The Shroff

In Arabic lands, the shroff was a money-changer, a banker. Into the 20th century, the shroff was also known to Europeans who traded in China and India. According to The Anglo-Indian Dictionary by Yule and Jobson, the word shroff referred to "the experts who are employed by banks and mercantile firms to check the quality of the dollars." The word shroff also meant the shroff's commission, his fee for testing coins.

(Originally appeared in the MSNS MichMatist in 2006. It can be found on the Web.  This version was retrieved from CoinPeople.com where I posted it April 6, 2006.) 

In Hebrew, the word appears in the Biblical book of Malachi as soref. It says, "He shall sit as a refiner and purifier of silver; and he shall purify the sons of Levi." In modern Arabic, the word "sherif" has come to refer to direct descendents of Mohammed through his daughter, Fatima. However, wealthy people often backdate their lineage.

Some numismatists cite shroff as the origin for the word "chop," the banker's marks found on large silver coins that circulated in Chinese finance. Chopmarks are often found on American Trade Dollars (1873-1878), as well as Spanish 8-reales, and other coins. Another etymology for that word points to the Chinese "chop" meaning "fast" or "quick" as in "chopsticks." It is true that chopmarks are seldom true Chinese characters but rather a shorthand. A third origin is in the Hindi word "chap" meaning a stamp, seal, or brand. Ultimately, that word may itself be a dialect pronunciation of "shroff."

Actor Omar Sharif

Like many foreign words adopted into English, there are variations in spelling including sharif and sheriff. Sharif is the stagename of Michael Sharoub, known as Omar Sharif, the star of the movie Dr. Zhivago. Other variants include sherif and sheriff. (The latter is not related to the name of the English and American county law officer, which comes from shire-reeve.) Shroff also appears as xeraf. Interestingly, this led to the plural xerafin, meaning the coins of the xeraf or shroff. The word became a pun, since the xerafin or serafine was also the name of "angel" gold coins of Portugal's Indian colonies. These xerafine were known to and happily welcomed by colonial American merchants.

In Portuguese commerce of the colonial days, the "xaraffo" was a customs officer whose job it was to "see to the money." Another reference speaks of "... very wealthy carafos who change money." The fee, the shroff or shroffage, appears in a colonial report from Goa, the Portuguese colony in India, in 1585. "This present year, because only two ships came to Goa, the reales have sold at 12 per cent of Xarafaggio (shroffage), as this commission is called from the word Xaraffo, which is the title of the banker."

 

Indian film star and producer
Jackie Shroff

In a 1750 report to the home office of the East India Company, a merchant in Madras wrote: "...the Irruption of the Morattoes into Carnatica, was another event that brought several eminent Shroffs and wealthy Merchants into our Town..." The word appeared in many such letters through the 1800s. 

In an 1878 digest: "Shroffing schools are common in Canton, where teachers of the art keep bad dollars for the purpose of exercising their pupils; and several works on the subject have been published there, with numerous illustrations of dollars and other foreign coins, the methods of scooping out silver and filling up with copper or lead, comparisons between genuine and counterfeit dollars, the difference between native and foreign milling, etc., etc."

During the American colonial era new money and new commodities would not have been transported but for the distant attractive force of the shroffs. Chili, tomatos, potatoes, and tobacco moved both East and West. According to David Ludden of the University of Pennsylvania's School of Arts and Sciences: "Europeans in the Indian Ocean system relied on this system and on the value of money in circulation -- even as they introduced more precious metals from their new world territories -- from which the Spanish imported huge quantities of silver into China via the Philippines, and from which money coming to Spain and Portugal then travelled east along the old routes of trade from the western Mediterranean through the Ottoman territories into the Asian trading system."

Americans who smoke tobacco may recall that Camel cigarettes advertise their fine Turkish tobacco. Tobacco, of course, did not originate in Turkey, any more than tomato sauce and noodles originated in Italy. We see England as the most powerful force in the global commerce of the American colonial period. England pulled the tides of our shipping, but the true course of our commerce was defined by the distant yet powerful attraction of the shroffs.

This is supported by Bill Swoger's June 23, 1997, Coin World article about the circulation of gold "chequins" in colonial America. The chequin (sekkah in Arabic) was first a Venetian coin in the 1200s. Trade with Arabs introduced the coin into their currencies. The coin was well-known in the 1600s. It appears in Ben Johnson's play Volpone (1606): "... every word your worship but lets fall is a chequin." According to Swoger, for most of the 17th century, these gold coins came to America along with the slave trade and as a result of our easy virtue with pirates. They are known to have circulated in New York and Virginia. They are cited as colonial currencies in Sylvester Crosby's 1875 book, The Early Coins of America.

