WEBVTT NOTE International Trade 1 00:00:00.000 --> 00:00:06.000 Before we begin today with our discussion of international trade again, 2 00:00:06.000 --> 00:00:11.000 I want to go back to yesterday's lecture, last class, 3 00:00:11.000 --> 00:00:15.000 and introduce another example of the problem of incentives. 4 00:00:15.000 --> 00:00:19.000 And as I said at the very beginning of this class, 5 00:00:19.000 --> 00:00:25.000 we're looking to develop ideas about the basic toolbox of the economist. 6 00:00:25.000 --> 00:00:29.000 So we're looking at relative prices and we're looking at incentives matter 7 00:00:29.000 --> 00:00:41.000 In the last lecture we talked about the coffin ships and how so many people died because the incentives weren't right. 8 00:00:41.000 --> 00:00:49.000 There's another case involving the shipment of prisoners from the United Kingdom to Australia. 9 00:00:49.000 --> 00:00:56.000 The English decided that the cost of keeping prisoners in prison was too high. 10 00:01:26.000 --> 00:01:33.480 Australia, which was not very well developed at all. And so you would be putting them out 11 00:01:33.480 --> 00:01:40.780 into the wilderness, so to speak. And so what they did was they shipped prisoners from England 12 00:01:40.780 --> 00:01:50.920 to all the way over here to Australia and what they found is that the ships would end 13 00:01:50.920 --> 00:02:20.920 in Australia and most of the prisoners would have died on the way over on the crossing and in some cases the whole ship the whole passenger list was dead in other cases a large percentage of them had died and so the parliament looked into this and found that they were paying the captains at the beginning of the voyage per prisoner and so that the captains would take the prisoners on take them 14 00:02:20.920 --> 00:02:38.920 and essentially invested as little in the upkeep of these prisoners as possible so they became malnourished, they became dehydrated, there was no medical services, disease was rampant and many people died either on the ship or shortly after arriving. 15 00:02:38.920 --> 00:02:47.680 So, what they did after looking at the problem was they decided to pay the captains in Australia 16 00:02:47.680 --> 00:02:54.520 for the safe arrival of the prisoners rather than in London or wherever they were shipping 17 00:02:54.520 --> 00:03:01.360 them out of, Southampton perhaps, and lo and behold all the prisoners started arriving 18 00:03:01.360 --> 00:03:02.360 alive. 19 00:03:02.360 --> 00:03:12.200 So this is a good example of where you, the economist, can investigate a problem, find 20 00:03:12.200 --> 00:03:20.000 a simple solution and a simple solution that works incredibly well. 21 00:03:20.000 --> 00:03:28.420 So on to international trade, now what we've seen so far is that England allowed the Americans 22 00:03:28.420 --> 00:03:55.420 The English wanted us to participate in the shipbuilding and the shipping industry within the British Empire, so that the Americans were included in whatever was considered English, and the English wanted us to be building ships for them, and building ships for international trade, especially between America and England. 23 00:03:55.420 --> 00:04:02.420 So, it was an open competition. They really didn't disable the Americans from competing in this process. 24 00:04:02.420 --> 00:04:08.420 Something interesting, however, develops with the major trade routes. 25 00:04:08.420 --> 00:04:15.420 One of the major trade routes is from the northern or New England states to England. 26 00:04:15.420 --> 00:04:21.420 Another trade route is between the southern states and England. 27 00:04:21.420 --> 00:04:37.420 And a third trade route is with the West Indies of goods being shipped, primarily sugar, from the West Indies to New England and commodities and food products from New England to the West Indies. 28 00:04:37.420 --> 00:04:47.420 Well, it just so happens that the colonists actually captured more than 85% of the market between New England and England. 29 00:04:47.420 --> 00:04:58.420 And they also captured almost 95% of the trade between New England and the West Indies, with sugar producing islands. 30 00:04:58.420 --> 00:05:06.420 However, the British controlled 80 to 90% of the trade between the southern states and the UK. 31 00:05:06.420 --> 00:05:13.420 Now, what kind of explanation can we come up for something like that? 32 00:05:43.420 --> 00:05:48.300 The main explanation for this result is the principle of comparative advantage, that one 33 00:05:48.300 --> 00:05:56.420 side would have a particular cost benefit structure that was higher than the other force, 34 00:05:56.420 --> 00:06:02.300 the other fleet in this case, and would dominate that trade route. 