Book Five - The Middle Ages

Book Five. THE MIDDLE AGES IN the dark and seemingly bottomless quagmire of the Middle Ages, through which Western civilization had to pass before reaching the firmer ground of a new day, most of the institutions of antiquity perished, and among them money. Money, indeed, was perhaps the first to disappear in the tremulant depths, although, as we shall see, the monetary tradition of Rome was to remain, like a floating scum, to poison the economy of modern Europe in the freshness and vigor of its rebirth. /. Passage of Avernus WE have already traced the gradual disintegration of money in Rome. By the end of the fourth century it had practically disappeared in Europe, and with it went all the fabric of organized commerce and industry. Law courts and libraries, schools and posts and inns, even the organization of armies, all disintegrated in the miasmic atmosphere or were sucked down into the paludal mire. The Roman Empire had been split in twain, and then into many fragments, each of which became a separate kingdom; the kingdoms in turn became divided into numerous counties and duchies, and the latter into still more numerous realms. The world dwindled and the commonwealth "became the duke's courtyard." Over the Europe that had basked in the deceptive effulgence of the Pax Romana swept wave after wave of barbarism, producing convulsions in society like the social revolutions of the modern age, engulfing everything not of the most solid substance, leaving in their wake, as they receded, the detritus of a destroyed civilization.

This long period of decay and convulsion and racial migration lasted in Europe for some seven or eight hundred years. While its boundaries cannot be precisely defined, roughly they 55 56 MONEY AND MAN may be marked by the fall of Rome in 476—although the northern provinces of the Empire had long earlier passed into other hands—to the fall of Constantinople in 1204, which signalized the removal of the commercial center of the Mediterranean from the Bosporus to the city states of Italy, the recommencement of gold coinage in Europe, and the revival of money economy. When European civilization began finally to emerge from its intellectual coma and economic misery, and money, among other institutions of the past, began to evolve itself anew out of the fading gloom of medievalism, it appears to have been reinstated in the same tentative manner that it fell. The order of falling was from money to bullion, and from bullion to barter.

The order of revival was much the same. It began with the fixation of weights, and money was weighed in the scales and assayed or tried by combustion. Following this came pieces or sums with the names of weights—to wit, pounds, shillings, and pennies (dennies or denarii) which passed by tale, and which, although they never contained the weights of metal indicated by their names, afforded by means of these names a ready conception of their relative proportions of value. Some memory of Roman institutions was carried across the gulf of the Middle Ages in the designation of weights and the division of money standards, as weights and money slowly revived. The Roman pound, or libra, survived as a conception of weight; but its actual standard, even in Roman times, is today a problem baffling to scholars, and when it was revived the libra became different things in different localities. Each locality had its own variation of the standard, and weights had to be qualified by prefixing the name of the town or locality in which they were current, as for example, the livre of Tours, the Cologne mark and the pound sterling (Esterling). * * Such a system prevails in many regions of Asia today. Despite the spread of the metric system under the influence of authoritarian governTHE MIDDLE AGES 57 Toward the end of the Middle Ages, three standards of account, at least for weighing the precious metals, had risen to enough prominence to become the basis for currency in the chief countries of Europe.

In France, two standards of weight for money had come into prominence, the livre or poid de marc of Paris, which was the capital of the Frankish kings, and the livre of Tours, the principal trading city toward the Arabian border at the west. The livre tournois was about a fourth lighter; and either because of the profits to be derived from coining money according to the lighter standard or, as some scholars assert, to take advantage of the higher relative value of silver to gold in the nearby Moslem dominions, the feudal barons enjoying the mint franchise preferred to do their minting at Tours according to the Tours standard, while at Paris the French kings attempted to keep up a tradition of the better weight standard. By the time of St. Louis (d. 1270) the sol of Tours had become generally known as the gros deniers d'argent or the gros tournois, and in Germany, as the groschen, and it became for a while a standard of coinage which was widely imitated. The distinction between the livres tournois and the livres parisis was maintained until the days of Louis XIV, when (1667) it was abolished and reckoning by a single livre, sol and denier was established.

Due to the fluctuations in weights and coinages, and especially the practice of lowering the standard of weight for money to bring it in correspondence with a debased coinage, it is almost impossible to assign modern equivalents to the various livres in use. The Paris livre or poid de marc was equivalent originally to 7,555 English grains,1 but the livre as a weight soon parted company from the livre as a unit of money. D'Avenel states that in 1200 the livre tournois designated 98 grams (1,512.336 grains) ments and their Five Year Plans, local measures persist. Thus, in villages in Iran, work may be measured by one batman, grain by another, and vegetables by a third, while the standard may take its name from the city of its principal usage. In China, as late as World War I, merchants had to be familiar with the weight of a variety of taels and the commodities to which they applied. Vestiges of these differences remain in the English system of weights and measures, as in the ounce troy and the ounce avoirdupois, and the long ton and the short ton.

