Will the dollar outlive America

By the early seventeenth century, the word dollar shows up in Shakespeare twice. This wasn't just for merchants. so as commerce spreads to the American colonies, the dollar also becomes a standard accepted unit of value and coin in the United States as well, or rather in the colonies, but then they choose for their currency A Spanish coin made from Mexican silver with a German name Well, that shows the joys of multiculturalism and immigrants they get the job done. It's an immigrant coin. This iss not the story of sovereignty. So when is someone going to tell the American government that they're using an immigrant coin Today on the story of Money, the origins of the Dollar. That's a topic which is super timely today because I've been seeing central bank governors and finance ministers recently and what many of them are wondering is can the dominance of the dollar remain in place? And is there anything which could possibly topple it? And of course to answer those questions about why the dollar is so dominant, it actually pays to look not just to the future but also to the past And to understand exactly how and where the dollar came from in the first place, because people don't often ask that question, do they, Robin? No, that's right. It may surprise some people to learn that the door itself is actually a lot older than the United States of America. But the original inventor has been almost completely written out of the history books And that's partly because he was something of an inept character. He wasn't a great hero, he was a bit of a loser, as you might say, in a time And when he created the dollar, he had no idea what was going to happen to it. I've actually prepared a little thing here. I'm gonna make it It's a bit of an experiment. This is you getting creative in a way that you're never allowed to do before when we were working together. Exactly. this is this fine reven free yes, my revenge So I'm going to do a bit of a fairy tale rendering Okay, here goes Wnce upon a time in a land far, far away, a land in central Europe called Bohemia It was a place full of mountains and valleys and untouched forests. in almost magical waters And it was a period of lords and counts and kings. And in one of these valleys lay a vast fortune hidden just beneath the surface a valley full of silver. And see, this mine had actually been hidden for ages and ages until one day, a nobleman. The hero of our story, if you will, here's about this fable silver min and decides to make his fortune Now doesn't that sound like a fairy tale st And it takes us to the point that the dollar actually started not in any printing press or central bank, but actually in a silver mine. Yeah. So we're going to be going back five hundred years actually now to the beginning of the sixteenth century. We're going to the silver mine in Central Europe And we're meeting this guy who played a key role in the creation of the coin That was the forefather of the dollar, the OG dollar, the granddaddy dollar in other words. So welcome to the Sore of Money from the Financial Times everybody. I'm Jillian Ted and I'm Robin Wiglleswth So the doll has existed in Verious's incarnations for almost half a millennium. But Jillian, as you mentioned Perhaps the dollar is reaching the end of the road. Or maybe it's past its peak perhaps, maybe Well, what has certainly piqued is discussion about whether the dollar regime that's dominated the global economy and financial system for the last few decades might indeed be starting to fracture a bit as rivals like China start to challenge it And of course, cryptocurrencies provide a potential alternative. But If we're going to start talking about the dollar and the future of the dollar, we have to go back first And look at how the dollar actually first came to life And to help us tell that extraordinary story, which most people never talk about at all We have Brendan Greeley. Now, Brendan a long time ago was one of my colleagues at the FT in New York. But he's the author of a new book on the world's most powerful currency called The Almighty Dollar. Brendon, great to have you back. Hi guys, thank you for having me in I mean, you used to be cool when you worked at the FT. so now you've sadly lost academia, but it's good Yeah. here I am just like in a groty blazer reading books and writing things down. Yes, I was at the FT. I was a Fed watcher. Well you were a fabulous colleague and you always challenged me and taught me a lot of things I didn't know And now we're about to find out another thing I didn't know, which is where the dollar came from. Super exciting. Yeah. So Brendon, you've actually visited the town where it all began And This iss actually a real place, despite my hands Chin Anderson imp impress. It is. It's not just a fairy tale. It's called Yakimov, I think, right? Yeah Yakimov and Czech. Yeah. It's originally Yakam's Tall in the German. Oh wow. So it's a valley that runs north south in the north of what's now the Czech Republic, what was then Bohemia It's a very narrow valley. You can easily see across it. I did the measurements once you could shoot a crossbow bolt from one side to the other. Did you do that with a real crossbow though? Yes, no, I absolutely tested that out, Robin. See that's a kind of hands on journalism experience that we need to bring to the academia a bit I also learned what an embracer is, which is an opening in a castle for a crossbow to shoot out. Anyway, At the southern end of this valley, it's almost like the Grand Budapest Hotel. It's a spa from the earliest twentieth century where you can get radium water treatments because radium water is leaking out of the mountains. And then if you run up to the top of the valley, you get the ridge and on the other side is Germany. And that's really important. This story of being right on the border between What was then Saxony, what is now Germany. And Bohemia is sort of part of the history of the valley. Germans came south to work the mines. This is the area that we used to call the Sudetenand of where Germans lived