By Tyler Rossi for CoinWeek …..
The Ottoman Empire was described as the “Sick Man of Europe” by the Russian tsar Nicholas I during a meeting with Austrian Prince Klemens von Metternich shortly after the Treaty of Hünkâr İskelesi[1] in September 1833. It was this defensive alliance that not only provoked the ire of Western Europe but also confirmed Ottoman weakness on the world stage. One secret article stipulated that instead of sending troops and weapons to support Russia, the Ottomans would commit to closing the geopolitically important waterway known as the Dardanelles to all foreign warships (England, in particular, was worried about its ability to project naval power and maintain its trade lines with India).
The tsar’s nickname turned out to be prophetic. The next century would prove full of weakness and decline for the Ottomans, culminating in civil war and the dissolution of the Empire in 1922.
Stepping back 80 years from that, we can see a coinage and monetary system in transition.
In 1844, the historic Ottoman Kuruş, also called the Piastre by other European countries, was replaced by the new Ottoman Lira. Originally a large silver coin comparable to the European Thaler, the Kuruş was slowly devalued and debased over hundreds of years, making the creation of a new denomination necessary. But instead of completely discontinuing the Kuruş and being forced to withdraw millions of coins from circulation, the older denomination was devalued to be the new decimal base of the Lira. In this new system, the Lira was divided into 100 Kuruş and 4,000 copper Para. The new silver Kuruş was issued in denominations of 1, 2, 5, 10, and 20 Kuruş while the gold Lira was denominated in 1/2, 1, 2 1/2, and 5 Lira.
This was the first time that the Empire had officially adopted a system of bimetallism.
At a rate of 1 gold Lira to 15.88 silver Kuruş, this bimetal system was intended to be on par with that of the Latin Monetary Union and when introduced, one Lira contained 6.62 grams of pure gold and weighed roughly 0.9 of a contemporary British Sovereign coin. However, as silver began to depreciate on the international market, this system began to fall apart. Starting with Sultan Murad V’s one-year reign in 1876 and the first two years of Sultan Abdul Hamid II’s reign (r. 1876 – 1909), the true market value of the Lira jumped from 102 Kuruş to nearly 108.
Even though debasement of the silver Kuruş was not an issue in the 1870s (compared with the 56.27% drop in weight between 1834 and 1844), bimetallism was discarded in 1881. Unable to force the recall of all old silver coins, the Ottoman Government decreed that all old, debased silver coinage was still legal currency. Consequently, the economy continued to rely on the Kuruş while the government officially shifted the currency to the gold standard.
This period is known as the Limping Standard.
A limping standard is when silver “limps along behind” gold because while the government keeps both silver and gold coinage as legal tender and maintains a fixed gold-to-silver ratio, only gold coins are struck freely (Conant, 216). Ottoman monetary problems continued until, on the eve of World War I, the Ottoman monetary system was in shambles. It is estimated that nearly half of the total gold Lira issued between 1844 and 1914–approximately 30 million coins–were hoarded. A massive quantity (roughly 6.39 million troy ounces of pure gold), this undoubtedly had an effect on the economy.
When the Ottoman economy finally went off the gold standard in 1914, the stock of actively circulating coinage was as follows:
- 32 million Lira of gold
- 12 million Lira worth of paper banknotes
- 11.6 million Lira worth of silver Kuruş
- 1.1 million Lira worth (4.4 billion Para face value) of bronze Para coins
Along with foreign coins exceeding 5 million Lira in value, all of this came to a total of 61.7 million Lira. At this point, the government issued the “Law for the Unification of Coinage” (Tevhid-i Meskukat Kanunu). This law finally demonetized all pre-1844 coinage and prohibited payments made to the government in amounts over 3 Lira from being made in silver.
The Ottomans also attempted to force the adoption of a second paper fiat currency. The first fiat currency was a failed series of interest-bearing paper notes denominated in Kaime in the second half of the 19th century. Production of the new fiat currency treasury notes, or Evrak-i Nakdiye (“Cash Documents”), began in July 1915 after one year of fighting in the Great War. Interestingly, the “privilege of printing paper money” had been the sole right of the Imperial Ottoman Bank since the 1840s. Because the Bank was controlled by British and French interests, it refused to cooperate, and the Ottomans turned to Germany for help. As a result, many of these notes were printed in Germany.
