Monday, May 30, 2011

The Birth of Money

During the 12th century in England money gradually came into use. It replaced the system of barter or payment in kind which had been prevalent up to that point. The only currency in circulation at the time was the silver penny.

These days everyone takes the presence of money for granted and whilst a small number of people will sometimes wonder what is was like before money arrived, even fewer will start to think about the birth of money and what it meant.

We know that the Romans used coins as a central part of their economy but once they left Britain around 400 AD the use of coins declined and barter once again came to the fore.

It was back in 1168 when silver ore was discovered at Christiansdorf (modern day Freiburg) and this sparked the silver equivalent of a gold rush. The silver coins started to spread across Europe and these are some of the changes it brought with it:

1. Wealthy families could now move into the cities as they could collect rent as coins whilst previously this would have been "paid" as goods or services.

2. Armies could be funded with money. Previously they were motivated by feudal obligations.

3. Poor serfs could, in theory, buy their way out of bondage for the first time.

4. Those who relied upon generosity and charity such as monks, wandering scholars and troubadours suddenly found themselves in competition with people who could pay for their lodgings for the first time. Offering service in return for a bed was no longer good enough!

5. Cities and towns started to develop their independence. Witness the old German proverb "Stadt luft macht frei" or "town air makes free".The Hanseatic League was founded in 1159.

6. The ability to live in growing cities and to pay for your upkeep helped lay the foundation for the first Universities in Paris, Oxford and Bologna.

7. Holidays were introduced. Under the feudal system there was no spare time. You owed work hours to your liege lord. With money this changed.

8. The great medieval cathedrals and bridges were paid for in currency.

9. Without coins how could the crusaders have paid their way across Europe en route to the Holy land.

10. All this helped to fuel the golden age of the 12th century.

Lets also look at some of the economic issues here ...

1. An early tradition was to replace the coins every 3 or 4 years. Typically the number you handed in was always more than you got back. So this encouraged people to spend and not hoard their money.

2.Imagine the world of the 12th century renaissance, with its wealth and growing prosperity.
Into this world came Richard 1st. A lot of what he achieved or was involved in was impossible without coins. Coins paid for the 3rd crusade and when he was captured the ransom was paid with coins. It has also been postulated that the collection of the ransom money effectively took money away from Britain and prevented the rapid inflation which should have accompanied the economic growth of those years.

In conclusion let us quote T S Elliot ...

"Between the idea and the action falls the shadow"

Here the shadow is the birth of money taking us from the old world into the full glory of 14th century renaissance.

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