Stefano Battilossi • Youssef Cassis

Kazuhiko Yago

Editors

Handbook of the History of Money and Currency

With 101 Figures and 56 Tables

Editors

Stefano Battilossi Youssef Cassis

Department of Social European University Institute

Sciences
Florence, Italy
Universidad Carlos III de
Madrid

Madrid, Spain

Kazuhiko Yago

School of Commerce

Waseda University

Tokyo, Japan

ISBN 978-981-13-0595-5 ISBN 978-981-13-0596-2 (eBook)

ISBN 978-981-13-0597-9 (print and electronic bundle)

https://doi.org/10.1007/978-981-13-0596-2

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Preface

Financial history as an academic discipline enjoyed tremendous growth in

the 1980s and 1990s. Economic historians’ renewed interest in a hitherto
neglected field reflected the growing shift from manufacturing industry to
services in the Western world and the rise of a global economy fueled by
the resumption of international capital flows. Interest in financial history
has continued unabated but has taken a different turn in the wake of the
Global Financial Crisis of 2008. No longer confined to academic circles, the
search for the meaning of past experiences has extended to policy makers
and even to banking practitioners trying to make sense of the enormity of
the debacle that had shaken the financial world. Professional economic
historians, including economists engaged with the past, have had to bear
a new responsibility: to extend the depth and scope of their
investigations, share their results with a broader audience, and maintain
exacting academic standards.
This task can be fulfilled by exploiting the extremely rich vein of financial
history. Finance is a highly technical specialism, in both theory and
practice, but it also touches upon all strands of economic, social, political,
and cultural life. Financial history is concerned with the contribution of
banks and financial markets to economic development; with the impact
of monetary policy on economic stability and economic growth; with
capital exports, foreign investment, and their effects on both creditor and
debtor nations; and with the management and governance of financial
institutions. It is also interested in the people involved in financial
transactions – from the wealth, status, and power of financial elites to the
financial behavior of small savers. Financial history’s remit also includes
the relationships between finance and politics, whether at national or
international level – state intervention in financial affairs, the political
influence of financial interests, and the interactions between finance and
international relations. The list is not exhaustive.

The increasing level of attention recently paid to the history of financial

crises represents, as it were, a synthesis of these various approaches. For
it is in time of panic and crisis that the interconnection between the
business, economic, social, political, and international sides of financial
activity is revealed in its most glaring way – as was vividly exposed by the
Global Financial Crisis of 2008, with bank failures and near failures,
systemic risks, bankers’ responsibility, state intervention, the Great
Recession, unorthodox monetary policies, international cooperation, and
so on.

v
Preface

Monetary history has been one of the fastest-growing subfields of

financial history – an interest spurred by the inflationary experiences of
the late twentieth century and their effects on economy, society, and
politics; the end of Bretton Woods and the advent of flexible exchange
rates; the search for monetary stability; the growing importance of
central banks and their conduct of monetary policy; and of course
Europe’s monetary unification.

The publication of the Handbook of the History of Money and Currency

represents the culmination of nearly 50 years of research in these areas
and beyond. It is an impressive collective effort, whether viewed
thematically (its 40 chapters cover all relevant issues), chronologically
(from the ancient world to the present), geographically (with its global
view), and methodologically (multidisciplinary approach, theoretical
insights, state of the art). It provides a long-term historical perspective to
current issues and integrates monetary history into the broader spectrum
of financial history. The book is a fascinating journey into the multifaceted
world of money and currency. It will also be an essential tool for social
scientists and a handy companion in the hands for decision makers.

Florence, Italy Youssef Cassis

January 2020
Contents

1 Introduction: New Research in Monetary History – A Map .

.... 1

Stefano Battilossi and Kazuhiko Yago

Part I Historical Origins of Money ...........................

43

2 Origins of Money and Interest: Palatial Credit, Not Barter .

.... 45

Michael Hudson

3 The Role of Money in the Economies of Ancient Greece and

Rome . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67

Colin P. Elliott

4 Primitive and Nonmetallic Money ......................

. . . 87

Bill Maurer

Part II Money, Coinage, and the State . . . . . . . . . . . . . . . . . . . . . .

