Posts by: Dominic Frisby

This month marks the 50th anniversary of gold’s demise. Or perhaps I should say money’s demise.

For in August 1971, 50 years ago, President Richard Nixon took the United States off the gold standard, and for the first time in the history of the world gold played no part in the monetary system.

Gold was $35 an ounce at the time. Today it hovers around $1,800 an ounce. That gives you an idea of how much the dollar has been devalued by. From $35 to $1,800, in just 50 years. That’s quite something.

And the US dollar has been one of the better currencies.

The British pound or the Italian lira have done far worse – and those were the currencies of G7 nations. Heaven forbid you should have been subject to the national currencies of countries such as Brazil, Argentina, Turkey or Zimbabwe.

It all started so well.

In July 1944, as it was becoming clear that the Axis nations were going to lose World War Two, delegates from the 44 Allied Nations met at the Mount Washington Hotel in Bretton Woods, New Hampshire, for the United Nations Monetary and Financial Conference, now known as Bretton Woods.

Their goal was to negotiate a new monetary order, so that international economic relations could be rebuilt after the war. After three weeks of deliberations, setting up a system of rules, institutions, and regulatory procedures, the delegates signed – well, mostly. Soviet representatives declined, saying the institutions that had been created, which included the IMF and the World Bank Group, were “branches of Wall Street”. The Soviets may have had a point.

The deal suited the United States. Countries had to adopt monetary policies that maintained exchange rates within 1%, by tying their currencies to gold. The United States controlled two-thirds of the world’s gold, and so insisted that the Bretton Woods system rest on both gold and the US dollar.

By 1958, the Bretton Woods system was fully operational. Countries settled their international accounts in dollars, convertible to gold at $35 per ounce. Effectively, the US was on a gold standard, and the rest of the world was on a dollar standard.

But then the costs of the US government began to grow, in particular the cost of its military industrial complex and its welfare. It got involved in an expensive and, in the case of Vietnam, some might say, needless wars. President Lyndon B. Johnson spent enormous amounts on welfare. Some might say to buy votes. The Federal Reserve, central bank of the US, printed more money.

As German and Japanese economies grew, the US share of the world economy shrank.

Non-American nations felt aggrieved that they had to produce one hundred dollars of goods and services to get a $100 bill, which the US could just print. The French called it “America’s exorbitant privilege”. By 1965 French President Charles de Gaulle had had enough. There were rather more US dollars in the world than there was gold to back them, he felt, and he was right. By 1967 US foreign liabilities were $36 billion, but it only had $12 billion in gold reserves. In practice the dollar was only about a third backed.

Gold may work but gold standards tend not to. Keynes called them “barbarous”, which is rather hypocritical given he had designed this one.

Successive administrations had tried to stop the outflow of gold from the US. In 1959 President Eisenhower made it illegal for Americans to buy gold overseas. President Kennedy tried to prevent Americans investing overseas with his Equalization Tax on foreign currency deposits, which came into being after his death. President Johnson discouraged Americans from traveling altogether. “We may need to forgo the pleasures of Europe for a while”, he said. “I am asking the American people to defer, for the next two years, all non-essential travel outside the western hemisphere”.

De Gaulle, who wanted a return to a proper gold standard, not this quasi system, began redeeming French dollars for gold. The French even sent battleships to New York to collect their dues. De Gaulle became the subject of several assassination attempts, co-incidence I’m sure.

West Germany, Spain, Switzerland were among many of the nations demanding redemption of their dollars for gold. Even America’s poodle, the British, for whom sterling had just been through one of its quadrennial collapses, asked the Americans to prepare $3bn worth of Fort Knox gold for withdrawal.

On Friday August 13 1971, Nixon met with Federal Reserve chairman Arthur Burns, incoming Treasury Secretary John Connally, future Fed Chairman Paul Volcker and 12 other high-ranking White House and Treasury advisors, at Camp David, the President’s country home in Maryland.

The following Sunday, Nixon, relying heavily on the advice of his very confident Treasury Secretary, Connally, announced that US dollars would no longer be redeemable for gold. He imposed wage and price controls to counter inflation – a 90-day freeze on prices and wages. And he imposed a 10% tax on imports to protect American products.

The bottom line is that Nixon didn’t have the gold to pay for all the explosives America had dropped, and was continuing to drop, on south-east Asia, nor for all its welfare.

It was a temporary measure. But like those other temporary measures, such as Income Tax, Quantitative Easing and masks, it has become permanent.

“What a tragedy for mankind”, said FED chairman Arthur Burns, when he realised what President Nixon was doing. He was right.

Without the discipline of gold, western governments have bloated to unprecedented size, fat on waste, war and welfare, intervening in areas of our lives never before thought possible. The consequences of the new fiat, petro-dollar system have taken manifold forms, from rampant inequality to successive financial crises. “Fix money, fix the world”, is the mantra of the Bitcoiners. They’re right. But in 1971 the President nixed money.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

I always had Henry VIII down as one of the good guys. Boldly standing up to papal supremacy in the way that he did enabled a much free-er Britain to go on and do many wonderful things. However, I doubt Henry knew at the time what the long-term consequences of his actions would be.

Having just read about his attack on sound money, the Great Debasement, which must be one of the greatest inflationary thefts by a ruler in British history, I’m rather revising my views. Never speak ill of the dead and all that, but extravagant (and not in a good way), power-mad, greedy and hypocritical are the adjectives currently springing to mind about Henry VIII.

