Origination of Legal Tender

The Form of Money

Money is commonly credited to have been originated by King Croesus of Lydia in sixth century BC; however, money had been in existence long before written history, and metallurgy had long been at an advanced state by sixth century BC to make rings, swords, shields, jewelry, and such. Creating small, circular, stamped disks of metal to be used as money would not have been a technological nor conceptual breakthrough. Minters stamping ingots of gold or silver to certify a coin’s weight and fineness had been practiced long before in Babylon.

Lydia was rich with gold and silver ores, and Croesus had an army to mine and protect it; however, many rulers of the time had mines and armies. The confusion of the origination of money itself lends credence that there is much more to the creation of Croesus’s wealth than the mere mining of the rich ores and stamping of coins. There had to be a monumental change in money for Croesus to become confused   with the origination of money itself and for his legacy to endure with the common axiom ‘Rich   as Croesus’.

Croesus

1. died 546 B.C., king of Lydia 560-546: noted for his great wealth. 2. a very rich man. 

The History of Money by Jack Weatherford, 1997

"As rich as Croesus" is a common expression in modern English, Turkish, and other languages around the world.

Martin Luther, 1517

“Why doesn’t the pope build the basilica of St. Peter out of his own money? He is richer than Croesus."

The Three Musketeers by Alexandre Dumas, 1844

However, when he served the dinner given by d’Artagnan and saw him take out a handful of gold to pay for it, Planchet thought his fortune was made and thanked heaven for having placed him in the service of such a Croesus.

Slaughterhouse-Five by Kurt Vonnegut, 1969

Billy owned a lovely Georgian home in Ilium. He was rich as Croesus, something he had never expected to be, not in a million years.

The War of the End of the World by Mario Vargas Llosa, 1981

The baron’s as rich as Croesus, isn’t that so? An antediluvian character, an archaeological curiosity, there’s no doubt about it.”

A Man in Full by Tom Wolfe, 1998

He was Old Family and Piedmont Driving Club all the way, and he was rich as Croesus.  

Fifty Shades of Grey by EL James, 2012

“Honestly, fancy falling for a man who’s beyond beautiful, richer than Croesus, and has the Red Room of Pain waiting for me.”

The name Croesus has unequivocally passed the test of time for defining wealth. So, there must have been a monumental monetary change in sixth century BC that caused Croesus to be confused with the origination of money itself while making himself the immortalized axiom of wealth, ‘Rich as Croesus’.

Prior to Croesus

A History of Interest Rates by Sidney Homer, Rutgers, 1963

About 1800 BC, Hammurabi, a king of the first dynasty of ancient Babylonia, gave his people their earliest known formal code of laws. A number of the chief provisions of this code regulated the relation of debtor to creditor.

Code of Hammurabi Law 88:

If a merchant has given corn on loan, he may take 100 SILA of corn as interest on 1 GUR; if he has given silver on loan, he may take 1/6 shekel 6 grains as interest on 1 shekel of silver.

Notice that there are multiple commodity forms of money mentioned  –corn, grain, silver - and the shekel is the standard of weight and measure of a precious metal.

Code of Hammurabi set interest rates and set Legal Valuation Ratios between these various commodity forms of money that to set repayment schedules for Debt that could be enforceable by the State. Problematically, the valuation ratios between multiple commodities are many and are continually changing in the Market, and over time, the Legal and Market valuation ratios will veer. With a slight difference between the Legal and Market valuations, there’s an opportunity for Lenders and Debtors to slight each other depending on the direction the Markets fluctuate.

Lenders would be reluctant to lend long term, knowing that these ratios will veer over a longer time period. The presence of multiple forms of money complicates the quantification of interest on Debt, complicates the enforcement of Debt, and hinders the spread of Debt.

Croesus Creates Bimetallic Legal Tender

Croesus narrowed down the commodity choices for the repayment of Debt to two, silver and gold (bimetallism)

Sardis in the Age of Croesus by John Griffiths Pedley, 1968, Excerpts

Croesus is thought to have been responsible for the introduction of a bimetallic coinage.

and made them both Legal Tender. Legal Tender is any form of money that a government decrees must be used as the only accepted payment of debts and taxes. Legal Tender is a derivative form of money, not money itself.

The reduction from a multiple number of commodities to merely two greatly simplifies the quantification and enforcement of Debt, allowing longer term Debt to expand and spread.

The exclusion of agrarian based commodities as forms of Legal Tender was a monetary coup of historical proportions by the two precious metals. The precious metals were now the enforced standard of measure for all Debt contracts. Agrarian Markets that traded in grain forms of money may not have typically included the precious metals in Debt contracts, but now were required to do so.

Debtors, and Taxpayers, are severely motivated to have Legal Tender in order to avoid the default clauses of eviction, seizure, and/or slavery enforced by the State. Whoever monopolized the control of the two precious metals was in a position to skew wealth towards their advantage. In this case, King Croesus and his army.

Sardis in the Age of Croesus by John Griffiths Pedley, 1968, Excerpts

That the mining of gold was largely under royal control. Croesus’ gift to the oracle at Delphi was a massive statue of a lion weighing ten talents. Gold mining was under royal control, the lion was the royal device of the kings of Lydia.

Wealth from the agrarian markets monumentally shifted to the two precious metals, and in the process, King Croesus became immortalized as ‘Rich as Croesus.’ 

Croesus and the Delphi Oracle

The Delphi Oracle was renowned both for the ambiguity and the occasional plain accuracy of its answers. Croeus, king of Lydia [560-546BC], wanted to test the most highly regarded Greek oracles. He sent messengers to each one of them with instructions to ask, after exactly 100 days had passed, the following question: “What is the king of Lydia doing today?” Five of the oracles were wrong. A sixth was close. The oracle at Delphi replied as follows:

Lo, in my sense there striketh the smell of a shell-covered tortoise,

Boiling now in a fire, with the flesh of a lamb in a cauldron.

Brass is the vessel below, and brass the cover above.

As it happened, Croesus was, at that very moment, cooking a lamb-and-tortoise stew in a brass pot. Convinced of the oracle’s accuracy, he questioned it about the weightier question on his mind, namely the Persian Wars. The answer was that a great army would be defeated. Taking this for a good omen, Croesus sent his army into battle against Cyrus the Great. Again the oracle hit the mark, but it was Croesus’ army that was defeated.

The Delphic Oracle, 1899, John William Godward [1861-1922]