The year the silver coins turned red in a few weeks

In the first few years of the Thirty Years' War, which began in 1618, the various territories and cities of the Holy Roman Empire debased small silver coins by removing silver and adding copper. They sorted out good coins by weight, melted them down, and used the silver to strike bad coins. The exchange rate for good currency peaked in early 1622 and returned to its original level in 1623. A re-examination of exchange rate tables, laws, and broadsheets reveals that figures like "8 times" or "one-fifth of face value" cannot be traced to their sources. What remains are the regional exchange rates for good currency and the mechanism by which the gap between face value and content spread across borders.

Original question: Why did bad money spread across borders?

In the first few years of the Thirty Years' War, which began in 1618, the various territories and cities of the Holy Roman Empire debased small silver coins by replacing silver with copper. They would sort out good coins by weight, melt them down, and use the silver to strike bad coins. From 1619 to 1623, the exchange rate of good money rose severalfold in various places, peaking at the beginning of 1622 and returning to its original level in 1623. Contemporaries called this period the "Kipper und Wipper time," from the words of a satirical song.

The starting point is the monetary ordinance established on August 19, 1559, in Augsburg by Emperor Ferdinand I and the Imperial Estates. Using the Cologne Mark of fine silver as a standard, it was decided that 9.5 of the 60-Kreuzer Reichsguldiner would be struck from one Mark, with a fineness of 14 Lot 16 Grän. The number of coins and their fineness were specified in the articles for smaller denominations down to 10, 5, 2.5, 2, and 1 Kreuzer. There was no obligation to accept small coins of less than 5 Kreuzer for payments exceeding 25 Gulden. The Imperial Circles (Kreis) were to ensure that small coins did not "pile up and push up higher currency," and the coinage of each territory was to be inspected at assay assemblies held twice a year. It was also forbidden to lease minting rights to others or to make contracts with the mint master other than for his salary. The Imperial Diet of 1566 acknowledged the reality that contracts in many regions were denominated in Thalers and added a 68-Kreuzer Thaler to the imperial coinage.

The ordinance had a loophole. Small denomination coins had a high minting cost per piece, and if they contained the amount of silver stipulated by the regulations, the mint would incur a loss. According to the commentary from the Deutsche Bundesbank Money Museum, while striking approximately 23 kg of silver into Thalers would yield a profit of over 14 and a half Gulden, striking the same amount of silver into 3-Pfennig coins resulted in a loss of over 46 Gulden. Territories that abided by the law did not strike small denomination coins, while mints with weak oversight struck them with reduced silver content. In an assay of 1595, 3-Kreuzer coins and half Batzen were 15 to 25% short of their official value; in 1596, they were 43% short; in 1604, an average of 18 to 26% short; and in an assay in Nuremberg in 1607, the 6-Kreuzer coin of the city of Frankfurt was about 37% short. By 1609, the list of illicit minters exceeded 20. The deterioration had been progressing for more than 20 years before the outbreak of the war.

The outbreak of war was the signal. The three upper circles, meeting in Nuremberg in May 1618, stated that they could only hope to prevent the occurrence of extreme debasement. The only monetary convention held in 1619 was that of the Upper Saxon Circle in May. Lords with minting rights leased their mints to contractors to avoid being associated with bad currency, and the Duke of Württemberg established new mints in Berg and Tübingen. The practice of leasing, forbidden by imperial law, and unauthorized "hedge mints" (Heckenmünzen) spread.

The appreciation of good currency is recorded in market price tables. In Hamburg, 1 Thaler was worth 37 shillings 6 pfennigs in December 1614, 48 shillings in October 1619, and 54 shillings 6 pfennigs in March 1621. In Brandenburg, a Reichsthaler was worth 2 guldens 4 kreuzers in 1620, 4 guldens in 1621, and 10 guldens in 1622. In tables for the entire Empire, the Guldenthaler rose from 1 gulden 22 kreuzers in May 1618 to 2 guldens in November 1620, 5 guldens 30 kreuzers in December 1621, and 8 guldens 30 kreuzers in February 1622. The broadsheet "Epitaph of Good Gold," printed in Augsburg, features a dialogue with a money changer who pays 5 guldens 30 kreuzers for one Reichsthaler and 8 guldens 30 kreuzers for a Ducat.

