Coins and Currency: Building a Foundation

Last week, I started my three-part series on Currency and Coinage. I talked about the existing currency system of Dungeons & Dragons, how the common silver standard can fix the price of common goods but doesn't really improve the "realism" of the system, and how larger projects of developing an economy to justify your currency can get way out of hand.

Well, this week, we're going to be looking at something smaller in scope than the whole economy. We're going to examine the underpinning principles of the historical European coinage system, and use that to discuss building a similar foundation for coinage in our world that we can use to build on top of.

Next week, we'll be doing that fleshing out. We'll talk about giving more character to your currency, so that the coinage complements other aspects of your worldbuilding and enhances themes present in your world. But before we can get to that, we need a currency basis.

Subscribers to the blog can see me put all this into practice in my own world, as I create the specific underpinning currency system for the main focal continent of my world. You can sign up at any point to gain access to this! The subscriber exclusive content is at the end of this post. Subscribing is free!

Pounds, Shillings, and Pence

Before the modern system where one British pound was 100 British pennies or pence, Britain used a confusing non-decimal system with weirder conversions. One pound equaled 20 shillings, and each shilling was 12 pence. While this feels like just a non-metric currency system for the same country to invent the foot, yard, gallon, acre, and mile, this sort of 1:20:240 system was the standard across Europe until the 1700s when countries started to adopt "decimal" currencies with 1:100 ratios (starting with Russia in 1704). We think of the system being British because they kept it until the 1970s, a solid century after most of the rest of the continent.

The Roman System

Why was this ratio so widespread? The medieval French livre tournais followed it until the French Revolution created the decimal "franc." The Dutch guilder followed a similar 1:20:160 ratio. And if the British used pounds, shillings, and pence, why does Charles Dickens talk about thinks like farthings and crowns?

The answer is Ancient Rome. Rome defined their coinage by weight--the theoretical librum (a literal pound of silver), which while too much for every day transactions, might be exchanged between states), the solidus (a gold coin of 4.45 grams of essentially pure gold), and the denarius (a silver coin predating the solidus, consisting of 4.5 grams of silver). While emperors would debase their coins, keeping the weight and reducing the purity, eventually essentially killing the denarius in the 3rd century (and replacing it with the solidus), and eventually ruining the solidus under the Byzantine era, while these coins were stable, they were good for centuries.

While the exchange rate fluctuated through Roman times--with the denarius being phased out and replaced by the solidus--they would become fixed by Charlemagne in the late 700s, and then adopted into Britain. Charlemagne established that one librum could be divided into 20 solidii or 240 denarii. We get "pounds" from librum's meaning, solidus became shilling, and denarius became penny.

Rome had ruled over pretty much all of Europe, and Charlemagne too ruled over a huge territory, which meant that these coins and rates could become standardized across their empires and therefore across the continent. Even when English monarchs introduced other coins, like the farthing--a quarter of a penny--they established them in reference to this core exchange rate.

For U.S. people--and most living under a modern, decimal currency--this might be confusing because we don't really reference things in multiple coins. If I say something costs "five pounds and four shillings," that feels weird, especially if I chose to pay that five pounds and four shillings in 3 pound coins, one two-pound coin, 2 individual shillings, and 24 pence coins.

But it is really no different than saying something is $5.25. You can pay that in a number of different combinations--525 pennies, or a $5 bill and a quarter.

5 pounds, 4 shillings is just the base amount you owe, and then you can mix and match specific named coins to make that amount. We just don't really name our bills except by their face value in dollars.

The takeaway for our worldbuilding is the importance of a standardized, imperial coinage system as our baseline. We can add in all the farthings and groats that we want for our actual usage, but we need some sort of reference value to base everything against. In history, that reference ratio was fixed by imperial decree.

The Role of Nature: Human and Precious Metallic

But why 1:20:240? That's an absolutely insane ratio to create in a vacuum. Why wouldn't you pick 1:10:100, something much cleaner?

There's essentially two reasons that we'll want to bear in mind. The first is that while metric/decimal numbers make far more sense when you have pen and paper or a calculator, there's a certain logic to the imperial system for mental math. A foot being 12 inches is easily divisible by more factors. 10 is only divisible by 2 and 5, but 12 can be broken into 2,3,4, or 6. If you're measuring flour by hand with fixed tools instead of a kitchen scale, being able to create a third of a recipe is easier than being limited to a fifth or a half. So we want numbers that are easily divisible in our system, especially since we're having to actually mint all of these coins by hand. Imagine how much more annoying it would be if you didn't have the quarter, nickel, or dime, and you could only get change in pennies. We want divisibility in our coin system.

Second, we're minting our coinage out of precious metals. These metals appear in the earth at a shockingly consistent ratio. The gold-to-silver ratio has hovered right around 1:12 for most of human history. During the middle ages, it dropped slightly, meaning that gold was relatively more abundant, but reverted to 1:12 by 1450. Discovery of abundant silver in the Americas by Spain led to massive inflation, ultimately crippled the Spanish economy after flooding the market with silver, and forever reshaped the ratio until our modern ratio that tends to be around 1:100--with gold being far rarer than silver.

