble remained uncertain and fluctuated until the period 1868 through 1875, when the government succeeded in propping up the ruble. Again, a war disrupted best-laid monetary plans during the Turkish war of 1877 and 1878.

Until the adoption of the gold standard (1897–1899) the ruble traded at a modest 30 percent discount, but fluctuated sharply in foreign exchange markets, scaring away potential foreign investment. Russian adopted the gold standard to attract foreign investors and bring in badly needed foreign capital.

See also:

Inconvertible Paper Standard,Sweden’s First Paper Standard

References:

Crisp, Olga. 1976. Studies in the Russian Economy Before 1914.

Pintner, Walter McKenzie. 1967. Russian Economic Policy Under Nicholas I. 

Trial of the Pyx (England)

The Trial of the Pyx was a public trial or test of the purity of gold and silver coins that began in the thirteenth century and continued into the present day. In 1982 Queen Elizabeth II and Sir Geoffrey Howe, chancellor of the Exchequer, attended the Trial of the Pyx in celebration of a custom marking its seven-hundredth anniversary. The oldest extant writ ordering a trial came at the behest of Edward I in 1282. Although similar tests were conducted at regional mints, the most meticulous and thorough tests were held for coins struck at the Royal Mint in London.

To conduct a trial a specified sample of coins of each denomination was set aside and stored in leather bags identified by the month of coinage. In 1485 a sample consisted of 10 shillings from every 10 pounds of gold and 2 shillings from every 100 pounds of silver. These leather bags were put in a chest, or pyx, hence the name “Trial of the Pyx.” The pyx was locked with three keys, one held by the warden of the mint, a second by the comptroller, and a third by the master-worker. The crown could call for a trial every three months, but the trials were much less frequent.

To conduct a trial, the officers of the mint appeared before the Council in Star Chamber, together with the lord treasurer’s clerk and officials of the Exchequer who brought the contracted specifications for the weights and fineness of coins. The pyx (or pyxs) was unlocked before the Council.

The Trial of the Pyx has always made use of the most advanced methods for assaying gold and silver, beginning in the earliest times with the use of the touchstone. A public jury of 12 lawful citizens and 12 members of the Goldsmith’s Company of London actually conducted the public testing. If the jury held the coins to meet the prescribed standards, based upon the fineness of the bullion sent to the mint by the Crown, the master-worker received a letter of acquittance. If the coins fell short of the required weight and fineness, the master paid a penalty to the Crown proportionate to the profits the master skimmed off by reducing the purity of the coinage. Of course, the king was never brought before a public jury to test the purity of the precious metal he sent to the mint. Presumably the mint master assured himself of the purity of the metal supplied by the king.

The custom of the Trial of the Pyx bore witness to the ever-present danger of debasement of the coinage, either at the hands of the Crown, or at the hands of dishonest mint officials. The longevity of the custom stood as a reminder of the importance certain groups in society, particularly merchants and bankers, placed on the trustworthiness of the coinage. The Trial of the Pyx helped the English Crown control the temptation to debase the currency, contributing to England’s reputation for sound currency and laying the foundation for England’s commercial success.

See also:

Touchstone

References:

Challis, C. E. 1978. The Tudor Coinage.

Davies, Glyn. 1994. A History of Money. 

Treasury Notes

Treasury notes were interest-bearing treasury bonds that circulated as money in the pre–Civil War era in the United States. The notes were not legal tender but were accepted for payments owed the federal government, including tax obligations.

For the first two decades of its existence the new government of the United States steered clear of the issuance of government notes that circulated as money. The hyperinflation of the American Revolution remained a thought-provoking memory of the dangers of paper money, and Alexander Hamilton stood as a staunch opponent of Treasury issues of paper money.

By the War of 1812 Congress was in the hands of people without firsthand experience of the Revolutionary hyperinflation, and wartime demands for resources pressed hard on government officials. On 30 June 1812 Congress authorized the issuance of $5 million of treasury notes, redeemable within one year, and paying 5 2/5 percent interest. The following years saw authorizations for additional issues, $5 million in 1813, $18 million in 1814, and $8 million in 1815. The notes circulated as money and were acceptable in payment of federal government taxes.

