From the silver Joachim’s Thaler...
....to the paper Tolarjev
Most commentators on how Fiat money always reverts to its intrinsic
value, (i.e. approaching the value of the paper it is printed on, or near
zero), quote the german Papiermark,
(observe the pictured 5 trillion bank note in this link) as a classic example
of this phenomenon.
The Papiermark was replaced by the Reichsmark in
1924 at the rate of 1 trillion PM to 1 RM.
(Note : 1 english billion = 1 german Milliard and 1 english
trillion = 1 german Billion)
The apochryphal stories from this hyper
inflationary period are typified by the one where a man loads up a wheelbarrow
with trillions of PM’s and stops outside a bakery to buy some bread. On
exiting the shop he discovers that somebody has stolen his wheelbarrow, but
only after tipping out the worthless bank notes which are left at his feet in
(Fiat money is defined in this context as paper money, not linked to
specie, ie gold or silver. The use of Fiat money
enables a government or issuing central bank to issue as much new money as
they wish, unrestricted by any link to gold. The result is usually an inflation
and loss of value of the paper money in commodity buying power corresponding
to the amount of new paper issued.)
This essay will deal with another aspect of fiat money, namely
the monetary turbulence in Eastern Europe,
(EE) in the 1990’s resulting from the political
changes in the aftermath of the collapse of the Soviet Union.
The author travelled extensively in the East Block from 1992 to 1995,
and has drawer loads of worthless fiat money as souvenirs of his visits to
It was a fascinating time to visit these EE countries, who were
struggling valiantly to convert from the communist economic model to
They were on a very steep learning curve and looking out for willing
teachers to aid them in making the transition. The author found himself
inadvertently thrust into this role, but despite the fundamental differences
between the two systems, the « students » were very quick to
learn and adapt.
The author commenced his EE marketing project by making a short list
of the countries most likely to be able to make
this transition quickly, and also, which countries were most likely to
require new sources for supplies of the raw materials that he was selling.
Finally the most important criterium was to find
company propsects who were sufficiently credit
worthy to become accepted by his credit control department as new customers,
or who would accept to pay cash in advance.
The next task was to find the best possible agents in each country.
In Slowenia in 1992 the author was very fortunate
to find and engage as his agent an ex member of the Yugoslavian National
government, who was a Slowenian national and had
excellent local contacts in his home state.
The war in the north of Yugoslavia had lasted only 10 days, and after
the withdrawl of the army, Slowenia
declared its independence, although international recognition took some time
On the author’s first visit to Ljubljana,
(the capital) in 1992, the government had hastily printed some new money, but
because of lack of agreement on the new name for the currency, the
notes contained only numbers on pictorial backgrounds, but no currency name
or symbol !
(Authors note : How close to (the game of) Monopoly money can you get)
Returning on his second visit a month or so later, he was disappointed
to learn that in the interim, the government had decided on the new name Tolarjev, and had issued another new
series of bank notes. ( see the comparative images of the two notes above)
The Tolar (plural Tolarjev)
was yet another new derivative
from the stem of the dollar, via the Thaler.
Dollar From "thaler" -- a
nickname for the silver coins that were minted from the ore found in Joachimsthal ("Saint Joachim's Valley" in
German), Bohemia (part of the current Czech Republic) -- which gained
"currency" (pun not intended) shortly after the lode's discovery in
1516. At that time, Bohemia was part of the Holy Roman Empire and that with
the assumption to the throne of Charles V of Austria (and I of Spain), the
territories of the Holy Roman Empire were united with those of Spain
(including the Spanish New World possessions), Burgundy, and the Low
Countries until 1556. This fact leads to the second half of the story: the Joachims' "thaler"
was one of the major coins in use not only in the Old World but also in the
New World as well, at least until the major silver strike at San Luis de
Potosi (Bolivia) and the major gold strike at Zacatecas (Mexico).
Furthermore, throughout the rest of the Colonial era, the nickname "thaler" (which eventually became "dolar" in Spanish and "dollar" in English)
would remain in use as the nickname for any silver coin that represented
exactly one piece of eight (By the way that is where the symbol for the
dollar "$" came from--it is the number "8" broken up with
a slash down the middle). The term also later made its way into the United
States in 1803 when President Thomas Jefferson sought to create a national
currency to supplant the various state, local and
private currencies then in use. At the time the United States had trade
deficits with almost every nation with whom it traded, except for one:
Mexico. Due to a sizeable trade surplus with Mexico, the United States
government found itself with a sizeable quantity of Spanish Colonial silver
"thalers" which it then proceded to use as the basis for the new currency: the
U.S. dollar. The dollar sign came from the back of the Spanish Colonial
dollar you mention on your page: the pillars on the back (representing the
Pillars of Hercules, the land beyond to which the Spanish owed their wealth)
with a banner that wove around them in an "S" shape.
