After reading the thread about the word picayune, I read up about old Spanish coins, and it made my head spin. Here’s the system as I understand it in the early 19th century -
Copper maravedíes, available in 1, 2, 4 and 8 denominations.
34 maravedíes = 1 half-silver real de vellón, available in 0.5, 1, 2, 4 and 8 denominations.
2 reales de vellón = 1 silver real de plata, available in 0.5, 1, 2, 4, and 8 denominations.
8 reales de plata also known as 1 peso / dollar / piece of eight.
16 reales de plata = 1 gold escudo, available in 0.5, 1, 2, 4 and 8 denominations.
I thought British pre-decimal currency was bad, but at least it was mostly based around the pound (sometimes they used guineas instead when they wanted to look fancy). The Spanish system seems to have had 4 completely different currencies all at once, and the exchange rates between them changed over time. Is this the most complicated currency system in history, or are there others even worse?
Not really sure, but an interesting trivia point to raise about that Spanish system was that, in the early 1800’s, the “piece of eight” was commonly treated and accepted in the US as equivalent to one US Dollar along with smaller reales which would frequently be accepted as worth an eighth of a US dollar, or 12.5 cents. The small Spanish reales were nicknamed “bits” by Americans, leading to the expression “two bits” to mean a quarter, since two reales were worth the same as a US Quarter (25 cents). Also, memory of this system is the reason that stock prices were historically (until the late 20th century) quoted in eighths of a dollar.
Depends on what you want to count as “complicated.”
The people of Yap had Rai stones as a currency (and they are sill used to some ceremonial degree). Since the value is tied to the size and history of the individual stone, being rich means very large stones (several thousand pounds), though there are pretty small ones too.
Being too big to move, makes it complicated to use.
That is because the the US dollar began by being a US issue intended to circulate on par with the Spanish dollar which it only supplanted very gradually. At the turn of the 19th century the Spanish dollar was the world currency and many countries just countersigned them with their own chop marks to make them their own. The Spanish and Mexican pesos remained legal tender in the USA until 1857.
The Spanish currency system was not so complicated as it may look. It is just that it was based on the intrinsic value of metals so you had copper, silver alloy (billon), silver and gold and the relative value of each would vary over time.
The maravedí did not exist any longer by that time except, maybe, as a unit of count.
This line glosses over an old complication in British coinage. Back when coins were made of precious metal, a pound was a silver coin and a guinea was a gold coin. They were supposed to have equal value but their actual values fluctuated relative to each other based on the relative values of gold and silver.
Roman currency, which was all too confusing on its own, also fluctuated due to the intrinsic value of the metal content of the coins and “clipping” was a serious issue. But since the point about pre-decimal British currency has been made (wasn’t a guinea equal to a pound and a shilling?) I’ll post this instead, from 5,000 Fingers of Dr T:
*Bart Collins: How much are you being paid overtime?
Mr. Zabladowski: Two thousand pastoolas.
Bart Collins: Two thousand WHAT?
Mr. Zabladowski: Two thousand pastoolas. Dr. Terwilliker doesn’t pay me in American money - he keeps that for himself. He pays me in pastoolas.
Bart Collins: What are pastoolas?
Mr. Zabladowski: If you must know, the currency here is a little strange. First of all, in the small money comes the drakmids. At the regular, normal rate of exchange, there are 59 drakmids to one silver zlobeck.
Bart Collins: “Zlobeck”?
Mr. Zabladowski: Three silver zlobecks make one golden kratchmuk. A pastoola normally is, uh, 44,000 kratchmuks. But these, they tell me, are not normal times…
Bart Collins: Pastoolas, kratchmuks… How much do you get American?
Mr. Zabladowski: Precisely twenty bucks. Show me a better job, and I’ll take it. *
A favourite of mine – seeming complicated arithmetically, even if without numerous different units – would be that of Tibet before annexation by China in 1950. According to the worldwide postage-stamp catalogue which I had in childhood (I only read of, and saw facsimiles of, Tibetan stamps there – was never lucky enough to own or indeed see one): in the currency of independent Tibet, four-and-three-quarter trangkas made one sang.
Getting into non-factual realms (as with Collins and Zabladowski’s pastoolas and the rest); there’s the wizards’ currency in the Harry Potter series. That works as follows: 29 copper Knuts make 1 silver Sickle, and 17 Sickles make one golden Galleon. According to J.K. Rowling, one Galleon is worth roughly five British pounds, subject to variations in the exchange rate. As well as pointing up the odd, and often old-fashioned, ways in which the “wizarding world” functions, compared to ours; I wonder whether the weird amounts (29 and 17) are a tongue-in-cheek homage by Rowling, to British pre-decimal currency.
