Monday, August 8, 2016

Pieces of Eight

One of the most famous phrases in pirate lore, the term “pieces of eight” is the phrase uttered by Long John Silver’s parrot, the first real proof that Silver is really a pirate. But the coin is not only piratical, it is the basis of the American dollar, the Canadian dollar, the Japanese yen and the Chinese yuan. It was the first “world currency” starting in the late 18th century. It’s definitely the most famous Spanish coin.

Although Spanish gold is a byword for the riches of the Caribbean, Spain was also looting the Americas of vast quantities of silver. While much gold was found already refined and in use by the natives, silver was mined by the conquerors. In 1554 a Spanish merchant named Bartolomé de Medina developed a method of refining low-quality silver ore using mercury and sea brine.

An 8 Reales piece minted in Mexico in 1650

The concept of a large silver coin with high purity (sometimes known as "specie" coinage) had become popular throughout Europe. In the 16th century, Count Hieronymus Schlick of Bohemia had begun minting coins known as Joachimsthalers (from German thal, or valley), named for the areas where the silver was produced. Joachimstaler was later shortened to taler.

The first thaler from 1525

So successful were these coins that similar thalers were minted in Burgundy and France. After 1575, the Dutch used currency with a daalder depicting a lion, hence its Dutch name leeuwendaalder. (Many traders did not think the picture of the lion was very good, and traders, especially in the Caribbean, gave the coin the name “dog dollar.”)

Specifically to facilitate export trade, the leeuwendaalder was lighter than the large denomination coins then in circulation. Thus, it became the coin of choice for foreign trade. Dutch traders were traveling all over the world, and the coin became popular in the Middle East, and colonies in the east and west.

Money in Spain was based on a system of reales (pronounced re-al-es’).  Spain was commonly using an 8-real coin of very high quality in 1497. In 1537 the Spanish escudo gold coin was introduced, which was worth 16 reales. The later Gold Doubloon was worth 32 reales or 2 escudos. It is this divisibility into 8 which caused the silver coins to be named "pieces of eight".

Since the leeuwendaalder and the 8-reales piece were of very similar size, purity and value, they began to be commonly referred to by the same name. “Dallder” was easier to say than “8 reales piece” so it became the more common term. English voices quickly slurred “dallder” into “dollar”

Legend has it that the Spanish coin’s markings made it easy to cut into 8 pieces in order to make change during a purchase. The coin wasn’t planned like this, but coinage in the New World was in a state of chaos for a long time. Coinage was scarce, people were poor, and defacing money wasn’t a crime. It’s likely that coins were cut up in some establishments and by some individuals.

This leads us to the common breakdowns of the dollar value – half dollar (coin cut in half), ¼ or one quarter dollar, usually called just a quarter (half a dollar cut in half again, or four pieces), and the “bit” which was half of a quarter.

The word “bit” is no longer used in used in the US, but it survives in the old song, “Shave and a haircut, two bits.”  One programmer friend of mine wonders of the “bit” coinage was the inspiration of the term “bit” in computer programming, since it was the smallest piece into which a coin would be cut.

Thanks to the vast silver deposits that were found in Mexico (for example, at Taxco and Zacatecas) and Potosí in modern-day Bolivia, and to silver from Spain's possessions throughout the Americas, mints in Mexico and Peru also began to strike the coin. The main New World mints for Spanish dollars were at Potosí, Lima, and Mexico City.

By far the leading specie coin circulating in North America was the Spanish silver dollar, defined as consisting of 387 grains of pure silver. Spanish dollars came into the North American colonies through lucrative trade with the West Indies. The Spanish silver dollar had been the world's outstanding coin since the early 16th century, and was spread partially because of the vast silver output of the Spanish colonies in Latin America. More important, however, was that the Spanish dollar, from the 16th to the 19th century, was relatively the most stable and least debased coin in the Western world.

Before the American Revolution (and possibly one contributing factor to the Revolution) there was a chronic shortage of British currency in Britain's colonies. Trade was often conducted with Spanish dollars that had been obtained by dealing with Caribbean pirates. Spanish coinage was legal tender in the United States until the Coinage Act of 1857 discontinued the practice.

But some traditional characteristics of the old pieces of eight lingered in America’s monetary system until very recently. The pricing of equities on U.S. stock exchanges in 1⁄8-dollar denominations persisted until the New York Stock Exchange converted first to pricing in sixteenths of a dollar on 24 June 1997, and shortly after that, to decimal pricing.

8 Reales from 1739. 
 One last thing – Look closely at the back of a Spanish eight-reales piece. See the two pillars on the back? They are supposed to represent the Pillar of Hercules – the two chunks of land that frame the Straights of Gibraltar, gateway to the Mediterranean Sea. But the pillar on the right also looks a bit like this - $. In fact, it is believed to be the inspiration for the sign for American currency.

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