History of Money, Banking, and Trade
A historical look at the development and evolution of money, banking, and trade. From the ancient civilizations to the present.
History of Money, Banking, and Trade
Episode 25. From Ingots to Coins: Lydia's Financial Innovation
Embark on a fascinating exploration of ancient Anatolia and uncover the secrets of how the Ionian Greeks and Lydians shaped the economic and cultural landscapes of their time. Discover how the Ionian Greeks turned western Anatolia into a bustling hub of sea trade, setting up expansive networks across the Black Sea and laying the groundwork for the rise of Miletus as a center of commerce and learning. I share the riveting story of the Lydians' cultural exchanges with the Ionians, which paved the way for the revolutionary introduction of coinage—a financial innovation that forever altered the dynamics of trade in the ancient world.
Through strategic alliances and visionary economic strategies, Lydian kings like Ardys and Alyattes transformed Lydia into a dominant economic power. Hear about the transition from cumbersome metal ingots to the more practical and valuable coins, which spurred trade and streamlined tax collection. We'll explore the captivating tale of how Lydia minted the first coins and how these small, stamped pieces of metal became catalysts for economic progress, inspiring a leap to monetary economies and setting the stage for the fiscal frameworks of today.
Join me, Mike D, as I unravel the societal impacts of this economic revolution, from the vast wealth and luxurious lifestyles of Lydian elites to the economic ripple effects of ancient warfare. Understand how Lydia's innovations in coinage not only facilitated economic growth but also fueled social stratification and conspicuous consumption, mirroring economic behaviors that persist in modern times. This episode offers a treasure trove of insights, connecting ancient monetary practices to contemporary economic systems and providing an engaging perspective on how early trading innovations continue to influence our world.
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Welcome podcast listener. I am Mike D, and this is the History of Money, banking and Trade podcast. My goal is to expand your knowledge of the history and evolution of trade, along with money, banking and credit, from ancient civilizations all the way to the present. I truly hope you find these episodes to be informative and entertaining. Now, I'm not a historian but, like Dan Conlon likes to say, I am a fan of history. We last left off with the rise and fall of the Hattians, the Hittites and the Phrygians, just to name a few. We also discussed some mythological stories that you may be familiar with that had their origins in ancient Turkey. But, most importantly, we talked about how the many kingdoms that had risen and fell up to this point ultimately played a major part in the development and trade in and out of Anatolia.
Speaker 1:The Greeks arrived in western Anatolia sometime after the late Bronze Age collapse and the colonization of Ionia, which was an area located on the western coast of Anatolia. Due to its location on the coast and the fact that they were already accustomed to the sea, the Ionian Greeks quickly became experienced sea traders. As such, they primarily traded with the Lydians, the Egyptians and even the various city-states in and around the Italian peninsula. This extensive trade ensured that the Ionians would become one of the wealthiest civilizations, and they used this wealth to set up their trading settlements around the Black Sea area as well. Once the city of Sardis fell, the Ionian city of Miletus replaced Sardis as the hub of trade and scholarship. Like I was alluding to previously, sardis was a cosmopolitan city, so therefore, some of the great minds of Babylonia, egypt, lydia and various Phoenician city-states made their way there, and they were able to share much of their scholarly research. This research included ideas related to the sciences along with navigation geography. Research included ideas related to the sciences along with navigation, geography, trade and commerce. In addition, the elites of Sardis, as well as Miletus, became some of the biggest collectors of art and other crafts, which meant that the artisans from all over the known world at the time would have made their way to Western Anatolia to make and produce their various works of art and other finished goods, for that matter. In fact, to show you how Greek religion influenced the Lydia religion, aliades and Cretaceous hired Ionian craftsmen to create offerings to the god Apollo at Delphi. As a result, this would have been a great example of how the Ionian Greek economy benefited directly from the sharing of cultural ideas and, more importantly, lydian wealth. Since the Ionians and the Lydians maintained a close working relationship, they were able to use each other as a source of knowledge to make trade more efficient. Then this efficiency would actually go up a notch when the Lydians had developed their own coinage, which they would have introduced to the rest of Anatolia and then the Greeks would have quickly adopted.
Speaker 1:So I want to be clear the first part of the Anatolian episode was set up to lead into this particular episode, because I wanted you to get a broad background of Anatolia before I got into talking about Lydia. In reality, I was originally only going to speak about the Lydians, but I kind of figured it would make more sense to have some understanding of Anatolia as a whole before I got into Lydia. Now, I suspect that the average person has never heard of Lydia and probably knows almost nothing about Lydian culture, even though they were probably the ones that had maybe one of their earliest and maybe biggest impacts on the development of modern economies and trade. The fact is, the Kingdom of Lydia isn't a well-known ancient kingdom. Lydia was located on the western edge of Anatolia, which says modern-day Turkey, and Lydia was originally part of the Hittite Empire before it fell in the late Bronze Age collapse. In addition, the Greeks occupied its Aegean shores as early as the 13th century BCE, around the fall of the Hittite Empire. As such, you will see a lot of crossover between the Lydian culture and the Ionian Greek culture, especially the religion. That's the biggest crossover that you'll see. But the Lydians had their own language, which was derived from Indo-European dialect. While historians have figured out ancient Lydian grammar, there are some words that they don't understand yet, so it's kind of a work in progress.
Speaker 1:At this point, lydia would develop into a very influential yet smallish city-state. A lot of it probably comes back to the beginnings, because initially it was run by peaceful farmers who generally had good relations with their neighbors. I mean, it's kind of not unlike a lot of other ancient societies as well. Now, it's worth noting that, due to its location in western Anatolia, that the Lydians and the Greeks lived peacefully near each other. As a result, they ended up sharing a lot of cultural norms, like I said earlier, including many religious belief systems. They ended up sharing a lot of cultural norms, like I said earlier, including many religious belief systems, including their religious figures. In addition, greeks had a major influence on the Lydians' alphabetic writing systems, which the Phoenicians had first developed. This might be the reason why Herodotus wrote extensively about the Lydians.
