When the war broke out in 1775, the – the future United States of America – were still using the English system of currency based on pound, shillings and pence. However, within the colonies, other currencies – Spanish dollars, French livres and Dutch Guilders – were all used in commercial transactions. A quick review of the units of currency will help provide some context so you can understand what our Founding Fathers dealt with on a daily basis.
The farthing was the smallest unit of English currency and there were two farthings to a half penny and four to a penny. Now you know where the expression “not worth a farthing” came from.
Moving up the English currency value chain, there were 12 pennies in a shilling, five shillings to a crown, four crowns or 20 shillings to a pound sterling. The term pound sterling came from the use of sterling silver coins, they weight of a pound was called a “pound sterling.”
However, in 1717, the head of the Royal Mint, the mathematician Sir Isaac Newton, shifted England from using silver as the standard to value its currency to gold as a backing but the moniker didn’t change. Prices in colonial business were written in pounds, shillings and pence, e.g. £7 8s 4d for a price of seven pounds, eight shillings and four pence. Newton standardized the guinea at 21 shillings.
So, if the price was 5 guineas, then then math was easy. Five guineas is 105 shillings or £10 5s. But what if the price is £7 8s 4d and you wanted five. The math and conversion is simple (if you’re Isaac Newton). Multiply each unit of currency by five, i.e. £25 40s 20d. Start with the pence and move up the currency value chain – 20d equals 1s 8d. The extra shilling is added to the total number of shillings to make the total 41 which is £2 1s. The total price becomes is £27 1s 8d.
Dutch guilders were an ounce of silver and one guilder was equal to 20 stuivers. Sixteen pennigen made up one duiteri and you needed eight duiteri to have a single stuiver.
Livre is the French word for pound. Louis XV in 1726 standardized French currency and stipulated a standardized conversion rate for gold to silver, i.e. 14.4867 ounces of silver were equal to one ounce of gold. A gold Louis d’or coin was worth 48 livres and an écu was worth six livres. A sou was worth 1/20th of a livre. But this is France and no one bothered to print or mint any livre coins leaving the livre as a measure of equivalency.
One needed eight reales top have one Spanish dollar, a.k.a. piece of eight. It too had a confusing table of equivalents in gold and silver.
Back in the 18th Century, there weren’t computers, point of sale systems and currency conversion algorithms. If nothing else, our founding fathers were businessmen to the core. To them, the math required to convert livres to pounds or pounds to Spanish Dollars or Dutch guilders made their heads spin. They wanted something simple, hence the U.S. dollar’s decimal system.
On the other side of the Atlantic, the English waited almost two more centuries to change their currency. For those of you who may remember, 50 years ago England finally came to its currency senses. On February 14th, 1971, and long after most of English colonies had adopted decimal based currencies, Great Britain finally redid its currency so that there are now 10 pence to the shilling and 10 shillings to the pound. Hallelujah!!!
Just having to do the math under the 18th Century system of English currency was almost enough to start a revolution!!
Image is a 1775 George III gold coin courtesy of Wikipedia.