Foreign gold and silver coins were legal tender in the United States until the Coinage Act of 1857. One of the more common coins used was the silver Spanish real de a ocho, also known as the Spanish dollar or piece of eight. The Spanish dollar was the inspiration for the U.S. silver dollar. The piece of eight was divided into eight “bits” of one real each. Sometimes this division was the literal cutting the coin into bits. Hence the term “two bits” meaning twenty-five cents.
I think people are skipping over an important step, because it probably seems too obvious to mention.
The value of gold was determined by fiat. The ruler - or really, whoever was in charge of the mint - took a weight of gold and set it equal to 1. In Roman, a gold coin was 1 aureus or basically one golden thingy.
From there, all the lesser coins were valued. Therefore, 1 aureus = 25 denarii = 100 sestertii = 400 asses = 800 semis = 1600 quadrans.
What was a quadran worth? Whatever a vendor would sell you for the price. Goods and services didn’t have prices as we know them. People haggled over what coins they would accept, and then haggled over whether the oddly shaped piece of metal you offered was worth its nominal value. Debasement was instant and omnipresent everywhere despite draconian efforts to limit it. Savvy merchants in international trading cities became extremely adept at weighing the coin and determining what percentage of it was gold or silver or brass. No coin had any fixed value at any time unless the emperor or whoever decreed that, say, an ass was worth 250 asses. That wasn’t a pun in Latin.
What would be the value of a chunk of gold? Well, possibly zero. Nobody was allowed to mint money except the emperor, so you couldn’t spend it as such. The high end craftspeople who created gold serving plates or silver necklaces had to get the metal from somewhere, but they would probably buy it at a discount because of all the labor they’d need to put in to change the metal into something valuable.
When you go back in time, coins are not much different than chickens, just much easier to carry. That anything had a fixed value that all people would agree upon is a 20th century notion. U.S. currency was a complete utter mess until after the Civil War, and then it was still a mess, only less so. Gold had a value other than 1 because the U.S. now had a notion of something it called a dollar. Gold had to be priced to a dollar, with the government gold price starting at $19.75 per troy ounce in 1792, rising to $20.67 in 1834, and $35 in 1934. But that was the official price at a bank for exchanging gold and dollars. Private people could price it as they wanted, and even trade gold dust or nuggets. Paper currency was much worse. Whole large guidebooks were regularly published to give equivalencies between and among the million bank notes printed by individual banks.
Nothing has really changed. Prices and value are floating numbers that sometimes almost all agree to and otherwise are created on the fly.
Not perfectly, of course, but surprisingly close. The lowest-paid non-slaves in ancient Greece got about 2.2 grams of silver (half a drachma) per day. (The following is derived from Moneyworth website and data on coin debasement.) 2 grams of silver was about the average wage in 13th century England; this became about 3.3 grams by the 17th century. (With social change associated with the Black Death, and the rise of crafts, wages went up.)
England’s cost of living (measured in pure silver to adjust for debasements under Edward IV and the Tudors) rose less than three-fold from 1200 to 1900; an average annual inflation of about 0.13%. (Wages began a rapid rise circa 1860. Cost of living began a rapid rise in nominal money after the gold standard was abandoned.)
Wouldn’t they just melt some gold and silver coins?
Besides, artisans who made gold and silver plates mostly worked on commission - meaning that some rich lord would ship over a bunch of gold in various forms, like coins, bullion or older plates and jewelry, and order them to melt it down and make something new out of it. They wouldn’t have to buy any raw materials themselves.
Yeah, I just copied some of a list from a silver collecting group and left off some details.
I collect a little silver but the only currency I look for is dimes and quarters as they are simple and easy to spot. My favorite silver rounds (not currency) are what they call “silver strikes” which were issued by particular slot machines. There are hundreds of varieties. I collect only the $10 strikes which have a center of .999 silver that weighs .6 troy ounce. Spot value is about $20 so they are an inexpensive way to save silver. They are big and impressive and each comes in a clear capsule already.
I’ve got a friend who collects those, from the slot machines themselves. She goes to Vegas several times per year, and has a whole group of friends who do the same. They schedule this around when new strikes are issued.
I was just trying to speculate ways in which “unminted Metal” would be as valuable as a coin.
The various lords would have kept tight controls over mines, but it was inevitable that new sources might be found. Other gold would enter the system as valuables taken as loot or in trade as frontiers were expanded. There had to be some legitimate market for new gold other than for coining.
The most common market for precious metals, then as now, was the jewellery market. Gold and silver went back and forth between coinage, bullion and jewellery all the time. Up until 1873, in the US, you could turn up at the mint with your raw silver and have the mint stamp it into coins.
The key thing in the bullion coin era is that the value of a coin was in the metal, not the number on the front or the face on the back. In the markets, a drachm of fine silver was a drachm of fine silver, and whose face was stamped on it was a distinctly secondary consideration. The advantage of coinage was that it had (supposedly) a fixed weight and purity, thus sparing merchants the hassle of having to weigh and assay every piece when making a transaction.
