The History of Money Part 4

In For a Penny, In for a Pound

By

March 12, 2015

A Caesars' Palace greeter in his Centurion costume walks into a Hostess Bake Shop. The clerk says, "May I help you?" The greeter says, "I would like a Twinkus, please." The clerk asks, "You want a Twinkie?" The greeter responds, "Twinkii? If I wanted two of them, I would have asked for two!"

In Part III of our series on the history of money, we left off with the Roman Empire. During the reign of Diocletian, rampant inflation led to a revaluation of the currency. As of 301 AD, the silver denarius was the smallest coin. Within 150 years, the Empire had fallen and many of these coins found their way into the hands of the German tribes who had sacked Rome.

Within a few centuries, the Anglo-Saxons of northern Germany had based their entire system of weights and measures on the Roman denarius. They called the weight of one denarius a pennyweight. It was equal to approximately 1/15th of an ounce. A quarter of a pennyweight was a farthing, and a dozen pennies was a shilling. Twenty shillings - 16 ounces if you do the math - was called a pound.

Then the Anglo-Saxons conquered the former Roman province/island of Britain. The kingdoms that made up the Island included the land of the Scots, the Welsh, and seven Anglo Saxon kingdoms. One of these was Mercia. These seven kingdoms would eventually unite as England, but that was still a few centuries away.

Offa, the King of Mercia, issued a pennyweight silver coin (basically a direct copy of the denarius) and called it (strangely enough) a silver penny. More than three centuries later, Henry II standardized the purity required in the silver penny and the silver shilling, and this specific grade of silver was named Sterling. So, at this time (1158) we have copper farthings, silver pennies weighing 1/15 of an ounce, and silver shillings weighing 4/5 of an ounce.

In 1344, King Edward III introduced the gold Noble. The Noble was about the size of a shilling, but since it was made of gold, it was naturally worth more. It was valued at 6 shillings 8 pence, which comes to 80 pence. Three nobles would therefore be worth 240 pence, which would allow you to have the value of a full pound of silver in just three coins. There was still no actual unit of currency that constituted the pound.

There never really was a pound coin because the relative values of gold and silver fluctuated, so it was somewhat difficult to issue a gold coin and say it was worth a pound of silver, and a silver coin actually weighing a pound was absurd. The English were not into carrying around silver bars. A gold coin that attempted to approximate the value of the pound sterling was issued in 1663, but its value fluctuated wildly. By 1717, the value of the gold guinea had been stabilized at 21 shillings of silver (1.05 pounds).

In 1694, the Bank of England began issuing paper money, and the one pound note made the issue of odd valuation of the guinea moot.

Here is a table of all of the English money.

Denomination Value
Copper Farthing 1/4 penny; 1/48 shilling; 1/960 pound
Silver Penny or Pence 4 farthings; 1/12 shilling; 1/240 pound
Tuppence (Two pence) 8 farthings; 1/6 shilling; 1/120 pound
Thruppence (Three pence) 12 farthings; 1/4 shilling; 1/80 pound
Shilling 48 farthings; 12 pence; 1/20 pound
Gold Noble 6 shillings+ 8 pence; 1/3 pound
Gold Guinea 21 shillings; 1 pound plus 1 shilling
One pound paper bank note 960 farthings; 240 pence; 20 shillings

On February 15, 1971, the shilling and the currently valued penny were done away with. The new penny was valued at 1/100th of a pound, making its relative value the same as the relative value between the American cent and the American dollar.

The historical origin of dollars and cents is the subject of my next (and final) episode of the History of Money.