The Constitution had strictly forbidden the states from declaring any money other than gold and silver to be legal tender and did not expressly give the federal government authority to declare any money legal tender. Most people at the time felt that the issuance of legal-tender paper money was at best against the spirit of the Constitution, and at worst unconstitutional. On 12 November 1814 Congress entertained a resolution that read as follows: “That the treasury notes which may be issued as aforesaid shall be a legal tender in all debts due or which hereafter may become due between citizens of the United States or between a citizen of the United States and a citizen of any foreign state or country” (Breckinridge, 1969).

Congress brushed aside the idea of declaring treasury notes legal tender in a decisive 95 to 45 vote. After the war the government retired the notes. By 1817 only 2 percent of the total issue remained in circulation.

The money panic of 1837 sent the government into a budgetary tailspin, and Congress again authorized the issuance of treasury notes. The notes were to be redeemable in one year, and pay interest no greater than 6 percent. Some of these notes paid as little as 0.1 percent interest per year. In 1838 Congress authorized the Treasury to reissue treasury notes that had been paid in for taxes or other government obligations, removing an important distinction between treasury notes and circulating paper money. Congress authorized similar issues in years leading up to and including the war with Mexico from 1846 to 1848. By 1850 the government had retired the treasury note issues, but in 1857 a budget crisis once again turned the government to treasury notes to meet a budget shortfall. These notes were earmarked for retirement until the budget crisis of the Civil War overtook budgetary policy. In 1862 the government began issuing legal-tender notes that were soon dubbed greenbacks.

The history of the treasury notes reveals how hesitant the federal government was to issue legal-tender paper money. Congress accepted without question that the issuance of treasury notes with the legal-tender function was beyond its power.

See also:

Greenbacks,Legal Tender

References:

Breckinridge, S. P. 1969. Legal Tender.

Hepburn, A. Barton. 1924. A History of Currency of the United States.

Kagin, Donald H. 1984. Monetary Aspects of the Treasury Notes of the War of 1812. Journal of Economic History, 44, no. 1 (March): 69–88.

Myers, Margaret, G. 1970. A Financial History of the United States. 

Trapesite Banking

Trapesite banking is the term for private banking that arose during the mid-fourth century in ancient Greece. The trapesite bankers themselves were called trapezitai, and the banking concerns were called trapezai. The Greek word trapeza means “table,” a reference to the moneychangers’ tables of the ancient world. The modern English word bank can be traced to the moneychangers’ bench of the Middle Ages.

Our information about trapesite banking comes largely from speeches delivered in lawsuits arising out of the banking business. No less of a person than Demosthenes, the most famous orator of classical Greece has passed down speeches that shed light on the trapesite banking in his time. The most famous trapesite banker was Pasion of Athens, who came to Athens as an alien resident, and won his citizenship for the value of his services to the city of Athens. In one reference to Pasion’s banking, Demosthenes says: “Of the deposits of the banks, eleven talents were interest-bearing” (Westermann, 1931).

Foreign exchange transactions accounted for a large share of the business of trapesite banks. Trapesite banks had correspondents in major cities of the ancient world and merchants could deposit money with a trapesite banker in one city and collect the money from a correspondent in another city. Merchants made use of this service to avoid the risks of traveling with large sums of money. These banks also acted as pawnbrokers. Demosthenes relates a story of a man who took drinking goblets—made of precious metal, no doubt—and a golden crown to a trapesite banker and received an advance. Demosthenes also mentions an instance in which Pasion received bronze vessels in exchange for an advance of 1,000 drachmas.

In one of his court speeches Demosthenes describes the deposit business of the trapesite bankers:

All the banks are accustomed when any private person has deposited money with them and wishes the bank to pay it to some man, to write first the name of the depositor, and the sum deposited, then in a marginal note: “It is to be paid to so and so.” If they know the man by sight to whom they are to pay the money they write only “The money is to be paid to this man.” If they do not know him by sight they also write an additional note stating what person will introduce the man who is to receive the money.

(Westermann, 1931)

A system to write checks on deposits was unknown at the time. In the classical period of ancient Greece there is not even evidence of deposit transfers from one depositor’s account to another depositor’s account.

In the early phase of ancient Greece banking services were the province of the religious temples, the safest place to store precious metals and coinage when law and order was precarious. Trapesite banks represent the appearance of private initiative in banking, which soon began to leave the cocoon of the temples.

See also:

Temple Moneychangers

References:

Millett, Paul. 1991. Lending and Borrowing in Ancient Athens.

