Have you ever wondered at the beauty of buildings from the 12th and 13th centuaries in Southern Europe, when about 600 new towns were built with solid stone houses that have survived to this day?

Ironically, it was not a politcally stable period. The wars waged by the Church on the Cathars necessitated much reconstruction. The wars were partly about religion and partly about the Church’s loss of revenue.

Inadvertantly, a rather strange system of money was responsible for the reconstruction that gives us such pleasure today.

In the Holy Roman Empire rulers of the dozens of small independent states issued thin silver coins called bracteates which would be reclaimed at three quarters of their value when the ruler died. Realizing that this was rather a good idea the rulers soon got the idea of reclaiming and reissuing them more frequently.

So holding on to money was risky – it was no store of value; better to use it while you had it to build houses with lasting value.
This led to a high demand for construction labour so wages were good, working hours were short (about six hours a day) and there were at least 90 religious holidays a year. It greatly improved the quality of life and was wonderful for the local economy.

But when gold coins were introduced in the fifteenth centuary it became worth storing money instead of using it because of the amount of precious metal it contained. You could keep it under your mattress.

So demand for labour dropped, wages fell, unemployment appeared, some businesses closed down because people could earn more by lending the money they had accumulated on interest rather than by trading.
And, to cap it all, rulers had to find other means of taxation.

From Short Circuit by Richard Douthwaite