58 MONEY AND MAN of fine silver, but that by 1600 it had fallen to 11 grams.2 The unit of weight (for metals) eventually became fixed upon the mark of 4,608 French grains (3,777.5 English grains) divided into 8 ounces. It is upon this mark that most of the tables of French coinage down to the Revolution were based. In Germany, the standard of most common acceptance, which subsequently became the standard for weighing metals, was the Cologne mark, which at the beginning of the nineteenth century was equivalent to 3,608 English grains. The origin of the mark is unknown but it is conjectured to have been a degenerate descendant of the Roman libra in Venice, and to have weighed originally around 4,000 English grains. As the medieval period wore on, it partook of the general degradation of weights, falling in Venice to 3,681.5 grains, and in Germany generally from 3,681.5 to 3,608 grains, at which latter weight it made its way into Denmark and England in the ninth century.

Its weight was fixed in Cologne at 3,608 grains by edict of Charles V in 1524, who declared it the standard of weight for the precious metals throughout his German empire. Charles was at the same time King of Spain, and the mark, after some further degradation (falling to 3,557.5 grains in Valencia and 3,550.5 grains in Castile), was fixed in that country generally at 3,550.5 grains, and at this weight found its way to America where it was used to measure and coin the vast metallic productions of the newly-found continent.3 The pound avoirdupois of 7,000 grains in use in the Englishspeaking countries is apparently derived from the "old commercial" pound of 7,600 grains formerly used in Amsterdam, Hamburg, and Paris, and used in England for the assize of bread until 1815, and in Scotland for general purposes until late in the nineteenth century. The Anglo-Saxon pound, sometimes called the "moneyers' pound," sometimes the "pound tower,"

contained 5,400 grains and was used in the English mints previous to 1527. In that year Henry VIII issued his second coinage (Act of 18th Henry VIII), and the pieces were weighed by the troy or troyes pound of 5,760 grains, and this has continued to be used for weighing the precious metals in England ever since.4 THE MIDDLE AGES 59 In addition to a vague conception of a libra, which survived in Europe, some memory was also retained of the Roman division of the coinage. In Byzantium, where civilization was still flourishing, and whose contacts with Europe were numerous if not vital, the libra was coined into 72 solidi. When Charlemagne attempted, in imitation of Roman imperialism, to reestablish his own coinage throughout his dominions, he instituted a system based upon a libra, divided into 20 solidi, each consisting of 12 denarii. A gold solidus seems to have been provided for, but he never got beyond the coinage of a silver denarius, and with the growth of feudalism, the break-up of his empire, the multiplicity of coinages by local princes and feudal lords, all that remains of his system is the traditional division of the unit. This survives in the English system of pounds (£), shillings and pence (originally dennies, and still abbreviated as d.) and in the livre, sou (or sol), and denier which were the reckoning in France until superseded by the metric system at the time of the French Revolution.

As money slowly reestablished itself in Europe, we find a multitude of provincial and feudal mints springing up. Every petty baron or princeling decided to perpetuate his name or rule upon a piece of metal. The right of issuing money is a special prerogative of the sovereign power. It is enough to say that as this power gradually collected itself in petty feudalities on the map of Europe, like drops congealing on a window pane, the first emblem of its new-found majesty was a mint and a coin. As sovereign authority gradually coalesced and extended its sway over larger and larger territory, its first task was to recover the exclusive right of coinage. But it was a long and difficult task. In France, the Merovingians had been compelled to delegate the right of coinage to counts, bishops, and cities. One writer declares that members of the ancient corporation of moneyers of Rome (the Mint Commissioners), whose signature was the official guarantee of coinage, continued to coin in their own name and to their own profit from a great variety of types.5 60 MONEY AND MAN In the seventh century there might be reckoned in France hundreds or perhaps thousands of mints uncontrolled and offering no guarantee. Throughout western Europe the position was analogous; lords, prelates, and municipalities claimed to be absolutely independent in coinage matters.

Charlemagne, in his capitulary of 805, had prohibited every mint except the royal one, but his successors had not been able to maintain the sovereign authority, and according to letters patent in 1315, twenty-nine lords of France appear to have retained the right of coining money and determining the law, weight, stamp and value of the different specie.6 And toward the end of the Middle Ages there were in Germany, according to Karl Helfferich, 600 mints working.7 Most of these mints struck small silver or copper, and their diversity of sizes and shapes and fineness renders them almost impossible of cataloguing or defining. It is, in fact, not until the thirteenth century that it is possible to construct any intelligible story of money in Europe. That century was marked by the sack of Constantinople by the Crusaders in 1204, the end of the Eastern Empire, as such, and the transfer of the commercial hegemony of the Mediterranean to Italy. The capture of Constantinople and the establishment of the abortive Latin Empire on the Bosporus marked the end of the solidus, or bezant, as the universal standard of international trade, and prepared the way for the introduction of gold coinage into Europe.

