Silver standard
The silver standard
The move away from the silver to the
Origins
The use of
For millennia it was also silver, not gold, which was the real basis of the domestic economies: the foundation for most money-of-account systems, for payment of wages and salaries, and for most local retail trade. In 14th to 15th century England, for instance, most highly paid skilled artisans earned 6d a day (six pence, or 5.4g silver in the mid-15th century), and a whole sheep cost 12d. So even the smallest gold coin, the quarter-noble of 20d (with 1.7g fine gold), was of little use for domestic trade.[3]
Everyday economic activities were therefore conducted with silver as the standard of value and with silver serving as medium of exchange for local, domestic and even regional trade. Gold functioned as a medium for international trade and high-value transactions, but it generally fluctuated in price versus everyday silver money.[3] Gold as the sole standard of value would not occur after various developments occurring in England starting the 18th century.
History
Ancient Greece
The first metal used as a currency was silver, more than 4,000 years ago, when silver
Great Britain
Great Britain's early use of the silver standard is still reflected in the name of its currency, the pound sterling, which traces its origins to the early Middle Ages, when King Offa of Mercia introduced a 'sterling' coin made by physically dividing a pound (mass) of silver in 240 parts.[4] In practice, the weights of the coins was not consistent and 240 of them seldom added up to a full pound; there were no shilling or pound coins and the pound was used only as an accounting convenience.[5]
In 1158, King Henry II introduced Tealby penny. English currency was almost exclusively silver until 1344, when the gold noble was put into circulation. However, silver remained the legal basis for sterling until 1816.
In 1663, a new gold coinage was introduced based on the 22
The economic power of Great Britain was such that its adoption of a gold standard put pressure on other countries to follow suit.
Bohemia
Beginning in 1515, silver coins were minted at the silver mines at
The coins were widely circulated and became the model for silver thalers issued by other European countries. The word thaler became dollar in the English language.Spanish Empire
Rich deposits of silver in southern Mexico and Guatemala, allowed the Spaniards to mint great quantities of silver coins. The Spanish dollar was a Spanish coin, the real de a ocho and later peso, worth eight reals (hence the nickname "pieces of eight"), which was widely circulated during the 18th century.
By the
Germany
After its victory in the Franco-Prussian War (1870–71), Germany extracted a huge indemnity from France of £200,000,000 in gold, and used it to join Britain on a gold standard. Germany's abandonment of the silver standard put further pressure on other countries to move to the gold standard.
United States
The United States adopted a silver standard based on the
The
In 1857, the final crisis of the free banking era of international finance began, as American banks suspended payment in silver, rippling through the very young international financial system of central banks. In 1861 the US government suspended payment in gold and silver, effectively ending the attempts to form a silver standard basis for the dollar. Through the 1860–1871 period, various attempts to resurrect bi-metallic standards were made, including one based on the gold and silver franc; however, with the rapid influx of silver from new deposits, the expectation of scarcity of silver ended.
The combination that produced economic stability was restriction of supply of new notes, a government monopoly on the issuance of notes directly and indirectly, a central bank, and a single unit of value. As notes devalued, or silver ceased to circulate as a store of value, or there was a depression, governments demanding
The Coinage Act of 1873, enacted by the United States Congress in 1873, embraced the gold standard and de-monetised silver. Western mining interests and others who wanted silver in circulation labeled this measure the "Crime of '73". For about five years, gold was the only metallic standard in the United States until passage of the Bland–Allison Act on February 28, 1878, requiring the US Treasury to purchase domestic silver bullion to be minted into legal tender coins co-existent with gold coins. Silver Certificate Series 1878 was issued to join the gold certificates already in circulation.
By acts of Congress in 1933, including the Gold Reserve Act and the Silver Purchase Act of 1934, the domestic economy was taken off the gold standard and placed on the silver standard for the first time. The Treasury Department was re-empowered to issue paper currency redeemable in silver dollars and bullion, thereby divorcing the domestic economy from bimetallism and leaving it on the silver standard, although international settlements were still in gold.[8]
This meant that for every ounce of silver in the U.S. Treasury's vaults, the U.S. government could continue to issue money against it. However, stamp overprints which were used under the Silver Purchase Act of 1934 to finance the nationalisation of U.S. silver mines, and also carried taxes ranging from 1¢ to $1,000, ended in 1943.[9] These silver certificates were shredded upon redemption since the redeemed silver was no longer in the Treasury. With the world market price of silver having been in excess of $1.29 per troy ounce since 1960, silver began to flow out of the Treasury at an increasing rate. To slow the drain, President Kennedy ordered a halt to issuing $5 and $10 silver certificates in 1962. That left the $1 silver certificate as the only denomination being issued.
