Coinage Debasements in Burgundian Flanders, 1384 - 1482

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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

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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

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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.

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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.

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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

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How Debasements increased a princes mint
revenues

• 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

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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.

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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).

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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
  imitations
• i.e., to counteract Greshams Law that cheap
  money drives out dear money

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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

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SOME BRIEF CONCLUSIONS ON FLEMISH DEBASEMENTS

• GENERALLY MORE HARMFUL THAN BENEFICIAL
• (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)

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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

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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)

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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

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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
  parisis
• (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

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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

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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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