Rostovtzeff, M. 1941. The Social and Economic History of the Hellenistic World.

Westermann, William Linn. 1931. Warehousing and Trapesite Banking in Antiquity. Journal of Economic and Business History.

Trade Dollar

In 1873 Congress authorized the coinage of the trade dollar, a special silver dollar coin intended to facilitate trade between the United States and China, and to furnish a market demand for rising silver production in the Western states. At first the coin was legal tender only for up to $5, but Congress later withheld its legal-tender status. The Treasury stopped minting the trade dollar in 1877 and Congress officially discontinued the coin in 1887.

Trade between the United States and the Far East, particularly China and Japan, accelerated around 1869 through 1870, and a popular medium of exchange in the Pacific Basin was the Mexican silver dollar containing 416 grains of silver. The American silver dollar, containing 412 1/2 grains of silver (before discontinuance on 1873), was not competitive with the Mexican dollar. The state of California petitioned Congress to coin a silver dollar containing 420 grains of silver, hoping to draw to California the Chinese and Japanese trade then flowing to Mexico.

The Act of 1873, known in American folklore as the Crime of ’73, discontinued the silver dollar as a standard of value in American coinage, but created the trade dollar strictly for commercial purposes with other nations. The act defined the value of the standard dollar strictly in terms of a fixed weight of gold, and silver coinage, excepting the trade dollar, remained only as a subsidiary coinage with a face value exceeding the market value of its bullion content. Apparently, Congress by accident gave the trade dollar a legal-tender status on par with the other subsidiary coinage, making it legal tender for debts up to $5. On 17 July 1876 Congress passed a joint resolution declaring that the trade dollar was not legal tender. The Treasury minted nearly $36 billion of these coins, and all but about $6 million of these coins were exported.

The trade dollar was ill starred from the outset. The traditional United States silver dollar remained in circulation, although new silver dollars were no longer minted. The old silver dollars, containing 7 1/2 grains less silver than the trade dollar, were legal tender, acceptable in payments of public debts, and the government was committed to maintaining their parity with the gold dollar. The trade dollar had more intrinsic value, but enjoyed none of these characteristics, giving rise to no small amount of confusion. Declining silver bullion prices put a tighter seal on the fate of the trade dollar, which commanded no official value and was worth only the market value of its silver content.

To put an end to an awkward situation, Congress on 19 February 1887 discontinued the coin and authorized the Treasury to accept trade dollars in exchange for standard dollars or subsidiary coinage for a period of six months. Congress further provided that the Treasury melt down the trade dollars received in exchange and recoin the silver content as subsidiary coinage. Over $7 million of trade dollars flowed into the Treasury for exchange. As a legacy of the trade dollar, many Pacific nations, including Australia and New Zealand adopted the name dollar for their domestic currency.

See also:

Bimetallism,Crime of ’73,Free Silver Movement

References:

Myers, Margaret G. 1970. A Financial History of the United States.

Nugent, T. K. Walter. 1968. Money and American Society.

Weatherford, Jack. 1997. The History of Money. 

Touchstone

Touchstones were stones used to test the purity of precious metals such as gold and silver. Touchstones were also called Lydian stones, after the country of Lydia, the birthplace of precious metal coinage and the first country credited with the use of touchstones. The spread of gold coinage particularly increased the profits that could be earned from adulterating and alloying gold coinage, and touchstones offered an inexpensive and useful test for purity of gold coinage. Both individuals and governments were known to reduce the purity of precious metals by alloying them with cheaper metals.

Touchstones were cut from black siliceous stone or opaque quartz, brown, red, or yellow in color, with a smooth surface, and convenient for holding in one hand. Ancient and medieval assayers tested the purity of gold or silver by rubbing the metal across a touchstone with sufficient pressure to leave a streak. Different metals left streaks of different colors. The color of the streak left on the touchstone by a metal of unknown purity could be compared with the color of a streak left by a piece of metal of known purity. Nitric acid was put on the streaks to dissolve impurities, and sharpen the contrast between the streaks of pure and impure metal. From this comparison an assayer rendered a judgment about the purity of a metal. Because differences in shades of color can be slight, the test involved a significant subjective component. Nevertheless, the test brought to light the more outrageous debasements, and was sufficiently accurate for most purposes.

Before the development of more advanced techniques the Goldsmiths’ Company of the City of London kept test metals of known purity, called touch needles, for use in making touchstone tests. The company made available 24 gold needles for each of the traditional 24 gold carats. They kept similar pieces for silver.