105

5 Monetary System of the “Ancient Régime” (Third to Eighteenth

Centuries) ..........................................
.. 107

Georges Depeyrot

6 Money, Law, and Institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

159

David Fox

7 Premodern Debasement: A Messy Affair. . . . . . . . . . . . . . . . . . . .

177
Oliver Volckart

8 Gresham’s Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
199

George Selgin

Part III Trade, Money Markets, and International Currencies ....

221

9 Money, Trade, and Payments in Preindustrial Europe ........

. 223

Meir Kohn

vii

Contents

10 Money Markets and Exchange Rates in Preindustrial Europe .

. . 245

Pilar Nogues-Marco

11 International Money Markets: Eurocurrencies ...............

269

Stefano Battilossi

12 The Asian Dollar Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

315

Seung Woo Kim

13 International Currencies in the Lens of History . . . . . . . . . . . . . . .

335

Barry Eichengreen

Part IV Money and Metals ................................

361

14 American Precious Metals and Their Consequences for

 Early Modern Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
363

Nuno Palma

15 Rise and Demise of the Global Silver Standard ...............

383

Alejandra Irigoin

Part V Monetary Experiments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

411

16 Experiments with Paper Money . . . . . . . . . . . . . . . . . . . . . . . . . . .

413

François R. Velde

17 Money and Prices in Colonial America .....................

431

Farley Grubb

18 Privately Issued Money in the United States ...............

. . 455

Matthew Jaremski

19 Money, Prices, and Payments in Planned Economies . . . . . . . . . . .

473

Michael Ellman

20 Complementary Currencies .............................

. 501

Massimo Amato and Luca Fantacci

Part VI Asian Monetary Systems ...........................

523

21 Monetary System in Ancient China ......................

. . 525

Yohei Kakinuma
 22 The Monetary System of China Under the Qing Dynasty . . . . . . .
549

Niv Horesh

23 The Monetary System of Japan in the Tokugawa Period . . . . . . . .

571

Hisashi Takagi
Contents ix

Part VII Exchange Rate Regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . 597

24 International Monetary Regimes: The Gold Standard . . . . . . . . 599

. . Lawrence H. Officer

25 International Monetary Regimes: The Interwar Gold Exchange

Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633
Olivier Accominotti

26 International Monetary Regimes: The Bretton Woods System 665

. . . Peter Kugler and Tobias Straumann

27 Currency Boards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 687

. Atish Ghosh, Anne-Marie Gulde, and Holger Wolf

Part VIII Monetary Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 717

28 The Evolution of the Modern US Monetary and Payments

System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719
.

David F. Weiman and John A. James

29 Currency Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747

. Anders Ögren

30 The Sterling Area 1945–1972 . . . . . . . . . . . . . . . . . . . . . . . . . . 771

. . . Catherine Schenk

31 Currency Blocs: The Yen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 791

Michael Schiltz

32 European Monetary Integration . . . . . . . . . . . . . . . . . . . . . . . . . 809

. . Emmanuel Mourlon-Druol

Part IX Central Banking and Monetary Policy ................ 833

 33 The Historical Evolution of Central Banking . . . . . . . . . . . . . . . . 835
. Stefano Ugolini

34 The Evolution of Monetary Policy (Goals and Targets) in

Western Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857

.......

Duncan J. Needham

35 The Evolution of US Monetary Policy . . . . . . . . . . . . . . . . . . . 883

. . . Robert L. Hetzel

36 The Historical Evolution of Monetary Policy (Goals and

Instruments) in Japan: From the Central Bank of an Emerging

Economy to the Central Bank of a Mature Economy . . . . . 923

.....