35 00:06:02.300 --> 00:06:07.500 So let's take a look at some of the factors that would lead to route domination in the 36 00:06:07.500 --> 00:06:08.500 shipping business. 37 00:06:08.500 --> 00:06:14.980 Well, the first factor to begin with is to recognize that this is a risky business, that 38 00:06:14.980 --> 00:06:21.300 a lot of cargoes simply didn't make it from point A to point B. And so merchants would 39 00:06:21.300 --> 00:06:27.240 tend to be very careful about who they trusted their products to, and insurance companies 40 00:06:27.240 --> 00:06:33.500 might have played a role here as well. And so merchants tended to deal with people that 41 00:06:33.500 --> 00:06:40.500 The Theory of Money and Credit 42 00:07:03.500 --> 00:07:27.500 The second factor is going to be related to information. Information about the marketplace. This is always going to be a factor, of course, in any economic process, but knowing market conditions is going to help create comparative advantage for one side or the other. 43 00:07:27.500 --> 00:07:57.500 and if you're locally based you're going to have better access to information, information about the harbor, information about services for shippers, information about warehousing, information about prices, labor availability, all sorts of things related to knowing the marketplace, so whoever had a better composite picture of the market, in this case the cities between a particular 44 00:08:27.500 --> 00:08:32.760 For ships to be unloaded and to be reloaded, they were also getting paid, and they would 45 00:08:32.760 --> 00:08:39.100 get paid on the return journey back, but if they were in their home port, they would be 46 00:08:39.100 --> 00:08:44.060 paid before they left, and then they wouldn't be paid for the days that they and the ships 47 00:08:44.060 --> 00:08:51.060 stayed in the harbor, so that a business received, in some sense, a cost reduction when the crew 48 00:08:51.060 --> 00:08:54.220 was in their home port. 49 00:08:54.220 --> 00:09:01.700 So if we look at the map up here and we look at who's dominating the trade routes, if we 50 00:09:01.700 --> 00:09:08.300 take all of these factors into consideration, the information problem, the risk that's associated 51 00:09:08.300 --> 00:09:15.180 with the business and the savings that crews had because they weren't being paid while 52 00:09:15.180 --> 00:09:22.460 in their home port, we can see why New England tended to dominate the route with the West 53 00:09:22.460 --> 00:09:30.660 West Indies 96%, where they dominated the route with the UK at 85%, but the British 54 00:09:30.660 --> 00:09:34.460 dominated the route between the UK and the South. 55 00:09:34.460 --> 00:09:42.380 England might have, New England, excuse me, might have dominated the South to the UK route, 56 00:09:42.380 --> 00:09:48.820 but in that particular route they would have had to pay their crews while in the Southern 57 00:09:48.820 --> 00:10:00.700 The New England Shippers had a cost disadvantage on that particular route, and that was an 58 00:10:00.700 --> 00:10:06.060 advantage that the British shippers took advantage of and essentially dominated that 59 00:10:06.060 --> 00:10:09.060 particular marketplace. 60 00:10:09.060 --> 00:10:14.020 Is there any questions on that? 61 00:10:14.020 --> 00:10:20.700 And we can wrap up the section on trade there and turn our attention to colonial money and 62 00:10:20.700 --> 00:10:22.260 trade. 63 00:10:22.260 --> 00:10:30.060 And as I mentioned briefly in one of the earlier lectures, the colonists were on a monetary 64 00:10:30.060 --> 00:10:33.140 system based on gold and silver coins. 65 00:10:33.140 --> 00:10:41.520 And that is essentially true, but the picture, the historical picture is much more complex 66 00:10:41.520 --> 00:10:51.960 and much more interesting than that, in that the colonial monetary situation is going to 67 00:10:51.960 --> 00:10:58.760 be impacted by British mercantilism and it's also going to be a process of innovation on 68 00:10:58.760 --> 00:11:00.000 the part of the colonists. 