Touchstone tests are not decisive in detecting silver alloyed with copper, but can be used to assay gold with some accuracy. By the fifteenth century the Tower mint in London was using a new method, cupellation, which makes use of the tendency of various metals to fuse at high temperatures. The new method using fire grew out of the experiments of the alchemists during the medieval era.

See also:

Trial of the Pyx (England)

References:

Davies, Glyn. 1994. A History of Money.

Marx, Jennifer. 1978. The Magic of Gold.

Temple of Juno Moneta

The temple of Juno Moneta acted as the mint and treasury for the Roman government. From the name of the temple can be traced the English words money, and mint. The Spanish word for “coin,” moneda, also stems from moneta. The month of June gets its name from Juno.

The most important of the Seven Hills of Rome was Capitoline Hill, a modest elevation even when compared to the other six hills, but at the crest of the hill stood the Capitol, the main temple of the empire. The center of the temple belonged to Jupiter Optimus Maximus, the king of the gods, but side chambers honored two other important deities, Minerva, the goddess of wisdom, and Juno, consort to Jupiter, and mother to Mars, the god of war.

Each of the Roman triad of gods came with different surnames reflecting different aspects of their heavenly responsibilities. Juno Regina reigned as the queen of heaven resembling Hera, wife of Zeus in

Greek mythology, and looked after the interests of women. Juno Pronuba oversaw marriage negotiations, and Juno Lucina guarded over expecting women. Labor and childbirth came within the province of Juno Sospia.

In the fourth century b.c., if we can believe Roman historians, the timely honking of sacred geese around Juno’s temple on Capitoline Hill tipped off the Roman people that the Gauls were scaling the walls of the Roman citadel, also on Capitoline Hill, and that an attack was imminent. Out of this episode was born another Juno: Juno Moneta, from Latin monere (to warn).

Juno Moneta, patroness of the Roman state, took on various government responsibilities, including the issuance of money. When the Romans issued a new silver coin, the denarius, in 269 b.c. the temple of Juno Moneta minted the coins with an image of the goddess and her surname, Moneta.

The temple of Juno Moneta worked as a full-time mint, either melting down existing coinage and issuing freshly minted coins, or minting new supplies of gold and silver bullion. A constant stream of coins flowed from the mint, and the Latin word currere, meaning “to run” or “to flow,” became associated with money, giving rise to the English word currency.

The temple of Juno Moneta furnishes another instance when ancient societies took advantage of the sacredness of temple grounds to protect treasures of precious metals. Temple coinage had a long history in Greece and Asia, but the mint in the temple of Juno Moneta owed its existence to the premeditated action of a powerful state government.

See also:

Temple Coinage of Ancient Greece,Temple Moneychangers

References:

Burns, A. R. 1965. Money and Monetary Policy in Early Times.

Weatherford, Jack. 1997. The History of Money.

Temple Moneychangers

The moneychangers in the ancient world made a market in foreign exchange where merchants and traders bought currency of other countries to carry on trade. The New Testament tells a story of how Jesus entered the temple in Jerusalem, disdainfully overturned the tables of the moneychangers, and showed his indignation with the admonishment, “It is written, ‘My house shall be called a house of prayer’; but you make it a den of robbers” (Luke, 19:46). This confrontation between Jesus and the temple moneychangers is another reminder that money in ancient times, particularly precious metal coins, was not embraced with open arms as a means

of encouraging trade and securing prosperity. It was more often associated with the dark forces in society. Today, money is regarded as a necessary instrument of exchange in our complex economies, but the idea of moneychangers in the temple still leaves our moral sensibilities in a state of repugnance.

The multiplication of coins minted in various Greek cities, and in Lydia and Persia, created a demand for experienced specialists who were knowledgeable of the diverse weights, quality, and standards of foreign coins. They sat at tables in streets and marketplaces and fulfilled the role of bankers to their customers. In addition to trading foreign currency, they aided merchants in arranging foreign deals, and acted as the custodians of savings entrusted to them.

