The Great Bullion Famine: When Europe’s money ran out

In an age of quantitative easing and creeping inflation, it seems hard to imagine a time when money simply ran out. Since the advent of paper money governments have been in the habit of turning on the presses when liquidity runs low, but 650 years ago that wasn’t an option and when the silver ran out, so did the money.

From around 1380 to around 1420 Europe was hit by an event now commonly referred to as the Great Bullion Famine. The mines that supplied the continent’s silver began to run out, meaning the myriad different currencies, widely accepted because they were all silver, hit big availability problems, severely stifling trade and prosperity for over a generation.

“It was the coinage in mass use,” says professor Jim Bolton, research fellow at Queen Mary University. “Silver is quite a soft metal so if you can’t replace or put new silver coins into circulation the old ones become worn and their value decreases. It severely harmed the economy because it made it difficult for the general population to buy things, gold was too valuable to buy bunches of carrots or sides of meat.”

Just a few decades before there had been so much silver around it had caused inflation, says Bolton. However by the end of the 14th century the mines in Bohemia, specifically those at Kuttenberg/Kutná Hora, now in the Czech republic, began to cease production. The knock-on effects were felt all around Europe. “By the early fifteenth century, England is lucky to have as much silver as we do, because there was about a tenth of the amount there had been a hundred years previously,” says Professor Peter Spufford of Cambridge University and author of Money and its use in Medieval Europe.

The Mining town of Kutna Hora

It’s hard to underestimate the impacts of the famine, which were remarkably varied says Spufford. The chief effect was that business slowed down: “Everything shrinks. When there’s a shortage of coin, there’s a shortage of credit. The possibility of doing things vanishes — you would expect credit to increase but in fact it diminishes because people aren’t prepared to loan money if they are not certain they are going to be paid in the long run. You have a bit of a return to barter and people not being able to sell things as trade diminishes.”

There are surprisingly detailed accounts: Spufford describes the trip of a West Country merchant to Spain who stocks up on wine but can’t shift his woollen wares. Elsewhere deficits were exploited: Jacques Coeur, a French merchant, was profiteering, making money from shipping bullion between the south coast of France and North Africa.

Bolton is not quite as pessimistic about this period, saying the shortage allowed for people to be creative in finding solutions. “I think that what happens in Europe at this particular time is a whole series of finding ways around the shortage of money. Although Peter and others would make the argument for depression at this time, I, and one or two others, are not convinced because we believe it was possible to find ways of creating fictional money.  What’s often called ‘ghost money’ — ledger money, paper money, book money – could be used to offset the shortage of silver and this was done on quite a wide scale; the leading experts being the Italian bankers.”

There are other notable impacts — Venice, Europe’s commercial capital, was able to largely mitigate the lack of silver by conquering new lands and working mines in the Balkan peninsula. Copper became more important and was traded and coined where silver was scarce, meaning Antwerp usurped Venice as the biggest copper trading city. The premium on mining equipment saw the advent of the 24 horse power pump to allow mining below the water table as well as the publication of Georgius Agricola’s (real name Georg Bauer) De Re Metallica; A book that became the definitive volume on mining for the next two centuries — curiously only translated into English in 1912, by none other than future US president Herbert Hoover.

Although the discovery of more silver seams in the 1420s helped alleviate the crisis, further solutions were found in expanding the use of gold. Seen as inherently more valuable, it was traditionally the currency of princes and dukes, used in war chests, in diplomacy, and in international trade. This couldn’t compensate entirely says Bolton, but there are now increasingly important arguments that small gold coins were able to keep currencies liquid. “There’ll be an English noble which is worth six shillings and eight pence, then there’ll be a half noble which is worth three and fourpence and then there is a quarter noble. There were other options but they involved debased currency via ‘white money’: poor silver, or ‘black money’: copper; used to prevent a monetised economy from falling back into barter.”

Silver ducets from the Republic of Venice, showing Antonio Venier, Doge of Venice (1382-1400).

So what was the legacy of these events? “Probably the development of accounting practices and paper money so that you can exceed the money supply in terms of gold,” says Bolton. Arguably those practices helped finance economic expansion and the growth of the middle classes as funds became more liquid and available. Conversely though, a departure from the quantitative coin informs Spufford’s opinion that declines in currency values, such as the recent drop in the pound following the Brexit vote, are based on perception and what people think of the situation rather than any economic reserve or value. “We do have a sort of financial base in the forms of foreign currency, but that in itself is relative. There is [also] gold in the Bank of England but it’s limited quantities and isn’t directly related to our currency. There is so many dollars here, so many euros here, so many yen here; that is part of the wealth of the country, but it’s very amorphous because it’s just what people believe.”

Belief in the inherent value of gold and silver saw rulers and their mints continue to seek out precious metals as the famine eased, in order to keep up liquidity. In 1422 Venice minted a record 1.2 million gold ducats, while 1441 saw the first shipment of gold reach Europe from the West African coast. In 1492, Columbus discovered America on a voyage in which he mentioned “gold” 65 times in his log. Such ventures, like the Great Bullion Famine, show the need for value and liquidity was as acute historically, as it is today.