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Decimal currency

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Decimal currency

For the system of library classification, see Dewey Decimal Classification. For other uses, see Decimalisation (disambiguation).

Decimalisation is the process of converting a currency from its traditional denominations to a decimal system, based on one basic unit of currency and a sub-unit which is a power of 10, most commonly 100.

Today, the only currencies which are in theory not decimal are the Malagasy ariary and the Mauritanian ouguiya, although in practice both of those are members of the large group of currencies with just one unit and no sub-unit.

Decimal currency

Decimal currencies have sub-units based on a factor of 10. These are most commonly 100 sub-units to the base currency unit, but currencies based on 1000 sub-units also exist, especially in Arab countries.

For example:

Historically, non-decimal currencies were much more common, such as the British pound sterling before decimalisation in 1971. Until 1971, the pound sterling had units of account of pence (12 to a shilling) and shillings (20 to a pound). Like other currencies, it also had coins with other names (ha'pence, guinea, and crown); and in addition, until 1960 the penny was divided into 4 farthings. There were 19 different divisions of a pound into equal shares of an integral number of pence (for example, 1/3, 1/4, 1/5, and 1/6, of a pound were respectively 80, 60, 48, and 40 pence, normally written as 6/8, 5/-, 4/-, and 3/4) and in 8 additional equal divisions into integral numbers of farthings (for example, 1/64 pound was 3 pence 3 farthings, written 3¾d).

Formal decimalisations

Europe

Russia converted to a decimal currency in 1704, with the ruble being equal to 100 kopecks, thus making the Russian ruble the world's first decimal currency.[1]

France introduced the franc in 1795 to replace the livre tournois,[2] abolished during the French Revolution. France introduced decimalisation in a number of countries that it occupied during the Napoleonic period.

Sweden introduced decimal currency in 1855. The currency riksdaler was divided into 100 öre. The riksdaler was renamed krona in 1873.

The Austro-Hungarian Empire decimalised the Austro-Hungarian gulden in 1857, concurrent with its transition from the Conventionsthaler to the Vereinsthaler standard.

Spain introduced its decimal currency unit, the Peseta, in 1868, replacing all previous currencies.

Cyprus decimalised the Cypriot pound in 1955 by dividing it into 1000 mils, later replaced by 100 cents.

On Decimal Day, 15 February 1971, the United Kingdom decimalised the pound sterling and Ireland decimalised the Irish pound.

Malta decimalised its currency, the lira, in 1972.

£sd conversion

In places where £sd was used, the decimalisation process either defined one new penny = 1100 pound, where the main unit (the pound) was unchanged; or a new main unit (such as the dollar), was introduced as a half pound, and one cent = 1100 dollar.

The following table shows the conversion of common denominations of coins of the £sd system.

Common name Amount New £p New $¢
Halfpenny 12d. 524p ≈ 0.208p 512¢ ≈ 0.417¢
Penny 1d. 512p ≈ 0.417p 56¢ ≈ 0.833¢
Threepence 3d. 1 14p 2 12¢ = 2.5¢
Sixpence 6d. 2 12p
Shilling 1/- 5p 10¢
Florin 2/- 10p 20¢
Half crown 2/6 12 12p 25¢
Crown 5/- 25p 50¢
Half sovereign 10/- 50p $1
Sovereign £1 £1 $2

The farthing, at ¼ penny, was never converted, as it ceased to be legal tender a decade prior to decimalisation. In 1971, a new penny would have been worth 9.6 farthings.

North America

United States

In 1784, Thomas Jefferson proposed a decimal currency system based on the Spanish dollar, with coins for 10 dollars, 1 dollar, 1/10 dollar, and 1/100 dollar; possibly supplemented by a half-dollar, "double tenth", and "five copper piece". One argument he advanced in favor of this system was that the 1/100-dollar coin would be similar in value to existing copper coins:[3]

States Denomination
Delaware, Maryland, New Jersey, Pennsylvania penny = 1/90 dollar
North Carolina, New York penny = 1/96 dollar
Connecticut, Massachusetts, New Hampshire, Rhode Island 2/3 penny = 1/108 dollar

The initial currency of the United States was of decimal denomination from the outset of home minted currency in 1792 with the dollar being equal to 100 cents, but other currencies were also accepted for some time after the standard was set. The Spanish dollar, a non-decimalized currency, was accepted as official currency in the U.S. alongside the U.S. dollar until 1857.

Canada

Decimalisation in Canada was complicated by the different jurisdictions before Confederation in 1867. In 1841, the united Province of Canada's Governor General, Lord Sydenham, argued for establishment of a bank that would issue dollar currency (the Canadian dollar). Francis Hincks, who would become the Province of Canada's Prime Minister in 1851, favoured the plan. Ultimately the provincial assembly rejected the proposal.[4] In June 1851, the Canadian legislature revisited the issue, and passed legislation that required the provincial accounts to be kept in decimalised format; dollars and cents. The establishment of a central bank was not touched upon in the 1851 legislation. The British government delayed the implementation of the currency change on a technicality, wishing to distinguish the Canadian currency from the United States currency by referencing the units as "Royals" not "Dollars".[5] The British delay was overcome by the Currency Act of 1 August 1854. In 1858, coins denominated in cents and imprinted with "Canada" were issued for the first time.