The money in Harry Potter made perfect sense to me. Presumably, the values of the original coins were determined by their metal value, and so fluctuated relative to each other as the metals fluctuated. Then, at some point in history, the government, or perhaps the predominant bank, decided that such fluctuations made things too complicated, and so fixed the relative values by statute or policy. In order to ease the transition, the fixed values were chosen to correspond to the then-current exchange rates (essentially, randomly-varying numbers), rounded to the nearest integer.
I am not sure what you are trying to say but Spanish history (and I assume other countries as well) is full of decrees establishing a correspondence in value between different metals. The problem is that it is impossible to set the real value of anything by decree and those decrees were useless and money would be traded at real market rates, not at any established rate.
Suppose the government decrees the value of one gold coin equals the value of sixteen silver coins. Then the value of silver goes up or the value of gold comes down and people are willing to trade only fifteen silver coins for one gold coin. There is nothing anyone can do about it and if the government insists on trading at the decreed rate then it will lose all of its silver while people trade in their gold and make a profit.
It is the same with fixed rates today. A government can decree an official exchange rate and try to enforce it and can succeed in transactions where it has control but if the market value is off then there will exist a black market where people profit. Pretty much every country with fixed exchange rates has a healthy black market.
The exchange rate between coinage of different metals is going to vary over time and there’s nothing any government can do to prevent it.
Then the government, or the dominant bank, or whoever’s issuing the money, starts adulterating the alloys, or varying the sizes (possibly reducing the metal value of all of them below face value), to bring the values back in line. Fiat money is a wonderful thing. Does anyone ever argue that a dime isn’t really worth ten cents, because of the values of the metals used in the coins? No, any merchant or banker in the country will treat one of those coins with Roosevelt’s picture on it as exactly equivalent to ten of those coins with Lincoln’s picture on it, even though the metal in the Lincoln coins is worth more than the metal in the Roosevelt coin.
The “face” value of a metal coin in those times was the intrinsic value of the metal it contained. If one peso contains 25 gr of silver then the value of one peso is the value of 25 gr of silver. If the government debases the coins to contain only 24 gr of silver then the coin is worth 24 gr of silver. There was no fiat money then. If old pesos contain more silver than new pesos but the government forces them to be traded at the same value then old pesos are hoarded and disappear from circulation.
The principle is known since antiquity.
That is because it is all fiat money and could as well be paper. But as soon as the intrinsic value of the metal is more than the face value of the coin you can bet the coins will disappear from circulation to be hoarded or melted or traded for their intrinsic value. That is why all precious metal has been removed from circulation. When was the last time anyone here saw a silver dollar in circulation for its face value?
And a central bank could also forcibly prevent the coins from shifting in value relative to each other. If Gringott’s will give anyone (or at least, any account-holder) 29 Knuts in exchange for a Sickle, and will also give anyone a Sickle in exchange for 29 Knuts, then how will copper and silver change value relative to each other?
Not necessarily-- We don’t know that that there are 59 drakmids to one zlobeck right now, or 44,000 kratchmuks to the pastoola-- Those are just the normal rates, but these are not normal times.
Because there would also be a silver exporter in Diagon Alley who will give people 31 knuts each for their sickles. People will certainly still go to Gringott’s and buy their sickles for 29 knuts apiece, but a lot of them aren’t going to go back to Gringott’s to sell their sickles at the same price. And soon Gringott’s will have no sickles but will have a whole lot of knuts.
Hmm…Tibetan currency looks pretty complicated. It looks like the trangkas were the native currency, and the srangs were imported from China, and both were in use simultaneously.
I never understood why the wizards in Harry Potter couldn’t just magic up their own money.
The thing to understand about these weird seeming currency systems is that they arose from different currencies used for different purposes, and then someone tried to figure out how much the different currencies were worth compared to each other.
And so it’s like “16 ounces in a pound”. Nobody sat down and decided to create a measuring system with two units in a 16:1 relationship. Instead, people who dealt with small things measured their weights using ounces, and people who measured large things used pounds, and people who measured really large things used tons. Then someone asked how these differing scales compared to each other, and a standards body fixed the exact relationship between them.
It’s confusing that a mile is 5280 feet, but nobody who measured things in miles was trying to use feet, and nobody who measured things in feet was trying to use miles. A mile was how long a roman soldier was supposed to march in an hour, and a foot was supposed to be how long a foot was. Nobody is confused that a mile equals 1.6 kilometers.
And so we have different weights of different precious metals issued as coins, sometimes by the same government, sometimes by different governments. And those coins vary in value depending on the exact weights and purity of the metals used, and the varying value of the metals relative to each other.
And then someone comes along an fixes a value, but of course this can’t last because you can arbitrage against the fixed value until the values have matched, and the official exchanges lose their shirts.