Historian Simon Montefiore goes further, declaring him egotistical, paranoid and tyrannical, and listing him as one of History’s 101 Monsters, alongside Vlad the Impaler and Adolf Hitler.

When Henry VIII was crowned king in 1509 the national finances were in rare good shape. His predecessor Henry VII had broken the mould of medieval English monarchs by pursuing marriages and alliances overseas instead of war. His reign saw just one overseas conflict.

Henry VII’s many achievements lay in his business brain. Rather than resist economic change and new technology, he encouraged it (and then taxed it). Rather than wage war, he avoided it. He built up an extraordinary wealth.

His taxation and legislation of the nobility effectively ended the power of the barons and thus feudalism itself, while establishing the freedom of the mercantile classes to trade. He became the first English king for centuries to run a surplus. Imagine!

The wool trade blossomed, serfdom was disappearing and the country was changing to a money- rather than land-based economy. England got its first blast furnace, and so began its iron industry.

Of greater relevance to us gold bugs, Henry VII had new coins issued to ensure a standard currency. Weights were also standardised.

Things however changed with his son, Henry VIII – and rapidly. One of his first acts, two days after his coronation, was to arrest the two men responsible for collecting his father’s taxes, Sir Richard Empson and Edmund Dudley. They were charged with high treason and duly executed.

Henry ushered in the idea that kings had divine right, an issue that would cause a civil war 100 years on. Never mind Henry VIII’s Great Debasement, which we will come to in a moment, the idea that a king was appointed by God and had Divine Right must be another of the greatest frauds perpetrated on a nation by its rulers. Anyone who dissented was treasonous or heretical, often executed without a formal trial – or simply banished.

He got involved in numerous costly and largely unsuccessful wars on the continent and in Scotland and these, coupled with a personal extravagance that people are still talking about, meant he was constantly on the verge of financial ruin.

To pay for it all he introduced numerous new taxes, including a tax on beards, which has to go down as one of the ruling classes’ greatest ever do-as-I-say-not-as-I-do moments. He dissolved monasteries, sold crown land and “redirected” any money formerly paid to Rome and the pope to the royal coffers.

But still he couldn’t get enough money – and so he ordered what became known as the Great Debasement. The amount of gold and silver in coins was reduced and, in some cases, replaced entirely with copper.

It began in 1542 with a secret indenture. Production of current coins would continue, but meanwhile new coins would be secretly minted, including the previously unsuccessful testoon, with significantly less gold and silver and stockpiled in Westminster Palace.

In 1544, a lack of bullion arriving at the mint prompted the government into phase two of the scam and the debased coins were allowed to enter general circulation. Within months merchants began to discover the new silver groats had been debased, and in the Low Countries they began fetching a lower price. Coins of a similar value but with a higher precious metal content were hoarded and so disappeared from circulation – a classic case of bad money driving out good, aka Gresham’s Law.

Henry’s stockpiled testoons were copper coins with a thin layer of silver on top. Over time the silver would wear off, especially around the nose on Henry’s face on the coin, which protruded a little and so wore quicker, and the copper underneath would be exposed. So Henry VIII got the nickname ‘Old Coppernose’.

The debasement continued after Henry’s death in 1547, and was eventually revoked by his successor Edward VI in 1551. Over the course of the seven year debasement, the purity of gold coins slipped from 23 carat (96%) to 20 carat (83%), while silver coins steadily fell from 92.5% (sterling silver) as low as 25% – that’s a theft of 83% of the silver.

When Elizabeth I came to power in 1558, the debasement had affected both trading relationships (foreign merchants often refused to accept English coins) and confidence in the monarchy. Elizabeth’s advisors William Cecil and Thomas Gresham persuaded her that these problems could be solved with sound money.

Following Gresham’s advice, the government passed a law which ended the legal tender status of debased coins and forbad “good” coins from entering foreign markets. Then in 1560 Elizabeth had all debased coinage removed from circulation, melted down and replaced with higher fineness, newly minted coins – soon to be harder-to-clip milled rather than hammer struck coins. The crown made some £50,000 from the re-coinage.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

I always thought that Jakob Fugger, the German who made his fortune in the 16th century through gold and copper mines, lending money to kings and, above all, selling absolution, was the richest man in history. By the time he died his net worth was equivalent to nearly 2.5% of European GDP, tantamount to half a trillion dollars in today’s money.

But, according to the internet – and we all know the internet is never wrong – there was someone even richer – a Malian gentleman by the name of Mansa Musa the Ninth, or King Musa IX to use English lexicon.

The BBC deems his wealth “indescribable”, placing him above the likes of Augustus Caesar, Andrew Carnegie, John D Rockefeller, William The Conqueror and Colonel Gaddafi in its Hall of Fame. Fugger doesn’t even get a look in.

So who was this Mansa Musa the Ninth?

Musa was born in 1280 in Mali in West Africa, and at some point in his early 20s became Mansa, the Mande word for ruler or king. The 8th Mansa, his brother Abu Bakr, had wanted to go and explore the edge of the Atlantic Ocean and Musa stood in for him while he was gone. Bakr never came back and so Musa become Mansa.

Conspiracy theorists argue that Musa actually saw to it that Bakr never came back – and the whole “exploring the edge of the Atlantic Ocean” thing was just a ruse. Who knows? Perhaps Bakr did make it to the edge of the Atlantic Ocean, also known as Brasil, found it to his liking, as many visitors there do, and decided to settle.

