The Spanish dollar (also known as the piece of eight (peso de ocho), the real de a ocho or the eight-real coin) is a silver coin, of approximately 38 mm diameter, worth eight reales, that was minted in the Spanish Empire after a Spanish currency reform in 1497. Its purpose was to correspond to the German thaler.
The Spanish dollar was the coin upon which the original United States dollar was based, and it remained legal tender in the United States until the Coinage Act of 1857. Because it was widely used in Europe, the Americas, and the Far East, it became the first world currency by the late 18th century. Aside from the U.S. dollar, several other existing currencies, such as the Canadian dollar and the Chinese yuan, as well as several currencies in Latin America and the Philippine peso, were initially based on the Spanish dollar and other 8-reales coins.
The term peso was used in Spanish to refer to this denomination, and it became the basis for many of the currencies in the former Spanish colonies, including the Argentine, Bolivian, Chilean, Colombian, Costa Rican, Cuban, Dominican, Ecuadorian, Guatemalan, Honduran, Mexican, Nicaraguan, Paraguayan, Philippine, Puerto Rican, Peruvian, Salvadoran, Uruguayan, and Venezuelan pesos.
In the 16th century, Count Hieronymus Schlick of Bohemia began minting coins known as Joachimsthalers (from German thal, or nowadays usually Tal, "valley", cognate with "dale" in English), named for Joachimsthal, the valley where the silver was mined (St. Joachim's Valley, now Jáchymov; then part of the Holy Roman Empire, now part of the Czech Republic). Joachimstaler was later shortened to taler, a word that eventually found its way into Norwegian, Danish and Swedish as daler, Czech and Slovene as tolar, Polish as talar, Dutch as daalder, Amharic as talari, Hungarian as tallér, Italian as tallero, Greek as taliro (τάληρο), Flemish as daelder, and English as dollar.
"The Joachimsthalers weighed 451 Troy grains of silver. So successful were these coins that similar thalers were minted in Burgundy, Holland, and France; most successful of these was the Maria Theresa thaler, which began being minted in 1751 and formed a considerable portion of American currency after that date."
English speakers began to apply the word "dollar" to the Spanish peso or "piece of eight" by 1581.
After the introduction of the Guldengroschen in Austria in 1486, the concept of a large silver coin with high purity (sometimes known as "specie" coinage) eventually spread throughout the rest of Europe. Monetary reform in Spain brought about the introduction of an 8-reales coin in 1497.
In the following centuries, and into the 19th century, the coin was minted with several different designs at various mints in Spain and in the new world, having gained wide acceptance beyond Spain's borders. The main new world mints for Spanish dollars were at Potosí, Lima, and Mexico City (and minor mints at Bogotá, Guatemala City and Santiago), and silver dollars minted at these mints could be distinguished from the ones minted in Spain, by virtue of the Pillars of Hercules design on the reverse. In the 19th century, the coin's denomination was changed to 20 reales (based on 20 reales de vellón) and finally 2 escudos.
Spain's adoption of the peseta and its joining the Latin Monetary Union meant the effective end for the last vestiges of the Spanish dollar in Spain itself. However, the 5-pesetas coin was slightly smaller and lighter but was also of high purity (90%) silver.
In the 1990s, commemorative 2000-pesetas coins were minted, similar in size and weight to the 8 reales and also with high fineness.
Following independence in 1821, Mexican coinage of silver reales and gold escudos followed that of Spanish lines until decimalization and the introduction of the peso. The Mexican 8-reales coin (eventually becoming a 1-peso coin) continued to be a popular international trading coin throughout the 19th century.
After 1918, the peso was reduced in size and fineness, with further reductions in the 1940s and 1950s. However, 2- (1921), 5- (1947) and 10- (1955) peso coins were minted during the same period, similar in size and fineness to the old peso.
The term cob, for a piece of eight or a Spanish-American dollar, was used in Ireland and the British colonies during the period when Spanish-American gold and silver coins were irregularly shaped and crudely struck.
When the colony of New South Wales was founded in Australia in 1788, it ran into the problem of a lack of coinage. In 1812, Governor Lachlan Macquarie took the initiative of using £10,000 in Spanish dollars sent by the British government. To prohibit use outside of the colony and to double the number of coins, they simply punched out the centers of the coins. Both the central plug (known as the "dump") and rims (known as "holey dollars") were stamped with a sunburst. The punched centers were valued at 15 pence and the outer rims became five-shilling pieces. The mutilated coins became the first official currency produced specifically for circulation in Australia.
By far the leading specie coin circulating in America was the Spanish silver dollar, defined as consisting of 387 grains of pure silver. The dollar was divided into "pieces of eight," or "bits," each consisting of one-eighth of a dollar. Spanish dollars came into the North American colonies through lucrative trade with the West Indies. The Spanish silver dollar had been the world's outstanding coin since the early 16th century, and was spread partially by dint of the vast silver output of the Spanish colonies in Latin America. More important, however, was that the Spanish dollar, from the 16th to the 19th century, was relatively the most stable and least debased coin in the Western world 
An eight-real coin nominally weighed 550.209 Spanish grains, which is 423.900 troy/avoirdupois grains (0.883125 troy ounces or 27.468 grams), 0.93055 fine: so contained 0.821791 troy ounces (25.561 g) or 394.460 grains fine silver. Its weight and purity varied significantly between mints and over the centuries. In contrast, the Coinage Act of 1792 specified that the U.S. dollar would contain 371 4/16 grain (24.1 g) pure or 416 grain (27.0 g) standard silver. This specification was based on the average weight of a random selection of worn Spanish dollars which Hamilton caused to be weighed at the Treasury.
The coins had a nominal value of eight reales ("royals").
Before the American Revolution, owing to British mercantilist policies, there was a chronic shortage of British currency in Britain's colonies. Trade was often conducted with Spanish dollars that had been obtained through illicit trade with the West Indies. Spanish coinage was legal tender in the United States until an Act of Congress discontinued the practice in 1857. The pricing of equities on U.S. stock exchanges in 1/8-dollar denominations persisted until the New York Stock Exchange converted first to pricing in sixteenths of a dollar on June 24, 1997, and shortly after that, to decimal pricing.
Long tied to the lore of piracy, "pieces of eight" were manufactured in the Americas and transported in bulk back to Spain (to pay for wars and various other things), making them a very tempting target for seagoing pirates. The Manila galleons transported Mexican silver to Manila in Spanish Philippines, where it would be exchanged for Philippine and Chinese goods, since silver was the only foreign commodity China would take. In Oriental trade, Spanish dollars were often stamped with Chinese characters known as "chop marks" which indicate that particular coin had been assayed by a well-known merchant and determined to be genuine.
Thanks to the vast silver deposits that were found in Mexico (for example, at Taxco and Zacatecas) and Potosí in modern-day Bolivia, and to silver from Spain's possessions throughout the Americas, mints in Mexico and Peru also began to strike the coin.
Millions of Spanish dollars were minted over the course of several centuries. They were among the most widely circulating coins of the colonial period in the Americas, and were still in use in North America and in South-East Asia in the 19th century. They had a value of one dollar when circulating in the United States.
In modern pop culture and fiction, "Pieces of Eight" are most often associated with the popular notion of pirates.
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