Speaker 1:The issue with discussing Lydia is the information isn't really coming from first-hand accounts. Instead, the information that we get is from the Greeks, especially Herodotus, and, as many of you know pretty well, herodotus isn't exactly the best source of information because he was prone to take some wild exaggerations at times. In fact, herodotus states that Lydia was founded by Her some wild exaggerations at times. In fact, herodotus states that Lydia was founded by Hercules. So there's that. But Herodotus' stories were meant to be spoken in public forums, so taking liberties for entertainment was kind of part of his deal. So that's why many of his writings were a bit outrageous at times. So you got to understand that the writing. So people can, you know, speak these to people and you know you want to have some kind of outrageous bits and parts because you want to keep people engaged.
Speaker 1:So if you're asking yourself why the name Lydia, well, it is believed that the regent got his name from a first king who was known as Lydas, of which he would have founded the capital of Sardis. Now, the earliest history of Lydia is quite fascinating to me because it's wrapped in myth, but the earliest stories are great nonetheless. Nonetheless, the earliest roots of the kingdom are from a king named Candolus, who was the last king of the Heraclid dynasty, and he would have ruled Lydia from Sardis in the 8th century BCE. Legend has it that Candolus had an extremely beautiful wife. As such, he instructed his servant, named Yegas, to spy on the queen while she was naked so that he could see for himself how beautiful she was. However, that plan backfired quickly because the queen discovered Yegas spying on her and she was essentially horrified when she learned what had happened. She insisted that Yigas kill the king to preserve her honor. Yigas follows her advice, kills the king and usurps the throne. Now, according to the Greeks, they claimed that Yigas was a tyrant, but the Oracle of Delphi was said to have applauded Egas because he was said to have prevented a civil war when he usurped the throne around 680 BCE. I mean that right there seems very interesting, if not a way, for the king to promote positive PR for himself. You know, use the high priestess to put out the good word that he had prevented a bloodbath in the streets, so he was doing it for the good of the people and not for himself. So that's a pretty interesting little promotional stunt, but uh, you know, that's that's what he's going to do back in the day. So so from there, basically, a new line of kings was created, as king Ardis rose to the throne after his father, yigas, was killed by the Sumerians.
Speaker 1:Ardes mainly focused on military conquests, so one of his first moves was to approach the Assyrian king Ashurbanipal with tribute and form an alliance against the Sumerians. In addition, he looked to subdue Greek city-states to the west. By doing so, ardes attacked the Ionian Greek city of Miletus and succeeded in capturing the city of Priene, after which Priene would remain under direct control of the Lydian kingdom. Miletus was a different story, as it was too powerful to conquer and it had a strong army to back it. Instead of trying to subjugate the Milesians, he allowed them some kind of freedom, such as allowing them to build new cities south of the Black Sea. In return, miletus was forced to pay tribute to Lydia. This proved to be a pretty wise move, because in the end, it would have spared both sides a costly war in terms of money and lives. So in the end, he was able to expand his borders and increase Lydian wealth. But unfortunately, ardes was killed, likely when the Sumerians invaded Lydia and sacked most of Sardis. So really, what we're seeing is Lydia is in a bit of turmoil right now because of the outside attacks that were coming into the kingdom, but the kingdom would have still survived nonetheless.
Speaker 1:Aliadis was the fourth king of the Myrna dynasty in Lydia. He was the son of Sidiotes, who may have died fighting the Sumerians in 653 BCE. He was therefore the grandson of Ardes and the great-grandson of Aegis. He died after he reigned for about 50 years, and then he was succeeded by his son, cretaceous, who was probably the most famous person from Lydia. By the time Aliades got to the throne, he had inherited a couple wars. The way he dealt with this was he would have formed an alliance with the Scythians, of which they would have entered Anatolia and defeated the Sumerians, so they were no longer a threat. However, the Scythians were now a dominant player in central Anatolia, but they would be expelled by the Medes after the destruction of the Neo-Assyrian Empire. So right now, aliades is probably thinking nah, this is great, I don't have to worry about the Sumerians anymore.
Speaker 1:But he now had another problem. He had a mead problem Now with regards to the continued conflict with the Alian Greeks. Aliades probably viewed them differently, because he honored many of their Greek gods. Furthermore, he needed the grain that Miletus had produced. Therefore, you kind of put two and two together and he decided to make peace with Miletus, which led to a profitable trading relationship, because Miletus had excess grains but few metal resources sort of like the people of Sumer and Akkad While Lydia had plenty of those metals, but they didn't have enough grain to feed his population. So, with the peace at hand to his immediate west, he then probably knew it was just a matter of time before he had to deal with his growing mead problem to the east.
Speaker 1:But before I get there, I wanted to get into what made Lydia so special. The Lydian economy was, like most of the ancient world, initially built through agriculture. The ancient world initially built through agriculture, but as populations grew and divisions of labor took hold, the Lydians were able to exploit their abundance of natural resources, of metals such as gold, silver, iron and zinc. In addition, the Lydians were known for manufacturing elegant fabrics and clothing, along with ceramics. Lydia, due to its location, was also heavily influenced by the Mesopotamians to the east and south. Because of this, trade had to go through Lydia if people from the east and west were to trade.