Temples became home to moneychangers for practical reasons. The temples had to build treasuries to keep safe the donations and offerings they received. The sacredness of the temple also gave an added sense of protection against would-be thieves. Businesses and wealthy individuals took to depositing their money and valuables in temples as a place of safety. Temples had an incentive to find ways to invest their own funds, and sometimes invested the funds of their patrons. Thus, some of the temples began to wear the aspect of banks, including paying interest on funds held in their custody. Temples issued their own money in the eastern parts of the Seleucid empire, which ruled most of Asia Minor, Syria, Persia, and Bactria from 312 to 64 b.c. In addition to coined money, gold, and silver, the temples also owned estates, cattle, and slaves.

The temples at Delos were known for their wealth. Cities deposited funds with temples, which in turn made loans to cities and private persons. The temples of Delos went so far as to hold deposits of clients while depositing their own funds in private banks. During the time of the Lydians and Persians the temple of Ephesus was the place of choice for kings, cities, and private individuals to keep money on deposit. A law of Ephesus of 85 b.c. makes a reference to loans of sacred funds and insolvent debtors of the temple. The temple at Jerusalem was wealthy when Seleucus IV, deep in financial difficulties, wanted to confiscate its treasury, exciting indignation because of its sacredness and the number of widows and orphans with deposits held by the temple.

Moneychangers resided in temples because the rights of private property had not been secured by law, and ancient societies were often embroiled in civil war, or ruled by arbitrary and capricious rulers. The sacredness of the temple helped secure the safety of precious metals in the midst of lawlessness.

Temple moneychangers may reflect a religious element in the origin of money that is often ignored. Commodities that developed as a medium of exchange often had religious significance. Livestock that served as money was also needed for sacrificial purposes and as payment to priests for religious services. Some societies regarded gold and silver as the metals of the gods, or special creations of the gods, making them especially appropriate as payment to priests or donations to temples. Charms that had magical powers were also struck from precious metals. The sperm whale teeth used as money on the Fiji Islands was called tambua, from which the word taboo is derived, meaning “sacred or forbidden for religious reasons.” Because an unlimited demand existed for commodities acceptable as sacrifices to the gods, these goods maintained their value, making them useful as money.

See also:

Temple Coinage of Ancient Greece,Temple of Juno Moneta

References:

Rostovtzeff, M. 1941. The Social and Economic History of the Hellenistic World.

Williams, Jonathan. 1997. Money: A History.

Temple Coinage in Ancient Greece

Before coinage became a monopoly prerogative of governments, religious temples minted coins in Greece, playing an important role in spreading the practice of coinage to the Greeks. The coinage of money on sacred temple grounds, under the direction of priests, brought to bear the full weight of

religion and custom to protect the funds of the mint and assure the quality of the coins.

The famous religious shrines of ancient Greece and Rome acted as treasuries, including the temple of Athena at Athens, the temple of Apollo at Delphi, and that of Juno Moneta at Rome. Even the later Roman Republic, famous for clever statecraft, used shrines as repositories of public funds. The gold statutes in the Parthenon and the bullion in the temple treasury were part of Athens’ monetary reserve. Thucydides, in his famous Peloponnesian War, puts these words into the mouth of Pericles regarding the resources of Athens:

Apart from other sources of income, an average revenue of six hundred talents of silver was drawn from the tribute of the allies, and there were still six thousand talents of coined silver in the Acropolis…. This did not include the uncoined gold and silver in public and private offerings, the sacred vessels for the processions and games, the Median spoils, and similar resources to the amount of five hundred talents. To this he added the treasury of the other temples. These were by no means inconsiderable, and might fairly be used. Nay, if they were ever absolutely driven to it, they might take even the gold ornaments of Athene herself, for the statute contained forty talents of pure gold and it was all removable. (Thucydides, 1952)

The temple priests handled large amounts of precious metals, flowing in from gift offerings, and revenue from investments in land, mines, and other ventures. In addition to providing religious services, temple shrines became centers of trade, affording safe conduct to travelers to the temple and occasionally constructing sacred roads that led to the temple. Temples were dedicated to a particular deity that protected pilgrims. Temple coins may have begun as souvenirs for pilgrimages held at the time of sacred festivals. In time, temple districts during religious festivals began to wear the aspect of trade fairs, attracting merchants who saw the concentration of people as an opportunity to market their wares. Temples supplied the need for local coins to transact the burst of commercial activity. Pilgrims also needed coins to pay priests.