69 00:11:00.000 --> 00:11:06.800 So we'll start with one of the curiosities of colonial money and that is the use of Indian 70 00:11:06.800 --> 00:11:15.800 Money, or WAMPM. And WAMPM was a product that the Indians made which was for ceremonial 71 00:11:15.800 --> 00:11:26.040 purposes and also is indicated to be a kind of memory aid or a device for storing historical 72 00:11:26.040 --> 00:11:34.920 information in the way that the beads were sewn into the textile belt, essentially. And 73 00:11:34.920 --> 00:11:40.920 To give you some idea of what wampum is, is that the Indians would take shells, some sea 74 00:11:40.920 --> 00:11:48.080 shells and they would work those into small beads and the beads would be either rounded 75 00:11:48.080 --> 00:11:54.920 or cylinder shaped and then the beads would be, a small hole would be drilled in those 76 00:11:54.920 --> 00:12:00.600 beads or cylinders and the beads would be sewn together in a pattern of different colored 77 00:12:00.600 --> 00:12:30.600 World Shell Beads 78 00:12:30.600 --> 00:12:36.600 The Dutch were highly valued and it was something that was hard to produce and so it was relatively scarce. 79 00:12:36.600 --> 00:12:47.600 And the colonists sort of mistook this as an Indian form of money and they began to use it in their trading patterns with the Indians. 80 00:12:47.600 --> 00:12:56.600 The Dutch actually used it in an arbitrage fashion between the coastal Indians who were very adept at making this wampum. 81 00:12:56.600 --> 00:13:19.600 The Dutch would buy the wampum from the coastal Indians, where it was relatively abundant, and then trade it with the inland Indians, where wampum was more scarce, where they didn't have seashells, and where they were not as adept at making wampum. 82 00:13:19.600 --> 00:13:32.600 So the Dutch, through this arbitrage process of buying the wampum and then reselling it, an indirect exchange process, were making profits. 83 00:13:32.600 --> 00:13:42.600 The Dutch were located in New York at this time, and they used the wampum, they would trade European goods with the coastal Indians for the wampum, 84 00:13:42.600 --> 00:13:51.160 The Wampum, take the Wampum inland and trade the Wampum for things like furs and pelts 85 00:13:51.160 --> 00:13:57.000 that the Indians had hunted, that's what their comparative advantage was, and then they would 86 00:13:57.000 --> 00:14:03.940 trade the furs and pelts back to Europe in exchange for European commodities and the process 87 00:14:03.940 --> 00:14:04.940 would repeat. 88 00:14:04.940 --> 00:14:12.520 So the Dutch were making money in several different ways, making profits I should say, 89 00:14:12.520 --> 00:14:17.720 through the use of wampum as money. 90 00:14:17.720 --> 00:14:23.200 Interesting to note that the Dutch decided that they could start manufacturing wampum, 91 00:14:23.200 --> 00:14:32.640 that they could displace the slow handmade process with better tools for shaping the 92 00:14:32.640 --> 00:14:40.520 beads and better tools for making the holes in the beads and so forth and so through developing 93 00:14:40.520 --> 00:14:46.080 In the manufacturing process of wampum, they were able to produce it at a much lower cost 94 00:14:46.080 --> 00:14:55.880 and acquire more furs and pelts as a result and this sort of leads into one of the more 95 00:14:55.880 --> 00:15:03.520 interesting economic stories about the early colonial period and that is the buying of 96 00:15:03.520 --> 00:15:13.220 of Manhattan from the Indians, where the Dutch, as legend has it, Henry Hudson discovered 97 00:15:13.220 --> 00:15:23.680 Manhattan Island or visited it for the first time on September 11th, 1609, and in 1613 98 00:15:23.680 --> 00:15:32.020 the Dutch purchased the island of Manhattan, which is really the center of New York City, 99 00:15:32.020 --> 00:15:39.020 The Dutch established a fur trading outpost and established a fur trading outpost in the 100 00:16:02.020 --> 00:16:10.020 It's long been thought that the Indians were taken advantage of for selling Manhattan, which 101 00:16:10.020 --> 00:16:16.320 means, in the original language, the place of intoxication, ironically. 102 00:16:16.320 --> 00:16:22.260 But as it turns out, the Dutch actually purchased the island from a tribe that didn't really 103 00:16:22.260 --> 00:16:23.460 own and control it. 104 00:16:23.460 --> 00:16:29.320 So the tribe that took the $24 in beads actually got a great deal because they weren't actually 105 00:16:29.320 --> 00:16:30.320 giving up anything. 106 00:17:00.320 --> 00:17:11.200 system of silver shillings and gold guineas and they were on a bimetalism system where 107 00:17:11.200 --> 00:17:21.880 both monies were official mediums of exchange however the British set an exact ratio between 108 00:17:21.880 --> 00:17:28.460 the value of a gold coin and the value of a silver coin so that one gold coin was equal 109 00:17:28.460 --> 00:17:35.460 The Market Economy does not really obey such government dictates like a price control or something of that nature. If market conditions are out of line with that 15 to 1 ratio, the market is going to respond in some form or fashion. 