The US dollar’s ‘immigrant’ origins

0:00Gillian Tett: What happens next in the story of money? Nuveen has spent over 125 years helping clients answer this question. By investing in the growth of businesses, real estate, infrastructure and natural capital, we continue to deepen our expertise across income and alternatives so investors can confidently write the next chapter of their own portfolio stories. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible.

0:28Brendan Greeley: By the early 17th 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.

0:54Gillian Tett: Well, that shows the joys of multiculturalism and immigrants. they get the job done.

0:58Brendan Greeley: It's an immigrant coin. This is not the story of sovereignty.

1:01Gillian Tett: So when is someone going to tell the American government that they're using an immigrant coin?

1:13Today on the story of money, the origins of the dollar.

1:20Gillian Tett: 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 dollar itself is actually a lot older than the United States of America.

2:05Gillian Tett: 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 time. time and when he created the dollar he had no idea what was going to happen to it i'm actually prepared a little thing here i'm going to 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're working together exactly this is it this finally breaking free yes my revenge so i'm going to do a bit of a fairy tale rendering okay here goes once upon a time in a land far far away a land in central europe called Bohemia.

2:49It was a place that was full of mountains and valleys and untouched forests and 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, hears about this fabled silver mine and decides to make his fortune. Now, doesn't that sound like a fairytale start?

3:26Gillian Tett: 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 500 years actually now to the beginning of the 16th century. We're going to the silver mine in Central Europe and we're meeting this guy who played a key role and 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 story of money from the Financial Times, everybody. I'm Gillian Tett. And I'm Robin Wigglesworth.

4:05So the dollar has existed in various incarnations for almost half a millennium. But Gillian, as you mentioned, perhaps the dollar is reaching the end of the road, or maybe it's past its peak, perhaps, maybe?

4:18Gillian Tett: Well, what has certainly peaked 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.

4:58Gillian Tett: But he's the author of a new book on the world's most powerful currency called The Almighty Dollar. So, Brendan, great to have you back.

5:07Brendan Greeley: 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 to have you back. Yeah, and here I am, just like in a grotty blazer, reading books and writing things down. Yes, I was at the FT. I was a Fed watcher.

5:21Gillian Tett: 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.

5:31Brendan Greeley: Super exciting. Yeah. So, Brendan, you've actually visited the town where it all began. And it's actually a real place, despite my Hans Christian Andersen impression. It's not just a fairy tale. It's called Yakimov, I think, right? Yakimov? Yakimov in Czech. Yes, originally Yakimsthal 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?

6:06Brendan Greeley: Yes, no, I absolutely tested that out, Robin. See, that's the kind of hands-on journalism experience that we need to bring to academia a bit more. I also learned what an embrasure 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 20th 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.

6:46Brendan Greeley: Germans came south to work the mines. This is the area that we used to call the Sudetenland of where Germans lived in Czechia.

6:55Gillian Tett: So how does this all relate to the dollar? 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 foreshadowed him like the hero, maybe a bit of an anti-hero. And I love his name, Stefan Schlick, which really just sounds like he definitely sounds like a financial pioneer, right? Like an innovator in the world of money.

7:17Brendan Greeley: Oh, man, the most perfectly named huckster. Yes, exactly.

7:20Gillian Tett: Far too Schlick for his own good, I think. Yes. So, Brendan, tell us about Stefan Schlick and his role in the Genesis story of the dollar.

7:28Brendan Greeley: 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 Count Stefan Schlick. 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 Schlick was part of a German-speaking family that had been elevated to the nobility in the classic medieval way. His great-great-grandfather was useful to the king.

8:00Brendan Greeley: And so the rest of the estates general didn't really regard them as legitimate. There's another problem, which is that the way inheritance law was set up, Stefan Schlick 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 Schlick was the 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 Karlsbad, which is now called Karlovivari.

8:39Brendan Greeley: It's a spring that was available then and is available now for recreation. And he heard that there was silver in the valley. Somebody 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 1520s, you had to build machines 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.