At the time the Mali empire extended through 2,000 miles of West Africa – from what today is Niger in the east, through parts of Mali, Burkina Faso, Guinea, Senegal, Mauritania, Sierra Leone and Gambia. With land ownership came ownership of the natural resources that lay within – and that’s how Musa came to be so rich. Salt and gold, mainly, and West Africa has always had lots of gold.

Even today Ghana is Africa’s second largest producer, beaten only by South Africa, whose premium deposit, the Witswatersrand, was only discovered in 1886 by an Australian mining prospector called George Harrison. Harrison, in what must be considered among the worst business deals in history, worse even than record label Decca passing on Harrison’s namesake’s band, the Beatles, sold his stake for £10. The first Harrison was never heard of again, but his discovery would provide the world with 20% of all the gold ever mined.

But, until the Wits Basin, West Africa was top dog. Indeed, according to the British Museum, something like half of the Old World’s gold came from the Mali Empire – and Musa sure did enjoy the trappings.

Musa had tens of thousands of slaves to his name and in 1324 set off with 12,000 of them and a retinue of 38,000 others, all of them dressed in gold, brocade and silk, apparently – 60,000 in total (including soldiers and entertainers) – on a pilgrimage to Mecca.

Like today’s mega billionaires, Musa liked attention. He didn’t have rocket ships, Twitter or potential appearances on Saturday Night Live to get it, so Musa’s means of getting noticed was this hajj – a pilgrimage to Mecca, the spiritual home of Islam. The 2,800 mile round trip took him some two years.

Each slave carried around four pounds of gold, while camels behind towed as many as 300 pounds of gold dust, so that the entire transit had some 18 tons of gold in tow. There were heralds who bore gold staffs, and, en route, this devout servant of Islam had a mosque built ‘every Friday’.

When he arrived in Cairo, then Medina and Mecca, he went shopping and the sudden, dramatic rise in the supply of gold in those cities caused an inflationary collapse that took some 12 years from which to recover.

Ever the businessman, the devaluation of the gold price was apparent to Musa, and on his way back from Cairo, Musa borrowed from money-lenders all the gold he could carry. It’s thought his strategy – causing inflation then collapse – was a deliberate ploy to undermine the Cairo economy and relocate Africa’s commercial centre out to Mali in the West – to Gao or Timbuktu.

Over the course of his reign Musa conquered some 24 cities (and their surrounding districts) among them Timbuktu, which he took on his way back from Mecca. Musa started throwing his gold about back in Mali. For 440 pounds of gold, he hired the services of poet and architect Abu Isaq Silla to give Timbuktu a makeover. Universities and mosques were built and Timbuktu became something of a cultural centre – the ‘Paris of the Medieval World’, according to one historian.

One of Musa’s buildings, the Sankore Madrassah, where maths, science, languages and the Koran were taught, is still operating today in the same capacity.

Musa died in 1337, at the ripe old age of 57, and the Mali empire began to fall apart soon after.
The inescapable laws of unsustainable spending applied as much then as they do today.

* Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

In late medieval and early modern England, banking was mostly the domain of goldsmiths. The wealthy merchants of London needed somewhere to store their gold and the vaults of the wily goldsmiths were the safest place. The merchants paid a fee, and the goldsmiths issued receipts certifying the quantity and purity of the metal they held. Only the original depositor could collect the stored goods.

These certificates evolved into promissory notes, redeemable to the bearer whether he was the original depositor or not, and so did the goldsmiths’ paper become currency. The goldsmith paid one rate of interest to depositors and then lent out the gold at higher rates. The notes he issued to depositors – known as running cash notes, effectively a promise to pay the bearer of the note gold or silver – were the first bank notes and the goldsmiths of London became the forerunners of its great banking tradition, creating this new money based on credit.

No surprise, the rates of interest payable on the gold the smiths lent out were high, often as high as 20%. Interest rates got so high that in 1624 King James I declared they must not exceed 8% and then in 1660 Parliament passed The Usury Act 1660 – “An Act for restraining the taking of Excessive Usury” – which reduced the maximum rate to 6%.

In that same year, Charles II was restored to the throne following years of civil war – ultimately a conflict over who had ultimate power, Parliament or the crown. Parliament won, but something like 4% of the population lost their life in the process.

Charles II was a big spender. A war monger (which king wasn’t?) almost constantly fighting the Dutch during his reign, and a notorious bon viveur – hence his nickname the Merry King – who fathered at least 12 illegitimate children. His spending habits were considerable. But Parliament had a tight grip of the amount of money he could raise through traditional means.

Charles was not a man to be held back, however. To support the Royal Household, which “needed” an annual income of £1.2 million, he persuaded Parliament to impose hearth taxes on the British people. Twice a year tax inspectors would demand entry into your home, rather in the manner of a BBC licence fee collector today, to count the number of fireplaces, and you then had a tax imposed on you. The English hated it, but it became the Crown’s largest single source of income.

Charles secured an alliance with his cousin, King Louis XIV of France, and a pension, by promising to convert to Catholicism.

But above all, he borrowed like mad. By borrowing from the goldsmiths of London, who had a virtual monopoly on banking, Charles was able to bypass Parliament. He effectively sold “tax futures” – future tax tallies to the goldsmiths at a discount, in exchange for gold now. These tax futures were recorded on sticks of wood – tally sticks. Wood for gold has never been a bad trade.

With promissory notes now payable to the bearer, the smiths were able to sell the King’s debt into the secondary market. Thus could the King raise funds for his wars against the Dutch. It was a good trade at first and the Crown would never default on its loans, thought the smiths. But there was a limit to this debt expansion: the amount of gold in London’s goldsmiths’ vaults. Eventually it ran out.

