Premodern Debasement: A Messy Affair（LSE Economic History Working Papers No. 270/2017）

Claims Supported by This Source

1. Pre-modern debasement was not orderly; high information costs hindered the supervision of mint officials, who sometimes debased currency on their own initiative. It was also impossible to monitor the market and enforce regulations, and debasement by raising the nominal value of coins was effective only when it aligned with market rates (Abstract).
2. The 1551 imperial currency of Charles V overvalued small-denomination coins of less than 6 Kreuzer, leading to only small coins being struck. The 1559 Imperial Diet of Augsburg demanded that small coins contain sufficient silver, but the law of that year conversely required too much silver, making profitable production impossible. Princes who obeyed the law, such as the Elector of Saxony, did not strike small coins for several decades thereafter, while many poorly supervised mints illegally debased them. Unsupervised mints leased to private contractors (Heckenmünzen) contributed to an oversupply of bad small coins, undermining the credit of the otherwise well-designed imperial currency (pp. 12–13, fig. 1).
3. The flood of bad small coins that undermined the Empire's common currency in the late 16th and early 17th centuries was issued by mints operating without the supervision of the rulers who were nominally responsible (p. 21).
4. Borders were porous to the flow of currency, and by the 15th century, a "trade in currencies" had been established. Issuing inferior imitations of a neighboring country's currency had the same effect as debasement and created an incentive for the recipient of the bad currency to debase its own. Debasement was not only fiscally motivated but also defensive (pp. 16, 21–22).
5. Governments could not fix the value of currency against the market, and the usual consequence of debasing small coins was a rise in the "exchange rate" against large-denomination coins (pp. 14–15).

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