The Power of Gold: The History of an Obsession
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When Richard I-Richard the Lion-Hearted-was captured by Leopold, duke of Austria, in 1192 on his way back from the Crusades, and subsequently "sold" to the Holy Roman Emperor, the ransom of 150,000 marks (the equivalent ofL100,000) levied on the English people was transferred from England to the continent in the form of silver pennies. This was a pile of small change that would warrant a place in the Guinness Book of Records: £100,000 added up to 24 million pennies, enough money to employ over forty thousand skilled carpenters for a year.*13 It is remarkable that the English were willing to make such a heavy sacrifice at such an early stage of national awareness and for a king who spent so little time in England during his reign.
It is also difficult to imagine the sheer mechanics of transferring 24 million pennies. When, in 1529, Francis I of France paid over 1.2 million escudos to Charles V of Spain to ransom his two sons, the process of counting and testing the coins took four months, during which time the Spaniards rejected forty thousand coins as below standard.14 In a later time, 1662, one hundred chests were required to handle the physical transfer of five hundred thousand large-denomination French coins!"
Gold coins were so valuable in the Middle Ages that they did not circulate much among the common people.t For the most part, gold coins were used in transactions by merchants and traders involved in foreign trade, by tax collectors, by the retinue of the monarch himself, and, as we have already seen, by monarchs as a means of buying off enemies and ransoming friends and family members. All these people exercised great caution to avoid accepting gold coins whose weight or composition was below required levels of purity, thereby rendering a public service for everyone else.
A favorite method of testing quality was the touchstone, which functioned in these times in precisely the same way as it had functioned more than fifteen hundred years earlier under the Lydian kings in Asia Minora stone rubbed by gold objects and then compared against a set of needles containing varying proportions of gold and silver, gold and copper, and all three metals. Many merchants kept touchstones for this kind of roughand-ready test. In cases of controversy, coins were taken to goldsmiths, who were skilled at the use of touchstones and their companion touchneedles; for over seven hundred years, the Goldsmiths Company of London has been the official arbiter of the purity of the British coinage. 16
The most important and reliable tests of purity were held at the Trials of the Pyx, in which a public jury of "twelve discreet and lawful citizens of London with twelve skillful Goldsmiths" presided over public examinations of coins freshly or recently issued by the Royal Mint. This ceremonial procedure probably began under the reign of Edward I in 1282; on the occasion of its seven hundredth anniversary in 1982, the trial was attended by Queen Elizabeth II and the Chancellor of the Exchequer.
Pyx derives from the Greek word for "box" and refers to the container in which the officials stored the coins selected for testing at the trial. These coins were chosen on some kind of random basis from the output of the mint-a practice still in use today in factories that check their output for uniform quality-after which they were meticulously compared with a special trial plate of the king's gold that was stored in a treasury room called the Chapel of the Pyx in Westminster Abbey. Some coins were melted down in an additional test of the purity of the gold.'"
These uniquely English Trials of the Pyx were serious affairs. The trials served a real purpose, because the goldsmiths and their jurymen had no conflicts of interest, performing their task in the open before the public, not in secret, for no reason except to assure the integrity of the currency. Today, we would refer to this as transparency. The whole process discouraged the monarch from debasement and encouraged people all over Europe to accept and execute transactions with English coinage.
The Trials of the Pyx are not the only evidence of the English intolerance for low-quality coins. Punishments were swift and unpleasant for moneyers and other employees of the mints who crafted poor coins or who were suspected of activities in the mints for their own benefit.
