Wednesday, October 06, 2010

Currency history - history of Japanese Yen

The origin of Japanese currency can be traced to the Wu Zhu bronze coin of China, which was introduced under the Han Dynasty around 221 BC. Until the 8th Century the Japanese imported such coins from China. However, in 708 the Japanese government began minting their own silver and copper coins called the Wado Kaichin or Wado Kaiho, which imitated the Chinese Kai Yuan Tong Bao coin's size, shape, and weight.
Approximately 250 years later though, the Japanese government entered into a period of decline and as they could no longer mint their own currency, begun to import Chinese currency again. Over the next few centuries, the inflow of Chinese coins did not meet the demand for a monetary medium that resulted from the growing trade and economic expansion. To meet this demand, two privately minted Japanese coins (from the 14th - 16th century) Toraisen and the Shichusen entered into circulation.
Around the late 15th Century, warlords had accumulated large debts that needed to be paid off, which subsequently encouraged the minting of gold and silver coins known as the Koshu Kin. Under the rule of Toyotomi Hideyoshi (Edo Period), gold coinage was made into a standard currency. The Tokugawa Shogunate Government then established a unified monetary system that consisted of these gold coins in addition to silver and copper. Minting took place in the Kinza Gold mints where the present head office of the Bank of Japan now stands.
Although some paper currency had been introduced previously (circa 1600), it was not until the Meiji Restoration that the first nationally accepted paper money was established. The Meiji Government wished to simplify and centralise all the various coins (holding different values) that came about under the Edo Period and thus created the Yen in 1871. The New Currency Act developed a monetary system similar to that of European countries, and made a decimal accounting system of Rin, Sen, and Yen.
Thus the gold standard was adopted and the round-shaped Yen replaced the previous gold and silver coinage. The first national Yen banknotes of the 1870s resembled US banknotes as they were printed by a US company. However, the 153 national banks of Japan of the late 19th century were to lose their authority when the official Bank of Japan was established in 1882.
The yen was introduced in 1872 as part of the modernization of the Japanese currency system. The value of the yen was originally linked directly to that of gold. After extensive devaluation resulting from World War II, the Bretton Woods system linked the yen to the US dollar. In turn, when the US started to abandon strict adherence to the gold standard in the early 1970s, the yen was allowed to float in 1973. However, since 1973, the Japanese government has maintained a policy of currency intervention, and the yen is therefore under a “dirty float” regime.

This intervention continues until today. The Japanese government focuses on a competitive export market, and tries to ensure a low yen value. The Plaza Accord of 1985 temporarily changed this situation and led to a peak value against the US dollar in 1995, effectively increasing the value of Japan’s GDP to almost that of the United States. Since that time, however, the yen has greatly decreased in value. The Bank of Japan maintains a policy of zero to near-zero interest rates and the Japanese government has an extreme anti-inflation policy.
The yen is widely regarded as undervalued, and the Japanese government cannot keep supporting this low level indefinitely. The current situation is very similar to 1998, when low interest rates also created an undervalued yen, and a few global economic shocks - relatively moderate in nature – cause the yen to rapidly appreciate. The increase in value had seriously negative effects on various industries that relied on a cheap yen.

Currency history - history of Italian lira

The lira (plural lire) was the currency of the Italy between 1861 and 2002. Between 1999 and 2002, the Italian lira was officially a “national subunit” of the euro. However, physical payments could only be made in lire, as no euro coins and notes were available.
The lira was also the currency of the Napoleonic Kingdom of Italy between 1807 and 1814.
The term originates from the value of a pound weight of high purity silver and as such is a direct cognate of the British pound sterling; in some countries, such as Cyprus and Malta, the words lira and pound were used as equivalents, before the eurowas adopted in 2008 in the two countries. "L", sometimes in a double-crossed script form ("₤"), was usually used as the symbol. Until the Second World War, it was subdivided into 100 centesimi (singular: centesimo), which translates to "one hundredth".
The Napoleonic Kingdom of Italy issued coins between 1807 and 1813 in denominations of 1 and 3 centesimi and 1 soldo in copper, 10 centesimi in 20% silver alloy, 5, 10 and 15 soldi, 1, 2 and 5 lire in 90% silver and 20 and 40 lire in 90% gold. All except the 10 centesimi bore a portrait of Napoleon, with the denominations below 1 lira also showing a radiate crown and the higher denominations, a shield representing the various constituent territories of the Kingdom.
In 1861, coins were minted in Florence, Milan, Naples and Turin in denominations of 1, 2, 5, 10 and 50 centesimi, 1, 2, 5, 10 and 20 lire, with the lowest four in copper, the highest two in gold and the remainder in silver. In 1863, silver coins below 5 lire were debased from 90% to 83.5% and silver 20 centesimi coins were introduced. Minting switched to Rome in the 1870s.
Apart from the introduction in 1894 of cupro-nickel (later nickel) 20 centesimi coins and of nickel 25 centesimi pieces in 1902, the coinage remained essentially unaltered until the First World War.