Speaker 1:Like I said, Lydia had huge reserves of silver and gold that was easily mined. With that being said, the kings of Lydia mined the metals and originally stamped their ingots with their official government seal so that traders could easily see the weight and where the ingot had come from. The kings then decided that it would be a good idea to shrink down the ingots to a smaller size, which meant that they were easy to be made divisible for trade efficiency. No one is really sure which king downsized the size and the weight of the ingots into a smaller micro unit, but it may have been done during the reign of King Eliades, who was in power from 619 to 560 BCE, so he was in power for quite a long time. These smaller ingots obviously helped trade, but it also made it easier to collect taxes. This ultimately meant that the Lydian kings could easily redistribute these small ingots much more efficiently. Let us not forget, mesopotamians have used metal money in the forms of metal ingots for over a thousand years by this point. But the process was inefficient as the traders would need to weigh out the ingots for each transaction, and they weren't very divisible either, so there would have been some manual work to divide the ingots down to even smaller units.
Speaker 1:These micro units were originally electron metals which were naturally occurring mixes of silver and gold metals. The way I've seen it explained is that they were basically nuggets that were traded, whether they meant it or not. The thing that made these nuggets so effective was the fact that they were easier to transport and conceal from potential thieves. But, more importantly, they were easily subdivided, to the point that, theoretically, they could be worth only a few days worth of labor or worth a portion of a farmer's harvest.
Speaker 1:The interesting thing about physical coinage is that the coins were ultimately preserved in the archaeological record. Now, as I've mentioned in the past, the idea of widespread barter being used as a sort of money may not have been a real thing, because there really isn't any evidence of barter. Instead, a lot of the latest thinking is there was a widespread credit arrangement system that people used, and what they would do is they would settle up at a specified time period. The issue with this is that most records of the world would not have survived, especially these, when these arrangements were written on some sort of paper. So finding hordes of proto coins or ingots was a great source of economic information. And just a little econ 101 refresher. We generally view money as having three functions, which would have been a medium of exchange, a unit of accounts and a store of value.
Speaker 1:Now the issue with these electric nuggets was the alloy of gold and silver would have varied, in its natural state, between 65 and 85 percent gold. In addition, the traders really didn't have the ability to weigh or use touchstones to tell the percentage of the material with any precision. Now it is widely believed that if the Illidians had the ability to separate the raw electrum between gold and silver, they might have done so, but the technology took some time to develop. Although metals were abundant, they were rarely found in their pure state, so they would have required some sort of separation techniques that consumed large amounts of human labor and energy. These metals were typically extracted from mines that were owned by the king, along with the silt of the Pactolus and Hermos rivers, remember. According to myth, the Pactolus river was filled with gold because King Midas had washed in the river to rid himself of the gift bestowed upon him by Dionysus.
Speaker 1:These electron micro ingots became known as the world's first coins. They were initially produced by pouring the molten metal on a plate. Over the years, this evolved into pouring the metal into a mold, which would have created blank disks, which were called flans. Once these blanks were cooled, they would be struck with their symbol by a hammer, which would allow the user to know the origin of the coin. They weren't very sophisticated at first, as they were just basic round shapes of metal with a basic stamp. Stamping the coins with an official seal would have conferred official value to it, which set the stater apart from all other tokens that had been used in trade previously. By making these coins a standardized weight and size and by stamping on them an insignia that conferred their worth to even the most illiterate person, the kings of Lydia exponentially expanded the possibilities of trade into and out of Lydia. So therefore one did not need to be able to work a scale, or even own or possess a scale to buy anything in the market. As a result, commerce was allowed to proceed much more rapidly and honestly, but more importantly, this would have served as a model for virtually all the subsequent coinage everywhere.
Speaker 1:The makeup of the coins were initially made from electron, as I said before, an alloy of approximately 55% gold and 45% silver and a tiny amount of copper. The copper additives were there to give the coin more durability. What other states realized was their coins were portable, hard to counterfeit and had some kind of value, whether inherently or by decree established by the government. For trade, and as we've discussed in the past, precious metals of gold and silver had long been used as currencies before the first coins came along into being. Prior to coinage, the precious metals could either be in the form of rings or ingots, which, with ingots, I should have clarified earlier, it's basically just bars, but they were universally used by all traders across the ancient world. With standardized weights, coins eliminated this time-consuming and annoying problem of weighing and verifying their content, making them quickly become a universally accepted means of trade. Like all other ancient coins that came after it, including the shekels, for example, the coins represented units of weight rather than a specific monetary value. If you look at the word stator, it meant that which balances scales. In ancient Greece, our modern English word for money comes from the Latin word of moneri, which means informing or to announce the value of a metal weight of a coin. Eventually, our modern version of the word coin will come from the French, when they use the word to describe a die stamping the coin, and the word bank will be derived from the word bench, because the money changers in medieval Italy sat on benches when performing their banking operations.
Speaker 1:And, as I mentioned prior, essentially military campaigns were almost always governed by plunder. From the early days of Sumer, you couldn't really necessarily pay a standing army with certain kind of coins, because coins didn't exist, but any kind of metals or anything like that, because a lot of times you didn't really have them or you didn't have enough food to pay for the standing army. So you incentivize your army by plunder, right. So the typical army for thousands of years would rely upon plunder to basically feed themselves and make enough money that they can send back home and live off of. Now the problem with plunder and looting to pay soldiers is it sounds well and good because you don't really have to take the risk of paying for them. But then the problem is after you plunder and take over a region, you must govern cities and towns that were essentially destroyed. So now you're governing over a destroyed area, which means that your tax resources would have also been destroyed. So in the end, using coins to pay soldiers is a much more practical way to compensate soldiers rather than having them constantly destroying cities and killing many inhabitants in the place that you need to govern going forward, many inhabitants in the place that you need to govern going forward.