By 1671, the discount on the King’s tax debt reached 10%. New funds barely covered maturing loans. At which point that 1660 Usury Act was cited: interest rates above 6% were against the law – thus were all those recent loans made to the Crown illegal. The King’s tally sticks became worthless. The goldsmiths and their customers had “drawn the short end of the stick”, as the saying derives. They owned the King’s debt, which was illegal for him to repay.

“Gentlemen”, Charles wrote in a letter to the goldsmiths – or words to this effect – “I’m an honest man but unfortunately I am unable to pay my debts back on this occasion. Sorry – will see what I can do”.

This became known as the Great Stop of 1672. Most of London’s goldsmiths were ruined and 10,000 wealthy families in England were “financially embarrassed”. Just as the third Anglo-Dutch War was beginning, the goldsmith bankers of London ceased all further credit to the Crown, and Charles II was forced to recall Parliament to plead for funds for the 82 ships with which he wanted to attack the Dutch.

In 1673, Parliament, concerned with Charles’ alliance with the Catholic French King Louis XIV in a war against the Protestant Dutch, and fearing invasion from Catholic Ireland, declared that all office-holders must deny Catholic ‘transubstantiation’ and take Anglican Communion. Charles’ brother James refused and, suddenly, the possibility that Charles would be succeeded by a Catholic became very real in the public eye. Parliament refused to fund Charles II’s war, and it soon ended with the Second Peace of Westminster, a treaty ratified with exceptional speed and greeted with enthusiasm in both countries, perhaps most of all by commercial interests in Amsterdam and London.

To ease public fears that the royal family was too Catholic, Charles had his brother James’s daughter, Mary, marry the Protestant King William of Orange. The pair would soon become monarchs, overthrowing King James II, Charles’ heir, in the Glorious Revolution of 1687.

To ingratiate the newly crowned monarchs with the conquered people, and ‘to erect a lasting monument of their Majesties’ goodness in every hearth in the kingdom’, Parliament repealed the loathed hearth tax. But it left the new monarchs with a problem. Their largest source of revenue was gone – and the King had wars to fight, against France this time and in Ireland and Scotland, not to mention that £1.2 million cost of the Royal Household.

Charles approached the goldsmiths of London, who said no. But, in 1691, a Scottish businessman by the name of William Paterson came up with a plan for a new type of bank. Members of the public could lend the crown £1.2 million in exchange for 8% interest. A royal charter would enable the bank to operate as a joint-stock company with limited liability, and those who signed up to the scheme become shareholders. No other joint-stock banks would be permitted to issue bank notes, so the bank would have special status and considerable competitive advantage.

The company was called ‘The Governor and the Company of the Bank of England’. In 1694 Charles Montagu, 1st Earl of Halifax, enacted Paterson’s plan. That £1.2 million was raised in just 11 days from 1,268 different people.

The bank was established in an old Roman temple in Walbrook, a street in the City of London, where Mithras was worshipped. Mithras was, among other things, the Roman god of contracts.

And central banking was born.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

“Money is gold and nothing else”, said the legendary financier J.P. Morgan when testifying before the US Congress.

That’s something I want to think about today as we investigate the history of paper money. Gold is one of, if not the most malleable metals known to man. It is similarly ductile. And yet it has little industrial use, apart from in electronics, dentistry and a few other things.

You can beat gold into a sheet barely an atom thick, but it is almost impossible to destroy it. It can be dissolved through using aqua regia, but the gold can be reconstituted again. All the gold that has ever been still exists. Gold is perhaps the oldest substance on earth, thought to have originated as a result of collisions and explosions in the stars billions of years ago. All that gold created still exists – somewhere. Some of it embedded in rocks deep beneath the earth’s surface, some of it hanging from people’s necks.

This permanent substance with no use. What a contradiction.

Gold’s only purpose is to be wealth, to be a store and display of wealth. It is money, pure money.

Gold was the first metal that man made use of. He was hanging from his neck the gold nuggets he found in riverbeds as he hunted and gathered to display beauty, wealth and status, and giving them to other humans as reward, thousands of years before he discovered smelting and began using the other metals he encountered – tin, copper and silver – to make tools.

Stone Age man used gold to store and display wealth, and to transfer it. He used gold for exactly the same reasons as does his 21st century descendent. Gold is pure wealth. It is pure money.

But it is not the only money, and it never has been, not since the dawn of civilisation. In Ancient Mesopotamia, man used mud tokens, representing sheep or barley, baked inside clay balls to log debts owed. He began inscribing bits of mud for the same purpose, and so did man begin writing. In Ancient China, man recorded his debts on bits of leather. After the invention of printing he started using paper. Today the records are stored on and exchanged with computers. This is promissory money, debt money – the credit JP Morgan was referring to in the pre-amble to the above quote.

Promises disappear. Gold doesn’t. They are two quite different forms of money and it’s important in one’s mind to distinguish between the two.

Promissory money has evolved as communication has evolved. Shortly after the first cables were laid across the Atlantic Ocean in the mid-19th century, the first money was sent – hence why the pound-dollar exchange rate is still known as cable. But gold wasn’t actually sent across the Atlantic. Just a promise was sent, between two parties who trusted each other. Today millions of promises are sent across the internet every second. Promissory money evolves with communication technology. In fact, promissory money is often the spur, the impetus for communication technology to evolve. Promises transfer as quick as words.

The history of promissory money, the history of credit in other words, and the history of communication technology are thus intertwined.

The breakthrough communication technology of the Middle Ages was of course Gutenberg’s printing press, and paper money soon followed.