9:24Brendan Greeley: It's a very capital intensive operation. And in fact, Friedrich Engels says these silver mines in Bohemia and Germany were one of the beginnings of capitalism, just assembling a - This is Friedrich Engels as in Engels and Marx. Friedrich Engels as in Engels and Marx, yes. Stefan Schlick 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 he gets in touch with the Saxons. Saxons have silver mines. They also have the capital and the understanding to figure out how to finance the silver mines. So he brings some silver investors and some silver miners down to the valley.

9:55Brendan Greeley: He has them dress up as a hunting party. So nobody knows what's going on. And he rides up into the valley. They look at the silver. Sure 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. But 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.

10:33Brendan Greeley: 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 this Saxon mining operation. It's not sovereign. And in fact, it's all breathtakingly illegal.

11:12Gillian Tett: But so the mine actually starts production in 1516, 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? Or how exactly did the whole thing work?

11:34Brendan Greeley: Yeah, he was also really bad at it. It's really important to remember with Stefan Schlick that not only was he not really the rightful lord of the valley, he was like 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 bursar 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 Schlick has no experience mining silver and he has no money.

12:09Brendan Greeley: So the first thing he does is he goes to Augsburg 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 explain that? Come on, you know what monopsony means. But not 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.

12:45Brendan Greeley: 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 Schlick took out. The challenge with this is, again, you've got to do it under cover of night. It doesn't really work very well. And people start to find out. So this whole mining operation, it wasn't sort of a big elaborate legal operation. It was, you know, a fly-by-night, wildcat 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.

13:25Brendan Greeley: And he doesn't have it. And the miners realize this. And in 1517, 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 asked for better money.

13:56Brendan Greeley: So 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, very bad pennies. And so they strike. As a result of the strike and the renegotiation, Stefan Schlick loses even more power. He has to bring in a captain of the mine from Saxony. And something really interesting happens.

14:29Brendan Greeley: The miners negotiate, and this seems to be important to them, the right to rename the valley. So this is when the valley becomes St. Joachimstall.

14:36Gillian Tett: And just for those who are listening, you know, we're back in 1515 in this far-flung corner of Europe on the edge of Germany and Bohemia. You 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?

15:02Brendan Greeley: So crucially, the mine 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 discs 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.

15:40Brendan Greeley: 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 Joachimstall. They start to call them Joachimstaller. 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 as they spread up into Leipzig and then out into the Baltic, Joachimstaller, and then just taller, and then in Dutch they become doll-der, and then in English they become dollar.

16:15Brendan Greeley: Already in the 16th century you have mentions of the word dollar in English. This is a coin that is outside of the currency system of the pounds, shillings, and pence that they had in England.

16:27Gillian Tett: Wow. I mean, it's fascinating because, you know, I think most people have never heard of the Jakimstala, and the idea that the word tala or dollar was floating around Europe back in the 16th century is a real revelation. But so this starts to emerge. And then, of course, we have a second miner's strike, don't we, in 1525. I mean, here's an example of industrial action or organized labor actually creating monetary history probably for the first time.

16:54Brendan Greeley: 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 or capital because you could... It's true. A crucial distinction, I imagine, for the East German scientists at the time. Yes, at the Humboldt University, very likely in Berlin.

17:26Brendan Greeley: 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, you know, from zero residents to several hundred within about two years and then into the thousands by the 1520s. 1920s, you know, there's this saying that sort of still today they talk about in Jakobstall where the Saxons streamed over the mountain saying, ins tall, ins tall, mut mutta, mut all, and that translates to into the valley, into the valley, take your mother, take everything.

18:02Gillian Tett: So in terms of practical things, I mean, so they're creating these quasi coins that aren't really coins called Jakobstaller. And why did the miners go on strike a second time? And why does that matter so much for the dollar or the taller?

18:17Brendan Greeley: Well, Stefan Schlick, again, was really bad at his job, and he didn't do a great job of managing the liquidity of the mine. So his bursar that he hired actually stole Joachim's taller, so 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 mine. 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.