R. Dickerson adds/corrects: Your site has two different explanations
for the origin of the dollar sign: the first one wrong, the second one
correct but incomplete. The proposal that the dollar sign comes from drawing
a line down the figure "8" to divide it into "pieces of
eight" is totally off base. Instead, Medieval Spaniards were quite proud
of the idea that they sat at the very far end of the civilized world, which
to them meant the Mediterranean. The narrow straits leading from the
Mediterranean to the Atlantic ocean were flanked by mountains, and these were
known as the "Pillars of Hercules" after a story from Greek
mythology. The Spanish royal coat of arms of the time had a shield, flanked
by two pillars. These pillars had decorative ribbons around them, wound in
opposite directions, with the legend "Ne Plus" at left and
"Ultra" at right. "Ne plus ultra" meant "Nothing
beyond". But then Columbus came along and expanded everybody's world.
Spain became even prouder of the fact that they now were the portals to a new
world. So the "Ne" was dropped from the ribbon at the left of the
coat of arms, and the inscription read "Plus ultra", or "More
beyond". The ribbons were wound around their pillars just like the
"S" in the dollar sign is wound around its uprights. This full
royal coat of arms flanked by pillars, whether inscribed "Ne plus
ultra" or the later "Plus ultra", was the obverse of the
dollar-sized 8 Reales coin, with the king's head on
the reverse. I was formerly a serious coin collector, and still have a couple
of examples of these 8 Reals, which served as the model in size for our
dollar coin. The 8 Real coins circulated widely in Florida and the Caribbean
prior to the Revolusion, and would have been
familiar to American colonials. It is my feeling that the new nation elected
to pattern its monetary unit after the Spanish 8 Reales
rather than the British Pound, as a sign of independence from the mother
country. The One-Real piece was a small silver coin, also called a
"bit". That is why our quarter-dollar has come to be known as
"two bits". END
On attempting to spend the few banknotes remaining from his first
visit in Slowenia, he was informed they were no
longer legal tender and so they were relegated to a drawer of souvenirs,
where they were soon to be joined, as we will see later, by other colourful but decreasing in worth pieces of paper.
As a result of the breakup of Yugoslavia, Slowenia’s
industry had lost some 50% or so of their raw material suppliers, and a
similar % of their customers, who were all located further south in Serbia
and the other ex Yugoslavian countries, where the
war was still sporadically in progress in some form or another.
Consequently there was an urgent need to replace both these suppliers
The most obvious solution was to look further north in Western Europe.
On the authors arrival with his agent at a
large factory near Ljubliana, the President of the
company, who by chance happened to be celebrating his birthday, was told that
a representative from a potential new western European supplier (of raw
materials no longer available from the south) had just arrived in reception.
We were immediately summoned to the boardroom for a more than joyous
reception. After several glasses of wine the meeting proved so successful
that an agreement appeared to be in view to supply some of the missing raw
To celebrate the author invited 6 of those present to dinner in what
turned out to be one of the best restaurants in Ljubljana.
After downing an obligatory Slivowitz with a
plumb in the glass, mounds of Adriatic prawns, frogs legs,and snails were consumed, before going on to the
main course, and all washed down with a few bottles of wine. Following
deserts and coffees, the author was becoming slightly nervous as to what
amount the bill would be, and whether he had enough money in the current
legal tender of the day to cope with it. Imagine his relief when the total
for 6 persons came to the equivalent of approximately US$ 50.