in Czechia So how does this all relate to the donor? Robin? I think you know this story, don't you? Yeah, it starts a little bit before. I mean, if we rewind a little bit, I already sort of foreshadowed him M the hero, maybe a bit of an antihero and I love his name, Stefan Schlliick Which really just sounds like he does definitely sounds like a financial pioneer, right? Like an innovor in the world of money. Oh man, the most perfectly named huckster. Yes. Exactly far too Slick for his own good, I think.es. So Brendon, tell us about Stefan Schlick and his role in the Genesis story of the Dollar You know, in this story that you told about him, we assume that he was sovereign. We assume that he was the count. He was in fact a countount Stefan Schlich. But it's a little tricky because the way Bohemia was set up, they had an estates general. This is something like what we would have thought of as a medieval parliament, right? They didn't have a lot of power, but they could constrain the king in various ways, and they met irregularly. Most of them were Czech speaking. So Stefan Schlich was part of a German speaking family that had been elevated to the nobility in the classic medieval way. H great great grandfather was useful to the king And so the rest of the Eestates general didn't really regard them as legitimate There's another problem, which is that the way inheritance law was set up, Stefan Schlich and his brothers and his cousins held this territory, this county in entirety. They all had an equal claim to it. So when we talk about Stefan Schlich was a count of this area of Bohemia, what we're really saying is that he was in control. it was his money, his money spread outside of his borders. And none of that is true because as the story starts, he's not really in control of anything He's sitting taking the baths at Carl's Bod, which is now called Carlo Vivari. It's a spring that was that was available then and is available now for recreation. And he heard that there was silver in the valley. Sbody had seen it. and the accounts we have from the time is that it was literally poking out from underneath the roots of the trees in the valley at the time. You could literally stumble across silver. So the first thing he does is he recognizes he's going to have to start telling some lies Silver in the ground is not silver in your hand unless you put a lot of capital into it. It's very expensive to get silver out of the ground, even in the fifteen twenties. to you had to build machines underneath the earth, you had to build machines on top of the earth. You had to sort of put cap stands with horses or even people dragging them around to pull ore or water out of the mines very capital intensive operations And in fact, Friedrich Engel says these silver mines in Bohemia and Germany were one of the beginnings of Citalism just assembling this is Friedrich Engel as an Engel of Markx. Friedrich Enls as in Enls and Marks, yes. Ston Schlich knows that he can't do this alone. He can't just get a spade and start digging silver out of the ground. So the first thing he does is gets in touch with the Saxons. Saxons have silver mines, but they also have the capital and the understanding to figure out how to finance the silver m So he brings some silver investors and some silver miners down to the valley. has them dress up as a hunting party, so nobody whats going knows what's going on. And he rides up into the valley. they look at the silver. sureure enough, it looks like there's a lot of silver there. Very quickly they start digging Crucially Nobody knows this is going on except the miners, the investors, and Stefan Schlick. And the reason that's important is silver mining was very tightly controlled by the kingdom. There were other silver mines in Bohemia. and when silver comes up out of the ground, it's got to be taxed immediately. The king gets a cut Everybody has an interest in this because the king always owes money to the estates general, always owes money to the other lords in Bohemia. So they want to make sure that all the silver that comes up gets properly taxed so he can immediately pay them back. So there's this whole operation in a silver mine called Kutnohoras closer to the center of Bohemia. And what happens is silver comes up it gets minted immediately into coins and then taxed. And so this silver mine is like a wildcat mine outside of this entire system means it's just producing silver. There's no tax to the king. The estate lords aren't getting their cut. It's just leaving the country immediately as part of the Saxon mining operation It's not sovereign, and in fact, it's all breathtakingly illegal. But so the minine actually starts production in fifteen sixteen, as I understand it, with these miners dressed up as a hunting party And once it actually starts production What happens then? Is he just producing this silver or getting this silver and smuggling it out? or was he acting like a middleman? O how exactly did the whole thing work Yeah, he was also really bad at it. It's really important to remember with Stefan Schlich that not only was he not really the rightful lord of the valley, was he was like, you know somebody's nephew who shouldn't even be in the company, given a really important job When you are the lord of a mining operation, the most important thing you provide is liquidity. So you have a burser on the mountain who works for you, you have what's called a captain of the mine who works for you, but all of the investment coming into the valley and all the payment for the miners, that flows through your purse. Now Stefan Schk has no experience in mining silver and he has no money So the first thing he does is he goes to Augburg and he borrows a lot of money. What he did have as the sort of made up lord of the valley was the monopsony right to buy all the silver in the valley and then sell it into the wholesale market. Okay, what does monopsony mean? Can you just explain? Come on, you know what monopsony means? But all that all our listeners will so A monopsony means you're the only buyer. Okay. So he's