Money and Credit in the Local Economy

Real Coinage and Moneys of Account

With the expansion of the towns in the later Middle Ages, and in response to the needs of their trades and industries, the money economy had everywhere become more pervasive. An essential feature of urban growth, it had also penetrated vigorously the economy of the countryside, disturbing age-old customary routines as it did so. Pure barter did not disappear immediately from the local economy even in the sixteenth and seventeenth centuries. The use of credit facilities in the money sector even enhanced the opportunities for barter transactions in so far as it encouraged barter on an extended time basis. Yet everywhere money was on the march. Rural production, both agricultural and industrial, was increasingly commercialized. Urban industry stimulated internal and external demand through specialization. The expansion of transcontinental and, above all, the Atlantic traffic opened up unprecedented prospects for intra-European distribution of goods. The market, designed to bring supply and demand together more efficiently, catalysed the new impulses of the sixteenth, seventeenth and eighteenth centuries. Urban and rural markets, weekly markets and fairs, multiplied in Europe or intensified their activity, assisting the penetration of the local economy by money and credit in many forms.

First came metallic money. On the local markets most transactions, apart from pure barter, were already valued in money and settled in cash. The increasing use of metallic money in the local economy nevertheless posed serious problems. Usually a real coin with its multiples or divisions would form the basis of die current money of account. The smaller the real divisions, the less was their relative silver content: this content was necessarily less than proportional, because the cost of minting the coins increased more than in proportion.