Page 32 - The South China Business Journal
P. 32
covery
The Dollar
Once Spoke
Spanish:
the Chinese money supply since the 15th century, but
The apparent truism that a global China had few domestic sources. Silver from Spanish-
currency must be tied to a leading American mines was so central that we have called the
economy is belied by the history of the trans-Pacific trade route la ruta de la plata — a silver,
antecedents of the US dollar: the 18th- rather than silk, road that integrated China into the
century Spanish real de a ocho and world economy; for the first time, one could talk of
the 19th-century Mexican dollar. This globalisation and a “world economy”.
largely forgotten period of monetary
history raises some questions Spanish-American silver was also the vehicle through
about conventional approaches to which world’s financial systems began to integrate.
predicting the future of the global Economic effects now traveled the world with the speed
monetary system. of single ocean crossing. The loss of a cargo of silver in
a shipwreck might deliver China a dynasty-threatening
There has only ever really been one global currency. money-supply shock. More than a glimmering of today’s
There is a direct line from the first, the 18th-century global financial markets can be seen in the early 17th-
Spanish real de a ocho or peso, to the US dollar, its century arbitrage of the differing relative gold-silver
direct descendant. exchange rates between China and Europe.
The peso’s global status was grounded in the trans- Regardless of Spanish coinage’s well-deserved
Pacific trade between Asia — predominantly but by no reputation for standardised purity and weight, the
means exclusively China — and Spanish America via development that turned the peso from “money” into
Manila. The “Manila galleon” ran from just after the “currency” was the introduction in 1732 of machine-
discovery of the “tornaviaje”, the route back from Asia made “milled” coinage with raised and serrated edges,
to the Americas, and the founding of Manila in 1565 deliberate anti-fraud features designed to prevent
and 1571 respectively, until 1815. clipping and shaving, something all too possible with
the previous hand-struck coinage.
This trade was distinguished not so much by what the
Chinese supplied as what they would accept in return: Chinese silver came in ingots of varied size and purity.
silver and only silver. Silver had formed the basis of Smaller transactions might use silver snipped off an
ingot. The result was a constant and clumsy need to
30 AmCham South China assay and weigh the metal. Spanish milled pesos —
many examples display Chinese chops or assay marks
— provided a standardised coinage which facilitated
commerce. The Spanish peso was now a currency rather
than merely silver.
The US dollar is a direct derivative of the peso
(whence “pieces of eight”); the latter were legal tender
in the US until well into the nineteenth century. The
dollar’s origins are reflected in the colloquial use of
“two bits” for a quarter and in the fact that the NYSE
The Dollar
Once Spoke
Spanish:
the Chinese money supply since the 15th century, but
The apparent truism that a global China had few domestic sources. Silver from Spanish-
currency must be tied to a leading American mines was so central that we have called the
economy is belied by the history of the trans-Pacific trade route la ruta de la plata — a silver,
antecedents of the US dollar: the 18th- rather than silk, road that integrated China into the
century Spanish real de a ocho and world economy; for the first time, one could talk of
the 19th-century Mexican dollar. This globalisation and a “world economy”.
largely forgotten period of monetary
history raises some questions Spanish-American silver was also the vehicle through
about conventional approaches to which world’s financial systems began to integrate.
predicting the future of the global Economic effects now traveled the world with the speed
monetary system. of single ocean crossing. The loss of a cargo of silver in
a shipwreck might deliver China a dynasty-threatening
There has only ever really been one global currency. money-supply shock. More than a glimmering of today’s
There is a direct line from the first, the 18th-century global financial markets can be seen in the early 17th-
Spanish real de a ocho or peso, to the US dollar, its century arbitrage of the differing relative gold-silver
direct descendant. exchange rates between China and Europe.
The peso’s global status was grounded in the trans- Regardless of Spanish coinage’s well-deserved
Pacific trade between Asia — predominantly but by no reputation for standardised purity and weight, the
means exclusively China — and Spanish America via development that turned the peso from “money” into
Manila. The “Manila galleon” ran from just after the “currency” was the introduction in 1732 of machine-
discovery of the “tornaviaje”, the route back from Asia made “milled” coinage with raised and serrated edges,
to the Americas, and the founding of Manila in 1565 deliberate anti-fraud features designed to prevent
and 1571 respectively, until 1815. clipping and shaving, something all too possible with
the previous hand-struck coinage.
This trade was distinguished not so much by what the
Chinese supplied as what they would accept in return: Chinese silver came in ingots of varied size and purity.
silver and only silver. Silver had formed the basis of Smaller transactions might use silver snipped off an
ingot. The result was a constant and clumsy need to
30 AmCham South China assay and weigh the metal. Spanish milled pesos —
many examples display Chinese chops or assay marks
— provided a standardised coinage which facilitated
commerce. The Spanish peso was now a currency rather
than merely silver.
The US dollar is a direct derivative of the peso
(whence “pieces of eight”); the latter were legal tender
in the US until well into the nineteenth century. The
dollar’s origins are reflected in the colloquial use of
“two bits” for a quarter and in the fact that the NYSE