In Bavaria in 1621, the fineness of bad money dropped to 10% of the 1559 ordinance's stipulation, and many of the smallest denominations contained no silver. The Ulm shoemaker Hans Heberle wrote of 1622 that the coins were at first as beautiful as pure silver but turned red like copper in three to eight weeks, and he noted that everything people needed for their livelihood was terribly expensive. A song from 1621 lamented having to search for a Groschen to buy beer and bread, and that it could not be obtained without paying a 20% premium.

The convergence began in 1622. The Hamburg Thaler fell from 54 Schilling in May 1621 to 48 Schilling in May 1622, and the Guldentaler in the tables for the entire empire was at 2 Gulden 52 Kreuzer on June 16, 1622, and 1 Gulden 20 Kreuzer in April 1623. In 1623, Bavaria devalued the bad money and returned its coinage to the imperial standard. From 1623 to 1624, the various territories invalidated and withdrew the Kipper coins and struck new currency. The losses from the recall were borne by the territorial treasuries. The specimen in NOMISMA's collection, a quarter Reichsthaler from the city of Hildesheim dated 1624, is one such coin from the period immediately following.

The mechanism lies in the discrepancy between face value and intrinsic content. If two coins circulating at the same face value have different silver content, one can mint the one with less silver, exchange it for the one with more silver, melt down the good coin, and again mint coins with less silver, leaving a profit after subtracting minting costs. Shaw wrote in his 1895 paper that this cycle only stops when the exchange rate is revised, eliminating the profit margin, or when the good coins run out. The ordinance of 1559 was also aware of this dynamic, stipulating that the inflow of foreign bad money and the outflow of good money should be stopped within 6 months, and that those who 'weigh and sort out' and 'buy up' coins should be punished in body and property.

What crossed the borders was this cycle itself. It was more profitable to bring debased coins into a neighboring territory, obtain good coins, bring them back, and debase them again, than to debase coins within one's own territory. The receiving territory, to protect itself, would debase its own currency and transport it to its neighbor. Volkert called this "defensive debasement" and pointed out that borders were porous to the flow of currency, and that issuing inferior imitations of a neighboring country's currency had the same effect as debasement. The more mints there were, the more intense the competition to buy up silver became.

Good money disappeared. In the 1621 poem 'A New Dialogue of Coins', the old Groschen says it is 'long since in the fire', the Mariengroschen 'has become a silver cup', and the Reichstaler says it 'passes for 5 and a quarter Thaler'. The figures in the exchange rate tables are not food prices, but the premium for buying good money with bad money. Daily shopping was done with bad money, and wages and taxes were also paid in bad money.

Who paid the price? People living on fixed salaries and pensions paid first. Heberle writes that the poor starved with their wives and children. Bad money returned to the lords as taxes and tributes, peasants refused to hand over their produce for devalued money, and mercenaries demanded payment in good money. The profits from minting were thus offset, and in the recall from 1623, the territorial treasuries bore the loss of invalidating the Kipper coins and reminting them into new currency. Bank loans and paper securities do not appear in this incident. What moved were metal, scales, and furnaces.

“‘Kipper’ is one who clips, ‘Wipper’ is one who rocks the scales.” Sources differ on the explanation of the names. The explanation from the Baden-Württemberg State Archives and the Bundesbank states that both words refer to the action of sorting out good coins with a quick balance. The 1888 Meyers Konversations-Lexikon explains ‘kippen’ as “to clip off” and ‘wippen’ as “to throw coins onto the scale pan so that it dips.” Rötlich explained it as a trick where money changers kept rocking the scales to confuse onlookers. The Ordinance of 1559 lists “clippers” and “those who sort by weighing” as separate offenses, so the practice is over 60 years older than the names. Shaw believes the names themselves spread from a line in a 1621 song: “In our village we call him a Kipper, and neighbor Hans says he's a Wipper.”