The influence of temple coinage accounts for the religious influence that is evident in Greek coinage. Coins minted in temples, under the auspices of temple priests, usually bore a sacred symbol associated with the patron deity that protected the temple, or perhaps an effigy of the deity. Coins struck in the temple of Zeus bore a thunderbolt, or an eagle, and coins struck in the temple of Apollo a tripod or lyre. The temple of Artemis stamped its coins with a stag or a wild boar, and that of Aphrodite with a dove or tortoise.

Religious themes remained a trait of Greek coins after civil authorities had assumed responsibility for coinage, perhaps reflecting the high esteem that temple coins enjoyed. Athenian coins bore the stamp of an owl, the sacred bird of Athene.

Some scholars have attached deep significance to the religious symbols stamped on temple coins, suggesting that the stamped symbols indicated the coins belonged to a specific deity, and were sacred to him or her. The symbols also assured the temple priests that the precious metal they received was of the same quality and quantity as the metal they paid out. The sacred symbols may also have helped establish the coins in the confidence of people, adding to the credit that the coins commanded.

Early in the sixth century b.c. minting coinage became the sole privilege of government authorities throughout the Aegean world.

See also:

Temple Moneychangers,Temple of Juno Moneta

References:

Burns, A. R. 1927. Money and Monetary Policy in Early Times.

Thucydides. 1952. The Peloponnesian War. Trans. Richard Crawley.

Williams, Jonathan, ed. 1997. Money: A History.

Tea

The eminent Zen scholar, Daisetz T. Suzuki, in his book Zen and Japanese Culture, observes that “If tea symbolizes Buddhism, can we not say that wine stands for Christianity?” Commodities having religious significance have a propensity to take on the characteristics of money. Gold was often considered the metal of the gods and a favored gift to religious temples. Therefore it should be no surprise that tea surfaced as money in geographical areas where Buddhist culture exerted a potent influence.

In nineteenth- and early twentieth-century Tibet, which was a virtual citadel of Buddhism, sheep served as a measure of value, but Tibetans used tea as a medium of exchange. Tea bricks and sheep also acted the role of money in Sinkiang.

In the nineteenth and twentieth centuries tea bricks displaced sheep as currency in inner Asia, and particularly Mongolia. During the nineteenth century the Chinese paid Mongolian troops in tea bricks. Consumers went to the market with a sackful or cartload of tea bricks. A sheep cost between 12 and 15 bricks, and a camel between 120 and 150 bricks. Between 2 and 5 bricks could purchase a Chinese pipe. Credit transactions were negotiated in tea bricks, and reports were heard of houses purchased with tea bricks. In Burma a tea brick was the monetary equivalent of a rupee and circulated as such.

The weight and size of tea bricks were not always consistent, but two main sizes predominated, one weighing two and one-half pounds and a larger one weighing close to five pounds. The bricks consisted of leaf stalks of the tea plant mixed with other herbs and glued with the blood of a steer or young bull. The inferior quality tea went into the production of tea bricks intended for monetary purposes, as if additional evidence was needed to validate Gresham’s law. This unappetizing concoction was shaped into bricks and dried in an oven. Value per unit of weight was not a selling point for tea brick money. The transportation of $100 worth of tea required the sturdy back of a camel.

Asiatic Russia also furnished examples of tea brick money, particularly in areas near the Mongolian border. Goods were purchased and wages were paid in tea bricks. Sugar, iron goods, tools, and arms also circulated among various tribes, and in the 1930s jam became a favorite and circulated as a medium of exchange in these areas.

Evidence of tea money outside Asia is scanty. In medieval Russia tea became a form of payment for government officials. Paraguay under Jesuit rule was a barter economy, but there is evidence of tea currency, including for the payment of taxes.

Stimulants and depressants, concomitants of most if not all civilizations, show up frequently as money. Tobacco, cocoa beans, and various varieties of alcohol come to mind as obvious examples. Tea shares some of the characteristics of these commodities and carries a religious significance, rendering it a likely candidate to fill a monetary role.

See also:

Commodity Monetary Standard

References:

Einzig, Paul. 1966. Primitive Money.

Quiggin, A. Hingston. 1949. A Survey of Primitive Money.

Tallies (England)

In England tallies were wooden sticks that functioned as instruments of credit and exchange in public finance. The Exchequer (treasury) began using tallies in the Middle Ages, and by the humor of history the use of tallies survived into the early nineteenth century.