110 00:17:58.460 --> 00:18:06.940 and what we're going to resort to here is called Gresham's Law and Gresham very early 111 00:18:06.940 --> 00:18:14.540 on saw that when a country tried to set up a bi-metalism system with an exact ratio between 112 00:18:14.540 --> 00:18:25.620 different types of metal coins that ultimately bad money drives out good money, so that under 113 00:18:25.620 --> 00:18:32.980 Under that kind of system, as market conditions change, bad money will stay in the economy 114 00:18:32.980 --> 00:18:37.660 and the good money will be driven out of circulation. 115 00:18:37.660 --> 00:18:47.620 And at this time, the British system overvalued gold and undervalued silver compared to world 116 00:18:47.620 --> 00:18:49.060 prices. 117 00:18:49.060 --> 00:18:57.060 So basically, because silver was undervalued, it disappeared from circulation. 118 00:18:57.060 --> 00:19:03.380 So all of the good silver coins that would have been in circulation from Britain disappeared 119 00:19:03.380 --> 00:19:10.040 as a result of Gresham's Law and the colonists were stuck with gold coins. 120 00:19:10.040 --> 00:19:16.340 But gold coins weren't very useful for the colonists because they represented too much 121 00:19:46.340 --> 00:19:57.340 at British Mercantilism because British Mercantilism was designed to sell British products to the colonies. 122 00:19:57.340 --> 00:20:08.340 They wanted to sell more and to buy the products or the commodities of the colonies at artificially low prices. 123 00:20:08.340 --> 00:20:14.340 So they want to monopolize the export of manufactured goods to the colonies 124 00:20:14.340 --> 00:20:33.340 and they wanted to be a monopsony buyer of the commodities of the colonies so that they would get a little advantage in both import and export and drive money into the British economy. More money was a goal of British mercantilism. 125 00:20:33.340 --> 00:20:39.340 They prohibited the export of coins to the colonies. 126 00:20:39.340 --> 00:20:44.620 of the Colonies. You could import coinage from the colonies, but you couldn't export 127 00:20:44.620 --> 00:20:51.620 coins from England to the colonies. So that would sort of also dry up a source of coinage 128 00:20:51.620 --> 00:20:56.460 for the colonies. And they also prevented the colonies from minting their own coins. 129 00:20:56.460 --> 00:21:04.820 So they really were putting the proverbial screws to the colonies in terms of money. 130 00:21:04.820 --> 00:21:11.820 Naturally, we would expect that there would be a big trade deficit with Britain, except 131 00:21:11.900 --> 00:21:18.900 for the fact that ships and shipping services would also play into the international trade 132 00:21:20.260 --> 00:21:26.820 picture. The British wanted the colonies to produce ships and shipping services, and so 133 00:21:26.820 --> 00:21:33.820 all the money that the colonies earned from ships and shipping services sort of brought 134 00:22:03.820 --> 00:22:33.820 The Northern colonies in Canada used fur and pelts as a medium of exchange for trade. 135 00:22:33.820 --> 00:23:03.820 Fur pelts were relatively uniform in size and quality of a given animal of a given size they were reasonably durable and they were of not a small value but small enough so that they could be traded for many different types of items so the northern colonies used fur and fur pelts they also used dried fish which was of a smaller value and dried corn 136 00:23:33.820 --> 00:23:55.900 1. Tobacco is a leading export product, so it was always readily sellable. In Virginia 137 00:23:55.900 --> 00:24:07.500 In Maryland in particular, tobacco served as a medium of exchange and actually tobacco 138 00:24:07.500 --> 00:24:15.880 at warehouses, people would put their tobacco in warehouses and they would be issued warehouse 139 00:24:15.880 --> 00:24:22.180 receipts for every unit of tobacco that they brought there and they could then use these 140 00:24:22.180 --> 00:24:28.980 These receipts for their tobacco that was held in the warehouse as money. 141 00:24:28.980 --> 00:24:34.420 They could do their shopping and buy their commodities and services and use these paper 142 00:24:34.420 --> 00:24:39.460 receipts as a form of money. 