the only buyer of the silver in the valley Again, this is all illegal as well. You're not supposed to mint silver into bars and smuggle it out of the kingdom. It's supposed to be coined so that everybody can get their cut within the kingdom before it goes anywhere. So this silver is very quickly leaving in bars to Nuremberg to start to attempt to pay in small slivers down the massive loan that Stefan Schlich took out. The challenge with this is again, you've got to do it undercover of night. It doesn't really work very well People start to find out. So this whole mining operation, it wasn't sort a big elaborate legal operation. It was, you, fly by night wild cat kind of silver mine done all illegally and furtively, essentially Yes, absolutely. And the real problem he had at the mine was liquidity. Everything's supposed to run through him, which means he's supposed to have on hand enough small change to pay the miners. And he doesn't have it. And the miners realize this. and in fifteen seventeen, they strike, they walk off the mine. So now nothing's going on And we have a sense of what they were complaining about from the laws that were passed afterwards. And so a couple of things happened. One is they decided to adopt Saxon mining law. That seems like a detail, but what it basically says is this little piece of bohemia is an outpost of Saxony. We're just going to do everything exactly the way they do it up there to make sure the mines work. The other thing they asked for, and this is so hard to understand from our perspective now They ask for better money Normally, when we negotiate now, we ask for more money. But what they recognized was that the quality of the pennies that they were getting paid in was very poor. It was adulterated with a lot of copper. And they're sitting there in the mines, which is insanely dangerous work. They're watching very high quality silver leave the mines and they're getting paid themselves in pennies, veryy bad pennies. And so they strike. As a result of the strike and the renegotiation, Stefan Schick loses even more power. He has to bring in a captain of the mine from Saxony. and something really interesting happens The miners negotiate and this seems to be important to them the right to rename the valley So this is when the valley becomes Staint Jachem's Tall. And just for those you listening, you know we're back in fifteen fifteen in this far flung corner of Europe on the edge of Germany and Bohemia. You've just had the miners go out on strike because they want to have better money, not just more money but better quality coins And Schlick, the creator has essentially lost But of course, the question everyone's asking is what on Earth is this doing in terms of being connected to the future of the dollar So crucially, the mind doesn't yet have a mint What changes it, what actually puts a mint at the mine itself, is the recognition by the rest of the Estates General in Bohemia and the King of Bohemia that they're going to have to bring this into the fold. It's no longer acceptable that there's this wildcat mine on the border with Saxony. Everybody wants their cut. Now. Crucially If you were a Saxon mining investor, you expected to get paid in diss of high quality silver. We think of them as coins now, but they weren't supposed to be for payments. They were supposed to be a dividend payment. So it was not the coin of the realm that you were supposed to use to pay for things. It was the dividend paid out to the investors in the mine. So they start making these big high quality dividend coins. The dividend coins in Saxony were always named after the mine. There's a new mine at Jachmstall. They start to call them Jachms Tllar. And this is the origin of the word for the dollar, but I also think that there's an actual monetary connection to our dollar today. But the word for the dollar they start to call these coins, they spread up into Leipzig and then out into the Baltic Jachum's taller and then just taller and then in Dutch, they become dolder. And then in English they become dollar. Already in the sixteenth century, you have mentions of the word dollar in English. This is a coin that is outside of the currency system of the pound shillings and pence that they had Wow in England Wow, mean it's fascinating because you know, I think most people have never heard of the Jakenstaler and the idea that the word tuller or dollar was floating around Europe back in the sixteenth century is a real revelation. but ye So this starts to emerge. and then of course we have A a second minor strike, don't we? in fifteen twenty five. I mean, here's an example of industrial action organised labour actually creating monetary history probably for the first time You know, interestingly, a lot of what we know about this mine comes from very good East German research And once you can read past the Marxist Leninism that was mandatory in the preamble to these papers, they really dig into the capital structure of the mine and what happens in the labor strikes. One of the things that was fascinating is that the East German historians couldn't figure out whether the miners were labor capit because you could a crucial distinction, I imagine if I' mean scientist at the time. Yes, at the Humboldt University very likely in Berlin. And the reason is, miners would come down from Saxony and you could work the mine, but you could also stake your own claim And so Saxons were coming down as investors, they were coming down as miners, but the miners were getting rich. You get a silver rush. This town grows overnight to know from zero residents to several hundred within about two years and then into the thousands by the fifteen twenties You know, there's this saying that sort of still today they talk about in Jacen's Tall where the Saxons streamed over the mountain saying, Ital, Inal M muta Mital and that translates to into the valley, into the valley, takeake your mother, take everything. So in terms of practical things, I mean, so they're creating these quQasi coins aren't really coins called Jakmstaler and Why do the minus