Peter den store, Alexander Hamilton, om russiske rublar, og amerikanske dollar med professor Svein Harald Gullbekk.

My name is Morten Søberg and I’m head of public relations at SpareBank 1, which is behind the Svalbard Money project. Today I’m here with Professor Svein Gullbekk. He is a professor of numismatics – the study of coins and medals – at the University of Oslo. It’s great that you’ve taken the time to come and talk to me today about coins – both Russian and American, but in relation to Svalbard and the history of monetary policy in Svalbard. Speaking of Svalbard: as a Norwegian and so on, what is your relationship with Svalbard?

To me, Svalbard is a fairy tale. It’s a foreign land far north, one that I’ve sadly not had the pleasure of visiting. Yet. With a fascinating industrial history, a community where people walk around trying to stay away from polar bears. That’s not everyday fare for most people in the world.

That’s true. And I did mention Norway: it’s a unique area in the sense that it’s Norwegian territory with, what should I say, porous borders. It’s a hybrid of Norwegian land and an international free zone. The point is that today it’s difficult and almost meaningless to talk about Svalbard without mentioning the Soviet Union and Russia. That’s true for the history of monetary policy in Svalbard, too. All the mining companies there issued their own notes, but only in the Soviet sector did they also issue coins. And the fact is that all Soviet Svalbard coins were struck or minted in Leningrad. That is our starting point today as we try to drill down into Russian monetary history. And then there is no avoiding Peter the Great. So why don’t you tell us a bit about him: an A–Z in 1-2-3? Then we can go into more detail later.

The fascinating thing about Peter is that he was a modern man at a time when the Russian realm was not – quite the opposite. It was mediaeval. When he came to power he had ideas about modernisation. Things needed to be done, streamlined, standardised. So he set off for Europe. He spent 18 months there, travelling almost incognito and meeting people, working in shipyards and factories in the Netherlands and England, picking up ideas and people and taking them back to Russia, where he started a reform process pretty much unparalleled in an early modern state.

And he evolved into not just a reformer and nation builder of note but also, in hindsight, a monetary strategist. Can you say something about how he defined Russian monetary units, how he came to have a mint built which still stands today? The decimal system is a key word here.

We’re talking about the period around 1700, the late 1600s, early 1700s. Up until then Russia, that vast realm, had a very rudimentary or primitive coinage and monetary system. It was in principle largely based on a subsistence and barter economy. And most of the money was spent on goods and services. There were coins that we now refer to as wire coins: primitive, elongated small silver coins with St George on horseback slaying the dragon depicted on the obverse (the front) and a Cyrillic inscription on the reverse (the back). They were so primitively produced that the Cyrillic writing is often only partially legible. A modern state, as in the European tradition, requires a functioning coinage and monetary system that works and is effective. And that you can trust. So in many ways Peter the Great adopted the monetary system that had existed in Europe since Greek and Roman times. At the time of Peter European states also used paper-based money valued against gold and silver, and there was a wide range of denominations so that the money could be used across society by everyone living and working there. Peter the Great wanted to achieve the same and adopted this model.

But he didn’t just adopt, did he? He also imported minting equipment from Germany, from Nuremberg, but I think that was a gradual process: to establish a monetary system that works, you simply have to exercise power by way of power of definition, you have to decide what the monetary unit should be and build institutions. All that was put in place under Peter the Great.

Indeed. And to go into a little more detail: he introduced the rouble as the basic monetary unit. It had the same value as European daler or thaler. Roubles were large silver coins on which he had his own portrait placed on the obverse (the front). The large Russian eagle with two heads was on the back, gazing across the big realm in two directions: both east and west. A magnificent coin in the European tradition. But he did something that had not yet been done in Europe. He defined his monetary system as a decimal system. It meant that 1 rouble was worth 100 kopeks. The kopek was a small copper coin. In addition there were 2, 5 and 10 kopek coins. And quarter and half roubles and the rouble. A standard system that everyone could use and relate to. At the same time it’s quite right as you say that he regulated the money in circulation. He said that no foreign coin was valid inside the Russian realm. That way he paved the way for his own minting. And by seizing foreign coins, he could melt down the precious metal and reuse it for his own coins.

Exactly. He is also well known as the founder of the mint in St Petersburg. And he moved the capital from Moscow to St Petersburg during his lifetime. The mint there was built in the early 1720s, I think.

He began by producing coins in Moscow, built a large mint there and then moved it. He did not replace the Moscow mint, but he did have mints operating in other places. And as you said, in St Petersburg he introduced a coin engraving machine acquired in Germany. Once the machine was in place he declared “all coinage in my realm shall be machine-minted.” The coins were to be of a decent quality.

What about the metals that were used for coin production? Gold, silver, copper, was much of it imported in the beginning or was it locally sourced and produced?

I think he really wanted to use local metals. He wanted sustainable supplies locally. But we don’t know much about this. He didn’t have vast metal resources within his realm. So he did use a considerable amount of foreign metals. And the monetary system, the coins that were minted, was primarily silver and copper. They had plenty of copper. Silver less so. Gold was still in short supply. Although he did actually try to facilitate search for precious metals. He was very aware of this, so he encouraged gold mining: anyone was practically free to acquire the rights to any discoveries they made.