In 1919, with a purchase power of the lira reduced to 1/5 of that of 1914, the production of all earlier coin types except for the nickel 20 centesimi halted, and smaller, copper 5 and 10 centesimi and nickel 50 centesimi coins were introduced, followed by nickel 1 and 2 lire pieces in 1922 and 1923, respectively. In 1926, silver 5 and 10 lire coins were introduced, equal in size and composition to the earlier 1 and 2 lire coins. Silver 20 lire coins were added in 1927.
In 1936, the last substantial issue of silver coins was made, whilst, in 1939, moves to reduce the cost of the coinage lead to copper being replaced by aluminium bronze and nickel by stainless steel. All issuance of coinage came to a halt in 1943.
In 1951, the government again issued notes, this time simply bearing the title "Repubblica Italiana". Denominations were of 50 and 100 lire (replacing the Bank of Italy notes) and they circulated until coins of these denominations were introduced in the mid 1950s. In 1966, 500 lire notes were introduced (again replacing Bank of Italy notes) which were produced until replaced in 1982 by a coin.
In 1967, 50,000 and 100,000 lire notes were introduced by the Bank of Italy, followed by 20,000 lire in 1975 and 500,000 lire in 1997.

Currency history - history of French franc

The euro replaced the French Franc that had previously been the French currency.
The franc has a long history, dating back to the 14th century - it was introduced by King John II in 1360 and lasted (with a break in the middle) until the euro was introduced in 2002.
The symbol of the currency was simply 'F'.
The franc officially ceased to exist between 1641 and 1795, following its replacement by Louis XIII with the ecu and the Louis d'Or, but the name franc remained in common usage.
The French franc was reintroduced and became decimal in 1795, after the French revolution.
As the value of the franc diminished over the centuries, it was replaced by the 'new' franc in 1960, with 100 old francs being worth one new Franc. The old franc became the valid 'centime' coin after the devaluation of the currency, and continued to be for some years.
Forty years later, many older French still convert prices into 'old francs'. This is complicated for us newcomers who expect to hear a price of, say, 25 euros, and get told the price is 20,000 francs!

