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Coinage Debasements in Burgundian Flanders, 1384 - 1482


Monetary or Fiscal Policies? – PowerPoint PPT presentation

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Title: Coinage Debasements in Burgundian Flanders, 1384 - 1482

Coinage Debasements in Burgundian Flanders, 1384
- 1482
  • Monetary or Fiscal Policies?

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Definitions of Debasement
  • Coinage debasement is the reduction of the
    precious metal content silver or gold in not
    just the coin itself but in the unit of the money
    of account
  • MONEY OF ACCOUNT the penny, the shilling, and
    the pound
  • With 12d (pence) to the shilling, and 20 s
    (shillings) to the pound, so that 240d 1

How Debasements were effected
  • (1) By a reduction in the fineness i.e., in the
    percentage of fine silver or gold in the coin, by
    adding proportionately more copper
  • (2) By a reduction in the coins weight
  • (3) By an increase in the nominal
    money-of-account value of the coin
  • - reserved normally only for gold coins and high
    value silver coins

Debasements monetary policies?
  • This paper seeks to answer two questions
  • (1) were the coinage debasements in Burgundian
    Flanders (1384-1482) undertaken principally as
    monetary or fiscal policies and
  • (2)were they beneficial or harmful?
  • In a recent monograph, Sargent and Velde contend
    that monetary objectives governed almost all
    medieval debasements, especially to remedy the
    chronic shortages of petty coins.

Late-medieval bullion famines'
  • Despite overwhelming evidence that Burgundian
    Flanders, along with most of north-west Europe in
    the later 14th and 15th centuries, experienced
    severe monetary scarcities and liquidity crises,
    especially in the periods ca. 1390 - ca. 1415
    and ca. 1440 - ca. 1470, both periods of severe
    deflations, there is no compelling evidence that
    the Burgundian rulers debased their coinages on
    the basis of any such monetary policies.

Coinage debasements as fiscal policies
  • My thesis is the Burgundian rulers of Flanders,
    in competition with neighboring princes,
    undertook their debasements primarily as
    aggressive fiscal policies, specifically to
    finance warfare.
  • Debasements, however, were also undertaken as
    defensive policies as noted below

How Debasements increased a princes mint
  • The princes goal was to increase his seigniorage
    revenues, the tax imposed on bullion brought to
    their mints, by two means
  • (1) by increasing the tax rate itself, and
  • (2) by enticing an increased influx of bullion
    into their mints,
  • both by the debasement techniques themselves
  • and by auxiliary bullionist policies to prevent
    bullion exports and divert them to the mints

Conditions for effective debasements
  • (1) that merchants supplying bullion received
    more coins of the same face value and thus with a
    greater aggregate money-of-account value than
    before (or than from other mints)
  • (2) that the public accepted such debased coins
    at the same face value, by tale and
  • (3) that the merchants spent their increased
    supply of coins quickly, before any ensuing
    inflation eroded those gains.

Debasements and Inflation
  • This study further demonstrates that the
    inflationary consequences of debasements were
    always less than those predicted by the
    mathematical formula
  • ?T 1/(1 - x) 1
  • possibly because those debasements failed to
    counteract the prevailing forces of monetary
    contraction and deflation in the later 14th and
    15th centuries (1390s to the 1480s).

Defensive Reasons for Debasements
  • to protect their mints from foreign competition,
    i.e., from aggressive debasements
  • to protect their domestic money supplies from
    influxes of debased and also counterfeit
  • i.e., to counteract Greshams Law that cheap
    money drives out dear money

Debasements and Warfare
  • If aggressive coinage debasements were primarily
    fiscal policies to finance warfare, in
    late-medieval Europe, monetary contractions and
    related deflations were often also the products
    of warfare
  • From bullionist policies related to warfare with
    almost universal bans on bullion exports
  • From disruptions of trade routes that impeded
    coin and bullion flows
  • And from increased hoarding

  • (1) Failed to provide any long term remedy for
    the combined problems of chronic monetary
    scarcities (bullion famines) and deflation
  • - indeed Burgundian rulers generally ended their
    rounds of debasements with severely deflationary
    coinage renforcements (restoring some of the lost
    silver to the coinage)

Conclusions 2
  • (2) The combination of coinage debasements and
    related bullionist measures generally served only
    to worsen the monetary scarcities by impeding
    bullion flows and coinage circulations
  • And also by encouraging hoarding by withdrawing
    coins from circulation, which ipso facto impeded
    coinage circulation
  • Note the monetary flows are often more important
    the monetary stocks

Conclusions 3
  • (3) To the extent that debasements did lead to
    some degreee of inflation, that inflation reduced
    real incomes of most members of the society
    since wages, rents, and other fixed incomes
    lagged behind consumer prices
  • - and that imposed an additional tax burden on
    the entire society (known as the seigniorage tax)

Conclusions 4
  • (4) Debasement injured creditors, in a similar
    fashion, by reducing the real values of both
    their principal (capital invested) and their
    investment returns whether interest, rent,
    dividends, profits
  • - in that respect Burgundian coinage debasement
    damaged Flanders international economic
    relations epecially with the Italians and the
    Hanseatic Germans

Conclusions 5
  • (5) Coinage debasements and renforcements as well
    sometimes provoked social unrest, indeed even
    industrial strikes
  • Industrial unrest amongst wage earners was
    understandable if, following a debasement,
    consumer prices rose more than did nominal wages
  • But paradoxically, strikes were more common after
    coinage renforcements when the prince or town
    government imposed wage cuts as part of the
    monetary reforms

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Flemish Coinage Terms
  • (1) Values in money-of-account
  • 1 penny or 1 d groot 24 mites 12d or 1s
  • (2) Fineness reckoned out of 12 deniers
    argent-le-roy, with 24 grains per denier
  • 23/24 or 95.833 pure silver
  • (3) Weight reckoned in terms of the taille or
    number cut from the Marc de Troyes of 8 onces
  • 244.753 grams

Traite of the Marc de Troyes
  • Official money-of-account value of the coinage
    struck from one marc argent le roy
  • Traite (taille value)/percent fineness
  • taille (number of coins struck to the marc) the
    face value of the coin/ divided by
  • The finenesss of the coin (in deniers and grains)
  • E.g. 68.0 2/ (6/12) 136d 22s 8d groot

Debasement and Inflation a reduction in the
silver content of a coin increases the
corresponding traite value of silver by the
reciprocal ?T 1/(1 - x) 1 ? T change
in the traite x change (reduction) in the
silver content (as a decimal) Nov. 1428
debasement of silver double groot by 11.8
1/(1 - 0.118) - 1 (1/0.882) - 1 1.133 - 1
13.3. increase in the value of the traite.
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