From 1992 to 1995 the author returned regularly to Ljubljana, and on
each occasion he got the impression that the prices at the same restaurant,
(and elswhere in the city, but not in the villages
surrounding the capital) doubled every 6 months or so, although this memory
may well have become befogged by the excellent quality and service of the
establishment. Apparently learning how to adopt to
the capitalist system was not so difficult as (the author) had at first
The author visited Prag a dozen or so times
during the period 1992 to 1995. The prices of hotels and restaurants
escalated dramatically during this period of rapid transition from communism
to capitalism. Tourism was expanding rapidly, for the excellent reason that
the old city of Prag is
one of the most unspoiled jewels of Europe, both west and east. The period
architecture is not interspersed with ugly modern buildings as in most other european cities. The total effect is harmonius
and beautiful, giving the impression that one is observing the city as it was
several centuries ago, (if one ignores the modern traffic on the roads of
course). By 1995 the prices of tourist related necessities, hotels and
restaurants in Prag had increased to a level
comparable to that of Muenich or other german cities, for example.
However, on visiting small towns and villages 100 kms
or so distant from Prag, price levels were still at
the much lower level that had existed in the country before the return to capitalism.
On my second visit to the Czech Republic, the split of Czechoslovakia
into 2 countries was well underway. The Czech government had not yet had time
to print new banknotes, so they had over stamped the existing ones «
Czech Republic ». The old (unstamped) czechoslovakian
notes from my first visit were no longer valid.
A few months later however, new notes had again been issued, this time
replacing Czechoslovakia with Czech Republic, and once again the stamped ones
had ceased to be in circulation. More paper souvenirs for my worthless
The Tupolev jet airliner from Prag to Svit ran into
turbulence as we approached the Tatra mountains.
The author reluctantly handed back the sandwich and glas
of wine to the stewardess, who amazingly was still able to walk despite the
severe turbulence, explaining that he had not been able to manoeuvre his hand close enough to his mouth for the last
ten minutes to enjoy the snack. As we landed on the short runway in cross
winds, there was a bang as we hit the runway, a massive roar from the engines
maximum reverse thrust, and several banging noises in the cabin as seat backs
crashed forward in unoccupied seats. The first thought was that we had
crashed, but apparently it was just a normal landing in extremely difficult
weather conditions on a short runway. No wonder they say east block pilots
are among the best in the world! In
these conditions they certainly proved it.
The Russian black chauffeur driven limousine (vintage 1956 ?) met the author at the airport. Its worn slick
summer tires proved inadequate for the ice covered roads in February in the Tatras, and gave the impression its movement resembled a viennese waltz as we slalomed over the black ice.
He was given a warm reception by his hosts, and stayed in a private
hotel with restaurant, and personal service which rivalled
or bettered the best one could expect in the west, a pleasant surprise after
the somewhat difficult journey. By midnight after tasting the famous Tokay 1
and 2 and politely refusing to try the number 3, he retired to bed,
reflecting it was amazing how many new experiences one could pack into 24
hours, and the excitement of all the cultural differences between eastern and
The Slovakian fiat money evolution exactly mirrored that of its ex partner in the Czech Republic, and once more the
authors collection of obsolete money grew, as the Slowacks
went through similar monetary mutations on each of my successive visits.
Suffice it to say that the change in 1992 from buying small items was
sometimes paid in 500'000 Zloty notes. The zloty resembled other currencies
about to go into orbit by governments who lacked the will or the necessity to
arrest the inflation of their legal tendered currency. But at least they did
not change the name or unit of the currency during the authors visits. He was
greatful for small mercies, until in 1995 monetary
reform replaced 10'000 old zloty’s with 1 new zloty.
The complex monetary history of Poland
also describes the debasement of coins, as was common practice generally
before paper money was introduced, but at least this process was slower than
the high speed printing press equivalent involved in the debasement of paper
money in modern times !
author’s collection of colourful
worthless banknotes from Eastern Europe
is a constant reminder that Fiat money often has a short and dangerous
life span in many countries.
provides many examples of how fiat money has enabled a government to
inflate its way out of fiscal problems usually to the detriment of the
unsuspecting public, who are forced to use the money as legal tender.
- Silver and
gold coins (denominated by weight and not in $ or other
fiat currency terms) are timeless, and do not necessarily
require replacement on every change of government or nationhood.
original silver « JoachimsThaler »
survived longer and retained its value better than the paper fiat
currencies which followed it over the centuries and borrowed its name :
from the dollar to the tolarjev !
- The recent
monetary history of EE related in this essay provides yet another
argument to consider returning to silver and gold in species in some
form to avoid the abuses of paper monetary systems.
- Why not
bring back the Joachim’s Thaler, even if
now we may have to mine the silver in Mexico, because the deposits in
the Joachim valley were depleted a long time ago?