Historically, early coins and proto-coin issues did circulate at intrinsic value. It was a way to monetize a commodity, expanding its market. Actual copper hoes and knives evolved into stylized versions exclusively for trade.
You are confusing trade value and intrinsic value here. Copper had a value X. A knife-shaped lump of copper had a value of X+Y, Y being an expression of the surplus utility of an unfinished knife over a lump of copper. An unfinished knife was acceptable because it could be sharpened. Later, the knives spades etc. got too small to be of any use, even when sharpened. This was fiduciary money. At least one emperor of China acknowledged as much in his correspondence. If that doesn't convince you, consider that Tibetan traders always preferred Indian silver over Chinese cash coins, even when China occupied Tibet and such preference could be at the risk of their lives.
All the silver and gold coined by the Spanish in their conquistador days was the same thing.
Most certainly not. Newton's papers prove that beyond any doubt. They were accepted by tally, but with a discount for certain mints or dates, depending on local tradition that may or may not have been correct and a bonus in places where coins were scarce. (see Chalmers)
Separate units for gold and silver was the norm everywhere else too. Reale and escudo floated against each other, albeit in a tight range, same as a guinea and pound sterling. In East Asia an exactly parallel float between copper and silver money went on for 2000 years.
Almost correct. The gold/silver price was reflected in the relation of gold to silver in coins in Europe and European colonies until the introduction of the double standard. In East Asia, the price of gold and silver was part of an elaborate system of price controls, based on the price of rice, maintained by the central government. This was much to the detriment of Asia when the two systems met. European traders were quick to
arbitrage the East Asian imperial prices, taking silver to Asia and carrying back gold (or the inverse in the rare cases that silver was undervalued in Asia). Domestically, circulation was close to 100% copper and paper. The sycee and koban were prestige items (note that paper was usually expressed in strings, not sycee.) I am less sure about India. My best guess is three circuits of circulation, where copper went mostly be tally (the exception being largesse money), silver by tally in small transactions, by weight in large transactions and gold little used, but going mostly by tally (Tipu Sultan seems to have paid his French military advisers in gold coins by tally) and silver floating against copper.
When Western nations made gold alone their currency base, the coins' gold content defined the value of their units.
That is a legal fiction, not a reality. Expressing all prices in terms of a gold only makes the gold coin unfit to measure the price of un-minted gold. A gold coin has a fixed value in terms of other countries' gold coins only quite temporarily. It has a floating value in terms of domestic goods. Domestic stuff gets cheaper or more expensive. The international relation (exchange rate) become a stress or breaking point as long as the coins remained fixed when inflation differs.
Let's set up a model of two countries, two goods, no trade (but with international investments) to show why that must fail. I'll leave it to you to relax the restraints and see how the model still fails with multiple goods and trade. I'll call the goods holes (in the ground) and gold (coins of the same weight and alloy). Country A has shovels, country B doesn't. It follows that A can produce holes in the ground more efficiently than B. In the first period, wages in A and B are the same. In the second period, workers in A demand some more gold because they produce more holes. Hole owners also profit from the extra productivity, because the wage increase is less than the productivity increase. Makes sense. However, no matter how people use the extra income, the value of gold in terms of holes in A and B will start to differ. One of the two should adjust the weight and/or alloy of its coins, or arbitragers will sell all the holes from one country and buy all the gold from the other country (depending on whether holes and gold become overvalued or undervalued.)
This is exactly what happened under the gold standard. You will find that French*, Belgian, Italian and Swiss gold coins of the Latin union is relatively expensive, while their silver (except for the 5 francs coins, that could be freely minted and melted) is relatively cheap. At the same time, British sovereigns of the period are still plentiful and half crowns and shillings are very worn or relatively expensive. Like the East Asian empires, Europe could not maintain a fixed price for gold in terms of other currencies.
Peter
* except for trade coins that didn't circulate and went by weight