The attendant circumstances of this transfer and their influence upon the monetary history of Europe are to be found in the history of the Crusades and of the commercial growth of the petty independent states which sprang up from the political confusion of Italy. The German invaders of the Peninsula had not swept away city life, as did their cousins in the provinces of northwestern Europe, and several of the older cities, such as Milan and Genoa, important in Roman times, continued to exist. Venice, founded during the disorders of the fifth century, began to attract settlers because of its comparative impregnability. The THE MIDDLE AGES 61 survival of these cities and the founding or revival of others was possible because of continued contact by sea with the civilized East, and toward the eleventh century they were sufficiently strong to throw off feudal and church authority and to organize local city states upon the basis of a commercial aristocracy. No sooner did they achieve each their little autonomy than they threw themselves with redoubled energy into the development of the trade with the East. Florence and Venice, Pisa and Genoa, led the way and reaped the fruits; and it was in her most flourishing time, when she had conquered her rivals and was enjoying a prosperous and active trade, that Florence resolved upon the coining of gold.

The influences which collected in the Italian city states, arising from their contacts with the East, molded and transformed under the peculiar forces of their own development, and finally emanating throughout Europe, were to affect profoundly the course of European civilization—in art, in commerce, in politics, in money—so profoundly in fact that the economic revolutions of today are but the distant convulsions produced by the subterranean conflict of the fire of Italy and the water of Europe. The concatenation of events that produced throughout Europe the almost simultaneous revival of gold coinage in the thirteenth century is attributed to various causes. According to some, the foreign trade of the Italian republics must have become so extensive as to demand a currency medium of higher denomination than silver; or that trade must have developed in such directions as to tap gold-using or gold-bearing regions that could supply the Italian mints.8 Alexander Del Mar, however, offers another theory of the correlation of the two events. According to his view, the coinage of gold has, since it first appeared in the monetary systems of the world, been the incontestable prerogative of sovereignty, and during the long period of the Middle Ages such was the majesty of the Eastern Empire, so powerful the tradition of Roman grandeur, so impuissant the multitude of feudal authorities, that 62 MONEY AND MAN no prince had the presumption to place his own seal and signature upon a piece of gold money. Even in those isolated cases where gold was coined by other princes, such as the coinage of Clovis, that of the kings of the Cimmerian Bosporus, or the coinages of the Roman generals, Roman suzerainty and majesty were acknowledged by placing upon the coins the imperial insignia.9 «§ §»> The reintroduction of gold into the coinages of Western nations is marked by the minting of the gold florin of Florence in 1252. Clovis had struck some gold coins of excellent quality, and Charlemagne may have issued a few, but Florence was the first state of modern Europe to establish a continuity of gold coinage. Genoa followed closely upon Florence in issuing gold, probably the same year, and in 1254, or possibly earlier, Louis IX of France (St. Louis) commenced the coinage of louis d'or.

Five years later (1257) Henry III of England imitated the florin in his gold pennies, while more than thirty years later Venice instituted the coinage of gold zecchinos (corrupted later into sequins). It was not until some seventyfive years later, in 1328, that gold coinage appeared in Germany, signalized by the issues of the Emperor Louis IV, surnamed "Bavarian," closely imitating the florin of Florence. In Moslem Spain gold coinage had prevailed since the Moorish invasion in the eighth century, but the first gold coined by Christian powers was the oro gran modulo (doblas de oro) of Alfonso XI of Castile (1312-1350). By the middle of the fourteenth century, therefore, we find the institution of money fully reestablished in Europe, with gold, silver and copper coins in circulation. Hardly, however, had money as an institution of organized economy, as a social mechanism, been reestablished, than it began to disintegrate under the destructive influences handed down from Rome, the sciolism of the age, and the moral infirmities of rulers.