18:48Brendan Greeley: And, you know, there's this amazing moment for any of us who have covered Silicon Valley. You're going to recognize this moment immediately, which is that they hold in early 1525 a shooting festival. They bring in all 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.com is sort of getting out over its skis.

19:26Brendan Greeley: And in fact, Philip Robinson Russner, 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 and 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 in the good pennies they demanded. So in 1525, they didn't just strike, they sacked the town. They burned Stefan Schlick's house. They seemed to have burned his fancy London clothes that he had ordered for the shooting festival.

20:03Brendan Greeley: Oh, poor thing. Poor thing, exactly. And then they really sit down to negotiate at the end of this. Stefan Schlick, you know, goes back to his hometown of Schlackenwert, 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 recognized even in the capital structure of all these mines. But after this, the miners start getting paid in what they call good white coin.

20:38Brendan Greeley: That means pure silver straight from the mine. Like these, almost like the dividend discs. Almost like the dividend discs, but smaller. Exactly. And so what you get then is everybody's 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?

21:14Brendan Greeley: You have this sovereign Lord making coins. Very quickly in this process, within seven years, he doesn't matter at all. He disappears. And what you have instead is this legal exception. Stefan Schlick, so far as we know, dies in the Battle of Mohac. This is, you know, the Turks moving north fight the Hungarian cavalry. Oh, yes, this is a battle when Suleiman the Magnificent, right, invades 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 fan of it for a very long time.

21:52Gillian Tett: That doesn't appear in a lot of economic courses. People don't really learn about that when they're learning about history and finance. No, I know.

21:56Brendan Greeley: And Stefan Schlick definitely wasn't magnificent, right? He was not magnificent. So the king dies in the battle. Stefan Schlick disappears in the battle. We're not really sure what happened to him. 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 and 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 matter. 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.

22:31Gillian Tett: And that's where basically the Jokamstahler, if I pronounce that right, starts to have a life of its own that outlives 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.

22:55Gillian Tett: The future of fixed income investing will continue to blur the lines between public and private markets. Nuveen's credit platform was built to navigate this shifting landscape, channeling capital toward the businesses, infrastructure and energy solutions that are shaping tomorrow's economy, all while aiming to deliver the resilience and returns that portfolios seek today. Nuveen. Invest like the future is watching. Visit nuveen.com slash future to learn more. Investing involves risk. Principal loss is possible. So just before the break, we heard about the man called Stefan Schlick, the hapless 16th century nobleman from Bohemia, who almost no one's ever heard of if you're studying finance and money, but actually matters enormously.

23:38Gillian Tett: 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 litter the history books but here's a really interesting thing because although Stefan Schlick vanishes from history at this point in fact his creation the Joachimsthaler 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, Brendan, what actually happens to Schlick's silver and the Joachimstahler, or the taler, the forerunner of the dollar that he birthed almost by accident?

24:35Brendan Greeley: So Carlo Cipolla is an Italian medieval historian from the 20th 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. The 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.

25:14Brendan Greeley: 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 21 pounds of bacon, right? So it's not a penny 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.

25:47Brendan Greeley: 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 Carlo Cipollas 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 the country expands and trade with the country expands.

26:20Brendan Greeley: 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.

26:37Gillian Tett: I don't think Norway was much of an entity in those days. No, it was not.

26:41Brendan Greeley: However, Shakespeare does actually mention in the Scottish play that the king of Norway paid a ransom in dollars. Oh, wow. Really? Yes, by the early 17th century. Oh, wow.

26:52Gillian Tett: And were these coins, were these copycat coins all made of silver as well?

26:57Brendan Greeley: 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. So when you get copies of the Jakobstahler in Hamburg, in Lübeck, they kind of look like the dollar and they resemble the dollar and they work the same way as the dollar, as the Jakobstahler. So 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 an unofficial reserve currency for large parts of Europe at the time?

27:41Brendan Greeley: Yes, absolutely. But crucially, nobody's telling them to do it. They're 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 taller. 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 70s and the 80s, 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.