You have to be careful to avoid tautologies in this sort of question - when the Emperor decreed that 1 pound of gold was 40 aurei, he was defining the measuring unit, not setting the price of gold. If Congress rules that a dollar is so many grains of silver, then by definition the dollar price of silver will stay flat until Congress changes the definition or the Treasury tries to debase the currency. That said, when compared to things like wages, land rents or the price of staple goods, bullion coins do seem to have maintained a surprisingly constant value over a very long period (though with a lot of chaotic ups and downs in the short term)
Of course, it depends on what basket of goods and services you compare it to. One comparison often made by gold bugs is “the price of a man’s suit”, but that’s a good that can literally vary by three orders of magnitude.
We could use “The price of one of Steve Harvey’s suits”. Now we are down to a $2000 to $90,000 range. Although I am sure he started out with $200 suits.
Glad somebody mentioned this. I don’t know much of the history but England had a period called The Great Debasement when silver and gold content of coins was reduced several times. The resulting coins had much less intrinsic value than their face value.
Yes. If you use the Bank of England’s handy historic inflation calculator, it will tell you that goods and services that cost £10 in 1225 would cost £11.64 in 1525 - less than 20% net inflation over 300 years - but close to £30 in 1575 after Henry VIII had done his thing.
Inflation then continued, so the same amount of stuff would cost you around £52 in 1625, £62 in 1725, £136 in 1825 - by which point “money” was increasingly coming to mean banknotes and account entries rather than bullion coins - £209 in 1925 near the end of the gold-standard era and over £10,000 today.
Sadly, there are few machines left. Only 4 in Vegas according to what I could find out. And most of the Silver Strikes are plated instead of solid silver centers. A single machine offers $40 Strikes and those are silver. There are also $300 Strikes with 6 ounces of silver but you have to buy them by turning in a bunch of $10 Strikes. Maybe you can buy one outright. At any rate you do not win $300 Strikes at the machines, you get them at the cashier. . When you Google for Silver Strike information you get all kinds of conflicting results because the rules have changed many times over the years.
That just shows that the value of the coins was determined by fiat, not that the value of gold was determined by fiat. If anything, it shows that the value of gold wasn’t determined by fiat — the intrinsic value of the coins differed from the nominal value precisely because the king couldn’t effectively decree the intrinsic value.
Said in more modern parlance, the “intrinsic” value is not intrinsic to a lump of pure gold no matter what shape it’s stamped into, what numbers are stamped on it, or how it is mixed with base metals.
The worth of that one ounce lump of pure gold is determined socially. It’s worth whatever most people in most places are willing to exchange it for. And the nature of arbitrage suggests that within any given trade region, that social determination will converge quickly to a single value with very tight tolerances.
What’s different between 1500s England and the 21st Century is now the “region” is worldwide and the pace of synchronization is driven by the internet and the finance industry. Which leads to the illusion that somehow, the “intrinsic” of gold is in the gold, not in the social agreement about the gold.
I was going to say much the same thing. The “worth” or value of anything is whatever someone else is prepared to trade for it. Crypto, gold, paper notes, or cowrie shells - it makes no difference.
Marco Polo visited China almost a century after Genghis had built an empire from Europe to the Far East; and there was already trade along the Silk Road before the time of Christ. So semi-global markets are an old thing, though transportation charges were huge. Silk was apparently worth its weight in gold in ancient Rome. Trade between Europe and China accelerated in the 15th century (motivating the search for sea routes). A big disparity in the value of gold (or silver) would be unexpected given this trade and the high value-to-weight ratio of gold.
However Marco Polo reports one fact that made trading precious metals difficult in the Far East. Kublai Khan, like F.D. Roosevelt many centuries later, required that all precious metals be sold to him for paper money!
Those huge transport costs are relevant. Prices will mostly settle out to be uniform in any given area, if trade within that area is cheap and easy. Silk was much more expensive in Rome than in China, because it cost a lot of time, effort, and risk to get silk from China to Rome. If that weren’t true, then nobody would pay the high prices to the exotic silk merchant in Rome; they’d just pop over to the Far East and buy some there themselves.
In the modern world, it’s cheap and easy to trade any commodity anywhere on the globe. But that’s different from the days of the Silk Road.
IIUC there was relatively little trade of gold or silver between Europe and China before the 15th century, despite that the ratio of transportation cost to gold’s value was as low as the ratio for precious silk. This puts a weak upper bound on the disparity of gold’s valuation between the two regions.
But your point is very correct, of course. I think the gold-to-silver price ratio remained lower in China than in Europe until almost modern times. This fact (along with British fondness for tea and Gresham’s Law) helped cause the “Opium Wars”!