Kipper and Wipperzeit II
In the early 16th century money became increasingly more important, mainly because it was during this period that capitalism began its steady rise. Money has become increasingly important from medieval times to modern times. In economic terms it means coming from a mainly self-driven economy to one driven by markets and of course money.
Money gained importance, a fact that can also be seen in the way the dilution of silver coins worked. Instead of diluting more of its own silver coins, city states tried to spend the diluted coins in areas far away from them. In this way they could also harm other economies, which can be considered an act of war in itself.
In this way the crises spread from Germany to Austria, Hungary, Bohemia and Poland. The debasement of money became so extreme that at the end of the crises, children were playing with the worthless coins. Leo Tolstoy used this as the basis of his story “Ivan the foul”. So money must be seen as a product, just like every other product.
Money’s main functions are:
- it serves as a medium of exchange,
- as a store of value, and
- as a unit of account.
During the end of the “Kipper and Wipperzeit”, many people suffered from a loss in confidence in their money. Additionally many people stopped doing their normal work, as shaving silver off existing coins was more lucrative. First, this even created an economic boom as people felt wealthier. But finally, they became the victim of their own debasement as the economy collapsed. The states were among those who suffered as taxes could hardly be collected with real money. Also, soldiers refused to go to war once they realized that they were being paid with worthless coins.
Trying to create a new minting standard failed as there was no central authority which was strong enough to implement the standard. Finally, it was possible to negotiate a treaty that agreed to the return to the Augsburg Ordinance of 1559. According to this decree, minting had to be carried out by a selected group of princes maintaining a limited number of mints. So in a way this was a standard set out for minting.
But history repeats itself, the “Kipper and Wipperzeit” crises was not the last in our history. In 1696 the Great Re-Coinage, in 1720 the Mississippi Bubble, in 1779 the Continental Currency Crises and in 1763 the Dutch Commodities Crash happened, just to name a few.