A form of currency that utilizes the minting of metals such as gold and silver used as a medium of exchange.
Before the use of coinage, people conducted trade on a barter basis. Barter was often difficult and restricted the development of trade because what one person had to exchange for an item produced by another individual was not always desired by the trading partner nor were values uniform. By the reign of Gyges, the Lydians had, according to the ancient historian Herodotus, become the first people to strike coins from gold and silver. The Greeks would later strike coins using an alloy of gold or silver with other base metals. Since the appearance of the coin does not change with the addition of these alloys, governments searched for a way to ensure the value of the metal. Mints were commissioned that stamped the coins with the heads of rulers or other marks that guaranteed the purity of the coins. During ancient times, the ratio of value between gold and silver coins was 13.3 to 1 and mixed metal (electrum) was valued at 10 to 1. The concept of coinage quickly spread to the Greek mainland, where master artisans struck real-life images of Greek gods on their coins. Alexander the Great spread the usage of coins through his empire in the fourth century B.C.E. The use of coinage facilitated trade within his empire. Goods could be easily exchanged at a uniform rate from regions as remote as the borders of India all the way to Egypt and Greece.
The Romans continued the use of coinage, often minting the heads of emperors or important events or places such as the Circus Maximus on the reverse side of the coin. The history of these Mediterranean empires was documented through these coins, including some rulers who remained relatively unknown except for their portraits on the coins. During medieval times, the portraits were changed to include Christ and the saints instead of rulers. Coinage remained limited in Europe because of the scarcity of gold and silver.
Where gold and silver was not readily available, coins did not exist. In Africa, the use of cowry shells substituted for coins. Furs were used as a medium of exchange in Russia and would often be cut in half or quarters to provide an equal exchange of value for other goods.
The discovery of large quantities of gold and silver in the Americas after their discovery in 1492 led to the extensive minting of coins in Spain during the sixteenth and seventeenth centuries. The unregulated use of coinage created inflation in Spain, and its rulers spent lavish amounts of money on wars throughout continental Europe. England and France benefited from Spain’s spending and were able to increase the amount of valuable specie in their own royal treasuries.
As the British expanded their empire to the New World, the country did not have enough gold and silver to accommodate the increase in trade. Instead, the British colonies were forced to rely on barter trade or the use of cash crops such as tobacco. After the United States gained its independence, the government under the Constitution established the U.S. Mint, which melted down the coins of other countries to produce its own coins. In the late nineteenth century, a major political struggle emerged in the United States between advocates of gold and silver coinage, the former supported by anti-inflation creditor interests and the latter by pro-inflation debtor interests. With gold in short supply, gold-backed coinage made money expensive, hence making it more expensive to pay back loans. With the decisive victory of “gold bug” Republican candidate William McKinley in the 1896 presidential election, the debate was largely settled along pro-creditor lines.
Today, most countries around the world rely on currency and coinage to conduct trade. The use of coinage has increased the ease and volume of trade on a worldwide basis. Since coinage continually circulates, it creates a multiplying effect that allows for the further expansion of transactions between individuals.
Cynthia Clark Northrup
See also: British Empire; Cowries; Fur; Greek City-States; Roman Empire; United States.
Schaps, David M. The Invention of Coinage and the Monetization of Ancient Greece. Ann Arbor: University of Michigan Press, 2003.
Vagi, David L. Coinage and History of the Roman Empire, c. 82 B.C.–A.D. 480. Chicago: Fitzroy Dearborn, 2000.