Masato Shizume

Contents

37 The Historical Evolution of Monetary Policy in Latin America .

. . 953

Esteban Pérez Caldentey and Matías Vernengo

Part X Aggregate Price Shocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 981

38 Bullionism ..........................................
. . 983

Joshua R. Hendrickson

39 Money in Wars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
995

Kenneth Mouré

40 The Anatomy of Inflation: An Economic History Perspective .

. . . 1021

Pierre L. Siklos and Martin T. Bohl

 41 Deflations in History ....................................
1047

Richard C. K. Burdekin

Index ....................................................
1071

About the Editors

Stefano Battilossi is Associate Professor of

Economic History in the Department of Social
Sciences,

Universidad Carlos III de Madrid. His research

interests include international banking, financial
regulation, macroeconomic policies, and stock
markets in historical perspective, with a special
focus on Western Europe in the nineteenth and
twentieth centuries. He has published articles in
The Economic History Review, the European
Review of Economic History, and Cliometrica and contributed chapters to
The Cambridge Economic History of Modern Europe (Cambridge
University Press, 2010, with James Foreman-Peck), The Oxford Handbook
of the Italian Economy Since Unification (Oxford University Press, 2013),
and The Oxford Handbook of Banking and Financial History (Oxford
University Press, 2016). He has edited European Banks and the American
Challenge: Competition and Cooperation in International Banking Under
Bretton Woods (Oxford University Press, 2002, with Youssef Cassis), and
State and Financial Systems in Europe and the USA: Historical
Perspectives on Regulation and Supervision in the Nineteenth and
Twentieth Centuries (Ashgate, 2010, with Jaime Reis). He has been an
editor of the Financial History Review (Cambridge Journals) since 2010.
He served as a member of the Board of Trustees of the European
Historical Economics Society (2006–2014) and sits in the Academic
Advisory Council of the European Association for Banking and Financial
History (EBHA) (Frankfurt a.M.).

xi
About the Editors

Youssef Cassis is Professor Emeritus of Economic

History at the European University Institute,
Florence. His work mainly focuses on banking
and financial history, as well as business history
more generally. His most recent publications
include Capitals of Capital: A History of
International Financial Centres, 1780–2005
(Cambridge University Press, 2006, 2nd revised
edition, 2009), Crises and Opportunities: The
Shaping of Modern Finance (Oxford University
Press, 2011), and Private Banking in Europe: Rise, Retreat, and
Resurgence (Oxford University Press, 2015, with Philip Cottrell). He has
also recently co-edited The Oxford Handbook of Banking and Financial
History (Oxford University Press, 2016, with Richard Grossman and
Catherine Schenk), International Financial Centres After the Global
Financial Crisis and Brexit (Oxford University Press, 2018, with Dariusz
Wojcik), and Financial Elites and European Banking: Historical
Perspectives (Oxford University Press, 2018, with Giuseppe Telesca). He
was the co-founder/editor, in 1994, of Financial History Review
(Cambridge University Press). He was a long-serving member of the
Academic Advisory Council of the European Association for Banking and
Financial History (EBHA) and past President (2005–2007) of the European
Business History

Association.

Kazuhiko Yago is Professor of Economic History

at the School of Commerce, Waseda University,
Tokyo. He obtained a docteur en histoire de
l’Université Paris X-Nanterre in 1996. His recent
publications include “A Crisis Manager for the
International Monetary and Financial System?
The Rise and Fall of the OECD Working Party 3,
1961–1980” in The OECD and the International
Political Economy Since 1948 (Palgrave, 2017;
Matthieu Leimgruber and Matthias Schmelzer, eds.); as an editor, with
Hubert Bonin and Nuno Valério, of Asian Imperial Banking History (Taylor
and Francis, 2015); and as the author of The Financial History of the Bank
for International Settlements (Routledge, 2012).

Contributors

Olivier Accominotti London School of Economics and Political Science,

London,

UK

Centre for Economic Policy Research, London, UK

Massimo Amato Department of Social and Political Sciences, Università

Bocconi, Milan, Italy

Stefano Battilossi Department of Social Sciences, Universidad Carlos III de

Madrid, Madrid, Spain

Martin T. Bohl School of Business and Economics, University of Münster,

Münster, Germany

Richard C. K. Burdekin Robert Day School of Economics and Finance,

Claremont McKenna College, Claremont, CA, USA

Georges Depeyrot Centre National de la Recherche Scientifiquen, École

Normale Supérieure, Cahors, France

Barry Eichengreen George C. Pardee and Helen N. Pardee Professor of

Economics and Political Science, University of California, Berkeley,
Berkeley, CA, USA