China had been using leather promissory notes as far back as 118BC, and Carthage even earlier in 146BC. Carthage is generally thought to have been the first user of lightweight promissory notes. Bank notes began appearing in China in the 7th century, during the Tang and Song dynasties – China was ahead of Europe as far as printing was concerned.

During the crusades in the 12th century, the Knights Templar issued promissory notes to pilgrims. A pilgrim could deposit valuables with a local Templar before embarking on his quest for the Holy Land and receive a document indicating the value of his deposit. On reaching the Holy Land, he could use his document to receive funds from the treasury of equal value. I imagine fraud must have been an issue for the Templars, but at least the pilgrim mitigated any potential financial damage from being mugged en route.

The use of paper money spread for this very reason. Paper is more portable than metal. The trader, merchant or voyager carrying paper is less vulnerable than if he were carrying metal, and the use of paper promises grew. They became written orders to pay the amount to whoever had the note in their possession. The term “bank note” is thought to derive from the benches (“banchi”) of Florence in the 14th century – the stone benches and tables that once proliferated on piazzas, streets, loggias, and palace façades, where people sat, talked, traded and exchanged. In many cases there were rows of benches and tables – effectively outdoor civic centres. A holder of “nota di banco” – a note from the bench – could exchange his note for the gold or silver of a banker. Although the practice of banking goes all the way back to Ancient Babylon, the word derives from those benches of Renaissance Italy.

But Gutenberg’s invention opened the door in Europe for paper money to proliferate. Paper would become currency, and by the 17th century those Italian paper promises would become institutionalised with the first central banks.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Today, as we continue to trace our way through the history of money, we look at English money in the early modern period and beyond. I’m not sure how the early modern period got its name, as, while it is early, it is not modern.

I’m reluctant to put precise dates on it as some historical pedant will no doubt start trolling me on Twitter if I do, but, when we say early modern, we are talking , roughly, about the 300 years from the mid-15th century through to the mid-18th when the far more dramatically named Age of Revolutions began.

We start with one of my favourite kings, Henry VII. His successors, Henry VIII and Elizabeth I, tend to get most of the publicity, but Henry VII was one heck of a king and a shrewd businessman at that.

Henry ruled for 22 years from 1485-1509, and, going against the tendencies of the English kings of the previous 350 years, his reign saw just one overseas conflict. Instead of war, he pursued overseas marriages and alliances. His taxation and legislation (he banned private armies) of the barons effectively ended their power, and with it feudalism; without private armies the barons struggled to enforce the collection of tithes. His policies established the supremacy of the crown and the freedom of the mercantile classes. It laid the foundations for the extraordinary expansion that took place in Tudor England. He was the first English king for centuries, if ever, to run a surplus.

He embraced economic change and new technology. The wool trade exploded. England got its first blast furnace (to manufacture cannon balls) and so began its iron industry. Weights were standardised and, of relevance here, new coins were issued to standardise money.

The penny was the basic monetary unit of the period. It had been for centuries and its symbol – d – goes all the way back to the denarius of Britain’s Roman rulers over 1,000 years earlier. 240 silver pennies made a pound – a pound of sterling silver. There was not a pound coin, as such – it would not have been practical; it was a measure of weight and a unit of account. Its symbol – £ – the letter L with a bar through it, was an abbreviation of the Latin word “libra” meaning pound – hence lb. Like pounds, shillings had not previously been minted, though their value had been used for accountancy purposes for many centuries – 20 shillings equalled one pound.

Henry began minting 12d coins known as testoons. These were basically copies of the Italian coin, the testone, which means “big head”, and the testoon was the first English coin to bear a real, rather than representative portrait of the monarch.

Testoons quickly became known as shillings, carrying the symbol s – an abbreviation of sestertius. 12 pennies equalled a shilling and 20 shillings equalled a pound – thus 240 pennies also equalled a pound.

The shilling had a weight of about 1/5th of an ounce and legend has it that one shilling bought you a sheep.

Despite numerous debasements, it was an extraordinarily successful coin that was minted in the reign of every monarch since, including Elizabeth II. The shilling lasted until decimalisation in 1971, but even today we refer to the 5p (of which there are twenty in a pound) as a shilling. The shilling had the nickname a “bob” – as in “it cost me ten bob”.

The minting of shillings was part of a wider trend in Europe towards larger silver coins, which would eventually lead to one ounce Spanish dollars, English crowns, pesos, tholars, daalders and dalers, and eventually the US dollar itself.

It was Henry VII’s successor Henry VIII who gave England its first crown coin in 1526 – but this was made of gold. The first silver crown came in 1551, during the reign of Edward VI. It was roughly an ounce of 92.5% silver, and 7.5% copper (for added hardness to discourage clipping). Soon coins came with milled edges too in order to discourage such nefarious activity. The crown had a value of five shillings.

When the United Kingdom united in 1707 the English crown became the British crown, still with a value of five shillings and still sterling, i.e. 92.5% silver. As it was the same size, the crown was often nicknamed the dollar. Its circulation as a currency began to fall into decline in the 19th century.
The silver content in the crown fell from 92.5% to 50% in 1920, and then altogether after 1947. After decimalisation in 1971 its nominal value was 25p – still five shillings, although from 1990, the face value of new crown coins was upgraded from five shillings to five pounds. There’s debasement for you. The value of a pound has fallen to a shilling.

Henry VII also gave England its first gold sovereign, half an ounce of 23-carat gold, which had a value of one pound and one shilling. Henry VIII reduced the carat to 22 (92% purity), which became the standard. Even today sovereigns are 22 carat.