On June 4, 1963, Kennedy signed Public Law 88-36, which marked the beginning of the end for even the $1 silver certificate. The law authorized the Federal Reserve to issue $1 and $2 bills, and revoked the Silver Purchase Act of 1934, which authorised the Secretary of the Treasury to issue silver certificates (by now limited to the $1 denomination). Because it would be several months before the new $1 Federal Reserve Notes could enter circulation in quantity, there was a need to issue silver certificates in the interim. Because the Agricultural Adjustment Act of 1933 granted the right to issue silver certificates to the president, Kennedy issued Executive Order 11110 to delegate that authority to the Treasury Secretary during the transition.
Silver certificates continued to be issued until late 1963, when the $1 Federal Reserve Note was released into circulation. For several years, existing silver certificates could be redeemed for silver, but this practice was halted on June 24, 1968.
Finally, on August 15, 1971, President
Due to the monetary policy of the U.S. Federal Reserve, calls for a return to the gold standard have returned.[citation needed] Some states have chosen to use a loophole in the Federal Reserve Act that gives individual states the right to issue currencies of gold or silver coins or rounds.[citation needed] This was done because the Federal Reserve Act does not allow them to print their own currency if they wished.[citation needed] As of January 2012, Utah allowed the payment of debt to be settled in silver and gold, and the value of the American silver or gold rounds used was pegged to the price of the given precious metal.[citation needed] Payment in some cases can be requested to be made in silver or gold rounds. As of 2011, eleven other U.S. states were exploring their options to possibly make similar changes like Utah.[11]
Imperial China
China had long used silver
The use of silver as money was established at the very time of the
During the
The silver standard was again adopted and codified in 1914 by the newly established republic, with one yuan still being equal to 0.72 tael of 900 fineness silver. After the
China's use of silver as a medium of exchange is reflected in the name for bank "銀行" (literally "silver house" or "silver office") and for the precious metal and jewel dealer "銀樓" (literally "silver building" or "silver shop").
Republican China and Hong Kong
Republican China, along with the British colony of Hong Kong, would be the last to abandon the silver standard.
In October 1934, the National Government of
Hong Kong abandoned the silver standard in September 1935. Hong Kong then adopted the
India
The Indian
Persia
The dirham was a silver coin originally minted by the Persians. The Caliphates in the Islamic world adopted these coins, starting with Caliph Abd al-Malik (685–705). Silver remained the most common monetary metal used in ordinary transactions until the 20th century.
Safavid era
Gold coins were minted for the king, but these coins were more suitable for use and served as gifts on occasions, especially Nowruz. However, silver was a precious and high-quality currency for tax and commercial purposes. Silver coins were higher in comparison with many other countries. When the coin-masters of the coin melted the European coins or the crack, they were purified them before they were minted again in the form of Iranian currency.
Usually the weight of the coins was correct, so that businessmen and government agents used both for a major payment of bags containing a certain number of coins. These bags have a guaranteed value of 50 Toman. A special observer, Sarrafbashi, was in charge of the quality of coins inside the bags, which personally sealed them. This monitoring of money certainly survived until the end of the fourteenth century.
From the beginning of the Islamic Empire, the dinar was a monetary unit. In the year 1260, the Mughal was presented with the Toman, which in the words meant 10 thousands.
The word was originally used to refer to 10,000 dinars of gold. However, after the year 1500, during the Safavid dynasty, Toman was a unit for calculation, not a gold coin. In practice, the value of the Toman fluctuated and was not always equal to 10,000 dinars. Also, the Toman of Tabriz or Iraq was often four times the value of the Toman of Khorasan.
Exports of metal money from Iran in the seventeenth century were followed by sea and land, and generally more exports included coins to bullion. Given that the tendency toward gold to keep its value historically longer than the West in relation to silver in India, it was often preferable to export to India, since at least until the 1080s of the lunar year in India, and in particular the Cromandal (south-east coast India) had a better rate. However, almost always silver was preferred to trade with the East, although it naturally depended on the prices of silver and commodities in India.
Iran's rulers repeatedly issued orders against coin exports, but since the merchants could easily escape the regulations by bribing the officers, their results were temporary. During the Safavid period, the first ban on the coin occurred in 1618 during the reign of Shah
Afsharids
With the fall of the Safavid in 1723, their monetary policy continued to be maintained by Nader Shah, who maintained the same weight and purity for coinage between 1723 and 1741. In this year, instead of continuing to follow the pattern of the traditional Iranian criterion, he made a coin draw on India based on the pattern of India to simplify trade between the two countries.
Zand
Although Karim Khan was known as the "greatest ruler of Iran" since 1764 with broad, independent or semi-autonomous sectors, there was no monetary unity in the country. The regional monetary system continued to work even when the national mint began to beat coins of equal weight and purity.
Qajar
The advent of the Qajar dynasty began in the late eighteenth century with the same Safavid monetary system. In short, in this system, the common currency was coins that were manually multiplied in the mint of all major cities and managed by privileged holders who paid royalties. The value of money was theoretically based on their precious metal content, which was guaranteed by the government.
