Author Topic: Denomination demand and supply  (Read 126 times)

0 Members and 1 Guest are viewing this topic.

Offline Figleaf

  • Administrator
  • Honorary Member
  • *****
  • Posts: 28 238
Denomination demand and supply
« on: April 11, 2019, 12:28:56 PM »
as I best recall Watson suggested 2,000 tons of silver may have left Europe for North Africa areound that time, in significant part in the form of millares

That is surprising. With the religious warfare on the Iberian peninsula, I would have assumed that the money flow would be the other way around - UNLESS this flow represents repatriation of plunder, in which case it is shocking.

Peter
« Last Edit: April 16, 2019, 11:34:46 AM by Figleaf »
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

  • Meritorious Member
  • ****
  • Posts: 750
Re: Money demand and supply
« Reply #1 on: April 11, 2019, 12:52:13 PM »
That is surprising. With the religious warfare on the Iberian peninsula, I would have assumed that the money flow would be the other way around - UNLESS this flow represents repatriation of plunder, in which case it is shocking.

Its to do with the role of gold and silver in the economy.  By about 1300 the European economy was becoming elitist and monopolistic, and was replacing its silver coinage with a gold one.  Meanwhile the Islamic economy had gone into its gold phase maybe three centuries earlier, and by 1200 its economy had more or less ground to a halt - so it started over with a silver coinage again.  The big switch back to silver in Islam seems to come with Saladin.

The European economy then itself ground to a halt around 1450 - so itself then switched back to silver.  That is what the first crowns (or thalers) were all about I think - "silver worth gold".

Watson (Back to Gold – and Silver, EHR 1967) is the thing to read on this – he wrote there:

“Rulers in all parts of Europe were ready to procure the metal needed to maintain a strong gold currency by sacrificing silver. They were prepared to let the common people, who received their income in silver, bear the burden of keeping intact a prestige coinage for the use of princes and merchants.”


Years ago I wrote to Watson to ask why he had discontinued his work on coinage in 1967.  He told me that immediately after publication the dean of his university arranged him a Ford Foundation grant to go study agricultural matters instead………………

Rob T


Offline Figleaf

  • Administrator
  • Honorary Member
  • *****
  • Posts: 28 238
Re: Money demand and supply
« Reply #2 on: April 11, 2019, 01:10:40 PM »
Thank you. Interesting. If I'd translate that in economic terms, it would be something like: the price of silver in terms of gold was different in Christian and Islamic areas. This could be maintained because of the constant wars fought between the two. However, arbitration still occurred. When the price of gold was high in terms of silver in Islamic areas, silver flowed in from and gold flowed out to Christian areas.

By 1200, with Saladin, an equilibrium was achieved that allowed silver to make a comeback. This led to a silver flow from Christian to Islamic areas that raised the price of silver in the Christian sphere, until, around 1450, large quantities of silver were discovered in Bohemia.

A little anecdote may clarify the role of the leaders. As a schoolboy, I would be playing monopoly with family and friends. I often volunteered for the role of the bank, but got bored anyhow. At one point, I started taking certain denominations from the players, but not handing them out in payment. I noticed that this did not do anything to change the game, but it did irritate the other players.

Peter
An unidentified coin is a piece of metal. An identified coin is a piece of history.

Offline EWC

  • Meritorious Member
  • ****
  • Posts: 750
Re: Money demand and supply
« Reply #3 on: April 12, 2019, 10:26:27 AM »
Thank you. Interesting. If I'd translate that in economic terms, it would be something like: the price of silver in terms of gold was different in Christian and Islamic areas. This could be maintained because of the constant wars fought between the two. However, arbitration still occurred. When the price of gold was high in terms of silver in Islamic areas, silver flowed in from and gold flowed out to Christian areas.

That is all true – but I judge inadequate to a full explanation.  Perhaps I would say my point concerns the “poverty of economics”.   

What did go on is that merchants travelling from Christendom to Islam would pay in silver (often these millares fakes).  Merchants going the other way would want payment in gold.   

However, economists will tend to talk merely in terms of supply and demand, and the move to a new equilibrium between the metal prices.  If we look at real history, that cannot be an adequate total explanation.  For instance – west of Afghanistan, within Islam from c. 1,000 to c 1200 AD - there was no silver coin struck at all.  It seems inconceivable that the sort of people who customarily use silver coin stopped wanting it altogether - that demand merely disappeared.  Something else was going on.  As far as I can tell, a sort of Turkish military dictatorship held sway over this period – and they pushed much of civil society far in the direction of serfdom.

The sort of argument that tries to explain past events in narrow economic terms has come to the fore in the 21st century under people like Thomas Sargent.  They seems to rely on browbeating people with tough maths, using it to put a fire wall around their own gross historical errors.

If we turn back to 1967 things were more sophisticated – Watson was a serious economic historian – as were his opponents – people like Lopez, Day and Spufford.  His critics relied chiefly on so called “bullion famines”.  Not demand side problems - but supply side problems – basically - that the (known) mines got worked out. 

Personally I think the bullion famine arguments are partly true, but Watson overturned them as an adequate total argument.  Its hard to disagree.  Spufford tried to take the opposite line to Watson, but even he admitted that over the period when silver coinage dried up in Europe, the number of controlling elite families dropped from about 400 to about 40………

A little anecdote may clarify the role of the leaders. As a schoolboy, I would be playing monopoly with family and friends. I often volunteered for the role of the bank, but got bored anyhow. At one point, I started taking certain denominations from the players, but not handing them out in payment. I noticed that this did not do anything to change the game, but it did irritate the other players.

Fascinating.  There is some dark humour here.  For a general picture of how “irritated” many “players” became during the 14th century “silver famine” I recommend this book

A Distant Mirror - Wikipedia

Regarding specific numismatic events – well the attempts under Edward III to reform the English currency is widely thought to be one matter that lies behind the peasant revolt of 1382.

Peasants' Revolt - Wikipedia

The reforms to the currency were masterminded by Florentine bankers – incorrectly called “Lombards” at the time – but the “irritation” was mostly visited upon Dutch merchants as I recall – (“thirty-five Flemings in one batch were dragged out of the church of St. Martin in the Vintry, and beheaded on the same block”).

Ciompi Revolt - Wikipedia

Irritation rather turned out the other way in Florence itself where coin denomination was even more clearly involved  - and where the “peasant” side took the bulk of the blood letting   “The Ciompi and Sotto posti were slaughtered that day ……...  named one of the bloodiest in Florentine history.”

It would be intersting to hear what specifically was going on in France, Germany etc - as the 15th century coin famines got even worse there in the end.......

Rob T