The sovereign lasted over a hundred years until King James I issued a new coin in 1604 called the ‘unite’ – to symbolise that he had merged the Scottish and English crowns. It never really took off. It was replaced by the laurel, then the broad and eventually the guinea in 1663.

The guinea, so called after the West African region where most of the gold to mint it was mined, was one quarter of an ounce of gold and started with a value of a pound. This fluctuated, depending on the price of silver, but Sir Isaac Newton’s Great Recoinage of 1716 fixed the value at 21 shillings, until the next great recoinage in 1816, when it ceased circulation.

Even after the guinea was replaced by the sovereign in the Great Recoinage of 1816, and the pound became the major unit of currency, the guinea was long used as a unit of account, retaining its value of 21 shillings (£1.05). With its aristocratic connotations professional fees, land, horses, art, bespoke tailoring, furniture, and other ‘luxury’ items were often quoted in guineas even until decimalisation in 1971.

The other great evolution in English money, which began in the early modern period, was the use of paper – and we’ll cover that next time.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

At the beginning of the 16th century, a mining prospector by the name of Stefan Schlick found silver in the Ore mountains of Bohemia, not far from what today is the border between Germany and the Czech Republic.

As is the way with mining discoveries, many soon moved to the area in search of opportunity. The mining camp became a village which became a town – the town of Joachimsthal – literally Joachim’s Dale or, better, Joaquin’s Valley. Stefan Schlick’s family fortune was made for generations. We now know him as Count Schlick, and his descendants would be known for their military endeavours and for their amours, as well as for their silver.

Schlick started minting coins with his newly mined silver, similar in size and weight to the Guldengroschen (shortened to Guldener), which were just gaining popularity at the time – each 1⁄8th of a Cologne Mark of silver. Schlick called his coins, which weighed roughly an ounce and were an inch and a half (4cm) across “Joachimsthalers”. German speakers to the north and west shortened this to “thaler”, while Czech and Slavic speakers to the south and east called them “tolars”.

On one side the coin was Joachim, father of the Virgin Mary, and on the other the Bohemian lion.

The Holy Roman Empire adopted the denomination, and the Reichstaler, 401 grains of silver (a little bit less than an ounce) became the standard coin of the Holy Roman Empire from 1566 to 1750.

Large silver coins were becoming ubiquitous in the period; the corresponding English coin would have been the crown. The French had their ecu, the Spanish their peso, the Dutch their daalder, the Scandinavians their daler and the Swiss the thaler.

But with the large quantities of silver discovered by the Conquistadors in Mexico, Peru and Bolivia in the 16th century, it was the Spanish peso that would become the most widespread, a coin of worldwide importance, essential to trade between Europe, America and even Asia. It was more commonly known as the Spanish dollar, and many historians see the Spanish dollar as the first international currency, although Alexander the Great might have something to say about that.

It was a truly international coin though, as it made its way across the high seas through Spanish trading networks, which, thanks to the voyages of Vasco de Gama, now extended to South-East Asia as well the Americas. The Spanish dollar became the basis for national currencies from as far as Japan and the Philippines to China and India and all the way to Canada, not to mention the Spanish speaking nations of South and Central America somewhere in between. Over the course of several centuries, millions of Spanish dollars were minted, made possible by the extraordinary silver discoveries in the New World, especially at Potosi, Lima and Mexico City.

Why did every pirate’s parrot worth his salt greedily cry “pieces of eight”? The reason was the Spanish dollar. One Spanish dollar was eight reales. It was, literally, a piece of eight. It even had an 8 stamped on it. No wonder pirates craved it. From the 16th to the 19th century, the Spanish dollar was probably the most stable and least debased silver coin in the Western world.

In the 17th and 18th centuries it became the most widely circulating coin in North America too. Spanish dollars made their way into North American colonies via trade with the West Indies.

There was a shortage of British coins in North America thanks to Britain’s typically short-sighted policies towards its colony. British authorities refused to allow the colonists to mint their own money. Worried about shortages at home, they also limited the export of gold and silver coins. Settlers, who were not usually rich in gold and silver anyway, often ran out of hard money, and, early on, found themselves adopting the wampum shells favoured by the Native Americans as currency. In 1637 Massachusetts even declared them legal tender.

Settlers also used commodities such as cod, corn, beaver skins, nails and tobacco as money, such was the shortage of coin. This led to all sorts of problems. Tobacco crops, in particular, deteriorated quickly and so lost value. Nails led to people burning down barns to get at the “money” that held them together.

Colonial governments also issued paper money to facilitate economic activities, but, despite the British Parliament passing several currency acts to regulate colonial paper money, it kept losing its value, even between states.

No wonder Spanish dollars proved so useful and became so widespread. Colonists wanted them for the same reasons as their pirate cousins.

With the cries “no taxation without representation” the colonists rose up against their British overlords in 1776, finally winning their independence in 1783. To fund their war effort, the colonists began issuing their own paper money – the Continental. But it quickly lost its value, mainly through overprinting to meet the cost of war. British counterfeiters did their bit for the war effort too, duplicating the notes to devalue them.

First issued in 1776, by 1778 the notes had lost 80% of their value. By 1780, the notes were worth 1⁄40th of their face value. By 1781, they had become so worthless they ceased to circulate as money. Hence the expression, “not worth a Continental.”

The runaway inflation and the collapse of the Continental is what prompted the Founding Fathers to include in their Constitution that often quoted phrase: “No State shall … coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts.” The US authorities broke that contract, of course, in 1971.