It is important to note that two relevant references do not cite this Arabian money. America's Foreign Coins by Schilke and Solomon and Money and Exchange in Europe and America 1600-1775 by John M. McCusker are both mute. It might be that these omissions come from eurocentricism. Of course, Schilke and Solomon focus specifically on the Federal period 1793-1857 and on the coins that had legal tender status. Swoger's underlying thesis is that the chequin was a coin of illicit trade. Even though slavery was legal, the procedure was supposed to be "molasses for rum for slaves" rather than the purchase of American goods by ships of foreign flags via gold coins of heathen pirates. Yet, undeniably, such trade took place.

 

Ratnakar Bank, privately owned, now rebranded as RBL Bank
Shroff Arcade, Sodawala Lane, Mumbai

Shroffs were clearing houses for the purchase, transport, and sale of imports and exports. For over 300 years, European merchants of all nationalities doing business in southern Asia even looked to local shroffs to provide venture capital. By 1850, the British world economy based on the industrial revolution and laissez faire economics ultimately eclipsed the Asian networks of shroffs in China, India, and the Islamic lands. Even so, the shroffs did not simply evaporate. Writing about life in Shanghai in the 1930s, Canadian aviator Pat Patterson makes several references to "shroffs" some of whom were merely bill collectors for bordellos. 

Oxford International is Chit Fund a kind of lottery pool

You can still find bankers on Shroff Lane in Colaba, near Bombay [Mumbai], India. Until a couple of years ago, The Far East Economic Review of Hong Kong used to have a regular column called "Shroff" about mergers, acquistions, and other financial transactions.

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Tibetan Tangkas: Sacred Silver from the Roof of the World

The Art of Finance

Money as Living History

Pictures of a Distant Country: Seeing America Through Old Paper Money by Richard Doty (Whitman, 2013, 296 pages, $24.95) is a "coffee table" book replete with enlarged, full-color images of banknotes and other fiduciary paper from the 19^th century. Dr. Richard Doty is the senior curator of the Smithsonian Institution’s National Numismatic Collection where he has had 27 years to study, organize, and display the tangible artifacts of our nation’s financial history.

 

Millville, New Jersey, Millville Bank, $2 1857 (proof)

Numismatics delivers the substantial evidence of our economic history.  Even great scholars such as Ludwig von Mises, Friedrich A. Hayek, and Murray N. Rothbard blundered because they never collected, and therefore were ignorant of the basic truths of what money is, and how people use it. Unlike otherwise very nice but run-of-the-mill efforts that organize the subject either by denominations by year of issue, or by series of issue by denomination, this book honors the American people according to our occupations, families, classes and social statuses, as well as by our own views of whimsy, entertainment, accelerating technology, and national mythology.  

1815: Doty indicates the power drive at the left.

 Doty begins by explaining the origins of our paper money.  For 200 years Europeans found everything in North America except the one thing they hoped most to find: precious metals.  (Gold was finally discovered in North Carolina and Georgia in the early 1800s.)  Tobacco, wampum, and other expedients were short-lived substitutes.  Paper money, backed by public authority was the lasting solution.  Massachusetts was first in 1690.  By the middle of the 1800s, paper money was established as the traditional medium of large-scale commerce.  Paper money also achieved a consistency of design and presentation with “a central vignette, or more portraits to the left or right of the central scene, and a smaller representation bottom center.”  These illustrations are now our windows to the past.

 

Mechanics Bank, Memphis, Tennessee $10 1855

The simple fact is that few teachers or professors even know about the rich array of private bank issues in the 19^th century. This only opens the door for the student who chooses to pursue an independent path to discovery.  Here we have images of how Americans perceived themselves, and (more importantly) how they wanted to be seen. 

Ten chapters including "The People in the Way",
"The People in the Middle", "Childhood and Family", "Whimsy",
"You Can Trust Me", "Progress", "An Age Now Ending"

Our nation expanded urban civilization, as it also was built by yeoman farmers, and, admittedly, by an agrarian society carried by slave labor.  Industry and manufacturing play a large role, of course, as do shipping, railroads, and farming.  

Above: Adrian Michigan. Adrian Insurance Company $1. 1853.
Below: Winsboro, South Carolina. Planters Bank of Fairfield $5. 1855.

While the hand that rocks the cradle rules the world, she did not design the banknotes of the 19^th century that portrayed woman as “temptress, saint, and helpmeet.”  By the 1830s, women had been astronomers, mathematicians, even pirates, but we do not meet any of them on banknotes, which, like many women themselves, were considered the property of men. The deeper problem of portraying "woman as..." would not have been understood.

Nonetheless, here is a deep treasury of images narrated by a person whom it is easy to nominate as America’s leading scholar of money.  In 2011, Richard Doty received the Huntington Award of the American Numismatic Society “in recognition of outstanding career contributions to numismatic scholarship.” 

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How Much is that in Our Money?

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Industrial Medals as a Currency of Fame

Mere Gold is Not Enough: Hayek's "Denationalisation"

F. A. Hayek's Denationalisation of Money (1978) made a case for an open market in money, without legal tender laws, and without a government monopoly in currency.  

Hayek's thesis is two-fold.  First, that a competitive market in money will create currencies that are desirable for their enduring value.  Good money drives bad money from an open market.  Second, more broadly, until we have that happy day, we really cannot say what forms and formats will be acceptable or popular.

