Latin Monetary Union
The Monetary Convention of 23 December 1865 was a unified system of coinage that provided a degree of monetary integration among several European countries, initially Belgium, France, Italy and Switzerland, at a time when the circulation of banknotes in these countries remained relatively marginal. In early 1866, it started being referred to in the British press as the Latin Monetary Union, with intent to make clear that the United Kingdom would not join,[1]: 18 and has been generally referred to under that name (French: union latine) and the acronym LMU since then. A number of countries minted coins according to the LMU standard even though they did not formally join the LMU.
The LMU has been viewed as a forerunner of late-20th-century
History
Preliminary context
The LMU adopted the specifications of the
Initial treaty
Denomination | Composition | Mass | Diameter |
---|---|---|---|
1 centime | Bronze | 1 g | 15 mm |
2 centimes | Bronze | 2 g | 20.2 mm |
5 centimes | Bronze | 5 g | 25 mm |
10 centimes | Bronze | 10 g | 30 mm |
20 centimes | Silver (.835) | 1 g | 16 mm |
50 centimes | Silver (.835) | 2.5 g | 18 mm |
1 franc | Silver (.835) | 5 g | 23 mm |
2 francs | Silver (.835) | 10 g | 27 mm |
5 francs | Silver (.900) | 25 g | 37 mm |
10 francs | Gold (.900) | 3.2258 g | 19 mm |
20 francs | Gold (.900) | 6.45161 g | 21 mm |
50 francs | Gold (.900) | 16.12903 g | 28 mm |
100 francs | Gold (.900) | 32.25806 g | 35 mm |
By treaty dated 23 December 1865,
The treaty required that all four contracting states strike freely exchangeable gold coins and silver coins according to common specifications. Before the treaty, for example, the fineness of the silver coins in the four states varied from 0.800 to 0.900. The treaty required that the largest silver coin of 5 francs be struck 0.900 fine and the fractional silver of 2 francs, 1 franc, 50 centimes and 20 centimes all be struck at 0.835 fine.[4] The agreement came into force on 1 August 1866.[5]
The LMU served the function of facilitating trade between different countries by setting the standards by which gold and silver currency could be minted and exchanged. In this manner a French trader could accept Italian lire for his goods with confidence that it could be converted back to a comparable amount of francs.
Further joining members
Following the
Other states later adopted the system without formally joining the treaty:
With the tacit agreement of
Issues
This section needs additional citations for verification. (October 2022) |
Bimetallism failure
From the beginning, fluctuations in the relative value of gold and silver on the world market stressed the currency union. This is today recognized as an inevitable effect of a currency based on bimetallism when precious metal prices fluctuate. When the LMU was formed in 1865, silver was nearing the end of a period of high valuation compared to gold.[12] In 1873 the value of silver dropped significantly, followed by a sharp increase in silver imports in the LMU countries, particularly in France and Belgium.[13] By 1873, the decreasing value of silver made it profitable to mint silver in exchange for gold at the Union's standard rate of 15.5 : 1. Indeed, in all of 1871 and 1872 the French mint had received just 5,000,000 francs of silver for conversion to coin,[citation needed] but in 1873 alone received 154,000,000 francs.[citation needed] Fearing an influx of silver coinage, the member nations of the Union agreed in Paris on January 30, 1874, to limit the free conversion of silver temporarily. By 1878, with no recovery in the silver price in sight, minting of silver coinage was suspended absolutely.[14] From 1873 onwards, the Union was on a de facto gold standard. The law still permitted payment in silver, but custom demanded and enforced payment in gold. The 5 franc silver pieces were "essentially upon the same footing as bank notes".[15]
More importantly, because new discoveries and better refining techniques increased the supply of silver, the fixed LMU exchange rate eventually overvalued silver relative to gold. German traders, in particular, were known to bring silver to LMU countries, have it minted into coinage then exchanged those for gold coins at the discounted exchange rate. These destabilizing tactics eventually forced the LMU to convert to a pure gold standard for its currency in 1878.[16][17]
Debasement of the coinage
Some members, notably the Papal State, began to debase their currency.[when?] The Vatican minted Papal lira coins with an inadequate amount of silver (0.835 fine[18]) and then exchanged them for coins from other countries that had been minted correctly, thus in effect forcing other members of the Union to do the same.[citation needed] According to the BBC, Greece with its "chronically weak economy meant successive Greek governments responded by decreasing the amount of gold in their coins,[b] thereby debasing their currency in relation to those of other nations in the union and in violation of the original agreement". Greece was formally expelled from the Latin Monetary Union in 1908. It was readmitted in 1910, however.[20]
Paper money issues
According to the
Effect of the Great War
In 1922
The political turbulence of the early twentieth century which culminated in the First World War brought the Latin Monetary Union to its final end in practice, even though it continued de jure until 1927, when it came to a formal end.[citation needed]
The last coins made according to the standards (i.e., diameter, weight and silver fineness) of the Union were the Swiss half, one-franc, and two-franc pieces of 1967.