gone strike a second time and why does that matter so much for the dollar or the Ta Well Stefan Schlick again, was really bad at his job and he didn't do a great job of managing the liquidity of the minine. So his burser that he hired actually stole Oakam's dollars. They had to figure out how to pay the miners back and they had to figure out also how to pay the investors back You begin to realize or at least it seems like they begin to realize that some very real money is coming out of this mind. It's becoming important to a lot of people, including the Holy Roman Empire. Everybody recognizes what's happening here. They're getting this pure form of silver dividend coin. And you know there's this amazing moment for any of us who haveve covered Silicon Valley, you're going to recognize this moment immediately, which is that They hold in early fifteen twenty five a shooting festival. They bring in all theon the Saxon electors, the Dukes of Saxony, they order special clothing from London, they hold a shooting festival. All the investors come in from Augsburg, from Nuremberg And then they all get completely hammered. And so this to me is sort of the moment of overreach, right? When they throw the big elaborate party, that's when you begin to think, maybe this d. com is sort of getting out over its skis. And in fact, Philip Robinson, Rusner, who's a historian of the area at the time, has said that it was like a Silicon Valley It was just capital and labor moving up and down the valley over the border to Saxony to sort of put this all together in sort of different mining companies that rearranged themselves. But the real problem was he never solved the problem of paying the miners No matter what happened, he could never stay liquid enough to pay the miners and the good pennies they demanded. So in fifteen twenty five, they didn't just strike, they sacked the town. They burned Steonchlick's house. They seemed to have burned his fancy London clothes that he had ordered for the shooting festival Oh poool thing. pooor thing, exactly. Then they really sit down to negotiate at the end of this. Stefon Schlick, you know goes back to his hometown of Slachenwert and he wants to ride up with an army and kill all the miners and cooler heads prevail. and they say basically like, this is not working. You're bad at this And they basically write him out of the agreement. So he still exists He has a small mining company with his brothers. He seems to sort of be barely recognize even the capital structure of all these mines. But after this, the miners start getting paid in what they call good white coin. That means pure silver straight from the mines. Like these almost like the dividend discs Almost like the dividend discs, but smaller, exactly So what you get then is Everybody is in agreement The miners are getting what they want. You have a legal understanding. they're going to use Saxon Law in this corner of Bohemia, but the king is getting what the king wants. The estates general is getting what they want. The Holy Roman Empire sort of seems to be getting a cut and is making his own creditors in Augsburg and Nuremberg happy. So this works for all the people with actual power. And at the beginning of this, you told your fairy tale, Robin, right? You have this sovereign Lord making coins Very quickly in this process. withithin seven years, he doesn't matter at all He disappears. And what you have instead is this legal exception. Stefan Schlich, so far as we know, dies in the Battle of Mohach. This is you know the Turks moving north fight the Hungarian cavalry This is a battleman Sleiman the magnificent, right? invvades and he thrashes the European or the Hungarian army Exactly, their heavy cavalry was not adapted to his tactics. I'm so glad I gave you the chance to say Suleiman the magnificent. I've been a force it for very long time. It doesn't appear in a lot of economic courses. and people don't learn about thath D definitely wasn't a magnificent He was not magnificent. but so the king dies in the battle. Stefan Schlich disappeaars in the battle. We're not really sure what happened to him. There was some The town seemed to think that he was sold into slavery in Armenia. They even sent a delegation with some silver to Constantinople to try figure out what had happened. We don't know. He disappears from the record. but fascinatingly, he disappears from the record and it doesn't. atter And in fact, it's kind of better for everyone that he's gone because This mint is cranking out huge volumes of pure silver dividend coins to pay the investors And that's where basically the Yum stlla if I pronounce that right starts to have a life of its own, that out lies its creator and goes into areas that no one could have ever imagined and carries on for centuries. So we'll get into that after the break, but thank you So just before the break, we heard about the man called Stehan Schlick, the hapless sixteenth century nobleman from Bohemia who almost no one's ever heard of if you're studying finance and money, but actually matters enormously. because he went around Plundering the silver in the valley that he had stumbled on, created mines He then tries to build up the mining business, but he's really bad at it And the miners keep striking And he ends up either dead or disappeared never to return in one of those many European wars that Again, literally history books. but Here's a really interesting thing because although Stefan Schlick vanishes from history at this point In fact, his creation, the Jochenstaler isn't anything but dead far from it, it's about to have a whole new life that goes on for many centuries until today. So tell us, Brandon What actually happens to Schlich Silver And the Jachenstaller or the Taler, the fore run of the doaler that he birthed almost by accident. Carlo Chipola is an Italian medieval historian from the twentieth century, and he had a framework for thinking about money that I found very useful to think about this and even now He said that there were two types of money broadly. There was big money. And there was