143 00:24:39.460 --> 00:24:45.340 In other areas, people referred to it just as country pay and that was basically any 144 00:24:45.340 --> 00:24:52.420 Many of the commodities that were produced locally had the characteristics of money that 145 00:24:52.420 --> 00:24:57.300 it could be divisible to a certain extent, that it was relatively durable, that it was 146 00:24:57.300 --> 00:25:00.780 relatively homogeneous. 147 00:25:00.780 --> 00:25:07.060 Alcohol products, for example, served as a medium of exchange. 148 00:25:07.060 --> 00:25:14.140 Alcohol had the advantage that it was more readily transportable than the grain. 149 00:25:14.140 --> 00:25:20.500 Green was also used as a medium of exchange but green was relatively bulky compared to 150 00:25:20.500 --> 00:25:24.700 the product of alcohol which it would be used to produce. 151 00:25:24.700 --> 00:25:31.420 So alcohol and grain products and anything that was relatively uniform, even musket balls 152 00:25:31.420 --> 00:25:36.740 that were produced in the colony served as money and musket balls were something that 153 00:25:36.740 --> 00:25:38.180 everybody used. 154 00:25:38.180 --> 00:25:45.260 There was a historian a number of years ago who tried to prove that Americans really didn't 155 00:25:45.260 --> 00:25:51.460 own and use guns on any kind of scale and that weren't really necessary. 156 00:25:51.460 --> 00:26:01.020 They later found out that he basically used fraudulent research techniques and sources 157 00:26:01.020 --> 00:26:06.580 to come to that conclusion and basically almost all Americans in the early colonial days had 158 00:26:36.580 --> 00:27:06.580 all of the qualities of coin money, of silver and gold coins. This is especially true of the problem of quality, tobacco products for example, the tobacco could be a rather fine tobacco or it could be a rather crude tobacco, it could be a nicely cured and fresh tobacco or it could be a badly handled or older type of tobacco, in the state of Maryland even passed a law in 1747 159 00:27:06.580 --> 00:27:36.580 to inspect the tobacco and establish minimum quality standards. This was considered an important improvement. However, for most people, would not be fooled by lower quality tobacco in the state of Maryland or Virginia, certainly. The real problem appears that tax collectors were taken advantage of and that it was a common practice to pay your taxes in 160 00:28:06.580 --> 00:28:26.580 The Spanish peso is where we get our dollar from. The German Thaler coin was based on the Spanish peso and the word Thaler somehow gets transmuted into the term that we use when we use the word dollar. 161 00:28:26.580 --> 00:28:36.340 Based on the Spanish peso and the word thaler somehow gets transmuted into the term that 162 00:28:36.340 --> 00:28:44.540 we use today which is dollar and this coin was in wide circulation in the colonies. 163 00:28:44.540 --> 00:28:47.180 It was probably the most dominant coin. 164 00:28:47.180 --> 00:28:54.100 The Spanish were minting the Spanish peso in Mexico City in Mexico and in Lima, Peru 165 00:28:54.100 --> 00:29:00.800 with silver that was being locally mined there and they picked it up in the trade in the 166 00:29:00.800 --> 00:29:06.380 West Indies and the sugar markets down there and brought it back to the United States and 167 00:29:06.380 --> 00:29:14.840 this money would just be more or less filtering into the U.S. as needed and these were one 168 00:29:14.840 --> 00:29:21.180 ounce silver coins just like the dollar used to be. 169 00:29:21.180 --> 00:29:30.740 The peso was valued by the Spanish at what's called 8 reals, which was 27 grams of 92% 170 00:29:30.740 --> 00:29:38.100 silver and 27 grams is just short of 1 ounce. 171 00:29:38.100 --> 00:29:46.260 We basically based our dollar and our silver dollar exactly on that Spanish peso. 172 00:29:46.260 --> 00:29:57.220 The Spanish peso was also designed so that it could be divisible by citizens, and it 173 00:29:57.220 --> 00:30:02.380 could be cut in half, so you'd have a half peso, or it could be cut in quarters, so you'd 174 00:30:02.380 --> 00:30:07.940 have a quarter peso, or even into eight, or eight reals. 175 00:30:07.940 --> 00:30:14.500 So you weren't breaking the law by cutting the coin up, it was meant to equal eight reals 176 00:30:14.500 --> 00:30:39.100 The American colonists referred to the Spanish peso as pieces of eight. 177 00:30:39.100 --> 00:30:45.020 Each of those little pieces were one piece of eight that would equal the Spanish peso 178 00:30:45.020 --> 00:30:48.900 or the American dollar later on. 179 00:30:48.900 --> 00:30:57.180 And so, of course some of you probably are starting to get the hint here, this is where 180 00:30:57.180 --> 00:31:12.260 Where we get the little saying, two bits, four bits, six bits, a dollar, all for Auburn stand 181 00:31:12.260 --> 00:31:14.780 up and holler. 