In a comment to a response to another question, P. Geerkens made the offhand comment that:

the monetary supply of Europe was grossly inadequate until New World silver arrived.

I'm intrigued. How do we measure whether the pre-modern money supply was adequate. How do we collect the data to measure concepts like deflation? If we assume that an inadequate monetary supply causes a rise in barter, how do we measure the rise in barter? Is there a significant rise in the search for precious metals? A change in the rate of debasement? Can we detect the expected responses to deflation (deferred consumption of goods, changes in loan rates, etc.)

  • Where do we get the underlying numbers to reach these conclusions?
  • What is the methodology?

Although this question may lie on the boundary between economics and history, I'm asking about the historical methods; I understand deflation and how to measure it; I'm interested in how historians approach the specifically historical side of the problem.


4 Answers 4


The Great Bullion Famine, in mid-fifteenth century Europe, was a shortage of precious metals. It was largely driven by an unfavourable balance of trade with the Middle and Far East due to the shortage of goods, other than precious metals, with which to purchase goods such as spices, silk and cotton.

Numerous factors may have caused the Great Bullion Famine. In the 14th century, the Black Death ravaged Europe, killing over half of its population, and leaving many areas heavily depopulated and unable to meet previous levels of economic production. In addition, Europe had a long-running precious metal deficit in its trade with the Middle East and Asia, ever since the days of the Roman Empire. This is due to the fact that products from China and India such as spices, silks, and cotton, were very rare or completely unavailable in Europe, and thus highly valued - but Europe lacked as many goods to trade back to the east, and so relied on precious metals, which were always in demand due to their use in coinage, bullion, and luxury goods. This meant that in exchange for renewable eastern goods, Europe was trading away its non-renewable precious metals. Additionally, the price of goods was very low in Europe, making the trade deficit worse.

Note that Western Europe suffered a massive deflation during and subsequent to the fall of the Western Roman Empire. Exacerbating the (already long running) precious metal deficit with the East was the specie hoarding characteristic of deflation - a positive feedback loop. Feudalism is an indicator of this as monarchs resorted to paying retainers with land instead of specie, and tenants likewise paid rent with labour and commodity produce.

All this while the precious metal mines of Europe were in decline. Flooding and the lack of technology to deal with it prevented mining deeper where the veins were still rich.

Over the course of this millennium we see two significant upticks in economic activity, associated with two significant quantitative easings resulting from de-hoarding activities:

  • Viking raids of Western Europe from circa 800 to 1000 C.E. put large quantities of precious metals hoarded by monasteries and churches back into circulation.
  • The Fourth Crusade's sack of Constantinople in 1204 puts 900,000 silver marks (~450,000 pounds) into circulation.

More detail behind these links on Medieval Silver and Gold and on Medieval money.

For those inclined to think deeper on the associated economics and politics of the millennium 453-1453 - the growth and popularity of mercantilism in the centuries immediately following this period becomes more understandable:

Mercantalism: a national economic policy designed to maximize the trade of a nation and, historically, to maximize the accumulation of gold and silver

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    Splendid answer; I knew some of the facts, but this puts them in context. this is why I love H:SE.
    – MCW
    Commented Apr 28, 2018 at 23:03
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    @MarkC.Wallace: Thank you - took me a while to recall the phrase bullion famine, which then led to everything else falling into place. Commented Apr 28, 2018 at 23:05
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    This is (probably) the first time I've seen a 'positive spin' on Viking raids, but I'm convinced. A very informative and commendably clear answer. Commented Apr 30, 2018 at 23:46
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    @LarsBosteen: They worked out better for Vikings than for monks.;-) Commented May 1, 2018 at 2:02

Sketch answer: Money can be used for small scale trade (grocery shopping), wages, long distance trade and to store value. I differ two scales of trade because I believe the needs of a merchant managing shipping between Venice and Damascus are different enough from those of a piper buying bread & beer. We can look at these four uses for a given time and place:

  • Shopping: Did people usually pay directly in coin, or did they use tally sticks, buckskins, or other forms of cashless payment?
  • Wages: Was labor paid in goods or coin? Was labor even wage labor or managed differently, like corvee?
  • Trade: IOUs between traders? I read somewhere that these where used extensively in pre-modern times, don't have the source now.
  • Store of value: From an older answer by Samuel Russel, about European middle ages:

    A few families would have concentrated wealth, but this wouldn't be liquid capital, it would be static textiles used for display, or cloths. We know this from the viciousness with which churchmen and nobles forced "sumptuary" laws on rich town dwellers to stop them from wearing hats too big, cloaks with too many folds, or shoes that were too long.

In a medieval society, there were fewer less transactions requiring money: Up until the 19th century, the majority (one figure: 80%) of a poor person's income would be spent on food. When the majority (ballpark: 80% for middle ages, likely too low) are peasants, producing their own food plus tax, you have ~60% of likely transactions taking place within one household. Money supply becomes more important, the more transactions take place between people who don't know each other & the less closed an economy is.

