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Archaic and ignored monetary technologies can be very interesting, especially when they teach us about newer attempts to update our monetary system. I recently stumbled on a neat monetary innovation from the bimetallic debate of the late 1800s, Nicholas Veeder's Republic of Eutopia coin: During the bimetallic debates of the late 1800s, one of the more interesting compromises put forward was Nicolas Veeder's cometallic standard. His model 'Republic of Eutopia' coins (1866) had a plug with 12.9 grains of gold and ring with 206¼ grains of silver. A good idea or no? pic.twitter.com/6eZN2YAq6o — JP Koning (@jp_koning) May 28, 2018 If you've read this blog for a while, you'll know that I like to talk about monetary technology. Unlike financial technology, monetary tech involves a technological or sociological upgrade to the monetary system itself. And since we are all unavoidably users of the monetary system—we all think and calculate in terms of our nations unit of ...

"America's only unwanted, unhonoured coin."  - John Willem on the silver trade dollar. The inspiration for this post comes from the old trade dollar , a U.S. silver coin that was minted in the 1870s and 1880s for the sole purpose of circulating in China. Taking the trade dollar as a model, I'm going to discuss the idea of converting the U.S. $100 bill into a trade bill ; i.e. to limit it to foreign and not domestic usage. Why bother modifying the $100 in this way? While not entirely convinced, I do lean towards Ken Rogoff's idea of getting rid of high denomination banknotes like the Canadian $100, the Swiss 1000 franc, and the Europe's €500. These bills are used primarily by criminals and tax evaders; their removal will make these activities more costly. The public's licit demand for a private means of payment  can be met by low denomination notes, as can the necessity for a convenient physical payments medium on the part of the unbanked. But as I wrote ...

Electrum coins [ source ] First proposed by economist Alfred Marshall in the late 19th century as an alternative metallic standard to the gold, silver and bimetallic standards, symmetallism was widely debated at the time but never adopted. Marshall's idea amounted to fusing together fixed quantities of silver and gold in the same coin rather than striking separate gold and/or silver coins. Symmetallism is actually one of the world's oldest monetary standards. In the seventh century B.C., the kingdom of Lydia struck the first coins out of electrum , a naturally occurring mix of gold and silver. Electrum coins are captured in the above photo. While symmetallism is an archaic concept, it has at least some relevance to today's world. Modern currencies that are pegged to the dollar (like the Hong Kong dollar) act very much like currencies on a gold standard, the dollar filling in for the role of gold. A shift from a dollar peg to one involving a basket of other currencies amoun...

1685 Guinea with the bust of James II ( link ) The guinea makes a fascinating story because its evolution reveals so many different monetary phenomena. It began its life in 1663 in the Kingdom of England as a mere coin, one medium of exchange in a whole sea of competing exchange media that included crowns, bobs, halfpennies, farthings, not to mention all the foreign coins that circulated in England, Bank of England paper notes, as well as the full range of portable property—like jewelery and art—and property-not-so-portable, say houses and land and such. If things had stayed that way, the guinea's life would be a boring one and I wouldn't be writing about it. But in the late 1600s the guinea crossed a line and became a very different thing. Rather than functioning as just one exchange medium among many, the guinea suddenly emerged as one of Britain's two media of account , the items used to define a nation's unit of account, in this case the £. Within a few decades it ...

Sir Thomas Gresham, c. 1554 by Anthonis Mor The zero-lower bound may seem like a new problem, but I'm going to argue that it's only the most recent incarnation of one of the most ancient conundrums facing monetary economists: Gresham's law. A number of radical plans to evade the zero-lower bound have emerged, including Miles Kimball's electronic money plan . When viewed with an eye to history, however, plans like Miles's are really not so radical. Rather, they are only the most recent in a long line of patches that have been devised by monetary tinkerers to spare the monetary system from Gresham-like monetary problems. Here's an old example of the problem. At the urging of Isaac Newton and John Locke, British authorities in 1696 embarked on an ambitious project to repair the nation's miserable silver coinage. This three-year effort consumed an incredible amount of time and energy. Something unexpected happened after the recoinage was complete. Almost immedi...

Shillings issued during Queen Elizabeth's reign There are plenty of rumours that Mark Carney will implement some sort of NGDP targeting regime when he arrives at Threadneedle Street. If so, this will mark the seventh medium-of-account used to define the pound sterling since the pound's establishment in the early part of the last millennium. This storied list of media-of-account includes silver, silver/gold, gold, the US dollar, the Deutsche Mark, CPI, and perhaps NGDP. First, some definitions. The pound sterling is a unit-of-account. Think of it as a word, a unit, or a brand name. The unit-of-account is generally defined in terms of some other good. This other good is called the medium-of-account. Some quantity x of the medium-of-account equals the unit-of-account. (See this older discussion of the definition of the word medium-of-account.) 1. Silver The pound's first medium-of-account was silver.  A pound sterling was defined as 5,400 grains of 92.5% fine silver. We don...

Isaac Newton, Master of the Mint Miles Kimball's proposal for subordinating paper money to electronic money sounds to me a bit like abandoning bimetallism. Beginning in 1717, Isaac Newton, Master of the Royal Mint, put England on a bimetallic standard. Under bimetallism, the pound sterling was defined as a fixed quantity of silver or gold. In other words, where before England's medium of account was a certain quantity of silver, the new medium of account was a certain quantity of both metals. The unit of account through all of this remained pounds. As the market prices of gold and silver varied due to technological advances and new discoveries, the fixed silver-to-gold ratio meant that one or the other would be undervalued relative to its actual market price. As a result, the entire nation's stock of circulating coin would either flip to gold (if gold was overvalued by the mint) or silver (if silver was overvalued). After all, why bring your silver to the Royal Mint in L...