The silver standard is a monetary system in which the standard economic unit of account is a fixed weight of silver. Silver was far more widespread than gold as the monetary standard worldwide, from the Sumerians c. 3000 BC until 1873. Following the discovery in the 16th century of large deposits of silver at the Cerro Rico in Potosí, Bolivia, an international silver standard came into existence in conjunction with the Spanish pieces of eight. These silver dollar coins were an international trading currency for nearly four hundred years. The move away from the silver to the gold standard began in the 18th century when Great Britain set the gold guinea’s price in silver higher than international prices, on the recommendation of Sir Isaac Newton, thus attracting gold and putting Great Britain on a de facto gold standard. Great Britain formalised the gold standard in 1821 and introduced it to its colonies afterwards. Imperial Germany’s move to the gold standard in 1873 triggered the same move to the rest of Europe and the world for the next 35 years, leaving only China (and, until 1930, the French Indochinese piastre) on the silver standard. By 1935 China and the rest of the world abandoned the silver and gold standards, respectively, in favour of government fiat currencies pegged to the pound sterling or the U.S. dollar.
Origins The use of commodity money can be traced to the cultures of the Bronze Age c. 3300 BC, with bronze, silver, and gold being the most prominent. However, the first commodity to satisfy all the functions of money was silver under the Sumerians of Mesopotamia as early as 3100 BC. Shortly after they developed writing, c. 3300 BC, the Sumerians recorded the use of silver as the standard of value, c. 3100 to 2500 BC, along with barley. Sometime before 2500 BC, the silver shekel became their standard currency, with tablets recording the price of timber, grains, salaries, slaves, etc. in shekels. For millennia, it was also silver, not gold, which was the real basis of the domestic economies: the foundation for most money-of-account systems, for payment of wages and salaries, and most local retail trade. In 14th to 15th century England, for instance, most highly paid skilled artisans earned 6d a day (six pence, or 5.4g silver in the mid-15th century), and a whole sheep cost 12d. So even the smallest gold coin, the quarter-noble of 20d (with 1.7g fine gold), was of little use for domestic trade. Every day, economic activities were therefore conducted with silver as the standard of value and with silver serving as a medium of exchange for local, domestic, and even regional trade. Gold functioned as a medium for international trade and high-value transactions, but it generally fluctuated in price versus everyday silver money. Gold as the sole standard of value would not occur until after various developments occurring in England starting in the 18th century.
History
Ancient Greece The first metal used as a currency was silver, more than 4,000 years ago, when silver ingots were used in trade. During the heyday of the Athenian empire, the city's silver tetradrachm was the first coin to achieve "international standard" status in Mediterranean trade.
Great Britain
Great Britain's early use of the silver standard is still reflected in the name of its currency, the pound sterling, which traces its origins to the early Middle Ages, when King Offa of Mercia introduced a 'sterling' coin made by physically dividing a pound (mass) of silver in 240 parts. In practice, the weights of the coins was not consistent and 240 of them seldom added up to a full pound; there were no shilling or pound coins and the pound was used only as an accounting convenience. In 1158, King Henry II introduced the Tealby penny. English currency was almost exclusively silver until 1344, when the gold noble was put into circulation. However, silver remained the legal basis for sterling until 1816. In 1663, a new gold coinage was introduced based on the 22 carat fine guinea. Fixed in weight at 44+1⁄2 to the troy pound from 1670, this coin's value varied considerably until 1717, when it was fixed at 21 shillings (21/-, £1/1/-). However, this valuation overvalued gold relative to silver compared to other European countries. British merchants sent silver abroad in payments, while exports were paid for with gold. As a consequence, silver flowed out of the country and gold flowed in, leading to a situation where Great Britain was effectively on a gold standard. In 1816, the gold standard was adopted officially, with the silver standard reduced to 66 shillings (66/-, £3/6/-), rendering silver coins a "token" issue (i.e., not containing their value in precious metal). The economic power of Great Britain was such that its adoption of a gold standard put pressure on other countries to follow suit.
Bohemia Beginning in 1515, silver coins were minted at the silver mines at Joachimsthal - Jáchymov (St. Joachim's Valley) in Bohemia, now part of the Czech Republic. Although formally called Guldengroschen, they became known as Joachimsthaler, then shortened to thaler. The coins were widely circulated and became the model for silver thalers issued by other European countries. The word thaler became dollar in the English language.
Spanish Empire Rich deposits of silver in southern Mexico and Guatemala allowed the Spaniards to mint great quantities of silver coins. The Spanish dollar was a Spanish coin, the real de a ocho and later peso, worth eight reals (hence the nickname "pieces of eight"), which was widely circulated during the 18th century. By the American Revolution in 1775, Spanish dollars backed paper money authorized by the individual colonies and the Continental Congress. In addition to the American dollar, the 8-real coin became the basis for the Chinese yuan.
Germany After its victory in the Franco-Prussian War (1870–71), Germany extracted a huge indemnity from France of £200,000,000 in gold and used it to join Britain on a gold standard. Germany's abandonment of the silver standard put further pressure on other countries to move to the gold standard.
United States
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