Deep monetisation: The case of the Netherlands 1200-1940

Abstract

Overall monetisation levels may diverge substantially from the daily use of small currencies by common people (recently termed 'deep monetisation'). In order to compare levels of 'deep monetisation' over a long period this article proposes the following formal definition: a substantial stock of currencies per capita in circulation, consisting of denominations equalling the value of one hour or less of waged work. Deep monetisation according to this definition has been reconstructed for one country here: the Netherlands 1200-1940. In this case deep monetisation has been demonstrated to have prevailed from at least the early sixteenth century. A per capita stock equal to between five and ten times the prevailing hourly wage was attained most of the time between 1550 and 1940. This level is therefore proposed here as a second element of the definition of deep monetisation, indicating what a 'substantial' level was. However, significant fluctuations are visible between the chronological cross sections. Especially between 1650 and 1700 and between 1750 and 1800, the official supply of small change lagged. This was caused not by technical but by institutional failure. As demand seems not to have declined, two solutions provided the answer: the de facto acceptance of unofficial currencies, and - it is suggested - the extension of small credit.