“‘The Jews melted down the good money.’” The 1621 “Epitaph for Good Money” and the 1622 “The Jewish Kipper and Money Changer” blamed the Jews by name in their titles and text. The same “Epitaph” also blamed Christians who brought good coins to money changers, stating, “The Christians who come here are even worse.” In 1597, an imperial commissioner in Frankfurt wrote of “Christians and Jews” as those who pushed bad pfennigs. The debased coins were struck by lords and cities with minting rights, and by contractors of leased mints; these are the people addressed by the 1559 Ordinance. The blame assigned in broadsheets is a prejudice recorded in historical sources, not an explanation of the events.

“Children used bad coins as toys.” This scene, found in NOMISMA's teaching materials, appears in a sentence from a 2012 Smithsonian magazine article that draws a comparison with 1923; the article does not cite its source. This scene is not found in the contemporary broadsheets, the quote from Heberle's chronicle, or the songs cited by Shaw that I have read for this. The origin is unknown.

“The populace hanged effigies of the lords who had debased the coinage.” The origin of this sentence in the teaching materials is also unknown. The riots themselves are documented; Shaw cites an 1866 paper on the unrest in Magdeburg in 1622, and the Smithsonian article writes that in the same city in February 1622, 16 people died and 200 were injured (it does not cite the original source).

“‘The state itself became a counterfeiter.’” The Ordinance of 1559 distinguishes between the two, stating that a minting lord who strikes coins outside the regulations is fined 50 gold marks, while a counterfeiter is punished with body and life. Volckart points out that the line between issuing inferior imitations of a neighboring country's currency and debasement was thin, the Bundesbank's explanation describes the post-war debasement as having been carried out “consciously,” and the State Archives' explanation notes that even the emperor participated in currency speculation. The essence of this incident is that while a distinction existed in law, this distinction collapsed in practice. Summarizing it with the single word “counterfeiting” obscures what the law forbade and who broke it.

“The first great inflation in German history,” “food prices octupled.” The Bundesbank Money Museum writes of “the greatest inflation in the history of the Holy Roman Empire,” setting the denominator as the history of the Empire. As for “the first,” there is no basis for this in the sources cited here. As mentioned in the previous section, the claims of “octupled” and “one-fifth of face value” cannot be traced to a source; there are only different exchange rate tables for each region.

What remains from this affair to this day is the speed at which the gap between face value and intrinsic value spreads across borders. If bad money enters, the neighbor also mints bad money, and good money disappears into furnaces, silverware, and chests. The 1559 ordinance, which set a 25-gulden limit on the obligation to accept small coins, answers the same question as modern legal tender statutes that place a limit on the number of coins that must be accepted for payment. Who must accept token money, and to what extent?

Another lesson is the habit of checking the backing. The coins described by Heberle looked like silver for a few weeks before they turned red. Fineness cannot be determined by sight alone; only those with scales and a touchstone can pick out the good coins. The 1559 ordinance attempted to externally verify the system where the issuer determined and inspected the fineness themselves, through district assay assemblies. In terms of modern money, this is about whether there is a way for a third party to verify the content, independent of the issuer's declaration.

This affair can be compared to incidents where the state manipulated the value of money for its own payments. John Law's system mobilized credit with banknotes and shares. The Kipper und Wipper was propagated by bad money crossing borders, through the physical manipulation of reducing metal content. What becomes apparent when comparing them are 'two ways a state can manipulate the value of money.' Since price records vary by region and there are no aggregate figures, the comparison is limited to the type of mechanism.

It should not be compared with incidents involving asset price inflation. Debasement is an intentional depreciation by the issuer, and its mechanism is different from a run on collateral or funding. If you compare it with Japan in the 1980s or the 2007 crisis based solely on the point that 'prices rose,' only the superficial similarities will stand out.