In 1124, with public confidence in English money having been destroyed by deterioration of the coinage, Henry I called before him all the mint-masters in the kingdom, about two hundred men, and punished almost half of them by chopping off their right hand. This was a punishment that fitted a crime for which higher authorities had the ultimate responsibility. As Glyn Davies, a distinguished British economist and historian, observes, "At least they were spared the stiffer penalties of being blinded or castrated or both, which were occasionally administered."'s Similar types of punishment were by no means unusual until well into the seventeenth century. Moneyers seem to have been an unruly lot for most of history. Gibbon's The History of the Decline and Fall of the Roman Empire reports that Emperor Aurelian, about AD 175, complained that the workmen at the mint "adulterated the coin" and then rose in rebellion, requiring the emperor to recall seven thousand soldiers from Dacia before the uprising could be suppressed.19
This English tradition of "sound" currency stood in sharp contrast with the irregularity of continental currencies. The resistance to going off gold that haunted the British from 1925 to 1931 had deep roots. In 1344, for example, when the weight of the English penny had been almost unchanged for two hundred years, Edward III attempted to finance the great war against France with a small reduction in weight and followed with a deeper cut in 1351. The Statute of Purveyors enacted by Parliament in 1352 "expressed the hope that the king would no more tamper with the coinage than with the standards of weights and measures. 11211
Contrary to popular myths about the eagerness of the state to debase the currency whenever possible, the monarch had a strong vested interest in maintaining the purity of the coinage when coins were almost the sole medium for effecting transactions and for paying taxes and debts. Good coins with royal authentication stamped on them tended to exchange at a significant premium over their intrinsic value as metal, because they were so much more convenient than any other means of payment. This difference provided a source of profit, known as seignorage, to the kings who maintained a monopoly on the process of minting coins; anyone else engaging in that activity would live to regret it. The monarch's eagerness to earn seignorage in the Middle Ages explains why wholesale recalls of outstanding coins occurred in many countries in three- to five-year intervals, to be replaced with new coins of different design. The process was often a welcome one, as old coins constantly deteriorated from handling or were clipped by those who hoped to sell the odd pieces in the black market for money.
Offa's pennies and the Trials of the Pyx reflect the growing importance of money and commerce as Europe emerged from the darkest days of the Dark Ages. Significant as these developments may have been, they were just a beginning in which gold played only a minor role. Far more exciting developments lay just ahead. Gold was about to combine with growing economic and financial sophistication to rival political and military power in shaping the course of events around the world.
he coming of the year 1000 was cause for great celebrations throughout the Christian world, and not just because of the arrival of the millennium. For some five hundred years, barbarians beyond the eastern and the northern borders of the old Roman Empire had repeatedly carried out violent raids on a helpless local population. In time, however, raiding lost its novelty and the former barbarians transformed themselves from outside predators into part of the scene. Like the industrious Lombards of northern Italy, they settled down, married, and raised families. Warfare of one kind or another within Europe continued through the ages, but at least the terrifying toll of the barbarian invasions ultimately came to an end. The Normans who invaded England in 1066 were far more civilized than their rough ancestors, the Norsemen, who had earlier descended into France from Scandinavia.
These developments set the scene for major advances in the uses of gold, especially in the promotion of trade, commerce, and finance. In the process, gold would become the preeminent tool in the management of economic power. Gold's strateg
ic role became so dominant over time that the struggle to obtain adequate sources of it would motivate monarchs and nations to great deeds and tragic treachery in the years ahead.
The proliferation of great cathedrals built throughout Europe during the first three hundred years after the celebration of 1000 is dramatic evidence of how life was brightening up in Europe. Between 1100 and 1200 alone, France built more than eighty cathedrals, including Notre Dame and Chartres, to say nothing of five hundred abbeys and ten thousand parish churches. Durham, Canterbury, and Ely rose in England; Spain built Burgos, Toledo, and Santiago de Compostela; in Italy and Sicily, cathedrals were completed in Venice, Florence, Siena, and Palermo. The universities of Paris, Oxford, Bologna, and Salerno were founded. Some of literature's most famous works appeared, including The Cid, the Nibenlungenlied, the Chansons de Geste, and the legend of King Arthur. And great kings governed-men such as Henry II in England, Frederick Barbarossa in the Holy Roman Empire, and Philip Augustus in France.' The most popular role models were knights skilled in the arts of chivalry, and Saint Louis, who was known for his passionate religious and moral leadership.
