Money, Currency, Precious Metals

• Inventing Money: Brass in China, electrum in Lydia, gold and silver staters...
• Prices of Precious Metals:  Current market values (Gold, Silver. Pt, Pd, Rh).
• Exchange rates  on the day the  euro  was born.
• Worldwide circulation  of major currencies.

Related articles on this site:

• Utility functions: A rational basis for making decisions under uncertain conditions.
• Gold Chemistry:  Aqua regia ("Royal Water") dissolves gold and platinum.
• IIS (or HS) is for sesterce (originally, 2½ asses, "unus et unus et semis").
• Dimes and pennies: The masses of all current US coins.
• Pound of pennies: The dollar equivalent of a pound of pennies is increasing!

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(2002-11-13) Earliest Currency
What was the World's first currency unit?  When and where?

Primitive economic exchanges may have been limited to simple bartering, but there was probably always some kind of preferred "commodity" of reference, against which the fairness of any barter could be evaluated.

Between those primitive exchanges and the modern notion of money (which is essentially a purely symbolic device to record economic transactions) there was a time when the very concept of money became clear and practical with the invention of a concrete device that would embody money for centuries:  coins.

Earliest Coins

Before coins were invented, there was a stage when metals became the precious commodity of reference.  This may have started early during the Bronze Age.  Possibly even earlier, since gold (or electrum "amber-metal", a natural alloy of gold and silver) is found in nature without any sophisticated mining or metallurgy.  The historical record shows that gold units were used for accounting in Egypt in the third millenium BC, while silver and/or grain was used in Mesopotamia.

Actual brass coins appeared in China, in the 11^th century BC.  These had a variety of odd shapes; they were not round but there were unmistakably coins.

In the Western World, the invention of coinage is usually attributed to Cyges Mermnadae, king of Lydia from 680 BC to 652 BC, founder of the dynasty of the Mermnadæ (whose last king was the well-known Croesus).  Early Lydian coins were ovals of natural electrum (gold alloyed with 20% to 45% silver).  By the time of Croesus (561-546 BC), the two metals could be separated.  Croesus (or Kroisos) thus outlawed electrum and introduced two coins  (both called staters)  one of silver and one of nearly pure gold (98%).

The smaller gold stater was nominally ³/₄ of the weight of the larger silver stater, but a gold stater could be traded for 10 silver staters, thus establishing an official gold/silver price ratio of  13¹/₃  (see next article for other historical ratios).

Money Museum at Richmond  |  Ancient Mediterranean  |  Greek Coinage  |  Asia Minor  |  Lydia

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  (2003-11-09)  Precious Metals
  $ per troy ounce of 480 grains
  ( 1 ozt  =  31.1034768 g )

Current Precious Metal Prices (Monex)
24 Hour Gold Chart (Kitco)
10 Year Gold Chart (Kitco)

Looking at how the prices of precious metals vary from day to day, it's hard to believe that gold and silver were once a stable basis for defining currency.  Both metals were sometimes used simultaneously, with a  fixed  ratio of the price of a weight of gold to the same weight of silver.  Such historic ratios were much lower than what the current market values of gold and silver imply.  Here's what we've gleaned, mostly from "Histoire de la monnaie" by Jean Rivoire (PUF, 1989):

Historical Ratios of the Price of Gold to the Price of Silver

Menes (1st Egyptian Dynasty, 3100 BC)	2½
Croesus Mermnadae (6th Century BC, Lydia)	13.33
Augustus (Early Imperial Rome)	12.50
Charlemagne (AD 781)	12.00
Edward III (14th Century England)	11.57
Jean le Bon (14th Century France)	11.11
Isaac Newton (Royal Mint, 1717)	15.21
Napoléon Bonaparte ("Franc Germinal", 1803)	15.50
US Coinage Act of 1873	16.00
Late 2003	» 75
Mid 2004	50 to 70

The depreciation of silver made the commercial ratio between gold and silver go out of control late in the 19th century:  It was 16 in 1873, 18 in 1876, 20 in 1886, 33 in 1900, 38 in 1910...  This left gold as the sole money standard until the reference to precious metals was dropped entirely.

Brief History of Gold   |   Periodic Table of Chemical Elements

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(2005-01-16) Exchange Rates
On the day the euro was born...

The conversion factors between national currencies vary daily.  However, there was one recent event which froze the exchange rates for the currencies of 11 European nations.  According to the terms of the Maastricht treaty, 11 of the 15 nations of the European Union made their national currencies a fixed multiple of a new monetary unit, the "euro", born on New Year's day of 1999.  (These 11 currencies were phased out in 2002.)  The new euro replaced the former ECU, the European Currency Unit  (whose acronym matched the name of an ancient monetary unit, but did not please the Germans).  The exchange rates of the 11 currencies were frozen at whatever the ECU was worth in terms of the old units on December 31, 1998, at 1 pm (legal time in France and Western Europe) according to the report published by the EEC commission at that precise time.

The EEC also published the values of the ECU/euro in terms of certain currencies not irrevocably tied to the euro, at the exact time the euro was so "defined"; these are listed without highlighting in the table below  (for good measure, the value of an ounce of gold is also given, based on the  $287.75 / ozt  price in the  London Bullion Market on the day the euro was defined).  The 3-letter ISO symbols listed in the last column have been in use since 1989.  (Usually, the first two letters denote a country, and the third one is the initial of the currency's name.)

Note that the British unit, the pound sterling, which was one of the important currencies defining the ECU, was not one of the original 11 currencies out of which the euro was born (4 countries of the European Union were not originally part of "Euroland": Great Britain, Denmark, Sweden, and Greece).  Greece became the 12th nation to join the Eurozone, as of January 1, 2001.  The exchange rate of the drachma was frozen at 340.750 drachmas to the euro on December 31, 2000 (2 years after the euro's introduction).

The US dollar exchange rate with the euro started fluctuating even before the euro was officially born:  On December 31, 1998, during the few hours that followed the announcement of the 11 frozen exchange rates with the euro, and the statement that the euro was "originally" worth $1.16675, the Wall Street Stock Exchange in New York rated the euro as high as $1.1755.  On the next business day (Monday, January 4, 1999), the euro was an "official" unit and opened at $1.1747 in Australia, which is, therefore the actual "introductory rate" of the euro against the US dollar; as the business day progressed around the world, the exchange rate reached $1.181.  It approched 1.2$ in the following days, and fell back at $1.154 on monday, January 11, 1999  (when this writer got tired of watching).

Notice that the economists who defined the euro made the same mistake as physicist of past centuries in defining a new unit in terms of old ones, whose disappearance was scheduled...  It would have been more farsighted to state that a French Franc (FF or FRF) was  exactly  0.152449 of a euro, since the euro would be the only unit making sense to future generations.  Instead, the euro was defined as 6.55957 FF, which now makes the euro value of a French Franc equal to an awkward 0.1524490172374...

In the more precise world of metrology, this is as bad as having the meter defined as either "3 pieds & 11.295936 lignes"  (as was done in 1795 and 1799) or as 39.37 British inches (as was done in 1866 and 1893).  Both definitions are now obsolete, but the latter survives to this day within the so-called "US Survey" system.  The correct approach would have been to enact as exact, for each obsolescent unit, some rounded decimal fraction of the new unit.  (For example, since January 1 1959, an inch is now defined as exactly equal to 25.4 mm.)

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(2004-06-09) Currency in Circulation Worldwide
How much of the major currencies [coins & paper] is in circulation now?

The following summary was gleaned from the various sources quoted below: