The Legal Tender Blog: Money in history

Bermuda - the monetary pioneer (September 29, 2023)

Nothing new under the sun.

Bermuda's first-ever asset, 410 years ago, also combined high value with stench. 

It was ambergris, a sperm-whale excrement used in perfumes. 

Politicians and money (September 28, 2023)

The story of Senator Menendez's bribed wife reminds me of my bewildered neighbors who saw the wife of an Israeli member of parliament regularly walking down the street, looking for something and yelling "money! money! money!" 

True story.

She did this because of monetary history.

That woman's dog often escaped home to wander in the streets. Upon finding out she would go outside and seek him.

His gray color had reminded her of silver, so she named him "kesef" ("silver" in Hebrew).

That turned out to be a problem. 

Because silver was the main Biblical money, "kesef" is also the only Hebrew word for "money."

Today when Israelis say "kesef", in 99.99% of cases they mean money, not silver.

Hence the scene of a politician's oblivious wife seemingly yelling in public "money! money! money!" 

Bucket money (September 24, 2023)

In 1687, the town of Hingham, Massachusetts, paid its taxes to the government in "milk pails," say the records. Empty ones, presumably. Because there weren't enough coins around.

This was long before the town became known as Bucket Town.

Porcelain is named after pork! A monetary explanation (September 5, 2023)

Why is the beautiful porcelain named after the filthy pig (pork)? 

There is a monetary answer!

And it's not appropriate for children.

The cowrie shell was Africa's favorite money so scientists named it Monetaria moneta. 

But Italian sailors called it porcellana ("female pig") because they thought it looked like female pig genitalia.

Later, French people who saw the best Chinese pottery thought it was as hard and shiny as those seashells. So they named the pottery after the seashells' Italian name: Porcelaine.

Reference: Any etymological dictionary. 

Money = reputation = propaganda (July 26, 2023)

The Hebrew word for "reputation" is MONITIN (מוניטין), derived from the Latin MONETA. 

Because in Roman times one got most famous only if money was issued with his name and portait (i.e., a king or emperor). In the same spirit, Jewish coins spread the "reputation" of ongoing rebellions against Rome. Twice.

And now something similar happens in Ukraine. 

The Continental dollar: A new book (July 6, 2023)

The recently celebrated US independence was paid for with blood, sweat, tears - and paper money. 

The continental dollar, named so because issued by the Continental Congress, lost almost all its value so that Americans could live by their values. 

Farley Grubb's book about it is published today by the University of Chicago Press. 

Why Bretton Woods? (July 1, 2023)

On this day in 1944 the Bretton Woods Conference began in New Hampshire. 

Why there? Why not in New York or DC?

Apparently because it was July. 

Treasury Secretary Henry Morgenthau hated the sweaty DC summer. 

Enjoy your AC today. 

Money and the Secret Service (April 14, 2023)

On the same day he was shot, on this day in 1865, Lincoln authorized the creation of the Secret Service to protect ... paper money.

Both sides in the Civil War printed lots of paper money to pay for the war. Due to much counterfeiting, a new bureau was thus formed in the US Treasury.

The Secret Service became responsible for the president's safety only after two more assassinations within less than 40 years. It was moved out of the Treasury into the new Department of Homeland Security only after the terrorist attacks of 2001. 

Pocahontas for copper (April 5, 2023)

On this day in 1614 the prisoner of war Pocahontas married John Rolfe. The English had captured her by bribing with a copper pot a chief that she visited. 

Why copper? Because the top money for Virginia's Indians was not seashells but copper. It was their equivalent to gold, tells us John Smith.

A painting made a few years later describes the event: 

John Law (March 21, 2023)

John Law, a chief paper money abuser (1716-1720), died on this day in 1729.

The next paper money inflation in France had to await the death of all witnesses: The French Revolution.

Presidents' monetary traumas (March 1, 2023)

Presidents' early personal traumas affected their monetary views:

• Harry Truman, son of a failed grain speculator, blamed inflation in 1947 on grain speculators. 

• Andrew Jackson killed the second Bank of the United States partly because he had once sold property for a bad promissory note.

I learned it in the Winter 2023 edition of the Financial History magazine, published by the Museum of American Finance. 

Presidents’ Day special (February 20, 2023)

During 24 of the past 100 years the President of the United States was a descendant of Massachusetts councilor Elisha Hutchinson, who led the issue of the first modern currency in 1690.

Who were these presidents? And which president's monetary policy closely resembled Hutchinson's?

See my short video here.

Beaver money (January 29, 2023)

The beaver fur was a key official currency in the earliest days of Canada and Massachusetts. 

And the original economic basis for these colonies as well as Plymouth and Nieuw Nederland (aka New York).

Learn more about American beavers here: 

The one-in-a-trillion coin find (January 28, 2023):

Francis Drake landed near present-day San Francisco Bay in 1579. He claimed the land as Nova Albion for Queen Elizabeth, posted a sixpence coin for her portrait, and left. 

Such a coin was found nearby in the 1970s.

Drake died on this day in 1596.

Massachusetts legal tender bills and a famous Bostonian (January 17, 2023)

Boston, 1716, in my imagination:

10-year-old Benjamin: Father, what backs our paper money if not coins?

Josiah Franklin: Taxes.

Benjamin: What?!

Josiah: Son, nothing is certain except death and taxes.

Happy birthday to the lifelong printer, promoter and theorist of paper money. 

I Have a (financial) Dream (January 16, 2023)

When a preacher gives the most important and prophetic speech of the 20th century, what would you LEAST expect to find there?

I'd say a detailed financial allegory.

But it's there, as shown below (full text).

Only in America.

Happy MLK Day. 

Jewish coins and sovereignty (January 10, 2023)

So another coin from the Bar Kochba Revolt of 133 AD was found in the Judean Desert.

One of the first coins of modern Israel, minted in 1949 near the end of the War of Independence, replicated this type of coin in honor of that previous Jewish war of independence. 

England's great debt default of 1672 - and the bank of England (January 2, 2023)

On this day in 1672 King Charles II of the House of Stuart (meaning ‘steward’ in Scots) proved he was no steward of public funds. The profligate king of 14 mistresses ordered suspension of payments of silver coins from his Exchequer to his creditors. This order became known as The Stop of the Excehquer.

Historians debate how much this default ruined London’s private goldsmith-bankers who were the largest creditors. It certainly was a reason for changing the rules as part of the 1688-1689 Glorious Revolution. Under the new rules of the game, with Parliament’s oversight on tax funds and their use, in 1694 a new private company borrowed money from the public in a much more secure way. The money financed a war with France, and the company was called the Bank of England.

Elizabeth Warren attacks Wells Fargo (December 21, 2022) 

It runs in the family. 

Money and slavery (November 30, 2022)

The Republic of Barbados was born one year ago. It used to be a monarchy, with the British monarch "serving" as Barbados's monarch as well.

Barbados began in the 17th century as a slave colony, an English-run hell. Slaves did not earn money as wages. Their only relation to money was that they were sold for it. Money among Barbadian enslavers was the main product of the island - tobacco at first, then cotton, and finally sugar. It was whatever was the dominant crop at any point. Such was the situation in most English colonies in America.

Barbados's independence was announced on Churchill's birthday. It is odd because my book has this line: 

"Horses in Barbados operated mills that squeezed sugarcane, extracting the sweet juice and leaving out the slaves’ blood, sweat, and tears." 

Below is a horrifying part of a 1657 English map of Barbados, showing an area in which it was apparent routine to hunt runaway slaves:

For Native American Heritage Month: How wampum influenced modern money (November 20, 2022)

Facing a coin shortage, Massachusetts made these seashell beads legal tender in 1637. Although it was money and jewelry to Natives, to Puritans it had zero intrinsic value, just like ... a small piece of paper. 

For the first time Europeans used money which was (to them!) intrinsically useless, and legally supported only by a legal tender law (although they could also expect Natives to sell them goods for wampum). 

In 1690 they would do this with paper - and invent modern currency. 

The presumed inventor of modern currency (November 15, 2022)

On this day in 1641, the most influential American colonist you never heard of was born: Elisha Hutchinson.

Descended from royalty (Edward I) and an ancestor of three US presidents (FDR, Bush, Bush), in 1690 Massachusetts he led the first-ever use of modern currency (legal tender paper, unbacked by metal). 

Below is his presumed portrait, with his signature leading the paper money committee.

The early modern period (October 12, 2022)

The early modern period began on this day in 1492 as an excited Columbus stepped on the sand of a Caribbean island and ended when an excited mob stepped on the guards of the Bastille.

The name of the period reflects well its position between old and new. As is well known, medieval dictatorship and religious fanaticism started giving way to modern democracy, science, and tolerance.

Another, less famous transition was from gold and silver coins to paper money. From semi-mythological reports such as Marco Polo’s, paper money became a fact of life for an increasing number of European countries during the early modern period. For the Americans who rebelled against the British at the end of that period, financing their army with paper money was a trivial choice after decades of experience with that “wonderful machine” as Benjamin Franklin called it in 1779. Franklin himself, a printer by profession, started printing paper money for various colonies in the 1720s, and below is one example:

Playing cards money (September 5, 2022)

Were Canadian playing cards the first paper money in North America? The order for redeeming the first batch was given on this day in 1685.

Hotly debated between Canadians and United Statesians for more than a century, on the question of whether it was real money or not, card money will finally get impartial analysis.

-Was it genuine money, and thus 5 years ahead of any paper money in English North America? Yes. Applying all standard tests, it was designed and functioned as money.

- Was it original? No. Such paper money, forced under penalty and convertible to coin after the emergency, had long been known in Europe, part of the "siege money" phenomenon.

- Global historical significance: Bringing the European idea of paper siege money to the doorstep of 1690 Massachusetts. Under different circumstances, Massachusetts paper money (issued to pay for a war with ... Canada) was only legal tender for taxes, and it was that new idea that eventually spread throughout the world.

The full story is in my book .

OK, so it's not as important as resolving the Oregon Territory Dispute, but as an objective extra-hemispheric scholar, I'm happy to resolve this Canada-US controversy. You are welcome.

Playing cards were used to pay soldiers when the government ran out of precious metal coins. Anticipating a shipment of coins from France, the government obtained cards and turned them into currency with writings, signatures, and stamps. Everyone was forced to accept this currency, and redemption in coin was promised. When the coins arrived, the government gave all card holders eight days to redeem them. The issue of card money continued intermittently until the British occupation of Canada eight decades later. Among the British civilians tasked with terminating the cards was an unemployed philosopher called David Hume.

Below is a 20th century reconstruction made at the Bank of Canada:

Bank of Israel - Visitors Center and black market temple (August 14-17, 2022)

First day after summer camp: took my eldest daughter to learn monetary history at the Bank of Israel's Visitors Center.

It is located at the Tel Aviv branch, which is itself one of the most significant and infamous places in Israeli economic and monetary history. Every kid knew that "black dollars" were illegally exchanged "at Lilienbloom St." - on this corner of the central bank's branch, out of the reach of foreign exchange controls. Until the late 1990s, this spot for money changers was the temple of Israel's underground economy. 

Yap stone money and bitcoin (August 8, 2022)

How I almost saved the world from bitcoin.

True story.

If only people had read my 2005 article that busted the myth of the stone money of Yap, this messy bubble might have been avoided.

The idea of bitcoin apparently contradicts both common sense and monetary history.

The idea is that an intrinsically useless, unbacked, inconvertible, not legally endorsed, private object could be currency.

But no precedents, you say? Really? Ever heard of the stone money of Yap (rai stones), cited by Milton Friedman, Greg Mankiw, and others?

This argument has been a classic among bitcoin enthusiasts.

As I proved in a 2005 article the stones had esthetic value and religious value, they were legal tender for taxes, and their use on special occasions was mandatory.

It was Yap's version of gold coins.

Myth – busted.

World – ignoring; then punished by bitcoin...

Yiddish on money (July 26, 2022)

Yiddish on a state’s paper money.

Where and when?

Sometime between Khmelnytsky and Zelenskyy.

Details here

The Continental dollar anniversary (June 23, 2022)

As US inflation rocks the world, I mark the anniversary of the first time that American money printing made international headlines:

On June 22-23, 1775, the continental dollar was born, to pay for American independence.

It was the stamp heard round the world.