Speaker 1:So, even though paying for soldiers through coin is a much easier and better way, ultimately as far as governing goes, there was one little problem with the original Electronian coins, with the original electron-lidium coins. Now, bear in mind, every coin should have a face value higher than the original cost of production. This concept of production versus face value is known as seniorage, which means governments literally are able to make money by creating money. There is, however, a modern case that goes against this concept, as the one cent now costs nearly two cents to mint and the US produces billions of them every year at a very significant financial loss. So this is, in part, a big reason why you often hear people say we should get rid of the penny from circulation.
Speaker 1:Now, getting back to Lydia, the Lydian government generally assessed the face value of the coins at a little more than their underlying value of the weight in metals in the coins. Therefore, the local and foreign markets would have traded coins that were in fact, overvalued in comparison to the underlying weights. Therefore, the government was able to generate a profitable spread between the underlying ingots and the accepted value of the coins. To appease this controversy, the Lydians struck the coins with religious symbols to further induce their usage, because now you are paying tribute to the gods. So it appears that Lydia was the first state to circulate coins.
Speaker 1:Now, bear in mind, india and China also developed coins independently of Lydia. However, most historians believe Lydia had minted coins first. So you might hear people say that actually China invented it first or India invented it first. It's quite possible that they did, but all signs seem to point to the fact that Lydia was actually first. So initially, as technology improved in the 7th century BCE, the merchants were already proficient at weighing tiny objects such as coins. Proficient at weighing tiny objects such as coins. Therefore, the merchants could easily detect if there was a discrepancy between the underlying weights of the electron coins and the face value of the coins. Since they were obligated to accept the face value, it wasn't uncommon for merchants to look to the black market to try and reduce the spread by trading these coins in the black market. And when I say black market. What I mean by this is that traders would hide their goods and then sell the goods under the table for pure silver or coins valued at their higher weights, not their legal face value. So in other words, coins were absolutely used in the underground economy by the 7th century BCE.
Speaker 1:The first Greek coins appeared in Aegina around 600 BCE. It should be noted that coinage in Greece wasn't really fully accepted on the mainland until Alexander moved into Anatolia. On the mainland, until Alexander moved into Anatolia, however, the rise of local Ionian cornage meant competition for the Lydians, especially due to the fact that they were using pure silver, meaning the people accepted the coins knew precisely the makeup of the metals, unlike the electron coins. So in foreign trade Lady and Kings couldn't really benefit from the full value of the Electrum coins. So in other words, they would have had to take a negative spread once the Electrum coins reached another kingdom. Therefore the foreign merchants underestimated the unknowable gold content of the electrum. Coins with an inconsistent pale yellow color of electrum were typically downgraded as silver by neglecting the gold portion in the alloy. Merchants instead weighed the Lydian coins and compared their value to Greek silver coins or fined silver ounces. Before I move further.
Speaker 1:Coins really ended up providing historians some color as to the local histories of certain kingdoms. So, for example, coins gives us chronologies of ancient kings, which is somewhat obvious, but it also gives us an idea about the hierarchy of local deities and the ideologies of ancient republics. This ultimately led to a whole new field of study, known as numismatics, which is devoted to the study of coins, which in reality, is amongst the most productive fields in historical research. To be honest, to give you an idea where we are in the historical timeline, this is after the fall of the Assyrians, babylon once again became the dominant city-state in Mesopotamia. The Medes had controlled the area now known as Iran. In 605 BCE, nebuchadnezzar II took control of the Babylonian Empire and during his 40-year reign, the one thing he is probably most known for is his handling of Judah. This was caused because, in 600 BCE, the king of Judah made a decision not to pay tribute to Nebuchadnezzar. In 598 BCE, the Babylonian army marched into Jerusalem, the capital of Judah and the cultural center of the Jewish people. Long story short, the battle lasted about three months and resulted in the exiles of the Jewish people. So that is where we are in our timeline Now the early Lydian kingdoms had relative peace with its neighbors, but the peace didn't last forever, as the Lydians and the Medes had engaged in a war that dragged on for six long years.
Speaker 1:Around 585 BCE, during a battle between the Medes and the Lydians, they turned into night. This pretty much freaked out both sides, as they came to believe that it was a sign from the gods, they immediately threw down their weapons and reconciled their differences and peace was established. Now there's some controversy regarding this eclipse. As it was told by Herodotus, some modern scholars think it wasn't a solar eclipse but a lunar eclipse, right before the moon rise at dusk on either September 3rd 609 BCE or July 4th 585 BCE. But either way, the eclipse appears to have happened and peace was established shortly thereafter.
Speaker 1:Like I said, prior, eliades had become the king of Lydia around 610 BCE, but it was his son, cretaceous, who would be the centerpiece of this particular episode when he became the king around 560 BCE. The next great leap forward in coinage came under the reign of Cretaceous, who ruled Lydia from about 560 to 546 BCE. You may or may not be familiar with the name, but you may be familiar with the expression Richest Cretaceous, as he was known to be the world's richest man. Cretaceous cut his teeth in politics as he served as a viceroy under his father, eliades. He served as a viceroy under his father Eliades. It's quite possible that this experience helped him understand how the political economy, especially with regards to the ease and efficiency that coinage brought to it, along with international and local trade. As such, croesus was the one who probably stretched the kingdom to its farthest, as he had conquered the Ionian Greeks along the west coast of Anatolia, and then he had pushed his border all the way out east until he was neighboring Persia. Now I should make it clear that, despite the fact that he was overseeing the Ionian Greeks, he still maintained a good relation with the Greeks. But I didn't really want to talk about Croesus' ability to increase his land and holdings, because that's really not the main point of this episode.