He tried to give all and sundry an incentive to take up mining with a view to procuring metals for coins, for the monetary system?

Yes. And, of course, for the economy generally. And he created a treasure trove, a state-owned treasure trove, where he kept precious stones, jewellery, precious metals, art – almost like you would a nation’s gold reserves.

And then time passes, he is out of the picture, the Revolution happens, the city changes its name several times to Petrograd and Leningrad. But the mint continues to operate. It has maintained its core function over time, including in the Soviet era.

Money is unique in a way, historically speaking. There may be wars, political unrest, crises of various kinds, but monetary standards tend to survive war and crisis. As do the mints. The first mint to be established in the US, in Philadelphia, is now the country’s national mint. The Royal Mint in Kongsberg in Norway, established in 1686 before Peter the Great opened his in Russia, is still in operation, today on private hands. These are institutions of great longevity.

Then we arrive at the Second World War. Occasionally it has struck me that the German siege of Leningrad has perhaps been slightly overshadowed by the Battle of Stalingrad and maybe also the final battles in Berlin. But the fact of the matter is that it’s a horror story without parallel. The siege began on 8 September 1941, lasted for almost 900 days and resulted in the deaths of nearly 1 million people – many of them from hunger. And the German – or Nazi – strategy was simply to starve the city and eventually wipe it off the map. A horrific story. Anyway, just after the war the mint there produced Soviet coins for use in Svalbard. This is not just about a mint but about a monetary unit that has survived hundreds of years, changing regimes and more. Svalbard money is fairly ordinary to look at; it’s not made from precious metal. Could you say something about how important it is, or the effect of, going from precious metal, gold and silver, to more common types of metal? And what consequences does that have for people’s trust in coins?

The classic model was of course a gold and silver standard where coins were issued in gold and silver. The coins had inherent value. Paper money was in principle based on a state’s precious metal resources. The state could not issue more paper money than a given proportion of the gold and silver held in its vaults, which formed the basis for the entire economic model or monetary system in the country. However, this became impossible to maintain when inflation took hold and economies began to grow faster than gold could be mined around the world. Eventually, after the first World War and a somewhat difficult period in the 1920s and 1930s, a switch was made to copper money, to fiat money as it’s often called, and to paper money with security in the state’s means of production. In Norway it was of course the Ministry of Finance, the central bank, which guaranteed the value of the money.

You’ve mentioned the decimal system, you’ve mentioned the gold and silver standard, you’ve even mentioned Philadelphia. The next step is perhaps to turn our attention to the US, as that’s where secretary of the treasury Alexander Hamilton was the big monetary strategist. It was he who took the initiative to establish a mint, to introduce the gold and silver standard, and to start federal coin production in the US in the early 1790s – 1792-93. I think the Philadelphia mint was also the first federal building to be raised under the constitution. One curious thing about money production in the USA was that it wasn’t until the Civil War, 1861, that federal banknotes were issued. The state’s monetary symbol was expressed in coins. Could you elaborate on that a little? Was the US really that ardently in favour of precious metals being the bedrock of federal money?

It’s a fascinating history. As you’ve already mentioned Peter the Great, Russia, Svalbard and the USA, we must add that – with the exception of Svalbard perhaps – these are young nations and monetary systems which have gained a high status and big role in modern history. But they joined the fray late – the US established a federal monetary system almost 100 years after Russia. That in itself is fascinating. Hamilton, Thomas Jefferson and George Washington were all central to the design of the first American banking and monetary system in the 1780s-90s. One thing they did was to realise that it was not possible to create a monetary system that covered all of this vast land mass. The USA was huge. Means of communication were limited. So what they did was to accept foreign coinage. They accepted foreign coins by statute. And they regulated the use of foreign coins by setting official exchange rates for the different currencies until as late as 1857. That way they ensured access to coinage across the country. By regulating the usage and value of coinage, the US had created a remarkable monetary system. We only think about dollars, cents and dimes coming out of the Philadelphia mint and subsequently also other mints, but the circulation of coins in the US is somehow reminiscent of the way coins circulated in the Nordic region during the Viking Age. It was not regulated, but comprised German, English, Islamic, Bohemian and Scandinavian coinage. The Americans simply decided to regulate it to their benefit. They made all major foreign currencies part of the American monetary system. English, French, German, Mexican, Russian and Spanish gold and silver coins were officially legal tender. All valued against the dollar. In that way they were able to supply monetary means to all Americans. That was a great move. A degree of self-awareness worthy of great respect.

You mentioned that both Russia and the US were late to establish decent monetary system – the US for natural reasons, perhaps, since they are quite a young nation. But what strikes me is that to this day – at least until the end of the Cold War – the rouble was a well known, big phenomenon. It had a lot to do with the Soviet Union’s role as a superpower. Today there is no doubt that the US dollar’s status in the world – at least to some degree – is a function of the vast military power that lies behind it. The fact that military potency, superpower status, serves as an important monetary dimension. What do you think?