When investigating this question, I believe you arrive quickly at a chicken and egg question - did changed, modernized social relationships necessitate more money (and thus encourage the plunder of the new world) or did the money supply fuel an economic transformation? This would be economic theory and I won't go into that here. But I think if you look at the use (or not!) of cashless payment system, you have a hint of the people then and there saw their money supply as adequate.

  • Oh, this answer fits the first version of the question better. Whatever.
    – mart
    Commented Mar 15, 2018 at 11:15
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    You are spot on. These are the right questions - but Mr. Geerkens referenced the conclusion as though the actual numbers had been analyzed and the conclusions reached. I was unaware of either the research or the conclusion and I wanted more details. SO our minds are running in the same ?analytical framework?. Well and quickly done
    – MCW
    Commented Mar 15, 2018 at 11:22
  • Yes, I (mis)understood your question to be about possible resaerch avenues, not actual figures. Oh, I also forgot point 5: Europe had not much to offer to the Near & middle east in exchange for silk, spices and whatnot, hence trade deficit & later importance of new world silver. Or so I read somewhere.
    – mart
    Commented Mar 15, 2018 at 11:45
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    @mart: I read something similar but it was about Europe not having much to offer to China - until the Brits started selling them opium, that is. There was also an arbitrage trade, because gold:silver was 1:12 in Europe and 1:6 in Asia. European traders brought silver in and gold back home. Commented Mar 15, 2018 at 19:34
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    Few people are older than I am; they hadn't invited numbers when I was born. I use "Mr. " as a sign of respect .....
    – MCW
    Commented Apr 28, 2018 at 23:01

"Adequacy" is not a technical term and will be hard to apply without reflecting modern biases.

Estimations of historical inflation expectations (see the 2016 paper by Carola Conces Binder) could be part of a judgment on monetary adequacy. Tracking trends of cash transactions against bartering and home production is difficult because those mostly go unrecorded.

Some risk factors and coindicators for inadequate money supplies are:

  • issuance of scrip
  • periods of inflation with little coinage
  • transactors complaining about sparse cash
  • businesspeople storing more of their worth in goods
  • being in a colony or frontier with no local coinage

The statement is, on its face, absurd. "Monetary supply" is an inappropriate term to describe the economic workings of the era. In today's economy, there are practically as many definitions of "monetary supply" as there are economists (or, at least, statistical agencies), and there is no meaningful definition for the term in a pre-modern context. I suppose that the author here simply meant coinage, but then he falls into a different fallacy.

Gold and silver coins are a convenient means to store and transfer value. However, they are far from the only means and historically have rarely been the dominant means. Credit, ranging in sophistication from tokens and tally sticks to bills of exchange; paper money; commodity money, ranging from measures of grain in ancient Mesopotamia to pelts in colonial America; and other tokens such as wampum and cowries; all compete with gold and silver in the "marketplace of money". Gold and silver have advantages in this marketplace - they are durable, portable and broadly fungible - but they are hardly irreplaceable. Rather than to say that the supply was inadequate, it would be better to say that there was unmet demand for gold and silver in the European marketplace.

The great question is, thus, to what degree did the influx of American silver increase the money supply, as opposed to simply displacing other forms of exchange. Unfortunately, most of the other forms of exchange are all but invisible to the historian. We can hardly do better than guess at the number of tally sticks and I.O.U.'s used in the past, or estimate how that number has changed. Researchers interested in the question scour the most basic documents of the era - particularly banking and shipping records and contracts of all kinds. It is a complex question and you'll find plenty of spirited disagreements in the literature.

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    Cannot agree; monetary supply is well enough defined as a term of use. Pre-modern monetary supply has some interesting complications, but I don't think it is impossible to measure - I'm just not sure how it is done.
    – MCW
    Commented Mar 15, 2018 at 18:43
  • Can you tell me how it's defined, then? I'm afraid that I've never seen a definition other than in terms of gold and silver coins, which are only a fraction of the actual money supply and thus hardly an adequate definition.
    – pokep
    Commented Mar 15, 2018 at 18:51
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    M1 through M5 are the commonly accepted definitions, for fractional reserve banking. Wikipedia's article on money supply is an adequate introduction. In the pre-modern (specie based) era, money supply would be roughly congruent with issued coinage (adjusted for debasement).
    – MCW
    Commented Mar 15, 2018 at 18:53
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    You make some good points, but personally I read Pieter's comment as meaning the supply of coinage. The exemplar area with respect to this would be the British Islands, which endured centuries of deflation after the Romans left the isle, in large part because coinage became increasingly rare. (I wish I could locate good online references to build an answer around that, too. It's probably an anecdote I picked up in some book related to the history of trade.) And of course Spain, which suffered massive inflation when silver and gold poured in from Latin America. Commented Mar 15, 2018 at 19:29
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    @Denis de Bernardy Coins may have been expensive, but for the supply to be "grossly inadequate" implies that the economic activity was constrained by their scarcity. Coal and oil were expensive, too, but rather than constrain the Industrial Revolution, they became much cheaper through the development of new supplies and technologies. The historical record makes it far from obvious that the lack of silver constrained the European economy.
    – pokep
    Commented Mar 15, 2018 at 20:26

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