Kindleberger C. (1991) An early manic episod

Kindleberger, Charles P. (1991) The economic Crisis of 1619 and 1623. The Journal of Economic History, 51/1 : 149-175.


The early European 17th century has commonly been described as the troublesome transition from a medieval to a modern economy (p.149). The multi-layered crisis of 1619-23 is a perfect embodiment of the woes of the time. However, the author’s “interest in that crisis does not concern its potential role as a catalyst of modern economies, but rather its function in the mechanism for the spread of a primarily financial crisis from one part of Europe to another” (p.150).

Klippermünze und Wipperzeit

The Holy Roman Empire was at the core of the crisis, its moneys serious weakened by Klippermünze (clipped coins) and Wipperzeit (fraudulent exchange). The conditions were right for a severe Gersham’s Law episode. Large coins used for long distance trade remained pretty much untouched as professional merchants knew how not to be fooled; however lesser subsidiary coinage quickly depreciated, containing ever more copper and less silver. “Germany has been said to have been on a de facto copper standard from about 1621 to 1623” (p.151).

The large German states (Bavaria, Brandenburg) and Austria were big and compact enough to ensure a certain level of minting sovereignty; but smaller did not enjoy this advantage an were very exposed to low-quality foreign coins – as late as 1816, over 70 different types of coins from all over Europe were used in the Rhineland (p.153). In times of monetary uncertainty, good moneys were hoarded and simply became imaginary units of account (p.154).

Beggar thy neighbour

Early on, Amsterdam had managed to defend itself against this sort of process using the Wisselbank which guarantied safe transactions, the model was quickly imitated by a few European cities (Venice, Hamburg, Delft, Nuremberg; p.155). However, in most German states, the absence of a central authority prevented any effective response to the monetary crisis looming (p.156). Even though it is impossible to pinpoint a single point of origin for this vicious circle, the process is all too clear (p.157).

The lack of efficient capital markets, forced most sovereigns to resort “to seek greater seignorage by coining more money” as a mean to raise funds for the starting Thirty Years War. Rulers increased artificially the price of silver in their realm, attracting the metal to their mint and allowing them to produce lesser-quality coins which then flooded their neighbours who had little other option then to answer in kind.

Ultimately “the higher price of silver and rising wages [due to rampant inflation] make it unprofitable to produce standard subsidiary coins. Thus honorable mints stop producing subsidiary coins altogether”.

Contagion and consequences

The value of the debased moneys kept falling, ever more rapidly after 1619, and by the summer of 1621, a full on monetary panic had spread over Germany. In this crisis small southern German states were particularly hit (p.158). Minting became very good business, in Brunswick alone 40 minting shops had been set up (p.160). Other European countries were seriously affected too, such as Poland and England, but the relationship of these contemporary crisis with the German case remain unclear, local shock having certainly a role as – if not more – important than contagion from Germany (p.163).

In Germany itself, a number of speculators managed to benefit handsomely from the crisis (most famously Wallenstein). But the urban poor suffered harshly, incapable to shield themselves from hyperinflation, they lost a large amount of their purchasing power (p.164). Worse even, peasants and artisans refused to bring their production to the market where they were paid in debased money and the monetized economy was commonly taken over by barter trade (p.165).

The fact that the masses took time to make the difference between good and bad money proved particularly damaging as it made fraud possible for a long while and because, once the crisis had gone, it took a very long time for people to trust species again. During, the crisis riots frequently broke out and the speculators were commonly murdered (p.166). As early as 1618, the Hanseatic cities concluded a mint treated to avoid mutually harmful behaviours, they were gradually joined by other states. Elsewhere, the crisis finally ended as the mints’ passers could no longer get people to accept their coins. The sovereigns, such as the Elector of Saxony, were finally forced to accept a huge loss to end the crisis. They had to initiate a recoinage and reinstall strict monetary quality control (p.168).


This episode brings to mind the great monetary crises Germany experienced in 1918-23, war environment and weak central authority seem to have doomed monetary stability. After both crises, the same questions were asked, in particular relatively to how to repay debts contracted during the crisis and termed in bad money once good coins had came back (p.169). Interestingly, after long debates, in both cases sums due were slashed by 50%.

The crisis had an enormous impact, in effect, it proved a watershed for the German economy the country took over two centuries to recover from (p.170). It wreaked the old banking system (Welsers bankruptcy) but “hastened the development of the bills-of-exchange network”. On a theoretical point of view, it also showed that, against free-banking advocates’ arguments, a decentralized uncontrolled monetary system is not the most stable system and can bring free-riding and catastrophic crises (p.171).

A 16th-century mint

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