Currency history - history of Belgian franc

The franc was the currency of Belgium until 2002 when the euro was introduced into circulation. It was subdivided into 100 centiem (Dutch), centimes (French) or Centime (German).
The conquest of most of western Europe by revolutionary and Napoleonic France led to the French franc's wide circulation. In the Austrian Netherlands (now Belgium), the franc replaced the kronenthaler. This was in turn replaced by the Dutch gulden when the Kingdom of the Netherlands was formed.
Following independence from the Kingdom of the Netherlands, the new Kingdom of Belgium in 1832 adopted its own franc, equivalent to the French franc, followed by Luxembourg in 1848 and Switzerland in 1850. Newly-unified Italy adopted the lira on a similar basis in 1862.
In 1865 France, Belgium, Switzerland and Italy created the Latin Monetary Union (to be joined by Greece in 1868): each would possess a national currency unit (franc, lira, drachma) worth 4.5 g of silver or 290.322 mg of fine gold, all freely exchangeable at a rate of 1:1. In the 1870s the gold value was made the fixed standard, a situation which was to continue until 1914.
In 1926, Belgium, as well as France, experienced depreciation and an abrupt collapse of confidence, leading to the introduction of a new gold currency for international transactions, the belga worth 5 francs, and the country's withdrawal from the monetary union, which ceased to exist at the end of the year. The belga was tied to the British pound at a rate of 35 belgas (175 francs) = 1 pound and was thus put on a gold standard of 1 belga = 209.211 mg fine gold. The 1921 monetary union of Belgium and Luxembourg survived, however, forming the basis for full economic union in 1932. In 1935, the Belgian franc was devalued by 28% to 150.632 mg fine gold and the link between the Luxembourg and Belgian francs was revised to 1 Luxembourgish franc = 1¼ Belgian francs.
Following Belgium's occupation by Germany in May, 1940, the franc was fixed at a value of 0.1 Reichsmark, reduced to 0.08 Reichsmark in July, 1940. Following liberation in 1944, the franc entered into the Bretton Woods system, with an initial exchange rate of 43.77 francs = US dollar set on October 5. This was changed to 43.8275 in 1946 and then to 50 following the devaluation of the British pound in September 1949. The Belgian franc was devaluated again in 1982.
Like 10 other European currencies, the Belgian/Luxembourgish franc ceased to exist in January 1, 1999, when it became fixed at 1 EUR= 40.3399 BEF/LUF, thus a franc was worth € 0.024789. Old franc coins and notes lost their legal tender status in February 28, 2002.

Currency history - history of Polish zloty

First Polish coins were struck in second half of X century. Earlier foreign money was used and barter transactions were made; along with Polish coins these two were still used concurrently till XIII century.
The first Polish duke - Mieszko I - begun to issue a silver coin. System was based on 1 pound = 367 grams of silver, of that 240 denars (called thick) were produced. During the political turmoil of XI century these coins lost the value and had to be replaced in the latter half of the century.
The new system was based on 1 grzywna (weight unit) = approx. ? Carolingian (French) pound. The system was 1 grzywna = 4 wiardunki = 24 skojce = 240 denars = 480 halfdenars (obol), but only denars (called thin) were struck. Value of denars was declining due to decreasing content of silver used. The thickness of coins was descending gradually also – in the end of XIII century they were so thin, that the only one side die was used – these were called bracteats (brakteat). Coins were neglected and seen as a way of making high profits for the issuer, therefore they were debased again.
Kazimierz the Great did the next recoinage in XIV century. The new, grosz (grosh) system was based on a European one. 1 Cracovian grzywna = 197 grams of silver = 4 wiarunki = 24 skojce = 48 groszy (grosh) = 96 polgroszy (half grosh) = 96 denars. The gold coinage of Hungary was used in valuable transactions. This system has also been debased. Foreign coins o less value were brought to Poland. Different systems were used in the parts of country – Prussia and Lithuania had completely different coinage. All these factors caused a lot of havoc to the trade.
Thorough reform has been made in 1526 – 1528, the new zloty system was implemented. 1 zloty = 5 szostakow (~six…) = 10 trojakow (~three…) = 30 grosh. 1 grosh = 2 half grosh = 3 szelag = 6 ternars = 18 denars. 1 grosh = 0.77 grams of silver. The system was implemented in Prussia in 1538 and in Lithuania in 1569. Gold ducats of 3.5 grams of gold were struck then. In 1564 silver talars were introduced, the coin was meant to be equal to golden ducat. 1 talar = 5 orts. The system was stable until the beginning of XVII century. When during the reign of Zygmunt III the coins were debased again, also worthless German coins were brought in and took place of melted Polish coins. The crisis occurred strongly after the war with Sweden in the half of XVII century – the coinage was debased even more. In 1659 Boratyni was granted a licence to strike copper szelags, he exceeded the amount agreed in the licence. In 1663 Tymf begun to issue low value zlotys, that consisted half of the silver then in the regal coinage. Those coins were then given an obligatory value over intrinsic one – this situation continued till the end of reign of Saxon elector kings in Poland (1763). During the seven-year war (1756 – 1763) Prussians got the genuine dies and struck fakes of very low intrinsic value.
Another thorough reform had to be made. In 1766 the new coinage was introduced; based on 1 Kolognian grzywna = 233.8 grams of silver = 10 talars = 80 zlotys (after 1786 83.5 zlotys). 1 gold ducat = 16.75 zlotys (after 1786 18 zlotys).
There was an attempt to issue first banknotes during the reign of Stanislaw August (1764 – 1795), it was realised during the uprising of Kosciuszko in 1795 – these were in circulation only for the short period of insurrection.
The previous coinage was continually struck in Warsaw Duchy since 1810.
In 1815 the system has been slightly changed: 1 Kolognian grzywna became 84 zlotys.
In 1834 the Kolognian grzywna has been replaced with Russian pound of 409.5 grams of silver. And double denominations were introduced: 10 zlotys = 1.5 rubles, 1 zloty = 30 grosh = 15 kopeek.
Russian rubles were implemented into circulation in 1842. This system lasted till the end of I World War. In the remaining two other parts of Poland under Prussian and Austrian domination the dominants’ coinages were used respectively.
All three countries introduced gold coin in the latter half of XIX century.
The monetary chaos of I World War lasted till 1922. Although since 1918 the Polish mark was a legal tender still Austrian, German and Russian money was used.
The hyperinflation of after war years was overcame in the 1924 with introduction of new zloty system (denomination structure lasts from then on): 1 zloty = 100 grosh = 0.1687 grams of gold. Before the war Polish zloty has been well stabilised. But the war had ruined the system again.
Germans had issued their own money (although it was based still on the proportion of 1 zloty = 100 grosh) for the General Government (eastern part of area of Poland occupied by German troops).
Polish banknotes were issued in 1945 and coins in 1949 (then under the name of republic of Poland, without Peoples).
Monetary system of socialistic Poland has, on several occasions, suffered from inflation and the governmental steps to fight it. In 1950 there was an unfair cut in peoples’ savings volume – to decrease the amount of money in circulation.
In 1995 there was the last change – the 10,000 old zlotys = 1 new zloty. New banknotes and coins had been issued earlier (since 1990 – coins and 1992 baknotes) but put into circulation on the Jaunary 1st 1995. The new reform brought coins back to life – as since early 1990’s they were non existent in the transactions due to very small value (with some exceptions of 10,000 zlotys and 20,000 zlotys coins that were commemorative but quite common).