And 1:12? Oh hey, D&D's 1:10 ratio that we discussed last week actually isn't looking that bad for historical values, even if it is wildly off-base to modern ears. If you want gold to be more abundant in your world, shrink this ratio--historic values have dropped to 1:9 in the medieval period, so that's totally within reason. If gold is exceedingly rare or silver is abundant, increase it to 1:20 or 1:50 or more.

Keep in mind that this ratio is our shillings-to-pence ratio, not our pounds-to-shillings one. The pound was just more silver, not a different metal. That 1:20 ratio of pounds to shillings? Well, silver was 12 times more abundant than gold, and Charlemagne redefined the pound to be 408g--different from our own and from the old Roman pound. His denarius was also only 1.46g, instead of the old Roman 4.5g, which meant that 279 denarii per pound – he rounded to 240 for ease of math, which gave a 1:12 rate for pounds to shillings. Sorry for all the math, but it goes to show that some rounding is totally ok.

Silver to copper has similarly been pretty stable at 1:112, though most modern sources convert copper to pounds and keep silver in ounces so the ratio looks weird if you google it. Copper is far easier to find than silver or gold.

What about platinum, D&D's highest currency? Well, unfortunately, platinum seems to have mostly been equivalent to gold for a lot of history (admittedly, I'm pulling from limited sources here, as gold-silver has been tracked for much longer than any other ratio), so a platinum piece probably shouldn't be worth that much more than gold. An easy argument could be made for a sort of 3:4 ratio, or even a 1:2 ratio with only a little exaggeration, but at max, 1 platinum should be 2 gold.

What about iron? In a lot of fantasy settings, people have chosen to swap copper for iron or to create a new, lowest currency denomination. I haven't been able to find a reliable source for this ratio at all, but my instinct says that iron is not a great currency for a few reasons: it is orders of magnitude more abundant than copper, and it has a lot of important non-currency relevance for someone living in the medieval or Renaissance world as armor and weaponry. Why divert so much useful metal into minting coins with it, when you could be making swords and then using those swords to go conquer some gold mines?

Anyways, back to copper, silver, and gold. We can pretty easily see the logic for the 1 shilling/solidus (gold) to 12 pennies/denarius (silver) ratio. Both coins were about the same weight, around 4.5 grams, and highly pure. Gold and silver naturally occur in Europe in about a 1:12 ratio, historically, and so it makes sense that the currencies would adopt that ratio as well. Plus, 12 is an easily divisible number, making it a useful measure for conversions between denominations.

A Brief Aside to Make Fun of J.K. Rowling

I hope you can see that there's a logic to the pre-decimal system. Gold, silver, and copper exist in real ratios in the ground to each other, and ease of division smooths over any slight differences in these ratios (1:12 is much easier than 1:11.5, even if that might be slightly closer to accurate at a particular point in time).

A particularly egregious example of worldbuilding and currencies comes from Harry Potter. Harry Potter uses a Gold Galleon:Silver Sickle:Bronze Knut system, with a ratio of 1:17:493. 17 (Galleon:Sickle) and 29 (Sickle:Knut) are both prime numbers, so they utterly fail at being handy for divisibility. Books references say that the gold coins were bigger than most normal non-wizard coins and that knuts were tiny. Particularly since these books are set in a modern world where the gold-to-silver ratio is massive, a large gold coin would be worth wayyyy more than 17 medium silver pieces. And a silver coin should be wayyy more than a tiny bronze one.

So it fails to align with historical or modern ratios or be divisible. It is a bad system, utterly rooted in "just making stuff up" to make fun of the British pre-decimal system without understanding why the British system was that way. It is lazy worldbuilding that doesn't even take the easy-to-comprehend method of using a decimal system.

Anyways, end of rant.

Conclusion: Creating a Baseline

So we've learned about historical precious metal values, and about the role that big empires played in standardizing these currencies. The important part for us is to design this sort of "reference currency". We'll talk about specific coins for your world next week, but the important part from this week is to design a standard sort of baseline that our particular coins then fit into.

Remember, inventing coins themselves is not inventing a money system. The U.S. has dollars and cents as its money system, but it has $1, $5, $10, $20, 25c, 10c, 5c, and 1c "coins". That's a lot of coins to design, but they all fit into the standardized system of 1$:100c exchange ratio.

While 1:100, like D&D has with Gold and Copper, is a totally acceptable and easy-to-use baseline, especially for modern people because it is the baseline for the dollar, the modern pound, and the Euro, you can have more fun with it by referencing the actual availability of the precious metals in your world, and aligning it with those numbers--constrained by divisibility.

This is all very abstract, I know! If you want a practical example of me putting it into play in my world, be sure to subscribe to the blog and read on!

But for non-subscribers, we'll quickly touch on:

Next Week

Last week, we diagnosed the problem. This week, we talked about creating a foundational "money system"--even before caring about the specific coins that people would use.

Next week, I'll talk about building specific coins to layer on top of this core money definition system! We'll focus on how to design coins that enhance your worldbuilding elements and themes, reflecting ideals of the world back at you, using real lessons from history. And as my subscriber exclusive, subscribers will get to see some specific coins from my world and how they fit into the money system described below in this week's subscriber exclusive section.