It is clear that political power and status have had a major impact. As has financial muscle. America has been an economic driving force for many, many years. And then there’s religion. Religion has traditionally been an outstanding driving force, both symbolically and in order to legitimise the money itself. Linking not only the money to higher powers, but also presenting the state and the American society and people to God and faith of many religious affiliations.

American banknotes still say “In God we trust”.

True, they do. Some would say “In gold we trust”, but that’s an entirely different story. This has been incredibly important. But if I may raise one thing that has struck me, as you mentioned the proposal to create a trillion-dollar coin in order to clear the national debt.

In the US. This is an idea that recurs at irregular intervals when there are doubts as to whether Congress will permit the state to continue to fund itself by issuing national debt. People have said that we have this mint under federal control; how about we just strike a “gigacoin” and be done with it? A fascinating idea, really.

It’s just a new form of money, or form of promissory note. When the state issues money, we can of course see it as a loan.

Indeed. On the balance sheet of, say, a central bank, notes and coins are usually classed as a debt to the public.

I had an incredible experience with the TV presenter Torkjell Berulfsen. We were shooting a film about the history of money in the vaults of the Norwegian Central Bank. We were going to film the destruction of banknotes. There was a pallet of banknotes right there. We were waiting for the set to be rigged and took a look at the notes: there was in fact NOK 1 billion worth of 1,000 kroner banknotes. Unused. We sat down on the pallet and began to ponder … the central bank had classified these notes simply as paper. They would not be classed as money until they’d been put into circulation. But how much is a billion, we asked ourselves. To get to a billion, you have to earn one million a year for 1,000 years. And that’s before tax. So you would’ve had to start work before the Battle of Stiklestad in the year 1030.

Talk about welfare to work … These are huge numbers. I’ve learned or heard – although I haven’t tried it – that it takes 18 years to count to a billion.

Exactly, but we’re digressing. I think … back to Svalbard coins. The US were striking coins and issuing notes long before they had a federal coinage and monetary system in place, but it was done by the independent states. So the first coins appeared in around 1650. And the first notes in the 1690s. This is around the same time as the first Norwegian banknotes. It’s a long and tangled history of trial and error, lack of regulation etc. Massachusetts, for example, which was striking coins in 1652, was under British rule, and they struck their first coins during the English Civil War. Once the Brits got themselves sorted out, they said “no more coins for you”. But they just carried on, striking coins with the same year.

Back to what we were saying about the US Mint striking a “gigacoin” to serve as legal tender to service the national debt, say, it seems to me to be an unresolved issue whether it is possible, whether it will be accepted. At the same time it’s obvious that the American central bank prints money in order to buy national debt in the US and is at least indirectly involved in financing some of the national deficit. However, what is not clear is what kind of status a new federal coins would have in this context. And then – if we could start to tie up the loose ends here – I myself envisage that we are perhaps about to see a renaissance for the coin as an ur-currency. You see this with various cryptocurrencies, which often has the word “coin” as part of their name. To sum up, could you say something about the difference between notes and coins in modern times? One obvious difference is of course that each note is unique in the sense that it has its own serial number, while coins are more or less identical.

If I may start with your trillion-dollar coin: as a coin it’s useless. You can’t wonder down Manhattan, line up and buy yourself a sandwich, for instance. It would be a bad idea.

You could buy all of Manhattan …

Yes, much of it, indeed. But it wouldn’t be a coin. It’s more of a symbol, I think, a bit like bitcoin often appears in images and stylish three-dimensional presentations online. Various bitcoin designs are starting to look like standardised coins. But that’s as far from the truth as you can get. It’s a purely digital currency, you can’t touch it in any way. But when it comes to tangibles – paper, metal – ur-coins: I think you’ve touched on something significant here, because metal has value in itself, it’s tangible, you can touch it, feel it and even smell it. It sparkles if it’s a precious metal. It has qualities that base metals do not. It’s available in limited quantities, so not everyone can own it, only a selected few. There is also something steadfast and solid about it, and it comes back to mining and to the cornerstones of our existence. I think the coin will remain what you call the ur-currency, the ur-capital, for a long time – no matter how much digital currencies come to dominate. For a coin to be of value to society, it needs to be standardised: uniform, of the same value, recognisable, people must be able to use it, blind people must be able to use it. That’s crucial. And even if notes are unique in that each has its own number, they are also very standardised in terms of form. The number has to do with accounting, technical and security issues. But I think you’re touching on something fundamentally important: we humans need something we can look at, touch and feel.

And that makes for a very good conclusion to our conversation. I must say – just to bring in my point of view – that one of the most fascinating things about studying the history of monetary policy in Svalbard is the things that have come as a result of it. It is quite literally a deeply fascinating starting point for numerous conversations, reading and writing on the phenomenon of money in general through the ages. And luckily the history of monetary policy contains stories of both notes and coins. As for coins, we ought to sign off by saying thanks to the Soviet Union for their little contribution. Thank you. The end.