Tuesday, October 05, 2010

Currency history - history of Egyptian Pound

Since the beginning of the circulation of silver and gold coins in Egypt and until 1834, no specified monetary unit existed to serve as a basis for the monetary system. Only a few of the coins were minted locally. In 1834, a Decree was promulgated providing for issuing an Egyptian currency based on a bimetallic base, gold and silver. In 1836 the Egyptian pound was minted and put into circulation.
The Monetary Reform Law issued in 1885 which set gold standard to become the basis for the Egyptian monetary system, and the country had a unified currency, the Egyptian gold pound.
It was permitted to use some foreign gold coins, particularly the Sterling pound, at fixed legal rates. The Sterling gold pound, which was valued at more than its gold content compared to other foreign gold coins, became the main medium of exchange, and the Egyptian monetary system was based on the Sterling gold standard.
In 1898 the National Bank of Egypt was established and was granted, by the government, the privilege to issue Egyptian banknotes, payable in gold for a period of 50 years. The National Bank of Egypt started issuing banknotes on the 3rd of April 1899.
Consequently, the currency circulated in Egypt consisted of gold Sterling pounds and Egyptian banknotes convertible into gold. This situation continued up to 1914 when a special Decree was issued making Egyptian banknotes a legal tender and suspending their convertibility into gold. Thus, the Egyptian pound banknote became the basic currency unit, and the base of the Egyptian monetary system was changed to fiduciary paper money standard. Accordingly, gold coins were no longer used in circulation, with the result that the volume of note issue increased from LE 11.6 million at the end of 1915 to LE 3557.0 million at the end of 1980, and further to LE 38320.0 million at the end of 1999. In 1930, for the first time in the history of Egyptian banknotes, a watermark was used in issued banknotes. This was followed, towards the end of 1968, by using a metallic thread (in notes issued by the Central Bank of Egypt) as a guarantee against counterfeit instead of dependence on complexity of colors .Other features against counterfeit were found in the detailed specifications of each currency. Holograms are currently added to large denomination notes.
In July 1960 the Central Bank of Egypt was established and granted the right of issuing Egyptian banknotes. Several changes were introduced with respect to the watermark, the designs shown on the notes and the colors.
The Central bank of Egypt established a printing plant for banknotes in 1968 instead of printing them abroad. The Bank also served some Arab central banks in printing their banknotes.
In 1977 The Central Bank of Egypt issued notes of 20 and 100 pounds in 1979 and 50 pounds in 1993.