The increase in population was the most important development. It was not just that fewer people were being killed. In a more peaceful environment, larger numbers of babies were born and survived. In Paris, for example, the population expanded from a little town clustered on the Ile Saint Louis in 1100 into a full-fledged city of some fifty thousand people by 1215.2 Higher rates of population growth do not have to mean falling standards of living. In the twelfth century, larger populations made greater specialization possible, permitted more people to spend time in study, the arts, and research, and stimulated all the networking benefits that cities with a diversified population create.'
The optimism and vitality of this period culminated in the Crusades, the great adventure of the Middle Ages. From 1095 to around 1450, waves of Europeans-often women as well as men, and, in one instance, children-walked or sailed to Constantinople and to Asia Minor, professing to regain the Holy Land for Christendom. These expeditions were on occasion a powerful positive expression of faith, but more often they were an escape from the tedium of small-town or rural existence, inspired by dreams of glory and even more vivid dreams of riches and treasures to be captured and carried back home.
During the 1300s, massacring infidels became a much less compelling objective as trade, commerce, and the interchange of intellectual ideas with the Arabs flourished, along with a flood of medical, scientific, mathematical, and philosophical innovations-including the windmill and the compass-provided by the Arabs. In addition, Arab shipping and transportation routes opened up access to the silks and damasks, spices and lemons, and finely woven tapestries of the countries to the east. Princes and churchmen whose predecessors had been content with bare walls and floors covered with filthy rushes now insisted on having palaces with gilded vaults, with such furnishings as curtains, cushions, embroideries, and floors covered with oriental carpets.4 Not everything learned from the Arabs had been developed by the Arabs themselves, but the Arabs had accumulated and put to good use a substantial pool of knowledge from the Indians and the Chinese. It was this set of influences that provoked Marco Polo to take off in 1271 on his famous quest in that direction.
The Crusades imposed massive financial requirements on an unsophisticated financial structure. Quite aside from the costs of supplies and equipment, soldiers had to be fed, clothed, housed, and paid in coin acceptable in the occupied territories, where gold was the basis of all the currencies and where the armies consisted less of men motivated by religious zeal and knightly chivalry and more of adventurers and mercenaries. In addition, ransoms payable in gold were often demanded for captured prisoners. Ships that traveled full of soldiers and supplies in an eastward direction were willing to take on freight at very low rates for the trip back to Europe, rather than traveling empty, and this pattern encouraged large-scale importations of the attractive merchandise of Arabia, which in turn required payments, most often in gold.
Much of the gold used by the crusaders came from the Holy Land itself, which relieved the need to import gold from Europe. Professor Andrew Watson, in a 1967 paper for the Economic History Society, lists a wide variety of local sources, such as "subsidies paid by the Emperor of Constantinople to the Franks; tribute exacted from Arab potentates who bought off the Christians ... booty, such as the twenty golden lamps weighing 20,000 mithgals, removed by Tancred from the temple of Jerusalem ... taxes raised in conquered areas where the basis of the currency had long been gold." Watson asserts that these sums were "truly enormous, though they were often quickly spent." In 1191, for example, the Teinplars bought the island of Cyprus for one hundred thousand golden bezants and then sold it at the same price to Guy de Lusignan. Raymond of Tripoli was ransomed at a cost of 150,000 bezants and the entire army of Saint Louis was redeemed from captivity for the sum of eight hundred thousand dinars.'
The Christian governments in the Levant were striking gold coins as early as 1124, using captured dies so that the money looked just like the local coinage, including the usual Arabic inscriptions praising Mohammed. The Christians continued to produce such coins for another 125 years, although in time a growing proportion of the coins was counterfeit, usually base metal such as copper plated with gold.
In 1250, Pope Innocent IV, scandalized less by the counterfeiting than by Christian mints issuing coins that honored the enemy, finally took action by excommunicating all those involved.6 Such drastic action was essential, because the Christian princes, more businesslike than spiritually inclined, had insisted on continuing to issue coins that had ready acceptance by the Muslims. In response to the pope's demands, the princes took the modest step of stamping Christian sayings while retaining the Arabic script.