Speaker 1:About 10 years into his reign, around 550 BCE, lydian metallurgy advanced to the point that they had developed a way of separating gold and silver out of the electrum in a long chemical process in a furnace. As such, it appears that he was, in fact, the first Lydian king to issue separate gold and separate silver coins. From then on, his royal seal on the coin certified a fine silver or gold medal. Afterward, the foreign merchants began to accept the coins on its face value, without any sort of discount to its face value. Each silver or gold coin had a precise value and weight, specified by law. In addition, the Lydian king fixed the values of gold versus silver, as an ounce of gold had a stronger value than an ounce of silver. So therefore one gold weight was worth 10 silver weights. In effect, the Lydians practiced bimetallism, whereas the government circulated both silver and gold coins separately. The king therefore had to have a good understanding of the aggregate supply and demand for each of the metals as to make sure he kept a proper balance between circulating the proper amounts of gold versus silver coins.
Speaker 1:Now, since the Lydian king had increased the circulation and had a monopoly over the production of coinage, he was able to enforce strict compliance of the coins. In fact, the early coins would later be known by historians as the Crescids, named after Cretaceous. With that being said, he realized that increasing the circulation of gold and silver coins would bring tremendous wealth to the kingdom, but also it would mean that the Lydian king would also increase its sphere of influence internationally, especially with his trading partners, its sphere of influence internationally, especially with its trading partners. So he might be the most important historical figure when it comes to international monetary policy, and thus the unintended consequence would be he expanded international trade, forever going forward. This all led to his legendary wealth, as in the name Riches Croesus, which at the time, I think it would be safe to say that he was, in fact, the richest man in the world.
Speaker 1:Now, as a reminder, croesus did not invent coins. In reality, it was probably invented by his father, who invented the first electrum coins. But, like I said, during Cretaceous's reign they were able to separate the electrum into pure gold and silver. Now, like I said, this means that they were going to be operating on a bimetal system. So the fact that they were able to operate on a bimetal system meant that trade would become much more efficient in Lydia, and this would have essentially solidified Sardis as the preeminent cosmopolitan city in the known world at the time, because, ultimately, traders from far and wide would find that selling goods in Sardis means that you would be able to get an accurate amount of gold or silver in the transaction and, more importantly, they had gold and silver.
Speaker 1:This access to gold and silver is the important part, because that will be a problem, especially in Europe when we get around the beginnings of the Renaissance period, because they just didn't have any gold or silver in Europe. It just wasn't in circulation. People were hoarding it, so trade was restricted dramatically in medieval Europe because of that. So with an increased money supply, this would mean that people would naturally flock to Sardis because ultimately people generally will flock to places that have money. Now I want to be clear. I don't want you to think of this time and location like a modern liquid market where coins or money is overflowing in the marketplaces. In reality, lydia would have a problem that so many others afterward would have when they're using metal coins. This problem will be very pronounced.
Speaker 1:Like I said, in medieval Europe this continued for centuries, in that they just like the people in medieval Europe when we get to it, what they would do is the Lydians tended to hoard coins when they first came into circulation. So just to be clear, it wasn't like they just developed gold and silver coins and within a short time period everyday citizens were using them. In fact, coinage was initially more used by traders who had bought and sold goods on a wholesale level because, shockingly, these coins did not trickle down to the middle class all that quickly. Ultimately, these coins were generally too expensive to pay for general labor and they weren't practical for retail transactions. However, herodotus seems to indicate that one of the reasons why the Lydians in particular had developed coinage was due to the fact that they were wholesale providers and they also had a vast amount of retail businesses.
Speaker 1:To encourage coinage and a more retail and everyday use, the Lydians also developed copper coins for smaller transactions, but even these smaller coins weren't really necessarily used by ordinary citizens. So, with that being said, the Illydian kings decided to take things a step further with their gold and silver coins. As they had figured trade would be even more efficient with even smaller denominations. So what they did was segment the coins into seven different weights, of which they would strike even more coins, all the way down to one 192nd of a stator, which meant that it weighed less than a tenth of a gram, which would have equaled to about 0.004 ounces, which would have equaled to about 0.004 ounces. So what this means is that payments could now theoretically be accepted in large and even small payments, and this would have allowed for change to be made if someone only had larger denominations of coins.
Speaker 1:Since Cretius was concerned with spreading his sphere of influence, it appears that Cretaceous made a conscious effort to ensure that minted coins could be used outside the Lydian borders with a universally accepted value. This notion helped contribute to the expansion of the Lenin Empire, especially by the time Cretaceous took power. Once he came to the throne of Lydia, he had secured allies with the Medes, sparta, egypt and Babylon, so this meant that he was in a pretty secure spot With his wealth. Cretaceous was credited with the construction of the Temple of Artemis, which was one of the seven wonders of the world. Like I mentioned prior, there was a ton of crossover between the Lydian and the Greek culture, especially with the worshipping of the same gods, as it was clearly seen on their coinage.
Speaker 1:The thing is, whenever certain groups of people become extremely wealthy, it's almost certain that other groups of people won't speak highly of them, or they would have created some kind of negative stereotypes about them. We certainly see this in modern times with certain ethnic or religious groups, and it was no different with the ancients. Certain ethnic or religious groups, and it was no different with the ancients. Herodotus called the Lydians a nation of merchants or sellers, but this was kind of a dog whistle feel to it, as it was known to be a negative undertone, because they were basically calling them hucksters or modern snake oil salesmen or whatever you want to use. He inferred that money ultimately became very important in their society. Basically, the same thing was said about the Phoenicians as well. According to Herodotus, girls from the lower classes were forced to go into prostitution as soon as they were mature enough in order to save enough for their own dowry so they can eventually get married.
