Monetary Instability, Lack of Integration and the Curse of a Commodity Money Standard. The German Lands, c.1400–1900 A. D.

Currency debasement, defined as a loss of precious metal content (intrinsic value) of the circulating penny currencies over time, was a common feature in the monetary history of Europe, c. 1400–1900. Over the centuries the loss rate was sustained; between 1400 and 1900 A. D. the (south) German penny currencies lost close to 90 per cent of their intrinsic value. As prior to the twentieth century all circulating means of exchange derived their purchasing power from the value of the precious metal contained in them these debasements reflect considerable fluctuations in these coins’ exchange value. Whilst some of the possible origins of this have been addressed by previous research, comprehensive models are missing, and the social and economic consequences of this phenomenon have only seldom been studied. The present paper contributes to the debate, using long-run data on the circulating small change currencies in the German lands, c.1400–1900. After an introduction (I.) the second section puts the present case study into an international, historical and conceptual context (II.). A third section provides a brief sketch of German monetary history since the Middle Ages with special regard to penny currency debasement (III.). A fourth section analyses some of the reasons for this, highlighting further areas and directions of research which previous models have missed (IV.). A fifth section studies the social and economic costs of monetary fragmentation and coin debasement (V.). A sixth section concludes (VI.).