182 00:31:14.780 --> 00:31:20.260 So that's really where that all came from and so we are indebted to the Spanish for 183 00:31:20.260 --> 00:31:26.740 the basis of our monetary system from the earlier colonial days right up onto the present 184 00:31:56.740 --> 00:32:26.740 on a wide scale until they were outlawed in 1857 and there was a question earlier about why would the British set that ratio at 15 to 1 knowing that one form of coinage or the other would drop out of circulation and there's not a lot of great answers for that except for possibly the silver and gold interests 185 00:32:26.740 --> 00:32:30.860 The people who were mining, providing the gold and silver would want their coins to 186 00:32:30.860 --> 00:32:37.700 come into favor and their opponents coinage being at a disadvantage. 187 00:32:37.700 --> 00:32:46.340 So when we look at this issue that they circulated until 1857, we have to wonder why it circulated 188 00:32:46.340 --> 00:32:51.940 so long and why it stopped in 1857. 189 00:32:51.940 --> 00:32:56.420 Now why was that? 190 00:32:56.420 --> 00:33:06.260 Well, certainly a part of the reason is you all have heard of the San Francisco 49ers, 191 00:33:06.260 --> 00:33:07.260 the football team. 192 00:33:07.260 --> 00:33:18.060 Well, their name is based on the 49ers, who were Americans who went to California in 1849. 193 00:33:18.060 --> 00:33:23.080 And of course the reason they all went to California in 1849 was that the gold has been 194 00:33:23.080 --> 00:33:37.160 in the American economy, gold discoveries in the Alaska and Yukon Territory, silver 195 00:33:37.160 --> 00:33:45.240 was being discovered in the western regions of the United States as well, but it was gold 196 00:33:45.240 --> 00:33:54.760 discoveries that really hit big in the United States in the 1850s, and that may be a large 197 00:33:54.760 --> 00:34:01.920 part of the reason why Spanish coinage was outlawed in 1857. 198 00:34:01.920 --> 00:34:14.000 So we get to the question here, was there really a shortage of money in the colonies? 199 00:34:14.000 --> 00:34:22.400 And in economic terms we'd have to say that no, there really wasn't a shortage in a traditional 200 00:34:22.400 --> 00:34:24.200 sense. 201 00:34:24.200 --> 00:34:32.300 Despite all the contrivances of the British, the colonies seem to have established a sort 202 00:34:32.300 --> 00:34:39.320 of monetary equilibrium, where they always had access to commodity-based monies for purposes 203 00:34:39.320 --> 00:34:47.200 of a medium of exchange and that sort of thing, and that's a good solid monetary system to 204 00:34:47.200 --> 00:34:52.760 work on, although it does have its problems and its drawbacks, particularly the quality 205 00:34:52.760 --> 00:35:00.160 issue that those commodities don't necessarily have all of the wonderful properties of coined 206 00:35:00.160 --> 00:35:04.760 metal money. 207 00:35:04.760 --> 00:35:10.960 So there is kind of some imbalances there in the commodity based monetary system, but 208 00:35:10.960 --> 00:35:16.740 then we have the supplementation from the Spanish coinage and coinage from other places 209 00:35:16.740 --> 00:35:20.760 around the world as well. 210 00:35:20.760 --> 00:35:26.280 There were coinages of various types, but they were, you know, coins at that time were 211 00:35:26.280 --> 00:35:30.480 basically all just units of weight. 212 00:35:30.480 --> 00:35:37.000 And so the peso represented, you know, one ounce of silver and that could be further 213 00:35:37.000 --> 00:35:40.040 divided up into pieces of eight. 214 00:35:40.040 --> 00:35:47.600 And so the colonists actually through some ingenious developments of developing their 215 00:35:47.600 --> 00:36:02.600 In the next class, we will see that this ingenuity was actually taken a step too far, and trying to address the problems of British mercantilism, they adopted the idea of a monetary system that really fits all of their needs. 216 00:36:02.600 --> 00:36:11.880 Now what we're going to see in the next class is that this ingenuity was actually taken a 217 00:36:11.880 --> 00:36:18.600 step too far and trying to address the problems of British mercantilism, they adopted commodity 218 00:36:18.600 --> 00:36:25.800 based monies and fixed that system up pretty well and they adopted foreign systems but 219 00:36:25.800 --> 00:36:31.860 What we're going to find is that they took it a step too far and actually hurt their 220 00:36:31.860 --> 00:36:35.940 own monetary system and economy as a result.