Breaking with tradition, Hayek stated that being limited to gold ("the wobbly anchor") is contrary to a truly free market.  Liberated from state control, there is no limit to the forms that money can take.  Hayek even suggested that a truly free market might see stable paper money backed by nothing but the credit of the issuer.  Paper money from one bank might promise payment in the paper of other banks.  Still other possibilities exist. 

It is easy see that if a bank issued too many notes then it would soon be redeeming them as a result of financial reporting. That is history.  For Hayek the more interesting problem was what to do when the market value of a bank's paper exceeds its issue price.

 "... but it could preserve this business only if it did in fact promptly buy at the current rate any of its notes offered to it.  So long as it succeeded in maintaining the real value of its notes, it would never be called upon to buy back more than a fraction of the outstanding circulation.  Probably no would doubt that an art dealer who owns the plates of the engravings of a famous artist could, so long as his works remained in fashion, maintain the market value of these engravings by judiciously selling and buying, even though he could never buy up all the existing prints." (Page 49)

This little book is dense with worthy ideas such as that. Most economists express three uses for money. Hayek defined four: cash purchases; reserves for future purchases; standard of deferred payment; unit of account.

F. A. Hayek apparently had little or no experience with numismatics.  Many of his theoretical claims are supported by facts known to those of us who study the art and science of the forms and uses of money. Other of his theoretical assertions are denied by the facts of history. And to be fair, numismatists, schooled in economics by publicly-funded (or aristocratic) institutions, also err when narrating the history of money.  The idea that coins were invented by merchants to make bullion more convenient for retail trade is the best example of such error.  Charles Seltman, the British numismatist who promoted that silly idea via the Encyclopedia Britannica, never worked behind a retail sales counter.   Similarly,  for all their theoretical knowledge Hayek and the other Austrians had no experience as merchants.

 Hayek says that it is unfortunate that there existed no complete history of the experience of government monopoly on money.  However, he does cite Murray N. Rothbard's monograph, What Has Government Done to Our Money (1963, 1974).  That work is little more than a sketch.  Like Hayek, Rothbard had little involvement with the artifacts.  Rothbard relied on "The Use of Private Tokens for Money in the United States," by B. W. Barnard from The Quarterly Journal of Economics, Vol. 31, No. 4 (Aug., 1917).  That academic paper reported all known issues without regard to their actual use.  Today, Bar Cents and Immune Columbia are regarded as rare and likely saw little use in their time.  Nova Constellatio tokens really did circulate.  In short, Rothbard's data was flawed because he gave weight to an academic paper instead of going to numismatists.  Any active collector of American money could have shown him (and Hayek), the material evidence they sought to support their theories.

"The early Middle Ages may have been a period of deflation that contributed to the economic decline of the whole of Europe. ... But where, as in Northern Italy, trade revived early, we find at once all the little princes vying with one another in diminishing the coin - a process which in spite of some unsuccessful attempts of private merchants to provide a better medium of exchange, lasted throughout the following centuries until Italy came to be described as the worst money and the best writers on money." (page 34)

Yet this complaint - common among historians and cited by gold bugs - ignores one of the arguments for gold-based money: with the quantity fixed by nature, each new invention, import, or innovation caused the existing money to increase in value: hard money is worth ever more over time.  That was the case in the Middle Ages as expanding trade brought more products to market.  It is also true that warlords and generals debased their coins, a common cheat in both Roman and modern times, as well.  But that negative motivation was only part of the story.  Absent new discoveries such as the mines of Joachimstal and the looting of the Americas, deflation is a beneficial consequence of hard money.   Moreover, some strong currencies, such as the English sterling penny and the Venetian gold ducat, enjoyed international reputations.  That meant, however, that they left one place and went to another.  For a local ruler to keep his coins in his realm, the issues had to be useful only locally, otherwise the locale would quickly enjoy an influx of imported goods and a loss of currency.

One solution to that is a token currency. The strength of a monetary medium, itself durable and cheap, but also a token for precious metals that do not pass hand to hand was explored by Neil Carothers in Fractional Money (New York, J. Wiley & Sons, 1930), a book that grew out of his doctoral dissertation some years earlier.  Again this data is a century old.  We know these facts; and they support Hayek's theories.

We can see an analogy to Hayek's laissez faire banking via the stock market.  Common stock certificates are a form of money; and historically their format resembled  bank drafts, being only much larger in size.  Stock certificates were issued, endorsed, transferred, and cancelled.  With or without a declared par value their worth fluctuated on the open market.

Knowing Hayek's theory you are perfectly free to use whatever moneys you prefer.  If you live in the USA, you will find Federal Reserve Notes most liquid.  But all manner of moneys are in circulation here and now, if you only know where to look for them.

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Numismatics: the Standard of Proof in Economics
Objectivism and the Gold Standard
Money as a Crusoe Concept
Electronic Money: Coins without Realms