THE MIDDLE AGES 63 //. The Color of Gold THE reappearance of money in Europe and the transition of society to a money economy was accompanied by the same phenomena that we have observed in early Greece and in the Roman commonwealth. Everywhere men were dazzled by its form, by the opportunities it offered for the accumulation of wealth, for the ease of movement, for the loosening of old ties and habits. Europe became money-mad; for the pursuit of spiritual peace was substituted that of the pursuit of the precious metals; the authority of the old morals and ethics were sensibly weakened, and life took on an unrestrained search for the pleasure, the ostentation, the movement, and the power that money offered. More than armies, or capable government, or sound administration, or a contented citizenry, as the bases of a prosperous and ordered society, was the presence and authority of money. With seeming suddenness one principle became the dominant chord and theme of contemporary thought and practice, and this principle was incorporated, like a heraldic device, in the attitudes of the day, by the phrase pecunia nervus belli (money is the sinews of war). It became the dogma of philosophy, the motto of princes, the adjuration of ministers. Gold, as the most precious of the metals, was elevated into the pantheon; the quest for the yellow metal became the occupation of alchemy, of statecraft, of war, of exploration. Letters-patent were freely issued by the kings to alchemists, permitting them to employ the means which they discovered "by philosophic art" to change impure metals into gold and silver, or to make gold and silver with mercury. It was so with Edward III, Henry VI, and Edward IV of England, and with the kings of France, and the German and Italian princes. The libraries of the day were rilled with volumes treating of the transmutation of the metals, crowding out the earlier works on the destiny of the soul, the nature of divinity, and the duties of the Christian life. Money became the basis of political philosophy, and Botero, Bodinus Besold, Ammirato, and other publicists of the epoch argued the need for money—even above man-power—for the successful prose64 MONEY AND MAN cution of war or state administration. The search for treasure, in the earth, in the crucible, in the Indies, and on the high seas, became the universal mania; and the voyages of the early explorers were not so much to discover spices as precious metals, or lands where the precious metals were abundant.

No sooner had Columbus taken formal possession of the island of Hispaniola than he asked the wondering natives for gold. "This fatal word," says Del Mar, "so fraught with misfortune to the aborigines that it might fittingly furnish an epitaph for the race, and so tainted with dishonor to their conquerors that four centuries of time have not sufficed to remove its stigma, seems literally the first verbal communication from the Old World to the New." Gold, indeed, became a fetish. "We allow the color of gold to be the noblest in the world," wrote Honore Bonet, in his Arbre des batailles, speaking of the colors of armorial bearings. "Now, this is the reason: gold of its own nature is bright and shining, and it is so strengthening and full of virtues that the doctors give it as a sovereign remedy to those who are weak even unto death. And so it represents the sun, the which is a very noble body if we consider it in regard to light, for the law says there is nothing more noble than brightness And the ancient laws formerly ordained that no man in the world should wear gold except princes."

<«§ $»> Perhaps nothing better illustrates the power of money in the Middle Ages and the mercenary quality of that period than the growth of the condottieri, or professional undertakers of war, and the general dependence of medieval princes upon the use of mercenary troops. For a long period wars were waged and states maintained by the use of bodies of professional soldiers, largely Germans, Swiss, and Spaniards, raised and equipped chiefly by Italians, and serving in any land or under any banner which could assure them of pay, and devoting their lives as a sacrifice to any prince whose only claim upon their loyalty was a full purse.

THE MIDDLE AGES 65 By the use of such mercenaries the French kings and German emperors expanded their authority, and the Thirty Years War was largely conducted. They remained an integral part of the French military system until the final downfall of the monarchy and were employed by the English government during the War of the American Revolution. The characteristic of the system is preserved in such terms as the Ribauds of the thirteenth century, or the Routiers, the Ecorcheurs, and Retondeurs of the fifteenth, and is nowhere better summed up than in the famous phrase, "blood for money; no money, no Swiss!" It is natural, under the influences and circumstances of this "raging avarice," that the mechanism of money should be utterly uncontrolled: there was no authority strong enough to assert itself over a territory of any consequence, and such authority as existed was without the courage, or the wisdom, or the morality, to undertake the control of money. It was an era of the most flagrant debasement, of money tampering and manipulation.

No one seemed to recognize the evils that were being piled up for subsequent generations by this practice, and if they were recognized no one seemed to care. "Many princes, both in the Middle Ages and later in the sixteenth and seventeenth centuries," says Richard Ehrenberg, "did a roaring business in currency depreciation." The right to clip, degrade, or debase the coinages, or to change the standard, was looked upon complacently as the prerogative of sovereignty. To debase the currency became, as it were, a crown right, and the process was given a sonorous Latin name, morbus numericus, as though it were a phrase of canon or civil law, an ancient and hallowed practice. Up to the reign of Charles VII, the "seignorage," i.e., the profits realized from the coining of money, was one of the chief revenues of the French crown. The idea was generally accepted that when the necessity of the state so required, the king could not only increase the seignorage, and raise still greater sums in the manufacture of 66 MONEY AND MAN money, but might also impair the coins by diminishing their worth. By some this process was considered a source of revenue that was prompter, easier and less burdensome than any other.