Currency history - History of russian ruble

The ruble has been the currency in Russia for 500 years. The name ‘rouble’ is thought to come from the Russian for ‘chop,’ literally referring to the way a section was cut off a silver ingot, which was the very first incarnation of the currency, with each section holding a different value depending on its weight.
There is no official symbol for the rouble although many options have been suggested over the years, including a ‘P’ with two horizontal stripes. However, the abbreviation ‘руб’ is often used in writing.
In 1710 the rouble was first divided into kopecs, 100 of which made up a rouble. Ten roubles are sometimes referred to as ‘chervonets’, in reference to the Soviet gold chervonets issued in 1923 that were the equivalent value.
There have been seven different incarnations of the rouble, due to various drastic changes in the currency’s value, with the most recent being released in 1998.
The FIRST rouble was in place for over 200 years up to 1921 when it fell dramatically in value.
The SECOND rouble was the first in the series of redenominations, swapping one ‘new’ rouble for 10,000 ‘old’ roubles. These were introduced in 1922.
A quick redenomination took place the year after, valuing the new rouble at 1 to 100 of the former roubles. This was the THIRD rouble.
In 1924, the FOURTH rouble, known as the ‘gold rouble’, was introduced and lasted until 1947. This one was valued at 50,000 of the previous issue of the rouble.
After the Second World War the government attempted to reduce the amount of money in circulation by imposing a confiscatory redenomination on paper money, which valued the new rouble at one tenth the value of the fourth rouble.
From 1961 to 1997, the SIXTH rouble was in circulation and the redenomination was based on the same terms as the 1947 redenomination. After the fall of the Soviet Union in 1991, the rouble remained the currency of the Russian Federation. During the early 1990s there was a period of hyper-inflation which meant the currency fell significantly in value.
In January 1998 the seventh rouble was introduced. It was valued at 1,000 of the previous roubles in what was simply a psychological step. Later in the same year, the rouble lost 70% of its value against the US dollar in just six months following the Russian financial crisis of 1998.
In the 18th century, the lower value roubles, such as half a kopek or a single kopec were made from copper, while five kopecs up to 50 kopecs and one rouble coins were made from silver. Five rouble coins were originally made from gold.
After the Russian civil war, silver was used for lower value coins with gold chervonets minted in 1923. In 1961 new materials such as aluminium bronze were introduced, along with cupro-nickel-zinc.
In 1991 more modern techniques were used, combining several types of metal to form new, bimetallic coins in denominations including ten roubles. New coins were again released after the fall of the Soviet Union in 1991.
Between 1769 and 1917 there were only Imperial issued bank notes, or ‘assignats.’ After 1917 the provisional government issued bank notes, called Kerenki. Soon after, in 1918 state credit notes were issued by the RSFSR, followed by currency notes the following year.

Currency history - History of Portuguese escudo

The escudo was the currency of Portugal prior to the introduction of the Euro on 1 January 1999 and its removal from circulation on 28 February 2002. The escudo was subdivided into 100 centavos.
Amounts in escudos were written as escudos$centavos with the cifrão as the decimal separator (e.g. 25$00 means 25 escudos, 100$50 means 100 escudos and 50 centavos). Because of the conversion rate of 1000 réis = 1 escudo, three decimal places were initially used (1 escudo = 1$000).
The escudo was introduced on 22 May 1911, after the 1910 Republican revolution, to replace the real at the rate of 1,000 réis to 1 escudo. The term mil réis (thousand réis) remained a colloquial synonym of escudo up to the 1990s. One million réis was called one conto de réis, or simply one conto. This expression passed on to the escudo, meaning 1,000 escudos.

