Banks, Financial Markets and the Development of International Currencies

Abstract

This chapter considers the rise and fall of international currencies in history and their relationship with banks and financial markets. It takes a long view, tracing the rise and decline of international currencies from the silver drachma coined in Athens in the fifth century bc to the Roman solidus, the Genoese genoin, the Florentine florin and the Venetian ducat, and culminating with the Dutch guilder, sterling and the dollar. It identifies four prerequisites for the acquisition of international currency status: size, stability, liquidity and power. This perspective is then used to speculate about the evolution of international money and finance in the twenty-first century.