At the end of the thirteenth century the situation was so harassing that the towns pledged themselves to pay heavy taxes in order to obtain from their overlords the assurance of sound currency. This was the moneyage—a tax levied triennially as a recompense for the king "not to alter or debase the coin, which he was entitled to do by his prerogative." The difficulty in tracing the actual course of the depreciation is complicated not only by the lack of historical records and the confusion in those that exist, but by the variety of forms employed to achieve the ends. Three general methods were employed for the debasement of money. The most common, during the earlier period, were la mutacion du poids, which was a reduction of the weight or standard of the specie without diminishing proportionally its current value—the surreptitious debasement so common in Roman history—and la mutacion de la matiere, which was a change in the standard.

A more subtle method, involving no actual tampering with the coin, was la mutacion de Vappellation—a change in the legal denomination or standard of value, a practice also hoary in antiquity—the method no doubt used by Solon, and used even in modern times, as in the devaluations of the United States dollar in 1934 and subsequently. The gold florin, for instance, was originally struck at 53 grains, and it was of absolute fineness. As the process of wear and tear and abrasion went on, and the coins in circulation became less than the nominal standard, it became customary to buy and sell and enter into contracts on the basis of the standard or perfect florin, and its subdivisions, and accepting or tendering at a discount the actual coins in circulation, depending upon their degree of abrasion. The ideal or standard florin became the "money of account" in which books were kept and transactions predicated. This "money of account" received official sanction THE MIDDLE AGES 67 in 1321 when the ideal or standard florin was officially designated as the "florin of the public seal" (fiorino di sigillo).

Florins were tested and counted into small leather bags, which were fastened up and sealed with the seal of the city. These were known as fiorini di sigillo and were used in the payment of large sums. Current florins were then given an official rate of discount to these sealed florins at which they should circulate. Gradually, of course, since the bulk of the circulation consisted of the worn coins—the greater value of the sealed bags rendering them useful only in large transactions—the fiorini di sigillo came to be more a concept than an actual measure. This method of officially valuing the current coinage in reference to the theoretical, founded upon sound principle, thus came to be used as a device for readjusting the ratio between gold and silver, which was beginning to be a problem; and then, as the money of account drifted further and further away from an actual coin, and its concept as a physical unit was gradually lost, it became the vehicle for currency depreciation. On the pretext of adjusting the ratio between gold and silver, or to take official cognizance of a deteriorated state of the outstanding circulation, or as an accompaniment of a "recoinage," the value of the money of account was gradually lowered. By this process the gold florin was gradually raised, between 1252 and 1534, from 20 soldi to 150 soldi of account.

In the sixteenth century, so far had the Italian states fallen away from the former probity of their currency policy and practice that Bernardo Davanzati declared in his Lezione delle monete, which appeared in 1588, that the disorder of the monetary system had within a period of sixty years made away with a third of the public wealth. In France, the price of a mark weight of gold was gradually raised from 44 livres de compte in 1309 to 171 livres de compte in 1342. At this point of depreciation a new livre de compte, equivalent to four of the old, was instituted to an accompaniment of a solemn declaration on the part of the government "to adhere to good money, as in the halcyon days of St. Louis, etc., 68 MONEY AND MAN etc." In the terms of this new livre the price of the mark of gold was again brought to 44 livres. By 1419 the price of gold in terms of the money of account had again risen to 144 livres, when it was again reduced by one-half or to 72 livres by the introduction of a new livre de compte. Again the livre de compte continued to decline, and in 1709, just before the French currency came into control of John Law, it took 576 livres to buy a mark of gold. Between 768 and 1764 the livre of Charlemagne had declined to one sixty-sixth of its original value, according to the tables prepared by the Abbot of Bazinham,1 in which some forty different and distinct debasements are presented, or one on the average of every twenty-five years, while omitting many surreptitious and gradual debasements occurring between the major depreciations.

The course of depreciation in Germany was as definite as in France. To draw one instance out of an uncharted mass: the standard of Hamburg and Liibeck, the principal trading towns, was a schilling, originally coined as one-sixteenth of the Cologne mark, each schilling consisting of 12 pfennige. The coin and the standard soon parted company, the mark being retained as a unit of account, the schilling both as the name of a coin, and as a subdivision of the mark. In 1255 the two cities, recognizing the state of depreciation, agreed, as a sort of monetary union, to coin the mark of fine silver into 38 schillingen 10 pfennige: in other words, the mark of metal became equivalent to 2 mark 6 schillingen 10 pfennige of account. The course of depreciation of the mark of account may be indicated by the following table showing the number of mark of account commanded by a mark weight of fine silver:2 Date 1226 1255 1293 1305 1325 1353 1375 1398 Mark 2 2 2 2 3 3 4 4 Schillingen 2 9 9 15 0 10 3 15 Pfennige 0 5 8 5 9 11 0 2 THE MIDDLE AGES Date 1403 1411 1430 1450 1461 1506 Mark 5 5 8 9 11 12 Schillingen 1 12 8 12 8 8 b Pfennige 11 5 0 2 10 0 It is frequently assumed that England was comparatively free from this constant and universal practice of money alteration.