little money Big money were full bodied coins, high value, and they were useful for international trade and for merchants and the wealthy Little money was for retail payments. So we now think of this as small change of a larger note, right? We think of all of these things as working together. We think of pennies, as parts of dimes, as parts of quarters, folding neatly into a dollar bill The system that he describes is different. And what you have is different ways of paying people that don't necessarily always work together. You have a small money system for retail and you have a big money system for wholesale. So these big silver coins fit perfectly into what we think of as big money. They were very useful to merchants. I went back and I looked at what things cost in Saxony at the time. So one of these coins would buy a whole week's labor or twenty one pounds of bacon Right So it's not a peny that jingles around in your pocket. I have a silver reproduction of it. I wish I had it right now so you could hear it when I drop it on the table. But these coins they clank. they don't jingle. They're large. And so what starts to happen is as it moves up into the Baltic, it becomes useful for trade, it becomes useful for tours. One of the things that Carla Chapolis said about big money in particular is that there tends to be one kind of big money that's more generally accepted, and it inspires what he called more or less faithful copies This copying is incredibly important. Again, we're used to a sovereign story of money, where money is produced inside the borders of a country and then it expands as a country expands and trade with a country expands. What actually happened was very quickly, you start to see in the Baltic and in North Germany more or less faithful copies of these dividend coins. So you have a Danish dollar, you have a Swedish dollar, No Norwegian dollar yet, Robin, but it's coming It's coming in the next century. I don't think Norway was much of an entity in those days. No, it was not However, Shakespeare does actually mention in the Scottish play that the King of Norway paid a ransom in dollars. Oh wow This is by the by the yes, by the early seventeenth century Oh wow. So and were these coins or were these copycat coins all made of silver as well They were all made of silver, and they were all roughly the same quality. Again, we're used to this story where sovereigns produce terrible coins of poor quality. That's not really what happens because there's a recognition, particularly with big money that merchants have high standards. They need high quality coins When you get copies of the Jakum Taller in Hamburg in Lubeck. they kind of look like the dollar and they resemble the dollar and they work the same way as the dollar as the Ocamess dollar. So also is standardization here, the crucial aspect that this is something that has One size, one quality and everybody kind of accepts it And therefore, that becomes kind of unofficial reserve currency for large parts of Europe at the time Yes, absolutely, but crucially nobody's telling them to do it doing it because that's the best way to manage their own money And so if you were a town and you had silver and you wanted it to sort of enter into circulation, you had to mint it in the form of this tllar. The copy was important, and they were in fact, as Chipola pointed out, more or less faithful copies. And I think this copying process continued until the present day. As a child in America in the seventies and the eighties on your birthday, you would get a silver dollar That silver dollar is a copy of a copy of a copy of Stefan Schlick's terrible experiment. In some senses what we're seeing today has echoes of what happened in the sixteenth century goes all the way back and shows a continuity through history. So a couple of years ago, I was talking to a friend in Germany about this whole story and he said, Wait right there, I've got something for you. He went and returned with a stack of Disney comics from the eighties in German translation In German translation, Scrooge McDuck, when he dives into his vault of coins, he's diving into Taller So this idea of, you know, money sticks around forever. It's very difficult to get rid of the idea of money. It's exceptional when it gets replaced. And so the idea of a toller, you know, stuck around forever. It's still with us today. So the dollar has kind of become synonymous with money long before the birth of the United States. Yes, absolutely. Broadly accepted, high quality universally acknowledgeed an accepted form of medium of exchange. We have this record of of Jakem's Taller by the sixteen thirties that are copied from all over Northern Europe But have you ever held one yourself like a proper original OG Yakam Tala in your hands? did a lot of this legal history comes from Peter Vorl. He's a professor at the University of Partabiche in Czechia. And I went to visit him to talk about this and he just sort of casually produced an original dollar. An original Yacum's dollar and he just sort of set it on the table and I was super nervous watching it rattling around as we were talking and looking over his notes, But The coin is fascinating to me because we think of currency as the proud symbol of a nation. The original Jachem's Tolars shows St. Joem Oold bearded, cloaked, feeble. It was a branding exercise for Jacums Tall. It was not about sort of the proud currency of Stefan Schlich So why did it become so durable? Because you know the point is that the dollar, the tellllar has been around for a very long time. These silver coins were copied widely very, very quickly. And they stuck without sovereign backing What made them so durable and so trusted? Yeah, because there could must have been other currencies right that work in theory could have been The Tala, like something that was broadly accepted of gold or silver or whatever, right? What's special about the Tala There were other big silver coins in Central Europe. It was not the first sort of full bodied silver coin What was different about the Taller was this unique legal