28:15Gillian Tett: In some senses, what we're seeing today has echoes of what happened in the 16th century. It goes all the way back and shows a continuity through history.

28:25Brendan Greeley: 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 80s 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 taller, 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.

29:03Brendan Greeley: Yes, absolutely. Broadly accepted, high quality, universally acknowledged and accepted form of medium of exchange. We have this record of Jakobstaller by the 1630s that are copied from all over Northern Europe. But have you ever held one yourself, like a proper original OG Jakobstaller in your hands? I did. A lot of this legal history comes from Peter Vorl. He's a professor at the University of Pardubice in Czechia. And I went to visit him to talk about this. And he just sort of casually produced an original dollar, an original Jakobstaller. 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.

29:47Brendan Greeley: The coin is fascinating to me because we think of currency as the proud symbol of a nation. The original Jakobsthaler shows St. Jakob old, bearded, cloaked, feeble. It was a branding exercise for Jakobsthaler. It was not about sort of the proud currency of Stefan Schlick.

30:04Gillian Tett: So why did it become so durable? Because, you know, the point is that the dollar, the tala, 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 must have been other currencies, right, that were, 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?

30:34Brendan Greeley: 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 big coins. So left to 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.

31:12Brendan Greeley: 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.

31:51Brendan Greeley: 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, telling 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 sovereignty over money.

32:13Gillian Tett: So it's a bit like in some ways, Darius, Bitcoin or the alternative non-fiat currencies today, which sit outside any government control, but people trust because they think it's got real underlying scarcity value. Yeah, I can almost hear to my horror the Bitcoin bros punching the ear as they hear this. But of course, the irony today is the dollar is controlled by the U.S. government, isn't it?

32:38Brendan Greeley: 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, 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. People want high quality payment money.

33:12Brendan Greeley: And so the United States has some ability to support these dollars and control them, but we don't have nearly the regulatory apparatus that we do over our own bank dollars at home. These 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.

33:30Gillian Tett: So when the U.S. dollar was first created, and as you said, the founding fathers sometimes joked about it being an ancient currency, when they took over that word to describe their own currencies later on, the U.S. dollar, did they realize about the link to the past, about the 16th century history? How did the word dollar even come to be used in America at all?

33:52Brendan Greeley: I don't know whether they knew who Stefan Schlick was. It's very clear when you look at 17th century English that there was a consistent understanding of what a dollar was. One thing that changed was the Spanish Empire built its vice royalties in Latin America, and there was silver in what is now Bolivia and Mexico. And they figured out a brutal Mita 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 know, possessor of new vice royalties, has to follow this merchant standard of the dollar.

34:34Brendan Greeley: He knows he's got silver. It starts to come out of Mexico very early in the 1530s. And 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 galleons directly to Manila and the Philippines and from there to China. Massive demand for silver in China at the time.

35:11Brendan Greeley: 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 dollar 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 17th century, the word dollar shows up in Shakespeare twice.

35:52Brendan Greeley: To me, what that says is the groundlings in the Globe 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. So 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.

36:23Brendan Greeley: It was universally recognized. They already knew what it was. I started thinking about this as the 1776 problem. If we assume that monetary sovereignty exists, a new country, new money. You have a problem in 1776 because they claim political sovereignty, but then they choose for their currency a Spanish coin made from Mexican silver with a German name.

36:47Gillian Tett: Well, that shows the joys of multiculturalism and immigrants, they get the job done. Yes, absolutely.

36:54Brendan Greeley: But absolutely, this is not, it's an immigrant coin. It's, this is not the story of sovereignty. The United States succumbed to an existing dollar zone. They did not create their own new dollar.

37:04Gillian Tett: So when is someone going to tell the American government that they're using an immigrant coin, an interloper?

37:10Brendan Greeley: 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 Jakimsthaler is accepted as legal tender and is a current currency in America until the 1850s.

37:24Gillian Tett: So one of the questions I have is that, you know, you're talking about a 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 the modern monetary system is busy copying just like 16th century Europe.