The Norman kings rarely tampered with the coinage. Their coins were all of one class—silver pennies, sometimes including half-pennies, but usually pennies only. These did not constitute the only money in circulation, but the only money issued by the king. In addition to silver pennies, there were coins issued by the nobles and ecclesiastics, commonly base silver coins, of local course and circulation, and the gold coins of Byzantium. With the reign of Henry II (Plantagenet), however, evidence of frequent debasements appears. It is worthy of remark, that this period which marked an enlargement in the authority and dominions of the English kings ushered in also an era of profligate monetary practice. The kings themselves now began the practice of coinage tampering which had heretofore been limited to the ecclestiastical and vassal mints. The process reached a culmination in the reign of the first three Edwards. In 1310 the Commons petitioned and represented to Edward II that the coins were depreciated more than one-half. Between 1300 and 1464 the weight of the silver penny dropped from 22 grains in weight to 12 grains.3 And Del Mar observes in England an innovation in the method of debasement. This was a marked difference between the content of a coin as provided by law or mint indenture and its actual content, as found by weight or assay of perfect specimens still extant. For example, the mint indenture of 1345 provided that the Tower pound of silver, .925 fine, should be coined into 22.5 pennies. This would make the gross weight of each penny 24 grains, and the content of fine silver 22.2 grains, whereas Del Mar found by examination that the actual coins in good condition weigh but 20 grains and con70 MONEY AND MAN tain but 18.5 grains of fine silver, and that this same thing held true in the case of other coins of the period.4 ///. Course of the Dinar THE failure of European philosophy to understand money, or of government to control it, or of business to resist its temptations is nowhere better illustrated than in the currency history of medieval Spain. Here in the Iberian peninsula the sounder traditions of the East met and were subdued by the wayward practices of the West; here again occurred the same conflict between Hellenic philosophy and self-control and the license and mismanagement of Rome.

While Roman civilization was slowly dying in the West, a new civilization was being born in Arabia. In the Arabian peninsula, at the beginning of the seventh century, arose a religious leader—Mohammed—who, in a few short years, united the diverse and disunited peoples of Arabia and established a great religious, social, economic, and political movement that was to flame like a beacon throughout Western Asia for the next two centuries, invade Europe, and for five hundred years more to constitute the most brilliant civilization of the Mediterranean. The Hegira, or flight from Mecca, occurred in 622. In 633639 the whole of Syria was subdued; in 638-639 Egypt was conquered; in 637-651 Persia was overrun; in the interval between 647 and 689 every organized state of Africa, westward to Carthage, was reduced; in 692-698 Carthage was captured; between 698 and 709 the remainder of Northern Africa, including Mauritania, to the Atlantic was subdued; and in 711 the Arabs entered Spain, so that within a century from the beginning of Mohammed's conquering career their power was firmly established over a territory which stretched uninterruptedly from India to the Western Ocean.

The wellspring from which flowed this tide of conquest is THE MIDDLE AGES 71 found in the religious inspiration of Mohammed's teaching, but the sources of the remarkable civilization that was established in its wake, which we know as Saracenic, were many and diverse. The religious teachings of the Prophet were derived in part from Jewish and Christian tradition; the political administration was copied, with modifications and refinements, from Persia; science and philosophy were derived from the Greeks; mathematics perhaps from India. Among the institutions which the Arabs borrowed from the Greek civilization of the eastern Mediterranean was the highly developed commercial system with its well regulated money economy. We have already told of money in Greece, the development of Hellenic monetary philosophy, and the traditions of sound currency which were established in the Hellenized portions of the East—traditions that somehow managed to survive the centuries of Roman imperialism and that were revived and purified at Byzantium.

To support the expanding commerce of their Empire, the Arabs adopted bodily the Byzantine currency system. At the outset of their national career they employed chiefly copper coins of their own design, but founded on the Byzantine type and system. The gold coins employed were those of the Byzantine Empire, and the silver ones those of the Sassanian kings of Persia (which, in turn, were based on the Greek drachma), whose empire they had overthrown at the battles of Kadisin and Nehavend. In 691 or 692 the Caliph Abd-el-Malik inaugurated the regular Moslem coinage, which thereafter was issued from all the mints of the Empire. This consisted of gold dinars weighing 65 grains, .979 fine or approximately the size of the bezant, and silver dirhems of 43 grains, .960 to .970 fine. This currency was carried into Spain when the Arabs overran the peninsula in 711, and soon supplanted the diverse and heterogeneous Gothic moneys in use.