After the Revolution, Alexander Hamilton, Secretary to the Treasury, had the task of forming a currency for this fledgling nation. He had a random selection of Spanish dollars weighed, and based on the findings, specified in the Coinage Act of 1792 that the U.S. dollar would contain 371.25 grains (24 g) pure or 416 grains (27 g) standard silver, so that it would have “the value of a Spanish milled dollar as the same is now current”. The dollar, the basic unit of account for the United States, was modelled on the Spanish dollar. Even the “$” symbol was based on the inscription on one side of the Spanish dollar – the old pˢ (for peso) looking, to our modern eyes, like an S.

Spanish coinage remained legal tender in the United States until 1857. The pricing of equities on U.S. stock exchanges in 1⁄8-dollar denominations persisted until 1997.

The global reserve currency of the world – built on a Bohemian name, a Spanish network and solid south and central American silver.
And all a dollar means is, “from the dale”.

*Dominic Frisby is the author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

The Byzantines had their solidus, the Arabs had their dinar, both around 4.5g of gold, but in Dark Age Europe, gold was notable by its absence.

Silver was money, and librae, solidi and denarii, or as we call them, pounds, shillings and pence – £sd – were the measures. The origins were Roman, but Charlemagne brought the system to Europe and Offa to Britain.

There were 12 silver pennies to a shilling, and 20 shillings, or 240 pence, to a pound. A penny was about half the weight of a 1p coin today, around 1.5g.

The mathematics of such a system may seem horrendous to our decimalized brains, but actually it worked. It enabled many fractions of a pound – tenths, eighths and sixths. When dealing with items in dozens, multiplication and division are straightforward. If a dozen pints cost four shillings, then each pint is fourpence. Basic addition, it should be stressed, is easier with decimals.

There were no coins at the time that weighed a pound of silver, whether in Britain or on the continent. The pound or livre was a unit of account. Today we would call it the Troy pound (around 12 ounces or 373g).

In Northern Europe, early in the second Millennium, they began to do things, quite literally, by half measures, well, ⅔ measures. The Mark, which would become the currency of Germany, and probably has its roots in the markets of Cologne, was a weight of about eight ounces. Again it was a convenient divisor, especially as wages were counted in pence. It was 160 pence, or 13 shillings and fourpence.

The £sd system continued for a thousand years or more. The United States of America dropped it in 1792, not long after its revolution. Revolutionary France followed in 1795 – one franc was 10 decimes or 100 centimes. But the UK stayed with it till 1971.

By the 13th century, with Europe’s silver mines exhausted and economics in Italy buoyant, gold began its comeback. Florence led the way with its florin, three and a half grams of pure gold. This would be the first gold coin struck in Europe for maybe 600 years to play a significant commercial role. But with Florence’s extensive trading and banking networks it quickly became the dominant coin for large scale transactions, replacing the bulky Mark bars.

By the fourteenth century, there 150 different varieties of the coin stamped by various issuers around Europe, most notably the Hungarian forint. (Hungary’s mines provided Europe with much of its gold, until the Spanish discovered America).

The original florin saw Florence’s emblem, the fleur-de-lis (literally lily flower, but actually the iris flower) on one side, and John the Baptist on the other. Elsewhere, John the Baptist would be replaced by other patron saints and sometimes kings.

One florin was tradable for a lira (pound) of silver, although it seems the Florentine lira, perhaps for reasons of debasement, only contained around 35 grams of silver. (Silver mines in Europe were heavily exhausted at this point). So the ratio of silver to gold was 10:1.

The French franc, first introduced in 1360, was 3.9 grams of gold (just 0.4g heavier than the florin) and its value was set quite specifically in law as one “livre tournois”. A “livre tournois” was 240 deniers, or 20 sols – the same as pounds, shilling and pence in other words. This was set by decree, rather than the market, and French silver coinage had been similarly debased.

The Dutch guilder has its roots in the florin too. Its symbol was Fl. or ƒ.

England too minted florins – the first coins of Edward III in 1344 – and it seems the reason for doing so was that the 3.5g continental florins were underweight for their value relative to British silver coins. Edward’s coins were effectively double florins, containing 7gs of gold, with a value of six shillings or 72 pence. That would mean 112g of silver had a value of 9g of gold and that the gold-to-silver ratio was thus 11, which ties in with historical averages.

Barely 30 years after Florence struck its first florin in 1252, Venice struck its first ducat, meaning “of the duke”, in 1284. These too contained 3.5g of 24-carat gold. Venice was following the Florentine and Genovese, as it happened, models. One side of the ducat shows the doge kneeling before St Mark, the patron saint of Venice, the other shows Jesus Christ.

Shakespeare fans will recall that 3,000 ducats is the loan Antonio wants to borrow from Shylock, the money lender, in the Merchant of Venice. If he fails to repay, Shylock will cut out a pound of flesh.

Italy’s striking its own coins was no doubt spurred on by Byzantium debasing its gold coin, the hyperpyron or “bezant”, which had for 200 years been the dominant coin of the northern and eastern Mediterranean. Today’s leaders take note: China’s development of its own digital coinage today is no doubt spurred in part by the US’s debasement of its dollar.

As with the florin, other European nations, including Hungary, Austria and Holland, minted their versions of the ducat. Later there would be imitators in Spain, Persia (the Mamluk ashrafi) and the Ottoman Empire (the saltun). Though at first the florin was more widely circulated than the ducat, by the 15th century international traders shifted to the ducat as their preferred currency. The Venetian ducat would become the standard money of the Holy Roman Empire, and the dominant currency of world trade.