arrangement that happened with basically a Saxon colony in northern Bohemia meant that the mint did not have to produce small coins Usually, Mints are private companies and the sovereign has an interest in making sure that they make the little coins as well. You don't get the same profit on the little coins that you do on the bigcoins. So left of their own devices, Mints would prefer to make big coins Because this whole silver mine was just meant to serve investors and the king They did not produce any small change whatsoever. So not only is it a rich load It's all going into big coins. So you get this unprecedented flood of just big silver coins shooting out through the silver markets in Leipzig and up into the Baltic. I think once the dollar started to inspire copies and took on a life of its own The fact that there was no sovereign in control of it was a feature, not a bug. It became a standard that nobody could stop because you couldn't go to that sovereign and say, you can't do this anymore. or you couldn't negotiate it with the sovereign to make money slightly different. The sovereign also never had the ability to sort of cheat on the coin and produce a slightly less valuable one It was because everybody was copying the coin that was useful for merchants. The demand that merchants had for very high quality silver had a power of its own. You know, tellelling the story, I often want to assign like agency to the dollar, which is, of course ridiculous. It's a piece of silver. It has no agency, but the merchants who want high quality payment, money have incredible power. and I think that's more powerful than soverenty over So it's a bit like in some ways, Dar I say it Bitcoin or the al alternative non fiat currencies today, which sit outside any government control but people trust because they think it's, you know got real underlying scarcity value. Yeah, I can almost hear to my horror the Bitcoin bros punching the air as they hear that But of course Iironntly today is the dollar is controlled by the US government, isn't it Sure, but you know the dollar did get brought into the fold for various empires including the United States. I think of it more like euro dollars So Euro dollars are basically copies of American bank dollars. Banks offshore are allowed to mark up their books with their own new dollar denominated loans They didn't ask permission of the United States Treasury or the United States Federal Reserve to do that. They just do it. And they do it precisely the same reason that there were lots and lots of copies of this original silver dollar because it's useful for merchants. peopleeople want high quality payment money. And so the United States has some ability to support these dollars and control them, but we don't have nearly the you know the regulatory apparatus that we do over our own bank dollars at home. theseese are offshore copies of the dollar. And I think when we look at how the dollar itself spread, we're looking at offshore copies of offshore copies of offshore copies. So when The US dollar was first created and as you said, The foundounding fathers sometimes joked about it being an ancient currency. When they took over that word to describe their own currencies later on US. dollar. didid they realize about the link to the past about the sixteenth century history? How did the word dollar even come to be used in America at all? I don't know whether they knew who Stefan Schlich was. It's very clear when you look at seventeenth century English that there was a consistent understanding of what a dollar One thing that changed was the Spanish Empire built its vice rooyalties in Latin America, and there was silver in what is now Bolivia and Mexico And they figured out a brutal MA system. This is forced labor in the Andes to get silver out of the ground. We don't have to go into the details of that, but you get Spain producing lots of silver as well Crucially, Charles V, Holy Roman Empire, king of Castile, you possessor of new vice rooyalties, has to follow this merchant standard of the dollar He knows he's got silver. It starts to come out of Mexico very early in the fifteen thirties. He's got to get his silver onto the same desk of the same money changers selling silver to the Portuguese in Antwerp. he copies the dollar So what we think of now as the Spanish piece of eight was kind of shoehorned into an existing Castilian monetary system precisely to create a Spanish silver copy of the dollar. This coin circulates widely. It circulates in the Pacific. The Spanish figure out how to get silver on galleions directly to Manila and the Philippines from there to China, massive demand for silver in China at the time. Dollars also circulate in the Atlantic world. and so The United States is very difficult to sort of get Americans to understand how unimportant the colonies were They're this backwater. They're selling shingles and hogs and wheat to the sugar islands of the Caribbean, and they're not participating in the economy in many other ways. And so they could get dollars and they got dollars by selling things to the Caribbean. And so the dollars circulated widely in colonial America. Again, this was not a surprise to anyone. they knew exactly what it was, they knew what it was called. And to go back, you know by the early seventeenth century The word dollar shows up in Shakespeare twice. To me, what that says is the groundlings in the Gobe Theater knew what it was. This wasn't just for merchants. This was a coin that everybody knew came from the low countries for cloth. So As commerce spreads to the American colonies, as they're able to sell things to the Sugar Islands and in turn get some silver coins, the dollar also becomes a standard accepted unit of value and coin in the United States as well, or rather in the colonies. Jefferson said when they're trying to figure out what's going to be the currency of this new country, he said, it should be something that's familiar to them It was universally recognized. They already knew what it was. I started thinking of this about this as the seventeen