The period of Saracenic dominion of Spain was, with the ex72 MONEY AND MAN ception of the short interval in which the treasures of the New World were flowing into Spanish coffers, perhaps the most brilliant and prosperous that land has ever experienced. The seat of government was at Cordova, which in the course of a few years became the richest, most learned, and most brilliant city in the world. The lands of Spain were brought to a thorough state of cultivation; fruits, vegetables, cereals, and commercial plants were introduced from Asia; irrigation was extended from the foothills to the lowlands; an infinite number of manufactures and other industries were established; the gold, silver, copper and lead, iron and quicksilver mines of Andalusia, Jaen, and other districts were reopened and worked by free laborers; and in addition, an immense trade with the Levant which employed more than a thousand ships was maintained from Barcelona and other ports.

There were of course weaknesses in the Arab civilization: its virtues were largely borrowed rather than native; the religious and philosophic base of the system was a rigid dogma which did not allow sufficient room for growth; and the fertile energies of the movement had no doubt exhausted themselves, like the febrile blooming of a transplanted flower, before they could be renewed from the inner sources of the race. Toward the end of the tenth century the Saracenic political administration began to decline, split among numerous warring sheiks, and with the reviving power of Europe, Spain in the next two centuries passed over into Christian hands. As the Saracens withdrew from the peninsula, they left behind them the cultivated lands, the irrigation ditches, their commercial organization, and in particular their money system. Unfortunately, our knowledge of the monetary system in Saracenic Spain is fragmentary and incomplete. We know practically nothing about the monetary regulations, the legal ratio of value adopted from time to time between gold, silver, and copper, the laws of legal tender and seignorage, or the quantity of money in circulation. Apparently, the system consisted of gold, silver, and copper, the integer and the tale relations of THE MIDDLE AGES 73 which are undetermined. At first there were 10 of the silver dirhems to the gold dinar; but afterward the ratio is supposed to have been raised to 18 or even 20. The earliest dinars which were circulated in Spain had Latin inscriptions on them, possibly to familiarize the inhabitants with the new coinage.

We do know, however, that during the four centuries that the Saracenic rule continued, the gold coinage was retained very near its original weight and purity, and although this feat alone may not indicate a stability of money or the most enlightened currency practice, it does bear witness to a self-restraint in dealing with the medium of exchange and a rigorous adhesion, despite all temptation to the contrary, to the best traditions and concepts of the day. The mere maintenance of an unadulterated coinage may not be evidence of "scientific" currency practice, but it is the best testimony the age could offer of a sense of moral responsibility and an intellectual restraint in dealing with the money mechanism. The dinar, the coinage of which had been instituted by the Caliph Abd-el-Malik in 691-692 at a weight equivalent to 65 English grains, was still minted at 64.5 grains in Spain at the beginning of the eleventh century. Under the Moorish dynasty of the Almoravides, which lasted from 1094 to 1144, the dinar was struck at an equivalent of 60 to 61.75 grains. As such, but under the name of maravedi (derived from almoravides), the Arabian dinar was adopted by the Christian conquerors of Spain as the basis of their currency, but its weight was immediately reduced; and it was struck at an equivalence of 56 grains.

Hardly had the authority and the coinage prerogative passed from Moslem to Christian hands when the dinar, which had been retained at substantially its original weight for 450 years, was immediately subjected to the most profligate and unrestrained debasement. By the time of James I of Aragon (1213) the maravedi had sunk to 14 grains. Under Alfonso the Wise the maravedi was reduced to 10 grains, and at that size it had become too small for circulation and, of course, for further debasement. Accordingly it was converted into a silver coin 74 MONEY AND MAN weighing about 26 grains. The silver maravedi now began the same headlong course downward in size and fineness that had attended it as a gold coin. In 1368, at the accession of Enrique II, it weighed less than 17 grains; by the time of Juan I, eleven years later, less than 14 grains; by the time of Enrique III, less than 7 grains. On the accession of Juan II in 1406 the silver maravedi contained only 3.35 grains fine silver, and by the time of Enrique IV (1454), only 1.49 grains fine silver. The maravedi had of course ceased long earlier to exist as an independent coin, and was merely a unit of account in which the value of the actual coinage was measured. The process of depreciation was effected by "recoinages," in which new coins and new denominations were introduced, but the maravedi was retained as the common measure of value, and as such descended further and further in grade until it became no more than the most minute unit of account in the monetary system. Its value was raised slightly at the time of the great reformation of the currency instituted by Ferdinand and Isabella to represent 1.52 grains of silver, but afterward it resumed its downward course, and at the beginning of the nineteenth century represented no more than 0.62 grains of silver.

