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Uses and Abuses of Gresham's Law
in the History of Money

by Robert Mundell
Nobel Prize for Economics, 1999

7. Richard's Ransom

About fifteen centuries later, in AD 1192, King Richard "Coeur-de-Lion," returning from the third Crusade, was shipwrecked on the Dalmatian Coast, taken prisoner by the Duke of Austria, and handed over to his liege-lord, Henry Hauhenstaufen, the German -- or Holy Roman -- Emperor. His ransom was 100,000 marks, or two-thirds that number of pounds. The sum was almost exactly that which Richard had inherited on the death of his father, Henry (Plantagenet) II, in 1189. Richard had exhausted this legacy and much more in financing his expedition to the Holy Land. The ransom was about the same as one year's government revenue from England and Normandy. How did Richard's mother, Eleanor of Aquitaine, go about raising the money for the ransom?

Queen Eleanor might have contemplated using the monetary system to collect the ransom, collecting the current silver coins (which qualified as ransom money) with overvalued billon coins. The latter would have served perfectly well as a medium of exchange and the capital levy and punitive taxes could have been avoided, all parties being made better off. At the time of Richard, the English monetary system was composed of gold coins issued by the Basileus (God-Emperor) at Constantinople, called bezants or byzants, solidi, nomisma or aurei; a silver coinage of pennies, exactly one-twelfth the value of the Byzantine sicilicus; and a base coinage of local circulation, issued by the nobles and ecclesiastics. The system of accounting, which, through the Carolingian and Roman system, goes back to ancient Persia,(35) was 1 pound sterling = 20 shillings = 240 pence = 960 farthings = 5760 mites.(36)

Would there have been enough gold or silver in Richard's empire to pay the ransom? We can try some guesses. In 1194, Richard's territories and fiefdoms comprised not just England, but Normandy, Aquitaine, Poitou, Brittany, Maine, Tourraine and Anjou. The population of this huge empire cannot have been less, or much less, than five million. If we assume that the per capita money supply was 1 shilling, the total sum of money in the empire would have been £250,000 sterling (375,000 marks). If the money supply was a fifth of GDP, the empire GDP would be £1,250,000, with per capita GDP of 5 shillings. The ransom would have been not much more than 5 percent of GDP and 27 percent of the empire's money supply. To be on the safe side, we should probably assume that not more than half the money supply was composed of gold and silver coins, and about half of this would have to be replaced or confiscated.

What was a shilling, or a pound, worth? We can start by considering its silver and gold content. At the time of King Richard (1189-1199) the Tower or Saxon pound was 240 pennies of 22.5 grains each, so the pound (in the sense of the sum of 240 pennies because no "pounds" were minted) weighed 5,400 grains. The silver pennies were 11/12 fine so each penny contained 20.625, and the pound, twelve times that or 4,950 grains of fine silver. Gold was twelve times more expensive than silver so a pound was equivalent to 408.3 grains or 26.5 grams of gold, a little less than an ounce. Richard's ransom was therefore the equivalent of about 67,000 ounces of gold (worth about $20,000,000 today).(37)

According to the preceding argument, Eleanor could have acquired the needed silver by replacing the high-valued silver and gold coins with light or billon coins having a face value of £67,000. The money supply would be unchanged but its composition would be drastically altered. Instead of £250,000 divided equally £125,000 of 'intrinsic' gold and silver coins and £125,000 of base coins, after the exchange it would be composed of only £58,000 of 'intrinsic' coins, £125,000 of base coins, and £67,000 of new "ransom" coins. Is there any evidence that Eleanor had recourse to this solution?

Unfortunately, the data are not clear. From the details of the collection process(38) it appears that the sums were contributed mainly in coin. A number of writers assert that the "plate was molten and made into money" and paid in "marks weight of Cologne," but there are reasons to doubt this conclusion.(39)

If the monetary resource was utilized, it was certainly not the only expedient since Eleanor certainly utilized the usual means of raising money:

"The levy was pressed in every quarter with no distinction between layman and clerk, burgher and rustic. . . The barons were taxed a fourth of a year's income, and lesser persons by a descending scale. The churches and abbeys measured up by weight their treasure "Accumulated since olden time," gold and silver vessels, candelabra, the very crosses on their altars. Reliquaries were shorn of their cabochons, basins scraped of their jewels. The Cistercians, those humble brethren of Saint Bernard, possessing no corruptible treasure of this world, sheared their flocks and gave a year's crop of wool. . . As the sluggish tithes flowed in, they were sealed with the queen's own seal and kept for safety in the cathedral of Saint Paul. . . the collections dragged. . . A second levy was made, and there was a third. . .But the labor progressed at a snail's pace."(41)

It was said that the Germans,

"those children of perdition, were levying a treasure that would not be drawn from the royal exchequer, but from the patrimony of Christ, the pitiful substance of the poor, the tears of widows, the pittance of monks and nuns, the dowries of maidens, the substance of scholars, the spoils of the church."(42)

There was apparently at the time of the ransom a great deal of "albata" money, composed of a lot of tin and a little silver, or simply tin coins blanched in silver. It is possible that these coins could have been issued to collect the silver to finance the ransom, but it is more likely that the existence of the large quantity of debased coins was one reason why the experiment could not be tried. If 'intrinsic' currency had already been replaced by billon, the opportunity to exploit it further no longer existed.(43)

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