seventy six problem. If we assume That monetary sovereignty exists. If new country, new money. you have a problem in seventeen seventy six because they claim political sovereignty, but then they choose for their currency, a Spanish coin made from Mexican silver with a German name. Well, that shows the joys of multiculturalism as immigrants they get the job done. Yes. Absutely sense Absolutely, this is not as an immigrant coin. This is not the story of sovereignty The United States succumbed to an existing dollar zone. They did not create their own new dollar zone. So when is someone going to tell the American government that they're using an immigrant coin an interloper, but well, it's not going to be me. And actually sadly, it is me. I'm literally going on book tour telling the United States it's an immigrant coin. But this coin, this copy of a copy of a copy of the original Yachams Tolerer is accepted as legal tender and is a current currency in America until the eighteen fifties So one of the questions I have is that you know, you're talking about copy of a copy of coin I mean, in a sense, you've had that with the fact you now today have a US dollar, you have a Canadian dollar, you've got a New Zealand dollar, Australian dollar So in some ways, what you're saying is a modern monetary system is busy copying just like sixteenth century Europe Yes, absolutely, and to add a twist to what you just said, the Hong Kong dollar and the Canadian dollar are not copies of the American dollar. They're copies of that silver coin. So when they were pegging their currencies to this coin W This coin was incredibly important in commerce in southern China as well by the end of the eighteenth century. So these countries all sort independently at various times all essentially pitched their monetorary sovereignty or adopted a supr national currency that existed hundreds of years long before these countries ever existed, essentially, because it was preree existing, andestablished and widely acknowledged and used around the world Yes, absolutely. The word for currency youuan comes from round. It's referring to these coins. Yen, same thing Ringit, the Malaysian currency actually refers to the milling on the edge of the Spanish dollars when they improve the quality in the eighteenth century The Bourbon kings of Spain actually went through and did a currency reform and made sure that the coins were uniform quality. They had been having trouble at the mints. and they of course put their own double chinned faces on the coins themselves When they arrived in the port cities of southern China, they were referred to as Buddhahhead coins after Mexican independence from the Spanish Empire The mints in Mexico City, they keep same quality of silver, same size, same weight. Absolutely, everything is the same. They change the design in the coin. They put a Mexican eagle on it Those coins arrive in China, the merchants won't accept them. They call them Batwing coins. they don't know them, they don't trust them. And so you actually have a problem. They're so not sovereign that when a new sovereign emerges to produce a new coin, it takes a period of adoption for them to trust the new coin. And there's frustration from the East India companies saying, lookook, we can't get enough of these old coins. They don't make them anymore, but that's what they're demanding as payment So in some ways, the coin had almost become a meme by then or a financial meme in terms of representing or symbolizing in short form the idea of a monetary token of value. I think Ame is a good metaphor for this. So I guess one of the key questions is that the dollar preree existed America. America copied it. It's an immigrant phenomena in America. Other variants have been copied elsewhere Will it outlive America. I have been wondering about this. There's this old joke that what's a historian's joke. so it's pretty poor by the standard of jokes. You know, Rome disappeared and all that was left was a church The British Empire disappeared and all that was left was a bank I think it's possible that you know the American empire could change and what would be left was is the global dollar system Right now, the way the United States supports the global' dollar system without getting too deep into the weeds is that the Federal Reserve will offer short term loans through other central banks to commercial banks that happen to have dollars that are questionable. We call these swap lines So The Fed supports these as a way of supporting the global dollar system because if the global dollar system were to collapse, then it would be bad for America too I have been wondering If these swap lines were ever called into question As they are being now, right Yes, could Could the Europeans offer swap lines and dollars to each other There's nothing stopping them from doing that It's very interesting because we've been meeting with central bankers in the last few days, kind of discussion is definitely happening right now, partly because The authorities in Washington have indicated that they might try and use those swap lines as a tool in geopolitical negotiations. And if say Washington fell out big time with Brussels Maybe they wouldn't be as keen to offer those dollar swap lines in the future And in which case, the Europeans might have to club together and try and provide support to each other and provide dollars and I actually heard a central bank governor of an unnamed country, which I won't disclose, saying We at our central bank are actually increasing our holdings of dollars right now. We're not diverversing away from it, we're doubling down just to make sure we have that buffer zone. And again, if you look at the Gulf States right now, you know, the reality is that big central banks like Saudi Arabia have a lot of dollars and are potentially in a position to help people in the region if they start to run out. Your point about the dollar having a life of its own even outside America is really very relevant. Jillian, that is amazing. That was just a theory I had of something they might be able to