Speaker 1:In addition, it sounds like gambling may have developed into a relatively small problem as well, which kind of makes sense. If you have extra money, there's a good chance you might gamble it away because you have something and you're just trying to create more and other people are buying things and creating things and you just want to keep up with the Joneses. And gambling is ultimately probably viewed as a get rich kind of scheme that I could see easily be employed in a place like Lydia, when money is overflowing and people becoming very wealthy. And it's also probably worth noting something you probably already know Gold has relatively few practical purposes outside of decoration and some sophisticated modern technological applications, so therefore it lacked utility, even more so in the ancient societies. However, unlike copper, which turns green, iron, which rusts and silver, which tarnishes, pure gold remains pure and unchanged.
Speaker 1:Another thing with regards to circulation it probably wasn't like coins just showed up one day and everybody was like, okay, it has a unique stamp on it, so it should be okay to use. Instead, it's more likely that the use of coins probably had a slow burn at first before it really took off in Lydia really took off in Lydia. Some tend to think that coinage was really boosted when Greek mercenary soldiers began demanding coinage as payment for their services, since coins could easily be stored for future use. Now I'm kind of getting ahead of myself, but if you look at the Persian empire, coinage was slow to adapt because they primarily used coins in places that mercenary soldiers required coin as payment. If it wasn't for them, it's quite possible that coinage would almost not have been circulated at all in the Persian Empire. As coinage evolved more and more, the coins themselves would get stamped on both sides to communicate more information to the public. The one thing that wasn't stamped on the coins was numerical dates, for obvious reasons and, of course, with coinage developing and getting more sophisticated and more widespread in use.
Speaker 1:It was the capital city of Sardis that probably benefited the most from all these developments. The Lydian capital of Sardis appears to have been divided between the rich and the poor, whereas the rich, including the king, lived in the upper part of the city, while the poor resided in the lower part of the city, which wasn't protected by a wall, which ultimately let them be vulnerable to outside invaders. Now, since Sardis developed into a wealthy city that had access to gold and silver and had prosperous trade routes coming to and from the city, it appears that it may have been the first ever to have permanent retail stores. Now, I presume that they would have been in the upper part of the city that was protected by the walls and near the wealthy. Therefore, the most affluent people in the city would have had easy access to international goods and, because of this, the city would have attracted people from far and wide, including, obviously, the Greeks, but also people from Mesopotamia, meaning that Sardis would have been one of the earliest, if not the earliest, cosmopolitan city. And because of this, sardis would be a melting pot which attracted intellectuals and new ideas from far and wide. Now, with regards to trade, the Lydians granted special statuses to merchants, terming them the people of the market. As such, they enjoyed a higher status than commoners in the social realm.
Speaker 1:As great as the concept of coinage was, it appears that the coins were likely hoarded by the kings and the upper classes. Thus, elite families developed over time. Now, with the ever-increasing usage and circulation of coinage within Lydia and its trade partners, wealth was flowing more and more into Lydia. As a result, wealthy families were becoming mainstay in the kingdom. However, it appears that many of the elite families in Lydia were really bad at managing their money, as many had completely squandered their wealth. It appears that they couldn't control themselves when it came to luxury goods. In part, it was probably because the elites became mired in an escalating game of one-upsmanship. In other words, they engaged in serious cases of conspicuous consumption to show their neighbors that they were economically superior, whether it's the bigger house or building a larger tomb. This sounds very modern, by the way. This is something we see all the time. So, therefore, the elites ended up destroying the wealth that their ancestors had accumulated. The elites of Sardis used their new wealth for conspicuous consumption instead of investing for long-term growth of their assets, cretaceous being chief among them, as he did with so many other kings the day before him, as he poured his wealth into vanity projects, especially buildings and mercenary soldiers.
Speaker 1:Now, with regards to the tombs in Lydia, the Lydians sort of had an Egyptian feel to them, in that the elites of Lydia were often buried with extremely valuable items which would ultimately give historians a lot of valuable information regarding the society they lived in at the time. However, lydia, just like Egypt, had experienced a lot of grave robberies over the years and, as a result, so much of the history was plundered and smuggled outside of Turkey. However, you can still see a lot of these items in various museums around the world to this day. So not as all lost, but I would imagine a lot of people in Turkey feel that they have been looted of their culture, but luckily, many have been returned over the years, where they were placed in the care of Ankara's Museum of Anatolian Civilizations.
Speaker 1:So, while theft of burial tombs became a problem after the fact, another issue that was beginning to creep into society and would be a problem for literally the next 2,000 years was the fact that the coins would often be worth more than the metal itself. Much of this was due to counterfeiters, who often used methods to swindle recipients by replacing the original metal content with something else. One of the methods that was used was an alloy, which was a mixture of metals that resembled the original metal. The trick is to make the coin with another cheap metal and then cover it with the precious metal so that the visible part of the coin looked perfect. Another way to commit this form of fraud was through coin debasements, which involves removing some of the metal from the coin in the most subtle way possible. This can be done by scraping the outer parts of the coin in the act of shaving off a small portion of the precious metal portion of the precious metal. Over time, the precious metal clippings would be saved up and melted into bullion or used to make new coins.
Speaker 1:So while coinage was making Lydia wealthy, it did cause some unintended consequences. In part, it may have led Cretaceous to think his kingdom was invincible. Now it is important to note what was going on in the world at the time. In Iran, the Persians, under the rule of Cyrus the Great, had taken control of Iran when Cyrus had overthrown the Median Empire, which was run by Astyages, the king of the Medes and Cyrus' grandfather, in 550 BCE. Around 547 BCE, cyrus the Great had been making certain assertions and arrangements with the Ionian Greeks behind Cretaceous' back. It's quite possible that Cyrus was initially using the Ionian Greeks to provoke Cretaceous and, more more importantly, to destabilize Lydia. Now Cretaceous whether he was looking to provoke the Persians or not led his troops into central and eastern Anatolia to capture the city of Tyria and, in the process, began selling its citizens into slavery process began selling its citizens into slavery. Well, that provocation wasn't going to work for Cyrus or the Persians and, as a result, it gave him an excuse to expand his empire even further into Anatolia.