The Qajar period's monetary system was likewise pre-disintegrated and decentralised. There were two types of Iraqi and Tabrizi Tomans (used most of Iran) plus Tuman Khorasani (used in Eastern Iran).
Pahlavi
Following the fall of the value of silver in the late 1920s and the early 1930s, the Pahlavi government experienced a serious monetary crisis. The Pahlavi government first tried to redirect the gold standard by the March 28, 1930 law. But when faced with difficulties, the Qajars' short-term strategy was chosen; that is, to stay on the silver standard.[16]
The law of March 13, 1932 stipulated that until the return to normal economic situation and the stability of the possibility of paying with gold or gold-based foreign currency suspended due to the economic crisis, the National Bank (Bank Melli Iran) was allowed to receive no silver coins or paper money in circulation which may be offered with a gold purchase (coin, bullion, or foreign currency). However, Bank Melli should pay Rial cash against paper money and nickel coins if there is a demand without limitation, for each coin in either Tehran or other provinces.[16]
Although the paper money was very important in the Reza Shah government, older attitudes were still expected. For example, the idea that the metal is the base of real money is found in this rule of law that the paper money is backed by gold or foreign currency.
However, the passage to the new currency system was one of the achievements of Reza Shah's reign.
Transition to gold standard
In 1717, the master of the
The British gold standard initially extended to some of the British colonies, including the Australasian and
In 1873,
Relative value of silver and gold
Since the time that
It has also however been suggested by Nevada Senator
Silver made a partial comeback in the first decade of the 20th century, such that the silver dollar coins of the Straits Settlements and silver peso coins of the Philippines had to be made smaller in size, and with a reduced silver content in order to prevent their silver value exceeding their recently established gold exchange value. An even larger rise in the price of silver after the First World War caused the Royal Mint in London to reduce the silver content of the sterling coinage. But silver never returned to the 15½:1 ratio of the first half of the 19th century, and the predominant long term trend was that silver continued to decline in value against gold. Nowadays the ratio in relation to the value of gold, although variable, is more of the order of 70:1.[18]
See also
- Bimetallism
- Digital gold currency
- Executive Order 11110
- Free silver
- Full-reserve banking
- Fungibility
- Gold standard
- Legal tender
- Representative money
- Silverite
- Silver as an investment
- Silver certificate (United States)
- Silver coin
- Store of value
- United States one-dollar bill — details of the silver certificates of 1878–1963
Notes
- ^ The silver standard is also sometimes known as silver metallism and silver monometallism.
References
- ^ "MESOPOTAMIAN ECONOMICS AND MONEY | Facts and Details".
- ^ "Making Cents of Currency's Ancient Rise".
- ^ a b pp 13-14 sec 5(f)(g)(h) https://www.economics.utoronto.ca/munro5/MONEYLEC.pdf
- ^ "Pound sterling". Britannica. 13 February 2024.
Silver coins known as "sterlings" were issued in the Saxon kingdoms, 240 of them being minted from a pound of silver... Hence, large payments came to be reckoned in "pounds of sterlings," a phrase later shortened...
- ^ Lowther, Ed (14 February 2014). "A short history of the pound". BBC News. BBC.
Anglo-Saxon King Offa is credited with introducing the system of money to central and southern England in the latter half of the 8th Century, overseeing the minting of the earliest English silver pennies – emblazoned with his name. In practice they varied considerably in weight and 240 of them seldom added up to a pound. There were at that time no larger denomination coins – pounds and shillings were merely useful units of account.
- ^ Rhodes, Richard (1986). The making of the atomic bomb. New York: Simon and Schuster. p. 118.
- ^ Julian, R. W. (2007). "All About the Dollar". Numismatist. p. 41.
- ^
A History of Money and Banking in the United States; Murray Rothbard. ISBN 0-945466-33-1. (2005)
- ^ "Silver Tax Stamps". 19 June 2017.
- ^ Archived at Ghostarchive and the Wayback Machine: "Nixon Ends Bretton Woods International Monetary System". YouTube.
- ^ "Utah law treats gold and silver coins as legal tender - Mar. 29, 2011".
- ^ Mihm, Stephen (26 August 2015). "How the silver standard wrecked China's economy". livemint. Retrieved 10 October 2020.
- ^ "Four Years of the Silver Program". CQ Researcher by CQ Press. Retrieved 2022-09-25.
- S2CID 153937120.
- ^ "India's Balance of Indebtedness 1898-1913"
- ^ a b قوّتی, توسط فاطمه (25 September 2018). "پادشاهان ایران چگونه سکه ضرب میکردند؟ / نگاهی به پول در تاریخ ایران – راه پرداخت" (in Persian). Retrieved 2019-06-18.
- ^ ""Monetary Madhouse", Charles Savoie". Archived from the original on 2012-02-27. Retrieved 2009-11-16.
- ^ 'Austin' gold information network Archived 2010-12-26 at the Wayback Machine