Soon, however, when Spain got its hands on American gold, the Spanish dollar came to dominate. And the dollar will be the subject of my next piece.

* Dominic Frisby, author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Today we consider the coins of Anglo-Saxon Britain.

The winter of 406-7 was cold, very cold in Europe; the Rhine froze over. Hoards of Alans, Vandals, and Suebi made their way across and into the Roman empire, no doubt violent with hunger from the cold, and greedy for what they had admired for so long on the other side. But the devastation they wrought met with no effective response from Rome.

In Britain, Rome had already lost the north and west to warlords. The Roman armies in Britain, who had probably not been paid, now feared these Germanic tribes would next cross into Britain. So, led by Constantine III, who would declare himself Western Roman Emperor, they made their way across the Channel into Gaul, leaving ‘Britannia’ to fend for itself. We do not really know if it was Rome that gave up Britain, or Britain that gave up Rome, but, either way, the Dark Ages had well and truly begun.

Gold, silver and bronze coins had found widespread use under the Romans. They were used to pay taxes, and often re-minted to pay the army and the civil service. With Constantine’s departure, there was almost no new minting and very little importation of new coins. Judging by the numerous hoards found from the period, many buried their money – presumably to keep it safe in this unruly new environment of no military protection and merciless invasion from Angles, Saxons and other tribes from the continent. With the lack of new supply, existing coins were re-used. Clipping became widespread. The previously vigorous late Roman monetary system lay in tatters. Minting did not properly start up again for at least another 200 years.

The Anglo-Saxon invaders, at first, did not use gold coins so much as money but for decoration. King Eadbald of Kent was the first Anglo-Saxon to mint coins around AD 625 – small, gold coins called scillingas (shillings), modelled on coins from France. Numismatists now call them thrymsas.

As the century progressed, these coins grew increasingly pale, until there was very little gold in them at all. From about 675, small, thick, silver coins known as sceattas came into use in all the countries around the North Sea, and the gold shilling was superseded by the silver penning, or penny. Gold fell out of use almost altogether, though silver had something of a boom.

It’s thought the word ‘penny’, like the German ‘Pfennig’ might come from the pans into which the molten metal for making was poured. ‘Pfanne’ is the German for ‘pan’.

The Mercian king Offa – he of dyke fame – reigned for almost 40 years from 757 to 796. He must be seen as one of the greatest Anglo-Saxon kings, certainly the greatest of the 8th century. As well as his dyke, which protected his kingdom from Welsh invaders, he is credited for the widespread adoption of the silver penny and the pound as a unit of account. His coins, with portraits and intricate designs, were as accomplished as anywhere in Europe at the time.

His system, though probably imported from the Franks, for reasons which will become clear, almost certainly dates back to the Romans. 12 silver pence equalled a shilling. 20 shillings equalled a pound weight of silver. Thus 240 silver pennies, weighing about 1.4g each (sorry for mixing imperial and metric) was equivalent to one pound weight of silver. Thus was the pound a pound of sterling silver.

The Latin word for a ‘pound’ is libra and the pound sign, £, is a stylised writing of the letter L. The d meanwhile used for pence comes from the Latin denarius. Thus the roots of the system were almost certainly Roman.

Offa’s system remained standard until the 16th century and, in many ways, until decimalisation in 1971. You had to add up each unit of currency separately in this format: £3.9.4, which would be spoken “three pounds, nine shillings and four pence”, or “three-pounds, nine and four”. To add, you would calculate each unit separately, then convert pence to shilling, leaving leftover pence in the right column, then convert the shillings to pounds (with leftover shillings in the middle column), and then add up the total pounds.

Offa’s systems were gradually consolidated over the subsequent centuries, especially as the kingdoms of Anglo-Saxon Britain began to merge. In the 860s, for example, the kingdoms of Mercia and Wessex formed an alliance by which coinage of a common design could circulate through both of their lands.

The Viking invaders over this period found coinage systems far more sophisticated than their own and the Danegeld, with which they were bought off, was paid in silver pennies. I had always thought the “geld” in Danegeld meant “gold” but in fact it means yield, and the Viking invaders demanded this tribute wherever in Europe they ravaged.

The system was quite efficient – on both sides. For the invaders, they were often paid more than they could raise by looting, without having to fight. For the locals, the ravaging was avoided, although, as Rudyard Kipling noted in his poem on the subject, “if once you have paid him the Dane-geld, You never get rid of the Dane”.

The Danegeld probably also motivated improvements to Anglo-Saxon coinage. To pay his own soldiers, to build forts and ships and to pay Dangeld, Alfred the Great increased the number of mints to at least eight. His successor Athelstan had 30 and, to keep order, passed a law in 928 stating that England should have just one currency. Ever since there has been just one. This was many centuries before standardisation in France, Germany or Italy.

When William Duke of Normandy invaded England in 1066, he succeeded where his Viking ancestors had failed for 270 years: he managed to conquer England. It meant he could take control of English coinage, which was far superior to that which he possessed in his homeland. William’s coins struck back in Normandy are remarkable for how poor they are, compared to their English counterparts. He had at least seven types of English pennies struck with his name on. It meant he was able to achieve the rebranding that was so important to him. No longer was he William the Bastard, as he was then known. Now he was William the Conqueror. He let the world know through his coins. And that’s how we know him today.

* Dominic Frisby, author of Daylight Robbery – How Tax Shaped The Past And Will Change The Future, out now in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.