Innocent appears to have been an appropriate name for this pope. One can only wonder why the Vatican was so slow on the uptake-or whether it had chosen to look the other way. Indeed, the identical sequence of events had occurred in Spain during the eleventh and twelfth centuries, and, in both gold and silver, throughout Europe.'
Innocent's effort was insufficient to satisfy Saint Louis, who was in the Holy Land on a crusade and added his authority to the pope's. An entire new coin appeared, the Agnus Dei (Lamb of God), which reflected both Louis's religious humility and his French pride: Christus vincit, Christus regnat, Christus imperat (Christ conquers, Christ reigns, Christ commands), the ritual acclamation of the French kings.'
We now move westward across the Mediterranean to the Kingdom of Sicily, which was ruled from 1211 to 1250 by the Holy Roman Emperor Frederick II, grandson of the great Frederick Barbarossa and one of the towering figures of the Middle Ages. Frederick was an enthusiastic producer of gold coins that he employed to project his economic power.
Frederick was born in Sicily in 1194, the same year his father had been crowned king of Sicily. Although a hypochondriac,9 Frederick was a valiant crusader, established an expert bureaucracy, opened Sicily to free trade, surrounded himself with the greatest intellectuals of the age, levied heavy taxes on the clergy and prohibited them from holding civil office, built handsome castles throughout Sicily, and founded a university at Palermo to train public servants-the first European university with a royal charter. Not incidentally, he also left his mark on the gold currency of his time.
Frederick did an extraordinary amount of traveling and was almost constantly at war with the papacy. He launched the Sixth Crusade in 1227, returned to Sicily to do battle with Pope Gregory IX-who excommunicated him-and then went once more to the Holy Land, where he reclaimed Jerusalem for the Christian forces. Jerusalem fell to Muslim mercenaries later on, and despite another two hundred years of crusading, was never again in Christian hands until the British General Allenby captured it in 1917. After declaring himself king of Jerusalem, Frederick traveled back to Sicily to defend his lands against another papal attack and survived a second excommunication (as a heretic, rake, and anti-Christ).<
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When, to Frederick's relief, Gregory gave up the ghost in 1241, the new pope was Sinobaldo Fiesco, who adopted the title of Innocent IV. This was the Innocent (innocent?) who had so belatedly prohibited the Christians in the Holy Land from issuing coins with Arab inscriptions praising Mohammed. Frederick had expected this pope to be a friend, but that may have been innocent on his part, because Fiesco came from Genoa, Sicily's mortal enemy and determined competitor for economic dominance. Frederick and Innocent were soon involved in a vicious war with each other that included an assassination attempt on Frederick and the capture of his son, who spent the last 23 years of his life in prison. Frederick suffered a final defeat at Parma in 1248 and died suddenly two years later. Frederick's son-in-law was reduced to pawning the Sicilian throne to some enterprising Genoese businessmen in return for gold.
At the time of Frederick's death, Sicily was operating with two concurrent gold standards. One was the tan', which had Arabic roots and had been in use since the ninth century. Although the tan'had gone through some debasement over the years, from the early twelfth century onward it was stabilized at 16%3 carats of gold. This was better than the purity of the Byzantine solidus at that time and established it as one of the most stable in Europe. The coins were stamped out in a variety of sizes and tended to circulate on the basis of their weight rather than their face value. The tan' enjoyed such wide circulation that it became a kind of unit of account by which many items were priced.
Frederick II considered the tari unimpressive and too irregular for the homeland of a Holy Roman Emperor of his exalted status. After a military victory against the Tunisians in 1231, he was assured of a substantial annual tribute in both gold coin and gold dust from the West African gold sources. Now Frederick's imperial mints began to strike a new gold coin called the augustalis. Robert Sabatino Lopez describes the augustalis, with its classical eagle imprinted on one side and the emperor's laureate head on the other, as "a startling advertising medium" and a dramatic contrast to the formless tari.i° The augustalis was minted in 20%2 carats and weighed 5.28 grams, which gave it greater value than the Arab dinar. This impressive coin soon eclipsed the taxi and was in strong demand throughout western Europe and the Near East.