History of the International Monetary System

Robert Mundell

“The earliest function of coinage was profit. Accepted at face value as if they had a high gold content, the Lydian staters started out with a high proportion of gold but got progressively smaller, increasing the markup and the revenue for the fiscal authorities.”Robert Mundell

We mustn’t be misled by the textbook fiction that coins were first struck to guarantee the weight, and therefore the value, of the earliest coins. There is no point stamping the weight on a lump of electrum metal if the fineness of the alloy is neither known nor constant; in fact the electrum coins from the early hoards varied widely in fineness.

The earliest coins were not the natural electrum found in the beds of the Patroclus River near Sardis, but artificial electrum made by a metallurgical technique that had been pioneered by the Egyptians over a thousand years earlier and which was well known to such monarchs of the Mernmad line like Gyges, Alyattes and Croesus. The conventional wisdom that these Oriental despots stamped the coins to confirm their weight and thus provide a convenience for their subjects, is sheer nonsense. The stamp meant that the coins passed ad talum–by their face value–equal to 1/3 of a stater (the word meant “standard”).

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