By the end of the war, paper Kaime dominated the Ottoman economy, and 158 million Lira in face value of the total 161 million printed remained in circulation through the end of 1918. Unlike the first issuances in the 19th century, the Ottomans promised to exchange all new Kaime for their face value in gold at the end of the war. Despite setting aside a limited amount of gold, enough to cover the early wartime issues, this promise was destined to be broken.
While economic disruption was mainly due to internal struggles, the British military also printed a number of counterfeit banknotes. These notes were released into circulation to further undermine the Ottoman Empire. Many, like the example below, were very well made and easily could be mistaken as genuine.
By 1917, the need for small denomination notes had become so great that the Government was forced to issue postage stamp money in 5 and 10 Para denominations. An example of the 10 Para denomination can be seen below.
At the same time, the price of gold in Istanbul shot up 500% – compounding the 18x increase in the cost of living between July 1914 and December 1918 as reported by the Ottoman Public Debt Administration. This inflation effectively destroyed the Ottoman economy, and while the armistice of October 31, 1918 officially ended armed conflict between Entente forces and the Ottoman Empire, it failed to bring stability to the Ottomans.
Coin production in all three metals continued for the duration of the war. At the start of hostilities in 1914, the Mint issued 2, 5, 10, and 20 Kuruş pieces. Most of these denominations would be struck throughout the war, with the exception of the 2 and 5 Kuruş coins. While these two denominations were not struck in 1918, small mintages were produced in 1919. Subsequently, all production of silver coinage ceased, and no imperial silver coins were struck after 1919.
As a result of the inflation mentioned above, the value of the cupro-nickel Para slipped ever lower. Production slowed, and no pieces were struck in 1914. In 1915, the Imperial Mint struck 5, 10, and 20 Para coins. Production shifted again in 1916 to the 10 and 40 Para denominations. The last wartime base metal denomination struck in 1917 under Mehmed V, was the 40 Para.
Brought back one last time in Regnal year 4 (1921) by the last Ottoman sultan, Mehmed VI, the 40 Para was officially the last circulating coin struck by the Ottoman Empire before the Sultanate was abolished in 1922. Struck entirely in Istanbul, this final mintage consisted of only 6.52 million coins.
Gold coins were struck, though the total combined issuance of all gold coins dated 1921 and 1922 is only 1,909 pieces, and it is unlikely that these coins were intended for circulation.
Thus ended the 623-year tradition of Ottoman coinage. It would take four years and a civil war for the striking of non-bullion circulation to recommence, this time under the authority of the fledgling Turkish Republic.
Mehmed VI (r.AD 1918-1922) Dually dated AH 1336 and RY 2 (4 July 1919 & 3 July 1920), CNG – Auction 100, Lot 538 – 07/10/2015.
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Notes
[1] https://en.wikipedia.org/wiki/Treaty_of_H%C3%BCnk%C3%A2r_%C4%B0skelesi
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Sources
Conant, 1903 – https://archive.org/details/futureoflimpings00cona/page/216/mode/2up
http://www.chiefacoins.com/Database/Countries/Ottoman_Empire.htm
https://encyclopedia.1914-1918-online.net/article/war_finance_ottoman_empire
https://sir-t.medium.com/fiat-money-ottoman-money-feudalism-and-mount-lebanon-famine-8614c349c3a0
http://turkeyswar.com/economy/financing-the-war/
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About the Author
Tyler Rossi is currently a graduate student at Brandeis University’s Heller School of Social Policy and Management and studies Sustainable International Development and Conflict Resolution. Before graduating from American University in Washington D.C., he worked for Save the Children creating and running international development projects. Recently, Tyler returned to the US from living abroad in the Republic of North Macedonia, where he served as a Peace Corps volunteer for three years. Tyler is an avid numismatist and for over a decade has cultivated a deep interest in pre-modern and ancient coinage from around the world. He is a member of the American Numismatic Association (ANA).
