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So, this one's probably for those ones with a bit of knowledge of economic history. I'm wondering what events tend to trigger the formation of a royal mint in a society so that a country might start manufacturing coinage and how they protect their coin values against nearby economies and counterfeiting. This isn't an exhaustive question though, since I'm sure some individuals could talk till the cows come home.

Edit: Time period. Obviously this depends on nation, but ideally earliest possible. Coinage has been around since the ancient eras during the byzantine and early roman empires Pre-BC. So maybe between 4000 BC and 0 BC? If you think there was a more interesting time use that.

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    $\begingroup$ Here I was hoping you talk about breath refreshers $\endgroup$
    – dot_Sp0T
    Commented Dec 2, 2016 at 8:04
  • $\begingroup$ Lawl. Now theres a crucial question for society. $\endgroup$
    – Mugluck
    Commented Dec 2, 2016 at 8:05
  • $\begingroup$ Time period please? I murdered millions of neurons via electrocution studying the concept and application just now so make it at least challenging... for me to comment! $\endgroup$
    – user6760
    Commented Dec 2, 2016 at 9:02
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    $\begingroup$ "Royal" is not necessary: The ancient Greeks, for instance, had minted coins but not kings. It was probably the ancient Mesopotamians, ca 2500 BCE, who created the first money. Suggest reading the book "Money Changes Everything" for an interesting historical overview: amazon.com/Money-Changes-Everything-Civilization-Possible/dp/… $\endgroup$
    – jamesqf
    Commented Dec 2, 2016 at 18:27
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    $\begingroup$ early stamped coinage did not have a standard value, the value was the weight of the coin, which varied by quite a lot, the royal stamp certified the purity of the metal. $\endgroup$
    – John
    Commented Dec 2, 2016 at 22:18

4 Answers 4

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A universally accepted commodity

For coins to appear the society must first reach a stage where there is a universally accepted commodity.

In the beginning trade was done in the form of barter, that is, goods and services were exchanged directly for other goods and services. Barter is inefficient. For example, suppose that a person P has three dozen eggs and wants two cubits of cloth. They must find another person who has cloth and wants eggs. If there is no person who has cloth and wants eggs, they must inquire what do the cloth-having persons want? Maybe a person Q has cloth and wants amphoras. So now person P must find a person R who has amphoras and wants eggs, so they can exchange the eggs for amphoras and then go and exchange the amphoras for cloth. Barter slows down trade considerably.

During the Late Bronze Age the civilizations in the eastern Mediterranean and the Levant reached the stage where trade began to use a generally accepted commodity, in the form of metal -- initially iron, copper or bronze. Everybody accepted metal, by weight, and trade was considerably simplified; for example, see the Greek obols, which were originally spits of copper or bronze traded by weight. The use of iron, copper or bronze as a generally accepted commodity was a great progress, but it was still inefficient because these metals are quite common and therefore traders needed to carry large amounts of them.

Standardized pieces

The next step forward was to use rarer metals -- silver and gold -- as a generally accepted commodity. In his Histories, Herodotus writes that the Lydians, a people in what we call today western Anatolia, "were the first men whom we know who coined and used gold and silver currency, and they were the first to sell by retail" (Histories, book I, chapter 94, trans. A. D. Godley). The advantage of using standardized pieces is that they can be counted, eliminating the need to assay them and weigh them, thus facilitating trade. Coins were invented roughly simultaneously in the Mediterranean, India and China; the oldest Lydian coins date from the late seventh - early sixth century BCE.

From the physical coins -- standardized pieces of metal -- came the idea of an abstract unit of value, laying the foundations for accounting and enabling the states to set up efficient taxation.

Centralized mints

Since coins were so much more convenient than using metals by weight, the states, be they kingdoms or republics, found a great source of revenue. They established centralized mints and required that metal be converted into coins only in the state mints; the mints charged a fee for this service (seigniorage). The coins made in the state mints were stamped with state symbols, guaranteeing their weight and purity.

As an aside, the first Roman mint was set up in the temple of Iuno Moneta (Juno the Mindful); from the Latin words moneta and monetalis comes the English word monetary, and indirectly the words money and mint.

Counterfeiting and further consequences

With the invention of coins came counterfeiting -- see a gallery of ancient counterfeit and imitation coins. With counterfeiting came a need to detect and apprehend counterfeiters, and a need to assay the coins accepted in trade. The ancients used various methods to assay the purity of coins, for example touchstones and measurements of density.

Since each and every little city state made its own coins, a need appeared for professionals who specialized in exchanging one kind of coin for another.

Once the minting of coins became a state monopoly rulers naturally found that they could increase their apparent revenue and purchasing power by minting coins with less precious metal in them than their face value; the unfortunate consequences of debasement are endlessly met with in history from the Antiquity to the Modern age, up until commodity money was replaced with fiat money (and debasement was replaced by inflation).

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  • $\begingroup$ FYI, related to copper and bronze: Tin was also a valuable metal and actively traded. (I recall a song in which Tin is slang for a sailor's pay.) The reason is that it takes a relatively small amount of Tin, added to a fair bit of heavy copper, to make usefully hard bronze. Copper ore was fairly available; tin's not so much. If I recall correctly, one of the first uses of steam engines was pumping water out of a deep tin mine. $\endgroup$
    – Catalyst
    Commented Dec 2, 2016 at 22:02
  • $\begingroup$ It's true that tin was a widely traded commodity -- the Phoenicians went to Britain for tin. It just was never used as money. $\endgroup$
    – AlexP
    Commented Dec 2, 2016 at 22:04
  • $\begingroup$ Fantastic, concise answer for how these things develop! Nice! $\endgroup$
    – Mugluck
    Commented Dec 3, 2016 at 8:04
  • $\begingroup$ One minor quibble. Anything that is fiat isn't money, it is currency (current value). $\endgroup$
    – ShadoCat
    Commented Feb 27, 2018 at 0:19
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From a slightly different angle, it wasn't royalty or nations that created the first non-commodity money - it was the Knights Templar. They would store gold for you, and then give you a letter of credit, which could be taken to any branch of the Knights anywhere and redeemed for gold. It was much easier to carry the letters of credit than to carry the actual gold.

