"Crisis Chronicles: 300 Years of Financial Crises (1620–1920)"

From the Federal Reserve Bank of New York:

As momentous as financial crises have been in the past century, we sometimes forget that major financial crises have occurred for centuries—and often. This new series chronicles mostly forgotten financial crises over the 300 years—from 1620 to 1920—just prior to the Great Depression. Today, we journey back to the 1620s and take a fresh look at an economic crisis caused by the rapid debasement of coin in the states that made up the Holy Roman Empire.

The Kipper und Wipperzeit (1619–23)
The Kipper und Wipperzeit is the common name for the economic crisis caused by the rapid debasement of subsidiary, or small-denomination, coin by Holy Roman Empire states in their efforts to finance the Thirty Years’ War (1618–48). In a 1991 article, Charles Kindleberger—author of the earlier work Manias, Panics and Crashes and originally a Fed economist—offered a fascinating account of the causes and consequences of the 1619–23 crisis. Kipper refers to coin clipping and Wipperzeit refers to a see-saw (an allusion to the counterbalance scales used to weigh species coin). Despite the clever name, two forms of debasement actually fueled the crisis. One involved reducing the value of silver coins by clipping shavings from them; the other involved melting the coins, mixing them with inferior metals, re-minting them, and returning them to circulation. As the crisis evolved, an early example of Gresham’s Law took hold as bad money drove out good. As Vilar notes in A History of Gold and Money, once “agriculture laid down the plow” at the peak of the crisis and farmers turned to coin clipping as a livelihood, devaluation, hyperinflation, early forms of currency wars, and crude capital controls were either firmly in place or not far behind.





From Self-Sufficiency to Money and Markets
The period preceding and including the early 1600s was marked by a fundamental shift from feudalism to capitalism, from medieval to modern times, and from an economy driven by self-sufficiency to one driven by markets and money. It is within this social and economic context that various states in the Holy Roman Empire attempted to finance the Thirty Years’ War by creating new mints and debasing subsidiary coins, leaving large-denomination gold and silver coins substantially unaffected....MORE

HT: Counterparties