The Early Modern Period
States, Coins and Inflation
The growth in bullion supplies appears to be intimately entangled With the
sixteenth century's most striking economic circumstance, the so-called 'Price
Revolution', which saw inflation raise prices sixfold between about 1540 and
1640, little enough nowadays but bewildering to contemporaries. To put this in
context, prices in 1500 were little different from those in 1300, while the
century from 1650 to 1750 was also one of relative price stability. The precise role
of bullion supplies in this has been contested but the coincidence in time
between inflation and the arrival of silver seems too great to ignore. The impact
of these price rises was exacerbated by the failure of wage levels to keep up: in
England, for instance, real wages may have been effectively halved between the
late fifteenth and mid-seventeenth centuries. Furthermore, taxation
undoubtedly increased in the course of the sixteenth century, becoming established as
the prime means of providing for the running of the state, though in practice
the money it produced was spread among the political and
financial elite rather than being spent on extensive state services.
The new bullion supplies had certain consequences for the coinage itself, in its
denominational structure and its usage, two factors that were probably related. Firstly, there was a general
expansion in the range of large and small denominations. In the later sixteenth century new,
larger, silver and gold coins were introduced. Gold ducats and scudi in the Italian states gave way
to silver ducatoni, scudi and piastras, with doppie
(double ducats) increasingly the standard gold piece. Gold half-crowns and crowns in England were replaced
by silver ones, with gold one-pound and thirty-shilling
sovereigns at the top of the scale; the Spanish piece of eight and
gold double escudo (doubloon) became internationally familiar coins, as did
daalders and double ducats of the Dutch Republic in the seventeenth century.
However, many states still produced gold coins equivalent to the Venetian
ducat (from this time often called the zecchino, or sequin) for use in international
dealings: these included the Dutch, the Swedes, the Danes and the Poles, the
Holy Roman Emperor in Bohemia, Hungary and Austria, and many lesser German princes.
The range of intermediate denominations within monetary systems also
increased from the late medieval level of around six or eight to ten, twelve
or more in most states. This development improved the flexibility of
denominational systems in the market-place, indicating perhaps a serious growth in the
level of daily transactions and immediate payments. In addition, older coins
would sometimes remain in the currency, officially revalued or accepted on the
basis of weight and fineness: in Stuart England, Second Coinage unites of
James I, originally worth one pound (20 shillings), later circulated at 22
shillings, alongside the lighter unites of Charles I, which were worth a
pound, while, during the rampant debasement and overissue of Spanish low
denominations under Philip III and Philip IV in the 1620s and 1630s, older issues of 4
maravedis were revalued and countermarked to first 8, then 12 maravedis.
Despite the effects of inflation in the sixteenth and seventeenth centuries, the lower denominations in
general survived and in fact became much more prevalent, suggesting that coin
was being used more frequently in small-scale transactions by individuals. They
were given a boost by the revival of coinage in copper, begun by Portugal,
Venice and Naples in the late fifteenth century, then spreading throughout Italy,
France, Spain, the Low Countries, Scotland and England by the early
seventeenth century. Token coinage within a precious-metal system was difficult to
manage, and it did sometimes lurch out of control through overissue and the
effects of counterfeiting (considerable in both England and France in the early
seventeenth century), which tended to drive out good money. Governments
often struggled to contain it by demonetization, by restricting circulation, by
withholding status as legal tender (i.e. its acceptance in payment being
voluntary not compulsory) and by crying it down (i.e. reducing the face value). But
token coinage proved too useful to be abandoned. When England ceased to
produce royal farthings in the 1640s, thousands of private, local issues took their place.
The source of most European copper was Sweden, especially the great Falun
mine. Demand for copper, particularly for coinage, enhanced the Swedish royal
revenues, contributing to the country's prominent political and military role in
seventeenth-century Europe. To maintain copper prices at reasonable levels by
absorbing enough of its own output, Sweden introduced a non-token copper
currency, the famous plate money: sheets of copper were stamped with dies to
indicate their value in terms of silver dalers, with denominations ranging from
1 to 10 dalers. To cope with the practicalities of such a cumbersome coinage,
Sweden made precocious use of paper money in the mid-seventeenth century.
The range of European currency systems expanded in line with commercial
and colonial expansion. Capital was multiplied through investment in such
ventures, and international coinages, not intended for domestic use, fuelled this
trade. The Spanish piece of eight was joined by the trade coins of the Dutch
Republic in the seventeenth century, its leeuwendaalders preferred in Asia and the
Levant, its rijksdaalders in the Baltic, its gold ducats in Russia and its silver ducats
in India and China. Exporting precious metal was an essential part of trade,
particularly for the Dutch, despite the reputation of the seventeenth century as the
great age of state bullionism. In the eighteenth century a third great silver coin
joined the 8-reales piece and leeuwendaalder as international trade coins: this
was the Austrian thaler, fossilized in appearance from 1780 as the Maria Theresa
thaler, but in wide use in the Levant, Ethiopia and Arabia from the middle of the century onwards.
Meanwhile, European money and monetary systems began to be exported
across the world. In Asia the Portuguese, the Dutch, the French, the English
and the Danes all established stations and settlements to advance and safeguard
their trade routes, and with these came Western-style money, mingling with
and influencing local traditions. In the New World the exploding trans-Atlantic
trade was mostly with European settlers exploiting directly the resources of a
new continent. In Central and South America the Spanish set up mints near the
principal mines, to turn some of the silver into coin for ease of shipment, and
later opened other mints to serve the growing immigrant communities there. In
North America and the West Indies the English and French colonies were less
well served in the seventeenth and eighteenth centuries. With little local
bullion to be converted into coin, they had to make do with a range of expedients
-often Spanish coin, sometimes cut up, stamped, plugged or pierced -as the
home governments were reluctant to send precious-metal coin out of the home country.
In the eighteenth and nineteenth centuries coin would be increasingly joined
by paper in the provision of currency. However, for most people coin remained
the normal medium for daily business, except under compulsion, and in any
emergency would be the preferred option for hoarding and saving. The failed
experiments in government-backed paper money in the early eighteenth century helped ensure that the official provision
of money was usually focused on coin, dogged though this continued to be by
problems of bullion supply, bimetallic tensions and the difficulty of ensuring adequate and trustworthy small change.
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