Impact
A 2018 study in the European Review of Economic History found that the LMU had no significant effects on trade, except during the period 1865–1874.[25]
The Latin Monetary Union inspired the Scandinavian Monetary Union, established in 1873.[20]
Coins
Below are examples of coins of 5 units silver coins:
5 Greek drachmae 1876 | |
---|---|
George I of Greece | Coat of arms of Greece |
5 Belgian francs 1868 | |
---|---|
Leopold II of Belgium | Coat of arms of Belgium |
5 French francs 1868 | |
---|---|
Napoleon III of France
|
Coat of arms of the Second Empire |
5 Italian lire 1874 | |
---|---|
Victor Emmanuel II of Italy
|
Coat of arms of the House of Savoy |
5 Spanish pesetas 1885 | |
---|---|
Alfonso XII of Spain
|
Coat of arms of Spain |
5 Venezuelan bolívares 1912 | |
---|---|
Simón Bolívar | Coat of arms of Venezuela |
5 Swiss Francs 1889
| |
---|---|
Coat of arms of Switzerland | Libertas |
5 Romanian lei 1883
| |
---|---|
Carol I of Romania | Coat of arms of Romania |
See also
- Bimetallism
- Economic and Monetary Union of the European Union
- Euro
- Latin Union
- Spanish peseta
- Stella (United States coin)
Notes
- ^ Not borne out by references in coin catalogues, e.g. Krause & Mishler, Standard Catalog of World Coins, 19th century, which shows LMU standard finenesses for Papal States silver and gold coinage with no debasement.
- ^ This assertion is not supported by the coinage record. Greece issued no silver or gold coins for circulation after 1884 (silver resumed in 1910), and all extant coins from the period in question (prior to 1884 and in 1910/11) are of LMU standard.[19]
- ^ The cupro-nickel 1⁄2, 1 and 2-franc coins made since 1968 were also still of LMU-standard weight and diameter, though no longer silver.
References
- ^ a b c Luca Einaudi (September 2018), "A Historical Perspective on the Euro: the Latin Monetary Union (1865–1926)" (PDF), Ifo DICE Report
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 1. Retrieved 12 June 2018 – via Internet Archive.
- ^ "Search the coin catalogue – Numista". en.numista.com. Retrieved 2023-03-12.
- ^ a b Recueil des traités de la France (1864-1867) [Collection of the treaties of France (1864-1867)]. Vol. 9. pp. 453–458. Archived from the original on 2020-11-22. Retrieved 2007-09-30.
- ^ ISBN 978-0-521-81204-7. Archivedfrom the original on 2023-01-15. Retrieved 2020-11-15 – via Google Books.
- ^ a b Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 81 – via Internet Archive.
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 83 – via Internet Archive.
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 84 – via Internet Archive.
- OCLC 1350926401.
- ^ "Daggar Jon's 'Coin and Currency'". Archived from the original on 2015-01-20. Retrieved 2009-11-11.
- ISBN 978-0-19-924366-2.
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. pp. 85–86 – via Internet Archive.
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 116 – via Internet Archive.
- ISBN 978-1-297-44892-8. Archived(PDF) from the original on 2022-01-20. Retrieved 2020-11-21.
- ^ Willis, Henry Parker (1901). A History of the Latin Monetary Union: A Study in International Monetary Action. Chicago: University of Chicago Press. p. 266 – via Internet Archive.
- ^ "The Latin Monetary Union". goldcoin.org. Archived from the original on 4 March 2014. Retrieved 2 February 2012.
- ^ "5: Enthusiasm and Resistance to Union in Britain and Germany". European Monetary Unification and the International Gold Standard (1865-1873) (PDF). Oxford University Press. 2001. Archived from the original (PDF) on 8 August 2007.
- ^ Pinchera, S (a cura di) (1957). Monete e zecche nello stato pontificio dalla restaurazione al 1870 [Coins and mints in the papal state from the restoration to 1870]. Archivio economico dell'unificazione italiana. Vol. V, fasc. 3. Roma.
{{cite book}}
: CS1 maint: location missing publisher (link) (cited in Rossi, Marinella (2013). La borsa di Roma dal 1847 al 1860 [The Rome Stock Exchange from 1847 to 1860] (PDF) (Thesis) (in Italian). Tesionline. p. 1. Archived (PDF) from the original on 2007-09-27. Retrieved 2022-10-15. (first degree thesis)) - ^ Krause & Mishler, Standard Catalog of World Coins, 19th-century & 20th-century volumes (annual publications)
- ^ a b "A Point of View: Making friends the shared currency way". BBC News. 2 March 2012. Archived from the original on 19 December 2018. Retrieved 26 February 2012.
- ^ "Eurozone: A nightmare scenario - Latin Lessons". Financial Times. 16 September 2011. Archived from the original on 2022-12-10.
- ^ Jaskólski, Józef (1924). Tabele walutowe i towarowe 1914-1924. Lwów: Spółki Akcyjnej Wydawniczej.
- ^ Krause & Mishler, Standard Catalog of World Coins, 20th century.
- ^ "Buy Swiss Gold from Echtgeld AG". www.echtgeld.ch. Archived from the original on 28 August 2016. Retrieved 27 August 2016.
- .
Further reading
- Bae, Kee-Hong; Bailey, Warren (2011). "The Latin Monetary Union: Some Evidence on Europe's Failed Common Currency". Review of Development Finance. 1 (2): 131–149. .
- Flandreau, Marc (2000). "The Economics and Politics of Monetary Unions: A Reassessment of the Latin Monetary Union, 1865–71". S2CID 154714928.
- Redish, Angela (1993). "The Latin Monetary Union and the Emergence of the International Gold Standard". In Bordo, Michael D.; Capie, Forrest (eds.). Monetary Regimes in Transition. New York: Cambridge University Press. pp. 68–85. ISBN 978-0-521-41906-2.
- Nenovsky, Nikolay; Jacques-Marie, Vaslin (2020). "Shadowing the Latin Monetary Union: Monetary regimes and interest rates in the Balkan periphery (1867-1912)". The Journal of European Economic History. 49 (2): 71–114. ISSN 2499-8281.