A tally was a wooden stick with notches denoting various sums of money. A notch the length of a man’s hand denoted 1,000 pounds, while a notch the width of a man’s thumb denoted 100 pounds. A simple V-shaped notch represented 20 pounds. The handle of the tally remained notchless. In a credit transaction, the notched segment of the wooden tally was split lengthwise down the middle and the handle remained with one half of the tally. The creditor kept the larger half with the handle, and the debtor kept the smaller half, called the foil. The two halves would match or “tally.” The tallies were assignable, meaning creditors could transfer ownership of tally debts to third parties. In this connection tallies circulated as money.

Tallies entered into the British public finance system in two ways. First, a citizen owing taxes to the government might hand the Exchequer a tally, signifying a debt of taxes. The government would use the tally to pay for goods and services. The recipient of the tally presented it to the taxpayer who had the other half (the foil) and demanded payment. A second use of tallies in public finance occurred when the government issued tallies in payment for goods and services. In this instance the government was the debtor, and tallies originating from the government could be used in payment of taxes. Originally the government pledged future tax revenue from specific sources earmarked for redemption of these tallies. Later the government issued tallies to be redeemed from the general revenue. Tallies used as an instrument of government debt paid interest.

It was this second use of tallies that contributed to the growth of a primitive money market in London. Purveyors of goods to the government received

tallies, and discounted them—that is they sold them at less than face value—to goldsmith bankers rather than using them in exchange, a practice that reached its zenith in the seventeenth century. The goldsmith bankers, in turn, expected the government to redeem at face value at some date in the future the tallies that they had purchased. Later, the Bank of England also discounted tallies, creating an even more ready market in tallies and adding to their acceptability in exchange.

By the seventeenth century tallies were already an anachronism, but they were not officially discontinued until 1834. In addition to assisting the emergence of the London money market, tallies reduced the need for money minted from precious metals and eased pressure on the English government to debase the coinage to finance excess government expenditures.

See also:

Exchequer Orders to Pay

References:

Davies, Glyn. 1994. A History of Money.

Dickson, P. G. M. 1967. Financial Revolution in England.

Feavearyear, Sir Albert. 1963. The Pound Sterling: A History of English Money.

Taler

The taler was originally a German coin equal to three German marks, but the word taler became a common name for currency that, in various guises, appeared in other languages and countries. The English word dollar evolved from taler, as did the Italian tallero, the Dutch daalder, and the Swedish and Danish dalers.

The first talers came from Jachymov, now a small village in the Ore Mountains in the western part of the Czech Republic. At the opening of the sixteenth century Jachymov fell within the Holy Roman Empire and was administered under German authority. In 1516 the local ruler, Count Hieronymus Schlick, found a silver deposit close to his home. As early as 1519 Count Schlick, without official sanction, began minting silver coins in his castle, and on 1 January 1520 he received official approval to operate a mint. Minting silver into coins was probably more profitable than merely selling silver. Between 1534 and 1536 King Ferdinand I ordered the construction of an imperial mint in Jachymov. The building housing the imperial mint served as a museum as late as 1976.

The coins were first called Joachimstalergulden or Joachimstalergroschen after the German name for the valley, Joachimsthal, where they were minted. The names were shortened to talergroschen, and later to thalers, or talers.

With the stimulus of silver mining, Jachymov blossomed into a bustling community of 18,000 inhabitants. In 1568 a plague left its mark on this mining community, but the most severe devastation was wrought by religious intolerance. Jachymov became strongly Protestant, but the Bohemian monarchy was Catholic. Religious persecution killed the community, which could only boast of 529 inhabitants in 1613, and in 1651 the government moved the official mint to Prague.

In the first year of operation Count Schlick’s mint

struck about 250,000 talers. During the years of peak production, between 1529 and 1545, the mines produced enough silver to mint 5 million talers. By the end of the century, Count Schlick’s mint had sent about 12 million talers into circulation.

The coinage of talers spread throughout the German-speaking world. During the sixteenth century alone as many as 1,500 different types of talers found their way into circulation from various German states and municipalities. By 1900 as many as 10,000 different types of talers had been minted for metal currency and commemoration medals.