Decimalisation occurred in:[6]

Date Notes
Province of Canada 1 August 1854
Nova Scotia 1 July 1860 Ordered its first coinage in 1860, but they weren't shipped by the Royal Mint until 1862
New Brunswick 1 November 1860 Like Nova Scotia, the coins were received in 1862
Newfoundland 1866 Took effect in early 1865 and had different coinage from 1865 to 1947
Vancouver Island 1863
British Columbia 1865
Manitoba 1870
Prince Edward Island 1871

The colonial elite, the main advocates of decimalisation, based their case on two main arguments:[7] The first was for facilitation of trade and economic ties with the United States; the colonies' largest trading partner; the second was to simplify calculations and reduce accounting errors.[8]

Mexico and Bermuda

The Mexican peso was formally decimalised in the 1860s with the introduction of coins denominated in centavos; however, the currency did not fully decimalise in practice immediately and pre-decimal reales were issued until 1897.

Bermuda decimalised in 1970 by introducing the Bermudian dollar equal to 8 shillings 4 pence (100 pence, effectively equal to the U.S. dollar under the Bretton Woods system).

South Africa

The rand was introduced on 14 February 1961. A Decimal Coinage Commission had been set up in 1956 to consider a move away from the denominations of pounds, shillings and pence, submitting its recommendation on 8 August 1958.[9] It replaced the South African pound as legal tender, at the rate of 2 rand = 1 pound or 10 shillings to the rand. Australia, New Zealand and Rhodesia also chose ten shillings as the base unit of their new currency.

Australia and New Zealand

File:ABC Decimal Currency.ogv Australia decimalised on 14 February 1966, with the new Australian dollar equivalent to ten shillings or half an Australian pound in the previous currency. Since a shilling became equal to ten cents, the Australian cent was equal to 1.2 Australian pence, although they were usually exchanged on a 1:1 basis during the brief period when both were circulating.

New Zealand decimalised on 10 July 1967, with the New Zealand dollar replacing the New Zealand pound. The conversion rates were the same as Australia's - 10c to one shilling, one dollar to 10 shillings, and two dollars to one pound. Confusion was expected with twelve pence becoming ten cents, such as people expecting four cents' change from paying ten cents/one shilling for an item costing eight cents. To help avoid this, the Decimal Currency Board recommended on inter-currency transactions (e.g. paying 4c with £sd coins, or paying 4d with dollar coins) to pay to the next highest five cents or sixpence to get the correct change.

Asia

Sri Lanka (known in the West as Ceylon at that time) decimalised in 1869.

India changed from the rupee, anna, pie system to decimal currency on 1 April 1957.

Yemen Arab Republic introduced coinage system of 1 North Yemeni rial=100 fils in 1974 to replace former system of 1 rial = 40 buqsha = 80 halala = 160 zalat. The country was one of the last to convert its coinage.

Rupee-anna-paisa-pie conversion

In India, Pakistan, and other places where a system of 1 rupee = 16 annas = 64 paise = 192 pies was used, the decimalisation process defines 1 new paisa = 1100 rupee. The following table shows the conversion of common denominations of coins issued in modern India and Pakistan. Bold denotes the actual denomination written on the coins

Rupee Anna Paisa Pie New paisa
1192 112 13 1 2548 ≈ 0.5208
1128 18 12 1 12 2532 = 0.78125
164 14 1 3 1 916 = 1.5625
132 12 2 6 3 18 = 3.125
116 1 4 12 6 14 = 6.25
18 2 8 24 12 12 = 12.5
14 4 16 48 25
12 8 32 96 50
1 16 64 192 100

Non-currency cases (security market)

In the special context of stating the prices of stocks, traded almost always in blocks of one hundred or more shares and usually in blocks of many thousands, stock exchanges in the U.S. used eighths or sixteenths of dollars, until converting to decimals between September 2000 and April 2001.[10]

Mauritania and Madagascar

Mauritania and Madagascar theoretically retain currencies with units whose values are in the ratio five to one: the Mauritanian ouguiya (MRO) is equivalent to five khoums, and the Malagasy ariary (MGA) to five iraimbilanja.

In practice, however, the value of each of these two larger units is very small: as of 2010, the MRO is traded against the euro at about 370 to one, and the MGA at about 2,900 to one. In each of these countries, the smaller denomination is no longer used, and coins denominated in khoums and iraimbilanja are no longer minted. Thus they are not decimal currencies as there is no sub-unit.

Influence on the introduction of the euro

Before the introduction of physical euro notes and coins on 1 January 2002, the plans and experiences of various decimalisations, particularly decimalisation in the United Kingdom in 1971, were studied by the European Central Bank because many of the lessons learned could be applied to the introduction of the euro. For example, on how to educate the public (particularly the elderly), how long the transition was likely to take, the likely speed of uptake of the new currency, the likely effects on inflation for those currencies where one euro cent, the smallest circulating denomination of the new currency, was greater in value than the smallest coin in circulation before the transition and the likely criminal activities which might be attempted during the transition period.

See also

References

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