Gold coin of Croesus

Old World, New Powers (1100 - 300 BC)

We've all grown so accustomed to using little round pieces of metal to buy things, that it's easy to forget that coins arrived quite late in the history of the world. For over two thousand years, states ran complex economies and international trading networks without a coin to hand. The Egyptians, for example, used a sophisticated system that measured value against standard weights of copper and gold, but as new states and new ways of organising trade emerged, coinage began to make an appearance, and fascinatingly, it happened independently in two different parts of the world at almost the same time. In China they began using miniature spades and knives in very much the same way that we would now use coins, and virtually simultaneously in the Mediterranean world, the Lydians started making actual coins as we would recognise them today - round shapes in precious metals. I have here some of the original gold coins that made Croesus so rich. They come in all different sizes, from about the shape of a modern one penny piece right down to something the size of a lentil. The Lydian coins are not all the same shape. The largest one we've got here - it's in my hand now - is a kind of figure-of-eight shape, an oblong, slightly squeezed in the middle, and on it are a lion and a bull facing each other as if in combat, and about to crash together head-on.

These coins were minted under Croesus around 550 BC but, in a very real sense, they are already part of our modern world, as the financial journalist and novelist, James Buchan explains:

"There is a continuity between this coin of Croesus and today, and when you look at it, it has concealed in it the entire future, including the bonuses at Goldman Sachs and the career of Sir Fred Goodwin.

"In modern times, what money does is it incorporates a wish, and displays that wish to the world. And in the way that human beings are, they tend to become fascinated by the potential of objects, and certainly it's a feature of the present day that people accumulate fortunes that nobody could possibly spend, and yet people still compete to accumulate ever larger fortunes. But what makes this inequality of fortune possible is having money.

"There is nothing either natural or God-given about the use of money. It's just a historical process, quite a complicated one, that's built up over time. Over that period, money has worked pretty well and has played a very important role in the triumphs of humanity - and also of course in its miseries. But it's allowed the population of the world to expand beyond limits that were thought possible. Since even a few years ago, it's raised the standards of living. All these possibilities are in this little object."

So Croesus's gold coins really have changed the world. It's said that Croesus found his gold in the river that once belonged to the legendary Midas - he of "the golden touch", and it's certain that the region was very rich in gold, which would have been extremely useful in the great trading metropolis of Lydia's capital city, Sardis.

In small societies, there isn't really a great need for money, because you can generally trust your friends and neighbours to return any labour, food or goods in kind. The need for money, as we understand it, grows when you are dealing with strangers you may never see again and can't necessarily trust - that is, when you're trading in a cosmopolitan city like Sardis.

Before the first Lydian coins, payments were made mostly in precious metal - effectively just lumps of gold and silver. It didn't really matter what shape the metal was, just how much it weighed and how pure it was. But there's a difficulty; in their natural state, gold and silver were often found mixed with each other and, indeed, mixed with other metals. Checking a metal's purity was a tedious task - likely to hold up every business transaction, and even when the Lydians and their neighbours invented coinage, about a hundred years before Croesus, this problem still remained. They used the naturally occurring mixture of gold and silver, not the pure forms of the metals.

The Lydians eventually solved this problem, speeded up the market and, in the process, became hugely rich. They realised that the answer was for the state to mint coins of pure gold and pure silver, of consistent weights that would have absolutely reliable value. It was the currency that you could trust in completely and, without any checking, spend, spend, spend! How did the Lydians manage to pull this off? Paul Craddock, expert in historical metals, explains:...

"The Lydians hit on the idea of the state, or the king, issuing standard weights and standard purity. The stamps on them are the guarantee of the weight and the purity. And of course if you're guaranteeing the purity, then it is absolutely necessary that you have the ability not just to add elements to the gold but also to take them out. And to some degree, taking out elements like lead and copper, that's not too bad, but unfortunately the main element that came with the gold out of the ground was the silver, and this had not been done before. So I guess that Croesus sent to his research teams and said: ‘Your problem today lads is to discover how we can get the silver out of the gold so that we can then make a consistent coinage.' Now silver is reasonably resistant to chemical attack, and gold of course is very resistant to chemical attack. So what they did was to get either very fine powder of the gold straight from the mines, or else get bigger pieces of old gold and hammer it out into very thin sheets - a bit like the old-fashioned cigarette papers - and then put these in a pot along with common salt, that's sodium chloride. And then heat that in a furnace to about 800 degrees centigrade, and ultimately you are left with pretty pure gold.’

So the Lydians learned how to make pure gold coins. But no less importantly, they then employed craftsmen to stamp on them symbols indicating their weight, and thus their value. These first coins have no writing on them - dates and inscriptions on coins were to come much later - but archaeological evidence allows us to date our coins to around 550 BC, so the middle of Croesus's reign.

The stamp used to indicate weight on his coins was a lion, and as the size and therefore the value of the coin decreased, ever smaller parts of the lion's anatomy were used, so for example the smallest coin shows only a lion's paw. What this new Lydian method of minting did, was to move the responsibility for checking the purity and weight of the coins from the businessman to the ruler - a switch that made the city of Sardis an easy, swift, and extremely attractive place to do business in. No wonder that Croesus and his kingdom became enormously wealthy.

It was thanks to that wealth that Croesus was able to build one of the Seven Wonders of the World - the great Temple of Artemis at Ephesus. Because people could trust Croesus's coins, they used them far beyond the boundaries of Lydia itself, giving him a new kind of influence - financial power. Trust is of course a key component of any coinage - you've got to be able to rely on the stated value of the coin, and on the guarantee that it implies.

It was Croesus who gave the world its first reliable currency - the gold standard starts here.

But did Croesus's money bring him happiness? We're told that he was warned by a wise Athenian statesman that no man, however rich and powerful, could be considered happy until he knew his end. Everything would depend on whether he died happy.

Lydia was powerful and prosperous, but it was threatened from the east by the rapidly expanding power of the Persians. Croesus responded to this threat by seeking advice from the famed Oracle at Delphi. And he was told that, in the coming conflict, "a great empire would be destroyed". But actually it was his own empire, Lydia, that was conquered. Croesus was captured by the great Persian king Cyrus, and he became the world's favourite moralising example of how fortune can turn, even against the richest! In fact, his end wasn't so bad. Cyrus shrewdly appointed Croesus as an advisor - I like to think as his financial advisor - and the victorious Persians quickly adopted the Lydian model, spreading Croesus's coins along the trade routes of the Mediterranean and Asia, and then minting their own coins in pure gold and pure silver at Croesus's mint in Sardis.

It's an intriguing fact that coinage was invented at pretty well the same time in both China and in Turkey, and it's probably not a coincidence.

Rather, I think, they're both responses to the fundamental changes seen across the world around three thousand years ago from the Mediterranean to the Pacific. There were military, political and economic upheavals that brought us not only modern coinage, but something else that's resonated till the present day - new ideas about how people and their rulers saw themselves, in short, the beginning of modern political thinking, the world of Confucius and Classical Athens. That's what we're going to be looking at next week, and we're going to start with the people that toppled Croesus - the Persians.