300 Years of Financial Crises

At Liberty Street Economics, James Narron and David Skeie of the New York Fed begin a series of posts with Crisis Chronicles: 300 Years of Financial Crises (1620–1920). In the first post they describe the Kipper und Wipperzeit (1619–23). Here's the setting for that crisis:

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.

...debasing subsidiary coins, leaving large-denomination gold and silver coins substantially unaffected.

When last we visited Liberty Street Economics it was to consider the two economies in ancient Rome: Run-of-the-mill banking was regulated; aristocratic finance was not.

Centuries later, in the "Kipper" crisis, again we see two economies. This time, it's the run-of-the-mill coin that is being debased; the aristocratic, large-denomination coin is not.

The run-of-the-mill coin, by the way, is "medium of exchange". The aristocratic coin is "medium of account".

I'm tempted to say again, "Some things never change." But that's not quite right. Things do change. But things recur. The division of the economy into two economies comes and goes; it recurs. It is a limiting point, or an indication that a limiting point is near.

Toynbee wrote of "challenge and response". The recurring division into two economies is a challenge in the Toynbee sense of the word. The response determines whether the society survives and again prospers, or whether society dies by suicide.