Today, most money is credit money, created by commercial banks. While credit can finance innovation, excessive credit can lead to boom/bust cycles, such as the recent financial crisis. This highlights how the organization of our monetary system is crucial to stability. One way to achieve this is by separating the unit of account from the medium of exchange and in pre-modern Europe, such a separation existed. This new volume examines this idea of monetary separation and this history of monetary arrangements in the North and Baltic Seas region, from the Hanseatic League onwards.

This book provides a theoretical analysis of four historical cases in the Baltic and North Seas region, with a view to examining evolution of monetary arrangements from a new monetary economics perspective. Since the objective exhange value of money (its purchasing power), reflects subjective individual valuations of commodities, the author assesses these historical cases by means of exchange rates. Using theories from new monetary economics , the book explores how the units of account and their media of exchange evolved as social conventions, and offers new insight into the separation between the two. Through this exploration, it puts forward that money is a social institution, a clearing device for the settlement of accounts, and so the value of money, or a separate unit of account, ultimately results from the size of its network of users.

The History of Money and Monetary Arrangements offers a highly original new insight into monetary arrangments as an evolutionary process. It will be of great interest to an international audience of scholars and students, including those with an interest in economic history, evolutionary economics and new monetary economics.

chapter 1|11 pages

Evolution of monetary arrangements

chapter 2|7 pages

New monetary economics and commodity bundles

A critique of the Black-Fama-Hall system

chapter 3|16 pages

A measure of value independent of commodities

Developing new monetary economics using the monetary theory of Schumpeter, Mises, and Wicksell

chapter 4|21 pages

Mind and monetary arrangements

A method to assess monetary heuristics in historical time

chapter 6|25 pages

Seventeenth century banking

Amsterdamsche Wisselbank, Stockholms Banco, and their consequences for monetary evolution

chapter 7|16 pages

The emergence of the gold standard and the unification of the monetary functions

What happened to the functioning of the cashless payments system using bills of exchange?

chapter 8|28 pages

Interwar monetary fragmentation and the gold standard restored

The crisis of 1929 compared with the crisis of 2008

chapter 10|21 pages

Monetary arrangements and the capital structure

Some lessons from the lens of Lachmann and Lundberg

chapter 11|14 pages

Concluding remarks

How to avoid pathologies of money and credit