37:44Brendan Greeley: 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. This coin was incredibly important in commerce in southern China as well by the end of the 18th century. So these countries all independently at various times all essentially hitched their monetary sovereignty or adopted a supranational currency that existed hundreds of years long before these countries ever existed, essentially, because it was pre-existing and established and widely acknowledged and used around the world.

38:26Brendan Greeley: Yes, absolutely. The word for currency, yuan, comes from round. It's referring to these coins. Yen, same thing. Ringgit, the Malaysian currency, actually refers to the milling on the edge of the Spanish dollars when they improved the quality in the 18th 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 Buddha head coins.

39:01Brendan Greeley: 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 on 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. There's frustration from the East India Company saying, look, we can't get enough of these old coins.

39:37Brendan Greeley: They don't make them anymore, but that's what they're demanding is payment.

39:40Gillian Tett: 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.

39:50Brendan Greeley: I think a meme is a good metaphor for this.

39:52Gillian Tett: So I guess one of the key questions is that the dollar pre-existed America. America copied it. It's an immigrant phenomena in America. Other variants have been copied elsewhere. Will it outlive America?

40:08Brendan Greeley: I have been wondering about this. There's this old joke that, well, it's a historian's joke, so it's pretty poor by the standard of jokes. But, 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 the American Empire could change and what would be left 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.

40:44Brendan Greeley: 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 the Europeans offer swap lines in dollars to each other? There's nothing stopping them from doing that.

41:07Gillian Tett: It's very interesting because I've been meeting with central bankers in the last few days. That 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.

41:50Gillian Tett: We're not diversifying 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 other 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.

42:12Brendan Greeley: 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 crazy.

42:18Gillian Tett: Well, they're discussing it discreetly and really just as a last case scenario and simply as part of prudent risk management. But we're in a world where prudent risk management is a very good idea.

42:28Brendan Greeley: 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.

42:54Gillian Tett: 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.

43:12Brendan Greeley: 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.

43:20Gillian Tett: So I have one last burning question from my part, and I'm sure Robin may have another one, but has anyone ever tried to create a dollar coin, a silver dollar coin with Schlick's face on it? Yes, there is one.

43:37Brendan Greeley: 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 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 were anti-Pope coins. There were sort of silver dollars that had 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 wouldn't get sick. Yeah, because there wouldn't have been any pro-plague coins, I'm guessing. thing. Yes, that's exactly right.

44:11Brendan Greeley: That's exactly right. So Stefan Schlick'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. I wandered into his house, crazily enough, in Jakmstall. 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 Schlick's house. It's empty. It 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.

44:52Brendan Greeley: It seemed like a really bad idea to fall through a joist when nobody knows that you're in Stefan Schlick'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.

45:05Gillian Tett: Well, someone should 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 the best of Bowmans, but there we go. Yeah, but it is fascinating that this silver mine in Bohemian 1515 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 taller that becomes the dollar is that it is outside of any sovereign control that it is not the gilda that's tied to the dutch or the florentine duket or the sterling which its fate is somehow entwined into the waxing and waning over the great powers it transcends all that and that's why the dollar is so powerful 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 to have something that we all agree is money.

46:14And we can exchange it, whether we're talking some bank transfers, trade, financial securities, whatever, really.

46:21Brendan Greeley: When we look back at theories of currency dominance, they often hang on empire. So Robert Mundell, 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 Mundell, who has a Nobel Prize and I do not, I don't see that story.

46:57Brendan Greeley: 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 Rheinflorn. It was a gold coin that was a depreciated version of the florins 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.

47:33Brendan Greeley: They know what they want.

47:34Gillian Tett: So will the dollar prove to be more long lasting than sterling, say?

47:39Brendan Greeley: I think it's possible that something called the dollar will outlive the current American-dominated dollar system. I think that's very likely.

47:47Gillian Tett: 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, Brendan, for joining us.

47:58Brendan Greeley: Thank you, guys.

47:59Gillian Tett: 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 Gillian Tett. And I'm Robin Wigglesworth. And we'll see you back here again next week.

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