Coins vs tokens

[bgriff99]

We are making some circular arguments.   "Fiduciary" = a promise taken as obligation.   The fiduciary value of a 1575 Mexico 4 reales was that it, and all its brethren and those to come were in fact .931 fine silver.    That got them into East Asia, but once passed from European to Chinese, into the melting pot they went, to be adulterated with alloy.   They circulated as intrinsic metal.   What was not accepted was any kind of subsidiary, token, or other fiduciary device from the King of Spain. 

Fast forward to the US in the 1830's, where all Spanish silver was legal tender.   Worn pieces of eight bought at discount could be exchanged at par with newly minted US gold coin.   That was a poorly thought out promise soon to be corrected.

US copper was by law explicitly a token coinage at first.   Hard to believe, but cents, half cents, and the nickel coinages were only legal tender up to ten times face value until 1873.    US silver however was always fully convertible into gold (except the trade dollar).   So that beggars the definition of "token" to call US subsidiary silver coins tokens, until perhaps the end of the species gold standard was looming, with their fiduciary promise about to be reneged on.

[EWC]

We are making some circular arguments.   "Fiduciary" = a promise taken as obligation.   The fiduciary value of a 1575 Mexico 4 reales was that it, and all its brethren and those to come were in fact .931 fine silver.    That got them into East Asia, but once passed from European to Chinese, into the melting pot they went, to be adulterated with alloy.   They circulated as intrinsic metal.   What was not accepted was any kind of subsidiary, token, or other fiduciary device from the King of Spain. 

Where to begin?

Since clay tokens apparently symbolising quantities of grain, cattle etc are about 10,000 years old, and the oldest pair of scales I know of are less than 6,000 year sold – the evidence suggests that creditory instruments might well pre-date metallic payments.  Since writing is only 5,000 years old, we are stuck at guessing on that matter.

What we can say with some certainty is the sort of fiat coinage system adopted world-wide in the 20th century (and the UK specifically in 1947), was basically the same as that launched in China by Wang Mang c. 14-23 AD.  Fourth century Roman copper is surely best explained as fiat also? 

Spain had a vast circulating fiat copper currency in the 17th century.  Unlike early medieval Bokhara however, Spain was repeatedly devaluing it, so no sensible person outside Spain would hold it.  Anyhow, since China had been issuing fiat money of its own, on and off, for more than two thousand years, its hard to see why they would want it from Spain anyhow?

They circulated as intrinsic metal

 

The crucial fact about the silver scycee issued under the single whip taxation system in China was the rate at which it was accepted in payment of taxes by local magistrates.  Notional “melting charges” of between 10% and 50% were applied – meaning that the claim they circulated as "intrinsic metal" is false.  At the crucial juncture in their circulation, payment of taxes, they passed at up to 50% below intrinsic. 

That is surely why silver coin issue was so retarded in China - till around 1900?  Why settle for maybe 6% every 50 years seigniorage on coins, when you can take 10% to 50% - every year!!! - on what you very misleadingly call “intrinsic metal” circulation.

[bgriff99]

Where to begin?

Since clay tokens apparently symbolising quantities of grain, cattle etc are about 10,000 years old, and the oldest pair of scales I know of are less than 6,000 year sold – the evidence suggests that creditory instruments might well pre-date metallic payments.  Since writing is only 5,000 years old, we are stuck at guessing on that matter.

What we can say with some certainty is the sort of fiat coinage system adopted world-wide in the 20th century (and the UK specifically in 1947), was basically the same as that launched in China by Wang Mang c. 14-23 AD.  Fourth century Roman copper is surely best explained as fiat also? 

Spain had a vast circulating fiat copper currency in the 17th century.  Unlike early medieval Bokhara however, Spain was repeatedly devaluing it, so no sensible person outside Spain would hold it.  Anyhow, since China had been issuing fiat money of its own, on and off, for more than two thousand years, its hard to see why they would want it from Spain anyhow?
 

The crucial fact about the silver scycee issued under the single whip taxation system in China was the rate at which it was accepted in payment of taxes by local magistrates.  Notional “melting charges” of between 10% and 50% were applied – meaning that the claim they circulated as "intrinsic metal" is false.  At the crucial juncture in their circulation, payment of taxes, they passed at up to 50% below intrinsic. 

That is surely why silver coin issue was so retarded in China - till around 1900?  Why settle for maybe 6% every 50 years seigniorage on coins, when you can take 10% to 50% - every year!!! - on what you very misleadingly call “intrinsic metal” circulation.

Clay counters were just that, not money or promissory units.   Wang Mang's coinage failed.   Cash coins are not fiat money.   Did you think copper was free?
You have equated sycee with pieces of 4 reales.   Silver was customarily fraudulent in China, to the extent requiring exactly the measures you list for redeeming it.   The original Mexican silver coins were both good silver and of such detailed striking that they could be accepted with just a check on the scales.    The reasons for China's not striking silver are long and involved.   Not least is custom and their conservative adherence to past practice.

[bgriff99]

Gaspar da Cruz, Portuguese missionary writing in 1569 (trans.):

"And because the common that goeth instead of money is silver by weight, every one hath scales of his own.   For each one laboreth by all means he can to deceive the other, so none do trust the weights and scales of the other.   They carry silver commonly full of alloy, and because they increase it with alloy, from hence it cometh that he who will make good market in the country of China... carrieth silver rather than goods.   The merchants are commonly false and liars, and labour as much as they can to have hidden defects in their wares."

At this point in time China was just beginning to re-establish a cash coinage, after a 130 year lapse.   The government would have found any attempt to coin silver, using the technology they had, undermined far worse by counterfeiting than anything ever sustained for their cash coins.    Sycee suffered the same problem.   Spanish money came at an opportune time, the beginning of a trade boom which forced China to make its domestic money better, and also start their own trade coinage.   Although it was inferior to the domestic cash, they received an enormous return on it, for a short time.   

[EWC]

Peter

I would put that slightly differently. It assumes that there is not enough foreign trade and international investment to create forces larger than government control. As you note, that situation may occur in ancient times, but it would be the exception, not the rule and it may have dire consequences as trade increases.

I broadly agree, but with some caveats.  Its not clear to me that someone like Darius would  necessarily be bothered about international trade.  Medieval Kashmir seems to have sealed its borders against all foreigners at some periods (Alberuni mentions this)  Lord Shang in ancient China seems to have wanted to suppress even internal trade – as of course did Pol Pot etc

Can you enlighten me on pipe rolls? I only know pipe heads and strongly suspect they are not the same.

These are English royal medieval records – held on long rolls of parchment

Going by memory now ... Surat was for long a special place. Foreigners were OBLIGED to take all their silver and gold there to be re-minted
 

Prakash argued that the additional  illicit imposts at Surat led European merchants to set up their factories in the south – beyond Moghul reach – where they could get better deals with other rulers on their bullion.  What I can find little on is the versions of old Gujarat half tankas struck at Kutch etc– the mahmudi’s.  By weight Akbar’s tola was about 12 grams – his rupee struck at 23/24 of that.  The mahmudi’s were initially struck at close to 2/5 of 12 grams – c. 4.8g.  Thus 5 Mahmudi’s would pay 2 tolas, seigniorage free.  There are hints that something like this went on beyond Surat – but I never got to the bottom of it.

[EWC]

bgriff99

Clay counters were just that, not money or promissory units.

You know this?  How? 

Wang Mang's coinage failed. 

Surely it was Wang Mang’s regime that failed - because his head was cut off? 

Cash coins are not fiat money.

Some obviously were fiat, some were not

Did you think copper was free?

Its at this point I start to wonder how fair minded you are willing to be

Silver was customarily fraudulent in China, to the extent requiring exactly the measures you list for redeeming it.   

Seems to be completely wrong.  A small customary charge in the 17th century was greatly inflated in the 18th century – giving an income stream to the local magistrate, which had nothing in reality to do with the silver purity.  Very often the silver was not even remelted.  A great deal is known about this due to Yung Chen’s intended reform of the melting charge, (huo-hao) -  to regularise a previously corrupt income stream - got by levying a large customary fee - and make it instead into a legal and very substantial tax raising measure.  That’s the account published by Zelin, (Magistrate’s Tael) and the account preferred at the British Museum. 

I looked into the matter in detail after I crossed paths with a chap with a Princeton background back in 1990 who made points very similar to the ones you are making here, in a very similar and I am afraid unacceptably dictatorial manner. 

Please - what study are you relying upon? 

[bagerap]

This thread is outside my normal sphere of interest or understanding, but I am enjoying it enormously.     

[bgriff99]

I'm having trouble getting anything to post, so will dispense with pasting specific quotes.   

Clay counters 10 thousand years ago is irrelevant.   If by that you mean credit existed, yes.   In China, fragmentary evidence of deer parchment financial instruments as far back as 2000 BC.   In the Sung Dynasty, a full gamut of mulberry paper devices from paychecks to currency notes to long term bonds.   All backed by cash coins in the most flush treasury China ever maintained.   Iron coins especially were transferred as notes.   It worked for a relatively long time, 80 or a hundred years.   But invasion caused the government to incrementally spend off the coin backing the paper, with the usual results.   For a time, between full remittance status, and no remittance, yes by definition there was some fiat money printed.   But not sustainable in the sense it sort of is (or maybe not) today.

[bgriff99]

Regarding fraudulent silver, the cash coin-less economy of 1500-1575 was not the norm, and not repeated.   Larger sycee were the parallel of gold coins in Medieval Europe:  changing hands infrequently and then only between the wealthy or financial institutions.   With silver of indefinite fineness, by weight, replacing cash completely, it meant not just tenths of taels, but hundredths and even thousandths.   It was easy to make fake large sycee but difficult and dangerous to pass them.   Not so the tiny bits of silver used in everyday transactions for food and such.    But still, nominal charges would have been applied in larger transactions to verify the silver was good.

It was exactly in this period that Spanish silver appeared, to purchase goods like silk, porcelain, spices, and gold.    So it was in high demand in an expanding economy which produced negligible silver of its own.    Pieces of 4, and then 8, were valued as intrinsic metal on a supply and demand basis.   They carried no other exchange value over from Mexico, let alone Spain.

[bgriff99]

Regarding cash coins themselves as fiat money, yes there were endless attempts to overvalue some against others.   Inevitably such pieces were simply discounted in actual use down to what their metal content dictated.    You argue that the attempt equates to modern fiat money.   I argue the discount back to intrinsic indicates that did not happen except at the margins where exact measurements were not practical.   And forgers were almost always busy working any possible discrepancy, removing outright anything undervalued against anything else.

All of this amounts to an evolutionary process for the nature of money.   Its same features repeat throughout the world and all history.

[Figleaf]

This thread is outside my normal sphere of interest or understanding, but I am enjoying it enormously.     

Quite so, but let's be clear about the absence of hard evidence either way, because there are no written sources or eye witnesses. There are cuneiform script financial documents. They are not the equivalent of banknotes, but of cheques or even bills of loading. There are money orders signed by early medieval Venetian merchants looking like crossed cheques. There are requests for payments in non-existing coins addressed to the Amsterdam exchange bank looking like bearer checks. It is clear that credit existed for very long, but at what point does it turn into currency?

I thought at some point that we could learn something from Australia as a penal colony. Here, there was no money at all. Left to their own devices, the convicts traded in all sorts of goods, finally settling on whiskey. You can argue that all of the goods traded in were "full value". Credit did not exist. However, the argument falls on its face when you look at the detail. Boat builders were paid in advance (so they were drunk when they built the boats) and wives sold were presumably of less value to the seller than to the buyer. Nothing is ever simple. (And Wang Mang's currency failed even before he got sliced up.)

An evolutionary approach of money and banking sounds right to me. The two were not invented some cool morning by a Greek or Chinese royal playing with his signet ring and some clay. They came about by a long and tortuous process, with false starts, dead ends, trials and errors.

Peter

[EWC]

bgriff99

Can I  take it you are now retracting your previous claims about the melting charge?

I really would like to finalise that matter before moving on to other suggestions pulled out of thin air - such as:

Regarding cash coins themselves as fiat money, yes there were endless attempts to overvalue some against others.   Inevitably such pieces were simply discounted in actual use down to what their metal content dictated.

[EWC]

Peter

(And Wang Mang's currency failed even before he got sliced up.)

Not sure that is true - but the key point seems to me that there is nothing inherent on Mang's currency, nor his understanding of economic matters, that caused his currency to fail, that I can see. 

Rather his regime failed militarily, against those who opposed his whole suite of reforms (abolition of slave markets, freer access to land, income tax  etc). 

The resemblance between his policies and those applied by 20th century administrations seems to me remarkable

[Figleaf]

Quote from Peng Xinwei's A Monetary History of China, volume I, 119:

The strangest of Wang Mang's monetary reforms (number 2 of five) was introduced in jianguo 2 (10 AD). This was the Treasury-money system. It comprised five monetary substances, divided into six types and twenty-eight items. The five substances were gold, silver, copper, tortoise and cowry.  The six types and twenty-eight items were Spring-money (six items), Cowry-money (five items), Spade money (ten items), Tortoise treasure (four items), Silver-money (two items) and gold. Are you still reading? Peng speculates that only spade and spring coins circulated, but each of the ten spade coins differed in weight by only one grain from the previous and next one and most people were illiterate. In addition, they use hallmark, rather than official characters for the numbers. That doesn't sound like a grasp of economics or finance to me.

Peng (121) concludes: Though Wang Mang's monetary system failed and was only in use for an extremely short period, his legislation has had a great influence on later ages. Doesn't sound like a thumping success story.

Wiki says: Wang died in the battle at the palace (by Du Wu (杜吳)), as did his daughter Princess Huanghuang (the former empress of Han). After Wang died, the crowd fought over the right to have the credit for having killed Wang, and tens of soldiers died in the ensuing fight. Wang's body was cut into pieces, and his head was delivered to the provisional Han capital Wancheng, to be hung on the city wall. However, the angry people took it off the wall and kicked it around, and someone cut his tongue off. It doesn't sound like he was very popular.

I see Wang as an early example for Nicolae Ceaușescu: a useful person with good ideas who, with time, turned out to be a crackpot dictator and a danger to everyone around him. He wasn't a romantic "first socialist", but rather a bizarre antihero, immersed in administrative tradition and detached from reality by the time he died.

Peter

[bgriff99]

bgriff99

Can I  take it you are now retracting your previous claims about the melting charge?

I really would like to finalise that matter before moving on to other suggestions pulled out of thin air - such as:

YOU made the statements about melting charges, not me.  You cited a reference.   I know little about sycee, and merely agreed with what appears to answer a question about them I have always wondered about but never seen discussed.   By extension, historians usually refer to "silver" being passed around in China as if it was under some kind of control of fineness.    My knowledge of that only begins when pieces of eight started to become current.   There would have to be a story about silver almost as complex as that of cash usage.

It's time for me to call you out as a blatant sophist, not even using it to make any point, but just for your own enjoyment of jousting.   Thus we have jousted our way far off the original question of what sort of silver currency ought to be called a token.