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License to Print Money – How Inflation Led to Disaster 400 Years Ago
05 September 2012
Prizewinning new book by Tübingen historian describes economic chaos caused by financing of the 30 Years War
Irrational exuberance in the markets can bring a society to its knees – and the 2008 subprime mortgage crisis was no exception. 21st century banks were not the first to make money too freely available – with disastrous results. 400 years ago, the Holy Roman Emperor Ferdinand II, needing cash, permitted a consortium of financiers to flood the marketplace with money – ultimately starving his people and bankrupting the state. A new book by University of Tübingen History PhD candidate Steffen Leins tells this fascinating story.
1620: Ferdinand II had just defeated the Bohemian nobles at the Battle of White Mountain. But the conflict had spread, and he knew he would need money to fight other Protestant forces in what was to become the Thirty Years War (1618–1648). To this end, he granted a license to mint coins in several parts of the Empire to the Prague Coin Consortium. Little did he realize that he would drive his country to economic ruin.
Silver was to be alloyed with cheap copper to pay mercenary soldiers. The currency was manipulated by two of the most remarkable bankers of the day – Jacob Bassevi and Hans de Witte. From their base in Prague, they sent their traders out across Europe to buy silver from anyone who had it, paying for the precious metal with new alloy coins. More than one hundred tons of silver were thus collected, smelted with copper, and minted into currency in Bohemian, Moravian and Lower Austrian mints.
The consortium apparently provided the equivalent of several state budgets – inflation money. Bassevi and de Witte made huge profits, but were not able to keep them all. A Jew and a Calvinist, the two financiers were held in low esteem and needed the protection of influential Catholic nobles such as Wallenstein and Prince Liechtenstein, who governed defeated Bohemia for the Emperor.
After executing the Bohemian rebel leaders, Wallenstein and Prince Liechtenstein ordered the confiscation of the lands of the Bohemian nobility, buying the land cheaply themselves as inflation ran rife. The common people suffered as food prices skyrocketed and wages fell. The economy collapsed and famine spread. The Emperor was forced to declare the state bankrupt and devalue the currency – proving how dangerous it is to flood an economy with cash.
The Publication: Steffen Leins, Das Prager Münzkonsortium 1622/23. Ein Kapitalgeschäft im Dreißigjährigen Krieg am Rand der Katastrophe, Münster: Aschendorff Verlag 2012, 208 pages, €29, ISBN 978-3-402-12951-7.
Steffen Leins M. A. was born in 1983 and is currently writing his PhD thesis at the University of Tübingen. His monograph on the Prague Coin Consortium is based on his Master’s thesis, supervised by Prof. Dr. Anton Schinding and Prof. Dr. Matthias Asche of the University of Tübingen’s Institute of Modern History. The work has won three awards: the Wilhelm-Deist-Preis, the Hannelore-Otto-Preis, and the German Armed Forces’ Werner-Hahlweg-Förderpreis. It was sponsored by the German Research Foundation.
“An epitaph for good money” – a contemporary pamphlet shows the adulteration of silver with copper to mint coins. The curtain in the background makes reference to the tactics – and financing – of warfare. Source: Johann Scheible (ed.), Die fliegenden Blätter des XVI. und XVII. Jahrhunderts in sogenan-nten Einblatt-Drucken, mit Kupferstichen und Holzschnitten zunächst aus dem Gebiete der politischen und religiösen Caricatur. Aus den Schätzen der Ulmer Stadtbibliothek wort- und bildgetreu, Stuttgart 1850, after p. 298