Speaker 1:So his army of Persians and Medes marched to Cappadocia. As such of Persians and Medes marched to Cappadocia, as such, cretaceous received word that the Persians were going to attack his kingdom. In response to this action by the Persians, he consulted the Oracle of Delphi, who prophesied that Cretaceous would destroy a great empire if he went to war. What does that mean? I don't even know. Does he mean, is it the Persians or the Lydians? Who really knows? I mean, it's pretty vague and not very clear. But also, too, this seems like one of those kind of reoccurring stories that you hear throughout history, that so-and-so goes to meet with so-and-so, and in the process a vague response is given that could mean either their kingdom is killed or the other kingdom is killed off. It's kind of a recurring thing that you kind of hear, you know, every once in a while, and this is just another case of it.
Speaker 1:So, by all accounts, the Lydians held their own at first, and their first battles were essentially a draw, but the winter was approaching, and that typically meant that campaigning season was basically over. As such, cretaceous expected Cyrus to head home back to Persia for the winter, so he withdrew his troops from Sardis and sent word to his allies to be ready in the spring, and really not immediately. However, cyrus didn't retire for the winter. He surprised Cretaceous by chasing him back to Sardis. But either way, cretaceous still had a much bigger army of approximately 420,000 men compared to Cyrus' 196,000 soldiers. When Cyrus caught back up, what he did was a bit of psychological warfare by putting regular camels in the front. Now, you might not think much of this to yourself. You know camels up front. Why does that matter? Well, the reason why this had an impact was that the Lydian horses had never seen them and were terrified by their size and smell. They could not be controlled and basically fled the battlefield. So this one single act decimated the Lydian cavalry.
Speaker 1:Cyrus eventually captured Croesus and it sounds like Cyrus was really mad and wanted to execute Croesus on a giant bonfire. But apparently the gods had stepped in and a rainstorm doused the funeral pyre and Croesus was saved. And apparently, after he was saved by the gods, croesus had said to Cyrus you should stop your soldiers from burning and looting Sardis. Cyrus said why? And Cretaceous replied because you have defeated me, the city belongs to you. Why let your men destroy it? Cyrus thought about it and agreed and spared his life. And on top of that, because this is Cyrus the Great, he decided to give Cretaceous a job as an advisor to him.
Speaker 1:Now you're going to probably think I'm a little bit nuts, but for some reason, when I read these stories, especially this story, the one thing that seems to pop in my head when I read this initially was when in Scarface. When in Scarface, when Tony Montana killed his former boss, frank and decided to spare Ernie his life and gave him a job. So Ernie thought he was going to get killed by Tony Montana and he said hey, you want a job. So he drinks the alcohol and he's shaking because he's so scared, but for some reason that just plays in my head when I read this story, and I know it's kind of silly, but it's just the way my mind works.
Speaker 1:Anyway, getting back to the story from a military strategic location, lydia was a buffer zone for Ionian Greek city-states on the Aegean Sea. Now, I don't think I've mentioned it or not, but nearly half the Greeks lived outside of today's Greece mainland. They stayed connected to the motherland through trade and culture, but they had independent governments. Cyrus' general was advising him to keep marching west and conquer Ionian Greek city-states. To keep marching west and conquer Ionian Greek city-states. Now, this was truly shocking to the other Greek city-states on the mainland, as they had understood that they had a potential powerful enemy right on their doorstep. Despite the defeats, not a lot had changed, as the Ionians maintained their ability to rule themselves if they paid their tribute and sent men to fight in the Persian military. However, the Ionians would occasionally rebel against their Persian overlords, of which a major rebellion happened around 500 BCE, of which the retaliation was swift and severe, as the Persian army burnt Sardis to the ground to send a message. However, the city was rebuilt soon afterward, but the message was delivered Incredibly.
Speaker 1:Even after Lydia was ruled by the Persians, the Cretaceous coinage remained in use for quite a long time afterward. So many Lydian gold or silver staters dating after the fall of Cretaceous have been around for over centuries that many historians believe the new Persian rulers of Anatolia continued to use the same coin dyes at the Sardis Mint for some many years afterward. In 334 BCE, sardis was taken by Alexander the Great. When the Romans took control of the region around 133 BCE, they made Lydia an administrative district, as it still held tremendous value to whoever held the region. Tremendous value to whoever held the region For as long as standing armies were created.
Speaker 1:We're talking back as far as even Sargon and his enormous standing army of over 6,000 soldiers. The biggest problem was how do you provision the army? For the longest time, kings just did not have the resources readily available to pay their armies, and when I say pay, that can mean a whole many different things, whether it's providing some sort of lodging or providing meals, or even providing certain necessities that would make life much easier, such as paying in salt. So, to overcome this lack of resources to pay soldiers, one of the biggest motivations was the fact that the king would allow his soldiers an opportunity to plunder and conquer the villages and towns and cities. In order to make the plunder worth their while, they needed to have things that they could take back to be valuable or, even more importantly, portable. As such, precious metals and precious stones would have been the most ideal items to plunder, as you can get your biggest bang for your buck due to the value to size ratio. Therefore, it wasn't uncommon for individuals to come into wealth through theft and plunder.