Noble houses, including royalty, made use of this service, and also borrowed from the Knights. Effectively, the Knights TEmplar became the world's first bankers.

In 1306, the French crown, which had become heavily indebted to the Knights, accused them of heresy, raided the temples, executed many of the Knights, and took the gold that was stored there. Effectively, King Philip of France was the world's first bank robber.

However, these notes of credit were not fiat money, but "representative money" because they were still backed by actual gold. The first recorded use of fiat money (it is valuable because our ruler says to treat it as valuable) was in China, around the 10th or 11th century.

European nations started to experiment with fiat currency in the 17th century, most experiments being brief (to cover a period of time when gold and silver were scarce) and/or unsuccessful (the currency's value rapidly declined to zero).

Protecting the value of coins has always been a problem - debasement of commodity coinage since coins were invented, as well as counterfeiting. This is why commodity coins were generally treated as scrap metal, not taken at face value, once they left their home jurisdiction.

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  • $\begingroup$ +1 for the inclusion of the illuminati sorry Knights Templar in their original form. :D $\endgroup$
    – Mugluck
    Commented Dec 3, 2016 at 8:05
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I'm going to keep this short and ignore all issues of counterfeiting.

First you have to consider the two types of money

  • commodity money
  • fiat money

Commodity money has value regardless of whose head is on it, which means you only need a royal mint when your country develops a sense of national identity or your monarch gets a bit of ego under him and wants his own head on the coins. Commodity money is better for trade caravans moving casually between countries, city states and other miscellaneous fiefdoms. They're basically accepting a weight of gold or silver rather than a number of coins.

Once you reach fiat money then you have to have a royal/national mint, the value of the money is entirely based on whose head is on it.

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    $\begingroup$ actually originally they used the royal mint to guarantee the purity of the coin, the value was still based on weight. coins without the stamp would be worth less becasue you could not be sure they were not cut with other metals, and testing could cost more than a coin was worth. $\endgroup$
    – John
    Commented Dec 2, 2016 at 22:21
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Well, it starts with the concept of money. Why do we need/use money?
We use money as a store of value, as in, it won't lose value if we keep it. So, the money I earn from selling my harvest this year will not lose value when I want to buy seed next year. This saves me the trouble of sorting out seed from my harvest, and I can just sell in bulk, making things easier for everyone.
So what do I want from money?
It must be durable, following from its function; generally acceptable, if people don't think much of my money, it's worthless; portable, i.e., have sufficient value compared to it's bulk, that it's worth carrying around (though, there are classical counterexamples to this); divisible, to allow me to use part of my savings without affecting the value of the rest; and most importantly, in limited supply, so that the amount doesn't rapidly change and destabilize the market (see Zimbabwe's recent economic history). The last also has another aspect we'll discuss further on. Now that we know what money is, and what we want from it, what do we use as money? Organics are (mostly) right out; they decay. The same with most common metals. Ceramics and glass came comparatively later. In fact, the value of precious metals and stones come from the fact that they were extracted very early in human history and the annual addition to the economy was limited. It persisted because they were, basically, useless. Copper had some use, e.g., in bronze and brass making, and was comparatively abundant, so formed the basis of the lower denominations of coins.
So, now you've got precious metals and stones for trading, now what? Stones aren't divisible, so they're not much use as general currency. That leaves metals. Metals are excellent commodities: one gram of gold is the same as any other, and half a gram is worth exactly half of one gram as you can pair it with any other half-gram to get one gram. Great...except that you now have to weigh your gold for every transaction, and if you're using gold dust, then you have to make sure your wealth isn't flying away. That means an air tight environment, free of contaminants, polished scales that gold dust won't stick to... in a society that thinks bronze is cutting edge stuff. This, while also dealing with things like tampered weights and uneven balances and the usual shenanigans.
The solution? Standardised weights of metal, in easily usable and recognizable shapes and sizes. The next problem? People cheat. One merchant stamping coins adds 10 mg of cheap impurity in each coin or makes his coins lighter by10 mg. He gets one coin extra out of every 100, but now, all the coins he releases into the market are impure. Eventually, people figure it out. They don't know who exactly is responsible, but they can figure out roughly where they came from. They then boycott the place. The crooked merchant gains temporarily, but everyone loses.
The people in the area figure out what's going on and everyone starts putting their own mark on the coins they mint in order to guarantee that they'll stand behind them. It works, until someone starts making coins with fake marks that nobody claims, or using other people's marks. Again, traders from other places refuse to do business with them, since they'll have to track down the maker of every coin to verify that they made these or test each coin themselves.
The eventual solution, get the guy running the place to make the coins. Everybody knows who he is and where to find him, and anyone looking to counterfeit his coins is going to have to explain themselves to some large men with pointy sticks and no sense of humour. And since, unlike individual merchants, the ruler has to mint a massive amount of coins, he needs a bigger mint and more security, due to the larger amounts of gold involved. Hence, a royal mint. This would probably show up within a hundred years or so of coinage.

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