The practice of coining money began some hundreds of years before the Christian era, probably about 900 B.C. It is supposed that the first coins consisted of a certain quantity or weight of metal stamped with some seal or symbol indicating their weight so that they would not have to be weighed at each exchange. The English pound sterling was originally a pound weight of silver. Other familiar examples of coins which represent weights are the Greek talent, the Jewish shekel and the French livre. The earliest coins were stamped only on one side, and they were not so designed as to prevent alteration. Accordingly, unscrupulous merchants began to stamp smaller quantities of the metal and to pass it as full weight. This deception and the practice of clipping or otherwise subtracting parts of the coin lead to more careful and elaborate coinage. The whole face of the disc was stamped on both sides and the name of the authority certifying the weight was inscribed on the coin. Strict laws were enacted forbidding the mutilation of coins. About the middle of the seventeenth century England began to serrate the edge of coins, a process called "milling."
At first pure metal was used in gold and silver coins. In this form, however, they abraded or wore away rapidly with frequent handling, so it became customary to add to the pure metal some harder metal called "alloy." Dishonest traders then began to make coins with less of the precious metal and more of the cheap alloy. Hence, it became necessary to indicate in some authoritative way the fineness of the metal as well as its weight. Most countries now make their gold and silver coins nine-tenths fine, that is, nine parts of pure metal to one part of alloy, usually copper. Gradually the right to coin money was restricted to a few reputable persons, and finally it was brought under governmental control. Even when the right of coinage was restricted to the sovereign, abuses continued. For many centuries the royal authority debased the coinage by reducing the weight and increasing the amount of alloy of the coins issued under royal decree. Thus, the English pound sterling, which originally contained a pound of silver, was reduced finally to about half that amount.
1 Taussig: Principles of Economics, Bk. I, p. 229.
The early American colonists were greatly embarrassed in their business transactions by the lack of "change" or coin. The small supply of coin they brought with them was soon drained off to Europe to pay for imports. Wampum, the currency of the Indians, was clumsy and poorly adapted to the purposes of general trade. They had to resort largely, therefore, to barter or to the use of staple commodities, called "country pay." To establish a basis of value in exchange, the General Court of Massachusetts fixed the price of all commodities by law, which led to great confusion and dispute as to the value of different articles.
After the colonists had begun to trade with the West Indies, Spanish dollars current in all the possessions of Spain, were imported and came into wide circulation. The Spanish dollar or "piece of eight," as it was called, was subdivided into eight reals, valued at 12 1/2 cents. These coins, however, were not of uniform value in the different colonies. The eighth part of a dollar was a shilling in New York, 9 pence in New England and Virginia, and 11 pence in Pennsylvania. Moreover, these coins had been debased by clipping and sweating, and when they were sent to England in exchange for goods, they were received only at the actual value of the metal in them. The coins that remained at home consisted largely of debased and depreciated pieces so poor that people were loath to accept them at all.
To remedy this difficulty, the General Court of Massachusetts in 1652 established a mint for the coining of shillings, six-penny and three-penny pieces. One side of the shilling was stamped with a pine tree, hence the name "pine tree shilling." The colony did not operate this early mint, but contracted for the minting of the coins. The mint master was required to coin all the silver offered, retaining as his pay fifteen pence out of every twenty shillings coined. The mint was closed in 1686 by order of the English government. The pine tree coinage did not greatly relieve the need for money, and country pay and Spanish coins continued to have wide circulation. When our Constitution was adopted in 1789 Congress was given the right "to coin money and regulate the value thereof."
Bullock: Essays on the Monetary History of the United States, Pt. I, Chs. II, III.
Selected Readings in Economics, Ch. XIV.
Conant: Principles of Money and Banking, Vol. I, Bk. I,
Chs. II, III, IV, IX. Jevons: Money and the Mechanism of Exchange, Ch. IV. Kinley: Money, Chs. II, III. Materials for Elementary Economics (University of Chicago), Ch. X. White: Money and Banking (5th ed.), Bk. I, Ch. I.