Colin P. Elliott Department of History, Indiana University, Bloomington,

IN, USA

Michael Ellman Faculty of Economics and Business, University of

Amsterdam, Amsterdam, The Netherlands

Cambridge Journal of Economics, Cambridge, UK

Luca Fantacci Department of Social and Political Sciences, Università

Bocconi, Milan, Italy

David Fox University of Edinburgh, Edinburgh, Scotland, UK

Atish Ghosh International Monetary Fund, Washington, DC, USA

Farley Grubb Alfred Lerner College of Business and Economics, University

of Delaware and NBER, Newark, DE, USA

Anne-Marie Gulde International Monetary Fund, Washington, DC, USA

xiii

Contributors

Joshua R. Hendrickson Department of Economics, University of

Mississippi, Oxford, MS, USA

Robert L. Hetzel Federal Reserve Bank of Richmond, Richmond, VA, USA

Niv Horesh Durham University, Durham, UK

Western Sydney University, Sydney, NSW, Australia

Michael Hudson University of Missouri-Kansas City, Kansas City, MO, USA

Levy Economics Institute of Bard College, New York, NY, USA

Institute for Long-term Economic Trends, Peking University, Beijing, China

Alejandra Irigoin Economic History, London School of Economics and

Political Sciences, London, UK

John A. James University of Virginia, Charlottesville, VA, USA

Matthew Jaremski Colgate University, New York, NY, USA

National Bureau of Economic Research (NBER), Cambridge, MA, USA

Yohei Kakinuma Teikyo University, Tokyo, Japan

Seung Woo Kim Graduate Institute of International and Development

Studies, Geneva, Switzerland

Meir Kohn Department of Economics, Dartmouth College, Hanover, NH,

USA

Peter Kugler University of Basel, Basel, Switzerland

Bill Maurer Department of Anthropology, School of Social Sciences,

University of California, Irvine, Irvine, CA, USA
Kenneth Mouré History and Classics, University of Alberta, Edmonton, AB,
Canada

Emmanuel Mourlon-Druol Adam Smith Business School, University of

Glasgow,

Glasgow, UK

Duncan J. Needham University of Cambridge, Cambridge, UK

Pilar Nogues-Marco University of Geneva and CEPR, Geneva, Switzerland

Lawrence H. Officer Department of Economics, College of Liberal Arts and

Sciences, University of Illinois at Chicago, Chicago, IL, USA

Anders Ögren Department of Economic History, Lund University School of

Economics and Management, Lund, Sweden

Robert L. Hetzel has retired.

John A. James: deceased.

Contributors xv

Nuno Palma Department of Economics, School of Social Sciences, University of Manchester,

Manchester, UK

Instituto de Ciências Sociais, Universidade de Lisboa, Lisboa, Portugal

CEPR, London, UK

Esteban Pérez Caldentey Economic Commission for Latin America and the Caribbean ECLAC,
Santiago, Chile

Catherine Schenk Faculty of History, University of Oxford, Oxford, UK

Michael Schiltz Department of International History, Graduate Institute, Geneva, Geneva,

Switzerland

George Selgin Center for Monetary and Financial Alternatives, The Cato Institute, Washington, DC,
USA

Masato Shizume Waseda University, Tokyo, Japan

Pierre L. Siklos Wilfrid Laurier University and Balsillie School of International Affairs, Waterloo, ON,
Canada

Tobias Straumann University of Zurich, Zürich, Switzerland

Hisashi Takagi Faculty of Letters, Yasuda Women’s University, Hiroshima, Japan

Stefano Ugolini Sciences Po Toulouse and LEREPS, University of Toulouse, Toulouse, France

François R. Velde Federal Reserve Bank of Chicago, Chicago, IL, USA

Matías Vernengo Bucknell University, Lewisburg, PA, USA

Oliver Volckart Economic History Department, London School of Economics and Political Science,
London, UK

David F. Weiman Barnard College-Columbia University, New York, NY, USA

Holger Wolf School of Foreign Service, Georgetown University, Washington, DC,

USA

Kazuhiko Yago School of Commerce, Waseda University, Tokyo, Japan