Decimalisation
Decimalisation is the process of converting a currency from its previous non-decimal denominations to a decimal system, i.e., a system based on one basic unit of currency and one or more sub-units, such that the number of sub-units in one basic unit is a power of 10, most commonly 100.
The only current non-decimal currencies are the Malagasy ariary (equal to five iraimbilanja) and the Mauritanian ouguiya (equal to five khoums), though in practice both just have one currency unit and no sub-unit because khoums and iraimbilanja are no longer minted.
Decimal currency
Decimal currencies have sub-units based on a factor of 10. There 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 sub-units of account of shillings (20 to a pound) and pence (12 to a shilling). Like other currencies, it also had coins with other names (ha'pence, guineas, and crowns); and in addition, until 1960 the penny was divided into 4 farthings. There were nineteen different fractions of a pound of a whole number of pence. For example, a third, quarter, fifth and sixth of a pound were respectively 80, 60, 48, and 40 pence, normally written as shillings and pence: 6/8, 5/-, 4/-, and 3/4. There were eight additional fractions which were a whole number of farthings (for example, one sixty-fourth of a pound was three pence three farthings, written 3 3⁄4d).
Formal decimalisations
Europe
Russia converted to a decimal currency under Tsar Peter the Great 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, which comprised 1,000 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 the lira in 1972.
The euro, which comprises 100 cents, was introduced in the eurozone, and as of 2015, it replaced 19 national currencies in Europe.
£sd conversion
In places where £sd was used, the decimalisation process either defined one new penny = 1⁄100 pound, where the main unit (the pound) was unchanged, or introduced a new main unit (such as the dollar), equivalent to half a pound, with one cent = 1⁄100 dollar.
The following table shows the conversion of common denominations of coins of the £sd system.
| Common name | Amount | New £p | New $¢ |
|---|---|---|---|
| Halfpenny | 1⁄2d. | 5⁄24p ≈ 0.2083p | 5⁄12¢ ≈ 0.4167¢ |
| Penny | 1d. | 5⁄12p ≈ 0.4167p | 5⁄6¢ ≈ 0.833¢ |
| Threepence | 3d. | 1 1⁄4p | 2 1⁄2¢ |
| Sixpence | 6d. | 2 1⁄2p | 5¢ |
| Shilling | 1/- | 5p | 10¢ |
| Florin | 2/- | 10p | 20¢ |
| Half crown | 2/6 | 12 1⁄2p | 25¢ |
| Crown | 5/- | 25p | 50¢ |
| Half sovereign | 10/- | 50p | $1 |
| Sovereign | £1 | £1 | $2 |
The farthing, at 1⁄4 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 (making a farthing slightly more than 0.104 new pence).
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 favour 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 afterwards. For example, the Spanish dollar, a non-decimalized currency, was accepted as official currency in the United States alongside the U.S. dollar until 1857.[4]
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.[5] In June 1851, the Canadian legislature passed a law requiring provincial accounts to be kept decimalised as 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" rather than "Dollars".[6] 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:[7]
| 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:[8] 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.[9]
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 US 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.[10] 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
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. The television campaign containing a memorable jingle was used to help the public to understand the changes.[11]
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 as Ceylon at the 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.
Japan historically had two decimalisations of the yen, the sen (1/100) and the rin (1/1,000). However, they were taken out of circulation as of December 31, 1953, and all transactions are now conducted in round amounts of 1 yen or greater.[12]
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 = 1⁄100 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 |
|---|---|---|---|---|
| 1⁄192 | 1⁄12 | 1⁄3 | 1 | 25⁄48 ≈ 0.5208 |
| 1⁄128 | 1⁄8 | 1⁄2 | 1 1⁄2 | 25⁄32 = 0.78125 |
| 1⁄64 | 1⁄4 | 1 | 3 | 1 9⁄16 = 1.5625 |
| 1⁄32 | 1⁄2 | 2 | 6 | 3 1⁄8 = 3.125 |
| 1⁄16 | 1 | 4 | 12 | 6 1⁄4 = 6.25 |
| 1⁄8 | 2 | 8 | 24 | 12 1⁄2 = 12.5 |
| 1⁄4 | 4 | 16 | 48 | 25 |
| 1⁄2 | 8 | 32 | 96 | 50 |
| 1 | 16 | 64 | 192 | 100 |
Non-currency cases (security market)
In the special context of quoting the prices of stocks, traded almost always in blocks of 100 or more shares and usually in blocks of many thousands, stock exchanges in the United States used eighths or sixteenths of dollars, until converting to decimals between September 2000 and April 2001.[13]
Similarly, in the UK, the prices of government securities continued to be quoted in multiples of 1⁄32 of a pound ( 7 1⁄2 d or 3 1⁄8 p) long after the currency was decimalised.
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. Therefore, in practice, they are neither decimal nor non-decimal currencies as there is no sub-unit.
Influence on the introduction of the euro
Before introducing physical euro notes and coins on 1 January 2002, previous decimalisation efforts, particularly that of the UK in 1971, were studied by the European Central Bank.[14] Questions included how to most effectively educate the public (particularly the elderly), the duration of the transition, the likely speed of uptake, the likely effects on inflation for currencies where one euro cent, the smallest circulating denomination, 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
- ↑ The history of Russian ruble and kopeck at the law-theory.ru (Russian)
- ↑ Gadoury, V. "Monnaies Françaises" p.48 (1999)
- ↑ Jefferson, Thomas (1905). "Notes on the Establishment of a Money Unit, and of a Coinage for the United States". In Ford, Paul Leicester. The Works of Thomas Jefferson. 4 (Notes on Virginia II, Correspondence 1782–1786) (Federal ed.). Retrieved 21 January 2014.
- ↑ "A Century of Lawmaking for a New Nation: U.S. Congressional Documents and Debates, 1774 - 1875". loc.gov.
- ↑ McCulloch, A. B. “Currency Conversion in British North America, 1760–1900.” Archivaria 16, (Summer 1983): 83-94.
- ↑ Canadian Mint. “Currency Reforms, 1841 – 71.” A History of the Canadian Dollar. Ottawa: Canadian Mint, 2003.
- ↑ Canadian Mint. “Currency Reforms, 1841 – 71.” A History of the Canadian Dollar. Ottawa: Canadian Mint, 2003.
- ↑ Mushin, Jerry. “Twentieth Century Currency Reforms: A Comment.” Kyklos 50 (1997): 247 – 249.
- ↑ W.T. Easterbrook and Hugh G.J. Aitken, Canadian Economic History (Toronto: University of Toronto Press, 1988), 381.
- ↑ Mboweni, T.T. 2001. The Reserve Bank and the Rand: some historic reflections. Speech by the Governor of the Reserve Bank 29 Nov 2001. http://www.reservebank.co.za
- ↑ "Australian Dollar Bill Currency Decimal Jingle from 1965".
- ↑ "通貨の単位及び貨幣の発行等に関する法律". e-gov.go.jp.
- ↑ "SEC Testimony: Decimal Pricing in the Securities and Options Markets (A. Levitt)". sec.gov.
- ↑ Moore, N. E. A. (June 1995). "The Introduction of Decimal Currency in the UK in 1971. Comparisons with the Introduction of a Single European Currency" (PDF). European Papers. European Commission Director-General for Economic and Financial Affairs (111). Retrieved 21 January 2014.