In the fortunes of the maravedi, as a gold coin maintained at from 60 to 65 grains weight for a period of 400 years or more under Arab control, to a unit of account representing less than 1.5 grains of silver in the first four hundred years of European control, is summed up the story of money as it was handled in Europe from the time of its reappearance after the close of the medieval period down to the beginning of the modern era. The secret of the currency disorganization of medieval times is to be found in the confusion in the eyes of nearly everyone between money as a mechanism and money as a commodity. Everywhere was an ignorant and foolish desire constantly to increase the number of units of money in one's possession, without reckoning what those units might represent—the same universal desire that led Adam Smith to comment in 1776, "no complaint is more common than that of a scarcity of money."

THE MIDDLE AGES 75 To the unrestrained desire to increase the quantity of money in circulation—by princes, in order to enlarge their revenues; by merchants, their profits; and by laborers, their wages—is to be attributed the inability of medieval, or modern Europe, to exercise sane and proper control over the money mechanism. IV. False Dawn HERE and there, amid the confusion of practice and the sophistry of thought, appeared the beginnings of a more intelligent approach to the question of money. This reorientation of attitude among thinkers was occasioned by the misery which the currency manipulations were producing among all but a few favored classes. By the middle of the fourteenth century parts of Europe were almost in stagnation as a result of the monetary malpractices of their rulers. According to an official document of 1361, in France, the currency tampering had become so frequent and so aggravating that "it was with difficulty a man might know from day to day what coins he should disburse."1 France was not the only sufferer: nearly every country was affected, and the extent of the evil might be measured by the complaints of the people and the protests and denunciations of the publicists.

The chief remedy lay in the limitation of the central power and in the continual vigilance of the subjects. Some countries exercised it. The Italian republics, as a result of their contacts with the East, had absorbed something of the Byzantine-Hellenic tradition, and as a rule maintained an honest currency system. The Florentine gold florin, for instance, was never debased, in spite of numerous adjustments in the minor coinage and changes in the rates. England did not suffer too many disastrous experiences. In Holland, at the beginning of the fifteenth century, Jacqueline of Bavaria had to promise not to make any change in the coinage without the consent of the towns of Dort, Leyden, Haarlem, and Delft. The frequent debasements in the currency had begun to pro76 MONEY AND MAN duce a series of memorials emanating either from towns or from private persons. Pierre l'Auvergnat deplored the hardships upon lesser folk—peasants and laborers and artisans—of receiving bad money for their labor and products, while the towns of the South of France went so far as to declare that it would be "the work of the Holy Ghost" to get back to the coinage of St. Louis and never after to depart from it."2 In the latter part of the fourteenth century appeared Nicole Oresme's famous treatise, De origine, natura, jure et mutatione monetarum (Treatise on the Origin, Nature, Law and Mutation of Money). With an exactness and clearness of idea, this greatest of the scholastic economists declared that money should not be debased without serious reasons of public utility; and he advanced proof that it does not belong to the prince but to the community, and to the private persons into whose possession it comes. Others—Diomede Caraffa, Andreas de Rampinis, and Gabriel Biel—began to give their attention to questions of monetary practice. Juan de Mariana, a German and a member of the Jesuit order, boldly attacked the mischievous administration of Philip III of Spain, which had issued a new billon currency of much less value than the old one. Mariana, also, insisted upon the rights of the people in the face of royal power. According to him, the coinage should be as stable as the weights and measures, if confusion in business affairs was to be avoided.

It is possible that the growth of economic philosophy and a keener analysis of the problem of money might have followed upon these early speculations and warnings, and money eventually brought under intellectual control, had it not been for the discovery of America. The discovery of America in 1492, and the enrichment of Europe by the spoils of treasure in precious metals that found their way throughout Europe, had a tremendous effect upon the politics and economy and attitudes of Europe. The desire for liquid wealth which the reviving use of money awakened, far from being satisfied by these seemingly limitless resources, was fanned into a consuming passion. Whatever intelligence was beTHE MIDDLE AGES 77 ginning to work in the field of monetary practice was immediately lost, whatever morality was growing up was cut down; and we find at this period the introduction of new refinements of the money mechanism, new methods by which its power could be multiplied while its value was lessened. From now on we note the beginnings of those practices which Despaux calls inflation fiduciare and inflation rentiere—that is, the use of paper money to expand public purchasing power and the use of commercial credit to expand private purchasing power.