The escudo's value was initially set at 4$50 escudos = 1 pound sterling. After 1914, the value of the escudo fell, being fixed in 1928 at 108$25 to the pound. This was altered to 110$00 escudos to the pound in 1931. A new rate of 27$50 escudos to the U.S. dollar was established in 1940, changing to 25$00 in 1940 and 28$75 in 1949.
Inflation throughout the 20th century made centavos essentially worthless by its end, with fractional value coins with values such as $50 or 2$50 eventually withdrawn from circulation in the 1990s. With the entry of Portugal in the Eurozone, the conversion rate to the euro was set at 200$482 escudos to €1.

Currency history - history of Argentine peso

"Peso" is a Spanish word, meaning "weight" and is termed as a unit of currency in the current scenario. Peso is quite a dominant currency in the South American continent as it forms part of the national currencies of most of the countries in the continent such as Argentina, Chile, Colombia, Dominican Republic, Mexico, Uruguay and also Cuba and Philippines. Peso is used since the time as early as the colonial times when it referred to a Spanish coin, which was equivalent to 8 reales.

Argentine peso is a currency that has been making its way through hard struggle due to the frequent crises that had struck Argentina’s economy time and again. Contrastingly, peso was one of the most popular and highly traded currencies at one time. Among many economic crises that the country had been through, the toughest of them is said to be the one that struck in 1999 as the nation’s trade partner countries Mexico and Brazil were also into serious economic crisis. It led to the currency’s discontinuation of its peg to the US dollar and it was floated. Even floating the currency was not sufficient enough for the stabilization of its value and it depreciated to as low as about 80% of its value. The currency still maintains its exchange rate at around 4 pesos per dollar when before 2002 it was equivalent to the value of the dollar.
Peso was a currency of Spanish empire since the Spanish currency reforms in 1497. The country, with time, gained power and spread its area through acquiring colonies and states like other powerful European countries that resulted in making peso a world popular currency. the Spanish peso was adopted as the legal tender throughout its colonies, many of them were among the new world countries including Argentina. At that time, peso was known as the 8 reales coin.
In 1816, Argentina declared itself independent following the defeat of the Spanish king Fernando VII with the hands of Napoleon. Independent Argentina started to issue its own currency that was denominated in reales, soles and escudos. In 1826, two versions of Argentine peso were induced one of them being convertible and the other being unconvertible and were called "Peso Fuerte" and "Peso Moneda Corriente". These version of the currency operated till 1881 when the both of them were converted into a single currency i.e. "Peso Moneda Nacional". With this conversion, the currency was officially decimalized with the announcement of a fixed exchange rate that was 1 peso moneda nacional = 1 peso fuerte = 25 peso moneda corriente = 8 reales. Initially the coin for 1 unit of the new currency was made from silver known as patacon but the economic crisis in 1890 made sure that silver coin to be changed to any other metal. Also, paper currency that was convertible into gold termed as "peso oro sellado" was issued in 1881 but it had to be with drawn in 1929.
Peso moneda nacional remained the currency of the country till 1969 and in 1970 it was taken over by a new version of peso i.e. "Peso ley", the conversion rate being 1 peso ley = 100 peso moneda nacional. In 1983, the political system of Argentina was transformed into a democratic framework and that resulted in the introduction of a new peso currency "Peso Argentino" @ 1 peso argentino = 10000 peso ley. But soon after in 1985, it was replaced yet again by a new currency "Austral" as it itself lost its value drastically. Austral replaced peso argentino @ 1 austral = 1000 pesos. During the short life span of the austral, it suffered from hyperinflation, that resulted in steep rise of prices even up to 200% in a month and constant downfall of the value of currency. in 1992, with the election of the new president, the value of austral was stabilized and peso convertible was made the national currency of the Argentina. It was directly pegged to the US dollar @ 1 peso = 1 US dollar. Unluckily the country was again struck with an economic crisis in 1999 and it resulted in the abandonment of the fixed exchange rate system and since then, Argentine peso float its way and the value of the currency is derived from the market situations.