Maria Theresa, a famous Austrian empress of the eighteenth century, gave her name to the best known, longest circulating of all talers. In 1773 the Gunzburg mint first struck a taler bearing the image of Maria Theresa. After her death in 1780 subsequent talers were always dated 1780. After the dissolution of the Holy Roman Empire early in the nineteenth century the Austro-Hungarian Empire continued to mint the Maria Theresa talers with the 1780 date. Following the break up of the Austro-Hungarian Empire after World War I the Austrian Republic minted talers until Hitler invaded in 1937. Mussolini found Maria Theresa talers the favored coin in Ethiopia, causing Italy to mint its own talers between 1935 and 1937 in order to facilitate trade with Ethiopia. After World War II the Republic of Austria resumed the coinage of talers, still bearing the date of 1780. Austria continued to mint talers until 1975.

See also:

Dollar

References:

Nussbaum, Arthur. 1957. A History of the Dollar.

Weatherford, Jack. 1997. The History of Money.

Tabular Standard in Massachusetts Bay Colony

During two separate periods of rapid inflation, the Massachusetts Bay Colony put in practice a tabular standard in which debts payable in shillings were adjusted for changes in the purchasing power of the paper currency. Under the tabular standard, a 100 percent rise in the price level meant debtors owed twice as many shillings as they had borrowed. Without the protection of a tabular standard, the money that came back to creditors in repayment for loans had less purchasing power than the money they first loaned out.

The first experiment with a tabular standard occurred in 1742, when the legislature authorized a new issue of paper currency. At the same time the legislature enacted a so-called equity law, requiring the repayment of all debts of five years duration and contracted after March 1742 at a rate of 6 2/3 paper shillings to an ounce of silver. The most innovative portion of the law, however, empowered justices of the Massachusetts courts, in adjudicating disputes involving debts paid in paper currency, to “make Amends for the depreciating of said Bills from their present stated Value,” which was 6 2/3 shillings to an ounce of silver. That is, the justices could force debtors to pay more than 6 2/3 shillings to an ounce of silver to compensate creditors for the erosion in purchasing power of their money while it was loaned out. (Creditors often do not fully anticipate inflation and do not charge enough interest to compensate for inflation.) Every six months the purchasing power of the new bills was adjusted according to “the Rates that said Bills then commonly pass at in Proportion to Silver and Bills of Exchange payable in London.”

Debtors complained that the equity law only considered the exchange ratio between paper shillings and silver, which might only reflect speculative activity, and ignored the cost of living in paper shillings, which was more pertinent to their lives. In 1747 the legislature amended the equity law to provide that “when any valuation shall be made of the bills … in pursuance of said act [1742] … regard shall be had not only to silver and bills of exchange, but to the prices of provisions and other necessaries of life” (Lester, 1939). This law did not remove all disagreement about the rate of depreciation of the bills, but it diffused the issue until 1749 when Massachusetts received from England a large reimbursement for war expenditures and began redeeming its paper money.

The colonial legislature faced similar problems during the American Revolution when Massachusetts soldiers complained that their pay, set at the time of enlistment, had lost all but a tiny fraction of its purchasing power. To encourage reenlistment, the legislature computed the original pay in terms of what it would buy in Indian corn, beef, sheep wool, and sole leather, and compensated the soldiers accordingly for the balance owed them in four bond issues, bearing 6 percent interest. The bond issues matured in 1781, 1782, 1783, and 1784, successively. 

Soldiers refusing to enlist received similar bonds maturing in 1785, 1786, 1787, and 1788. The legislature indexed the principal and interest on these bonds to the prices of four staple commodities. A statement on the face of these bonds read:

both principal and interest to be paid in the then current money of said state [Massachusetts], in a greater or less sum, according as five bushels of corn, sixty-eight pounds and four-sevenths parts of a pound of beef, ten pounds of sole leather shall then cost, more or less, than one hundred and thirty pounds current money, at the then current prices of the said articles.

(Lester, 1939)

The advent of fiat paper currency opened the possibility of episodes of rapid inflation that was unheard-of in monetary systems based upon precious metal standards, such as gold and silver. Rapid bouts of inflation wiped out the claims of creditors against debtors, setting the creditors against the debtors, and making the hidden seam separating debtors and creditors a major point of social division and political discontent. Massachusetts Bay Colony demonstrated Yankee ingenuity in developing a scheme for balancing the interest of creditors and debtors at a time when inflationary finance was inevitable.

See also:

Massachusetts Bay Colony Paper Issue

References:

Fisher, W. C. 1913. The Tabular Standard in Massachusetts History. Quarterly Journal of Economics, 27 (May): 417–454.

Lester, Richard A. 1939. Monetary Experiments.