54 pence sterling, and formed the basis for the calculation of sterling exchange in the United States until such calculations were forbidden by the law of March 3, 1873 (see Coinage Laws).

4

There are 240 pence in a pound sterling, and to make it the equivalent of $4.44 4-9 (the old method of estimating the value of a pound in dollars) the dollar must contain 54 pence. But the American monetary unit the silver dollar of the value of a "Spanish milled dollar" was worth only 51 pence sterling, and was thus 4 per cent below the standard of the ideal dollar of exchange; hence in all payments it was necessary to add 4 per cent nominal premium. This continued until 1837, when the bullion value of all American gold coins was reduced. The eagle, which under the law of 1792 was to contain 247 grains of pure gold, was reduced in value so as to contain only 232.200 grains of pure gold. (See Digest of Coinage Laws.)

But, while the monetary unit of the United States continued to be the silver dollar, both gold and silver coins were a legal tender, and the gold dollar being reduced in bullion value below the silver dollar, all debtors exercised their legal option of paying in gold instead of silver dollars. The bullion value of silver coins being greater than their legal tender value, as compared with the gold coins, the former passed out of circulation and were exported, leaving the gold coins as the principal part of the metallic currency in the United States. This was found so great an inconvenience that by the law of February 21, 1853, the silver fractional coins (but not the silver dollar) were reduced in weight, and though they were declared to be legal tender for no more than five dollars, their legal tender value was so

much greater than their bullion value that they remained in the country until the issue of legal tender paper money in 1862.

The change from an almost exclusive silver metallic currency to one of gold in 1837 was not, as is frequently supposed, the result of a demonetization of silver, but only of the exercise of the legal option of all debtors to pay debts in the cheapest one of two legal tender metals. A similar change (except that it was from gold to silver) took place in France in 1785.*

In 1857-8 a somewhat similar change was made in Austria. By an imperial decree the value of the monetary unit, the silver florin, was reduced from 48 cents. in American silver dollars to 45. Silver was established as the only legal metallic currency of the empire, though gold was also to be coined for commercial purposes.

But the American gold dollars measured by the silver dollar of exchange (54 pence) were 91 per cent below par. Hence in foreign payments it was customary to add 9 per cent nominal premium to the $4.44 4-9, which was presumed to be the equivalent of a pound sterling.

Seeing that none of our own coins nor those of other nations now in circulation agree with this standard of 4s. 6d., the query naturally arises as to how it came to be adopted. A complete answer to this requires a glance into history.

* In France a different valuation of the metals has had a different effect. Previously to the recoinage in 1785 the louis d'or was rated in the mint proportion at only 24 livres, when it was really worth 25 livres 10 sols. Those, therefore, who should have discharged the obligations they had contracted by payment of gold coin instead of silver, would plainly have lost 1 livre 10 sols on every sum of 24 livres. In consequence, very few such payments were made; gold was almost entirely banished from circulation, and silver became almost the only species of metallic money used in France. - SAY, Traité d'Economie Politique, tom. i, p. 393.

In a remote little valley in Bohemia in 1518, the Count of Schlick began to coin silver pieces of an ounce weight. These were not only of uniform weight and fineness, but they soon became very numerous. The traders of the time were in want of some international standard, fixed at least by common honesty as a measure of the value of other coins; and these coins soon became in good repute all over Europe under the names of Schlickten thalers or Joachim's thalers the first from the name of the Count of Schlick, and the second from Joachims-thal or Joachim's valley, where they were coined. These names soon became synonyms for honest coins of full weight and value, but after a time the name was abbreviated, and the word thaler (literally, in this connection, "valleyer") was combined with other words to designate the established coins of various nations, which, though not of the same weight and fineness as the Schlickten thalers, were of uniform weight and fineness. Thus originated the German thaler, the Low German dahler, the Danish and Swedish dalers, the Italian tollero, and the more widely known dollar.

When the idea of a characteristic name for honest coins crept over into Britain it found a word there already coined for its adoption, viz.: the word “dollar,” from the Gaelic dol, a valley, and ard, a hill, signifying in a valley shut in by hills, and there is yet in Scotland, near Clackmanan, a little valley parish and a village called Dollar.

Although there were no coins minted in England called dollars, there were many foreign coins of different values, from the various national mints of Europe, circulating there under the common name of dollars. Shakspeare uses the word twice (once in Measure for

Measure and once in Macbeth), and there is plenty of evidence that the term "dollars," as applied to coins, was in common use there previous to 1600. Some common measure or standard for these dollars was necessary as a matter of convenience, and Spain being then the leading country of Europe, her piasters of eight reals called also "pieces of eight' - being in more general use than any other foreign coins, were adopted as the standard dollar. But previous to this, in 1519, when Charles V, king of Spain, became also emperor of Germany, he had adopted a new coat of imperial arms, in which those of Spain were quartered with those of the empire, and had stamped this new device on the coinage of Spain, the pillars in the device giving rise to the name of "pillar dollars"- this particular coin being then known in Spain as colonato. These dollars were from the mint of Seville, and in the table of "silver coins of the world," made by Sir Isaac Newton when assayer to the British mint, are set down at the exact value of 54 pence. This and the old French ecu, of about the same date, are the only coins of that exact value in the whole table. Thus that which was known in England as a dollar, and as our dollar of exchange, is the adaptation of an idea of German origin to a Gaelic word and a Spanish coin.

The dollar of 54 pence is an instance of that ideal money, or money of exchange, which has no existence in fact, but is used in calculating nearly all international exchanges. With many nations, as with our own, it differs from the money used in domestic accounts, and

*

* Professor Sumner, in his History of American Currency (page 103), is mistaken in saying: “It is not known how this ratio ($4.44.44 to the £1) was determined." It is very plain that it was determined as I have described above.

almost universally differs from the coins in use. Coins being national, and in a great measure local, are subject to alterations and debasements by governments; but moneys of exchange, though rarely established by design, become widely established by the mutual consent of nations for convenience, and are in a measure beyond the reach of legislation. While we, through English custom, had taken our ideal dollar from the Spanish dollar of Charles V, custom has established in Spain itself a different ideal dollar. The "peso duro," or "hard dollar," was once a Spanish coin of eight reals, but was afterward altered to a greater value of ten reals. The first coinage of the "hard dollar," however, had been accepted by other nations as the standard of exchange with Spain, and though the value of the coin was altered so that eight hard dollars were worth ten and five-eighths dollars of exchange, the ideal dollar remained unchanged.

The ideal unit of values in the United States until 1873 was a dollar of 51 pence, and the ideal dollar of exchange adopted in London was 54 pence. Our coinage never agreed with either of these values. But in 1816 a new monetary system was adopted in Great Britain, and it was enacted that gold coins only should be legal tender in all payments, and that silver coins. should be legal tender for only 40s. The original pound of silver which previous to 1816 was coined into 62 shillings was then coined into 66 shillings, and the

* From 1664 down to 1717 the relation of gold to silver was not fixed by authority, and silver being then the only legal tender, the value of gold coins fluctuated according to the fluctuations in the relative worth of the metals in the market. In 1717 the ancient practice was again reverted to, and it was fixed that the guinea should be taken as the equivalent of 21 shillings, and conversely. --Mc Culloch's Commercial Dictionary, page 352.