Currency history - History of Greek drachma

Drachma was established on the island of Aegina during the 7 century BC. Depreciation was remarkably slow - about 50% over the following 200 years. Aristophanes (c. 448-380 BC) tells us that in his days one drachma was the average daily wage of a skilled labourer or a hoplite, while a juror earned half a drachma. Eight drachmas would buy a pair of shoes, 20 drachmas a quality tunic and 160 drachmas a slave (child slaves were a bargain at 72 drachmas). A family of four with slave spent 1,000 drachmas a year on living expenses. On the other hand, Xenophon claimed that half a drachma was the minimum required to provide a comfortable subsistence. More recently, some historians and economists estimated that in the 5th century BC a drachma had a rough value of 40 U.S. dollars (2006).
Shortly after the creation of the modern Greek state in 1827, after 400 years of Ottoman rule, a new currency was struck. The coins depicted a phoenix rising from the ashes to mark the kingdom's new-found freedom, under President John Capodistras (1827-31). They were minted on the island of Aegina, which served as the temporary capital of the newly-founded state, where - by coincidence - the first coinage system was introduced more than 2500 years ago!

The phoenix lasted only five years, and was replaced by the traditional drachma, showing the head of the first king of the independent state, Otto. The first coinage consisted of copper denominations of 1, 2, 5 and 10 lepta, silver denominations of 1/4, 1/2, 1 and 5 drachmae and a gold 20 drachmae. The drachma coin weighed 4.5 g and contained 90% silver, with the 20 drachmae coin containing 5.8 g of gold. The drachma of King George I (1863) was made as identical as possible in size and composition to its Attic forebear. The conceit backfired badly, as throughout the 19th century the modern drachma could gain nowhere near the solidity or prestige of the ancient. In 1868, Greece joined the Latin Monetary Union and the drachma became equal in weight and value to the French franc. The new coinage issued consisted of copper 1, 2, 5 and 10 lepta coins (with the 5 lepta coin bearing the name obolos and the 10 lepta, diobolon (two obols), silver coins of 20 and 50 lepta, 1, 2 and 5 drachmae and gold coins of 5, 10 and 20 drachmae. Very small numbers of gold 50 and 100 drachmae coins were also issued.
Overspending and overborrowing precipitated a national bankruptcy in 1893. An English financial specialist, Edward Law, helped to save the drachma from huge depreciation and his labours kept the currency intact for 50 years. In 1894, cupro-nickel 5, 10 and 20 lepta coins were introduced, the 1 and 2 lepta having not been issued since the late 1870s. Silver coins were last issued in 1911 and no coins were issued between 1912 and 1922, during which time the Latin Monetary Union collapsed due to the First World War. By the time the republic was declared in 1924, the number of coins in circulation had dwindled and there was a serious shortage of cash.
It was not until the late 1940s, after almost a decade of war and civil war, that the drachma again inflated with a vengeance. Inflation during World War II was dramatic in the extreme. In January 1941, 1 british pound was worth 1,200 drachma. By October 1944 that had spiralled to 1,219 billion drachmas. As in other countries, it required basketfuls of flimsy notes with a lot of zeros on them to buy basic provisions. A currency reform introduced a new drachma which was worth 50 billion of the old variety but nevertheless inflation continued.

In an effort to halt the inflation, Greece joined the Bretton Woods system in 1953. In 1954 the drachma was revalued for a second time at a rate of 1000 to 1 and the Finance Minister, Spyros Markezinis, dealt with the problem Alexander-fashion by chopping off three zeros. The new currency was pegged at 30 drachmae = 1 US dollar. Artists and writers who settled on the Greek islands in the inflation-free 1960s and early 1970s marvelled at how far the humble drachma - like the olive a symbol of national frugality - could stretch. In 1973, the Bretton Woods System was abolished and over the next 25 years the official exchange rate gradually declined due to growing urbanisation and EU-fuelled prosperity. Renewed inflation resulted in the exchange rate reaching 400 GRD = 1 USD and the situation was brought under control only in 1997, thanks to determined supply-side policies by the Government.