Speaker 1:So I always remember thinking to myself why would these soldiers, officers and government officials be okay participating in these long, protracted wars? Why didn't they just lose their nerve or just get frustrated and go AWOL in large numbers? Why did they stick around and see it through, even though it could be years or decades? Well, the reason is, war could provide you with life-changing wealth, along with the glory that you may be seeking Now. The fact is, when individuals come into a great deal of wealth in a relatively short amount of time, they are going to look to spend it and therefore there are going to be people who are looking to sell their goods and services and, as a result, you end up with newer and larger marketplaces. Not all these marketplaces were on the up and up because, just like in modern times, when people come into a lot of wealth doing unsavory things, you'll have large black markets pop up.
Speaker 1:So you can see how, even as far as back in these ancient civilizations, war often stimulated economies, whether it was above or below board. Like I said, it wasn't just about plundering money, but it was also about glory. Now I realize glory is probably an idea that may or may not resonate with the modern thinking the way it resonated with ancient societies, but war was constant in ancient societies, ancient societies. But war was constant in ancient societies and it may have been the fact that, yes, glory played a major part in that. But it's quite possible that these constant states of warfare were pushed forward as an impetus for developing trade, especially when trade involved precious metals and stones, particularly when they are smaller in size and more portable and easily broken down into smaller amounts. So, in the end, warring with places like Lydia was a gamble that the soldiers on either side could end up with significant amounts of precious metals, which then meant marketplaces were bound to spring up within close proximity of these soldiers. In other words, war had stimulative economic effects, just like you hear in modern parlance that war is great for the economy.
Speaker 1:Well, until it isn't so, the Lydians started using coins that developed and then, within a relatively short time period, maybe within 80 years or so, the Greeks also started using coinage. And it may be just one of those crazy, weird coincidences, but the Greeks developed a phalanx tactic right around the same time that they had adopted coinage. So maybe it was a thing that the Greeks had realized that they better be superior on the battlefield because now they had an even bigger incentive at plunder, and therefore the Greeks almost became obsessive with drilling and training its hoplite soldiers, because maybe they realized that they're going to have to defend their growing wealth. But also, whenever they plundered a foreign kingdom, the raw materials brought back into the Greek city-states could be broken down into some sort of coinage and therefore, by increasing coinage to the government, they were able to increase its capacity for trade, increase its economies of scale when producing weaponry and tools and also be able to afford mercenary soldiers to feed the growing military-industrial complex, which was an investment to bring back more raw materials to create more coinage to increase its army and navy. And you can say that this ultimately got its start with the Lydians. Now that these governments had their own coins, they were able to implement rules that their coins would be accepted wherever they collected taxes or imposed any kind of fees or fines. Thus, what they were doing is establishing uniform national markets for trade. Now I want to be clear that the markets were originally more or less a side effect of government systems when they first started to appear in places like Sumer. Now you can see that places like Lydia and then later the Greeks, the marketplaces became increasingly entangled with the military-industrial complex. So, going forward from the Lydians, what we really see is whenever there's an increase in military activity, there will also be an increase in the usage and production of coinage, along with other things such as slavery. So therefore, the natural progression would be people would become more materialistic in nature. So we see more conspicuous consumption as a result of military action and plunder.
Speaker 1:And I want to make sure that I'm clear, because I mentioned conspicuous consumption prior. What that really means is people who are purposely going out and buying goods just so they can show off to their neighbors. I remember seeing an article published by the guys at Freakonomics Radio where they basically said that, despite the fact that there were several types of hybrid cars in the marketplace, the Toyota Prius far outsold other hybrid car sales, despite the fact that the Prius had essentially similar miles per gallon ratings. And the reason why the Prius sold in much higher numbers is because the people wanted others to know that they were in fact driving hybrid, because the Prius had a unique look and you can easily identify it as a hybrid vehicle versus another car model that was identical to its non-hybrid design. So that form of conspicuous consumption is a lot more subtle than just seeing who could go out and buy the largest house or build the largest tomb. But either way, more wealth will almost always increase conspicuous consumption, even when people will say that they will never show off their wealth or show that they got an increase in their salaries.
Speaker 1:So what I'm getting at is materialism really takes a great leap forward with the advent of coinage. Coins would eventually carry a sea power message across the trading world from the ancient Greek city-states to Imperial Britain, and then, as coinage becomes more widely circulated, you start to see the idea of pure greed being put on steroids. Now, when we get to the classical Greek city-states, you start to really see a pushback against the monetization and the idea of coinage and banking being something less desirable as compared to landowning and farming. But the fact is, whether people push back against it or not, the Lydians planted the seeds for the modern economies to develop and thrive for the next 2,500 years, for the modern economies to develop and thrive for the next 2,500 years.
Speaker 1:I want to thank you for taking the time to listen to these two parts on ancient Anatolia. Now I want to be clear I really liked doing these episodes, these two episodes in particular, because this was kind of really what I was kind of looking to do when I first started this podcast. I really wanted to discuss banking, especially in the United States. But you know, as I kind of went back further and further into the development of money, you kind of really went all the way back actually to Sumer, really when money really first started. But then, when you look at coinage, it was really the Lydians who really helped kickstart the idea of using coins.
Speaker 1:I mean, we do know that the Chinese and the Indians played a major part in this as well, but I think it was someone like Cretaceous who became world famous and was really the first ever kind of mega superstar when it comes to wealth. But, more importantly, I think you can kind of really see credit for basically everything when it comes to ancient societies and developments. Kind of really push aside places like Lydia and we push aside ancient China and ancient India, but all these ancient societies played their part in creating the modern international economies that kind of really feed off of each other and we need quite honestly. So. I hope you really enjoyed these episodes and I look forward to discussing more in the near future. If you like what you hear and want to donate to the show, you can visit us at patreoncom slash history of money banking trade or you can visit our website at moneybankingtradecom. Also, you can help out the show a ton by leaving a five-star review and telling a friend about it. Thank you very much. Talk to you soon.