do. They're actively discussing it. That's. They're discussing it discreetly and really just as a last case scenario and simply as part of Pudent risk management, but we're in a world where prudent risk management is a very good idea. But this brings up for me the same question we've had for this whole conversation, which is that If We allow banks offshore to copy the dollar, us meaning the Americans is America sovereign? over the dollar. We assume that it is, we have some sovereignty, a good deal of sovereignty over banks in the United States. But if this thing is happening offshore, that to me really calls into question these assumptions that we have about monetary sovereignty. It also refers to stable coins as well, though, because in some ways That's a partly state sanctioned effort now by the U.S Treasury to popularize the dollar's usage, have forms of dollars used all over the world. but in a vehicle that's not actually directly controlled by the Fed anymore And that's because it's useful for the United States to continue to encourage this dollar system so long as we have the best and only reserves. So I have one last burning question from my part, and I'm sure Robin may have another one, Has anyone ever tried to create a dollar coin, a silver dollar coin with Licks face on it Yes There is one It's the only reason we know what he looked like. Oh, wow when he disappeared, there was a tradition in central Europe of what we would think of today as commemorative coins. But they, you know, you could wear it a coin. You would drill a hole in it and wear it on a chain around your neck. And so there was like there were anti pope coins There were sort of silver dollars that had like anti papist messages on them. There were anti plague coins. It was sort of if you had the anti plague silver dollar around your neck, you you wouldn't get sick. Yeah, because there weren't have any pro plague coins, I'm guessing. That's exactly right. That's exactly right. Stefan Schliick's widow had a coin commissioned of his bust. Crucially, he's depicted as a merchant. with a big ruff and not as a warrior Okay, that I wandered into his house crazily enough in Jacem's Hall. So I went down to the bottom of this silver mine to tour it and I got back up and I had some extra time before I needed to leave. and I just started wandering around the town and there's a little sign that said this was Stefan Schlliick's house It's empty has not been occupied since the Second World War. The rooms are empty, the windows are destroyed, and I sort of like poked my head in. And I did not go up to the second floor because nobody knew I was there. It seemed like a really bad idea to fall through a joist when nobody knows that you're in Stefan Schlich's house You know, but that's it, he was not really wealthy. It's not the biggest house in town. and he only lived in it for about two years Well, so I wanted to tell President Trump if he's going to put his face on the next commemorative coin on the dollar linked coin in America, that there's been a very long antecedent And it's not always it's the best of Omens, but there we go Yeah But it is fascinating that this silver mine in Bohemian fifteen fifteen essentially kind of births this super currency that transcends sovereignty. and you talked about how it was a feature, not a bug But it seems it's actually the Killer USP, like what is actually the selling point for the Tala that becomes the Doalar is that it is outside of any sovereign control, that it is not the Gilda that's tied to the Dutch or a Florentine Duucat or the stirling, which its fate is somehow entwined into the waxing and waning of the great powers it transcends all that. and that's why the dollar is so powerful. It actually indicates that even if the US. were to decline, actually the dollar can shrug all that off anyway because there is a kind of, I guess use the economist phrase, a reveal preference from the entire world have something that we all agree is money And we can exchange it, whether we're talking of bank transfers, trade Uh sec financial securities, whatever, really? When we look back at theories of currency dominance, they often hang on empire So Robert Mundel, the economist who won a Nobel Prize for his work on sort of figuring out how the eurozone might work said that great currencies are the children of great empires. And his assumption was if you have an empire that's got a big domestic market and it's more or less stable, so it produces stable coins and it trades with states outside of its own borders, then its own domestic currency will spread outside of its borders and become dominant With all due respect to Robert Mundel, who has a Nobel Prize and I do not I don't see that story I see the story that Robin just described And when you look at the beginning of the dollar at the very least, you do not see a story of empire or sovereignty. The Holy Roman Empire, for a lot of complicated reasons, actually hated the dollar coins. They were trying to come up with some standard for the empire. and they were settling on something called a Rhine fllor and it was a gold coin that was a depreciated version of of the Florence that came up from Florence, they struggled with the dollar precisely because As Robin points out, it was useful for merchants And it's very difficult to tell a merchant, don't buy or sell this way. They know what they want So will the dollar prove to be more long lasting than stterling say I think it's possible that something called the dollar will outlive the current American dominated dollar system. I think that's very likely. Well, that's a fantastic cliffhanger to end on because most of us won't be alive to actually see whether that's true or not, but it's certainly very thought provoking So thank you so much, Brendon, for joining us. Thank you guys. I'm sure we'll come back to talk about the dollar again in future episodes, but unfortunately, that's it from this episode of The Story of Money from the Financial Times. I'm Jillian Tet, and I'm Robin, Wiggleswifith. And we'll see you back here again next week