Oxford’s Ashmolean Museum is home to art and antiquities from around the world. In the museum’s grand basement is the money gallery, where you can see coins from Rome, the Vikings, the Abbasid Caliphate in the Middle East, and from medieval Oxfordshire and Somerset.
But while it seems obvious that the money gallery would be full of coins, most money isn’t in the form of coins at all.
As Felix Martin points out in his book Money: The Unauthorized Biography, we tend to misunderstand money because much of our monetary history hasn’t survived in a form that could grace a museum. In fact, in 1834, the British government decided to destroy six hundred years’ worth of precious monetary artifacts. It was a decision that was to have unfortunate consequences in more ways than one.
The artifacts in question were humble sticks of willow, about eight inches long, called Exchequer tallies. The willow was harvested along the banks of the Thames, not far from the Palace of Westminster in central London. Tallies were a way of recording debts with a system that was sublimely simple and effective. The stick would contain a record of the debt, carved into the wood. It might say, for example, “9£ 4s 4p from Fulk Basset for the farm of Wycombe.” Fulk Basset, by the way, might sound like a character from Star Wars but was in fact a bishop of London in the thirteenth century. He owed his debt to King Henry III.1
Now comes the elegant part. The stick would be split in half, down its length from one end to the other. The debtor would retain half, called the “foil.” The creditor would retain the other half, called the “stock”—even today, British bankers use the word “stocks” to refer to debts of the British government. Because willow has a natural and distinctive grain, the two halves would match only each other.
Of course, the English Treasury could simply have kept a record of these transactions in a ledger. But the tally stick system enabled something radical to occur. If you had a tally stick showing that Bishop Basset owed you five pounds, then unless you worried that the bishop wasn’t good for the money, the tally stick itself was worth close to five pounds in its own right. If you wanted to buy something, you might well find that the seller would be pleased to accept the tally stick as a safe and convenient form of payment.
The tally sticks became a kind of money—and a particularly instructive kind of money, too, because the tally stick shows us clearly what money really is: it’s debt; a particular kind of debt, one that can be traded freely, circulating from person to person until it is utterly separated from Bishop Basset and a farm in Wycombe. It’s a spontaneous transformation from a narrow record of a debt to a much broader system of tradable debts.
We don’t have a clear idea of how significant this system is, because we don’t know how widely traded tally sticks were. But we know that similar debts were traded. This happened in China about a thousand years ago, when the idea of paper money itself emerged. But it also happened more than once in living memory.
On Monday, May 4, 1970, the Irish Independent, Ireland’s leading newspaper, published a matter-of-fact notice with a straightforward title: “Closure of Banks.” Every major bank in Ireland was closed and would remain closed until further notice. The banks were in dispute with their own employees, the employees had voted to strike, and it seemed likely that the whole business would drag on for weeks or even months.
You might think that such news—in what was one of the world’s more advanced economies—would inspire utter panic. But the Irish remained calm. They’d been expecting trouble, so many people had been stockpiling reserves of cash. But what kept the Irish economy going was something else.
The Irish wrote each other checks.
Now, at first sight this makes no sense. Checks are paper-based instructions to transfer money from one bank account to another. But if both banks are closed, then the instruction to transfer money can’t be carried out. Not until the banks open, anyway. But everyone in Ireland knew that might not happen for months.
Nevertheless, the Irish wrote one another checks. And those checks would circulate. Patrick would write a check for £20 to clear his tab at the local pub. The publican might then use that check to pay his staff or his suppliers. Patrick’s check would circulate around and around, a promise to pay £20 that couldn’t be fulfilled until the banks reopened and started clearing the backlog.
The system was fragile. It was clearly open to abuse by people who wrote checks they knew would eventually bounce. As May dragged past, then June, then July, there was always the risk that people lost track of their own finances, too, and started unknowingly writing checks they couldn’t afford and wouldn’t be able to honor. Perhaps the biggest risk of all was that trust would start to fray, that people would simply start refusing to accept checks as payment.
Yet the Irish kept writing one another checks. It must have helped that so much Irish business was small and local. People knew their customers. They knew who was good for the money. Word would get around about people who cheated. And the pubs and corner shops were able to vouch for the creditworthiness of their customers, which meant that checks could circulate.
When the dispute was resolved and the banks reopened in November, more than six months after they had closed, the Irish economy was still in one piece. The only problem: the backlog of £5 billion worth of checks would take another three months to clear.
Nor is the Irish case the only one in which checks were passed around without ever being cashed in. In the 1950s, British soldiers stationed in Hong Kong would pay their bills with checks on accounts back in England. The local merchants would circulate the checks, vouching for them with their own signatures, without any great hurry to cash them. Effectively, the Hong Kong checks—like the Irish checks, and like the tally sticks—had become a form of private money.2
If money is simply tradable debt, then tally sticks and uncashed Irish checks weren’t some weird form of quasi-money; they were money. They were simply money in a particularly unvarnished form. Like an engine running with the cover off or a building with the scaffolding still up, the checks were the system of money with the underlying mechanism laid bare.
Of course, we naturally think of money as those discs of metal in the Ashmolean Museum. After all, it’s the metal that survives, not the checks or the tally sticks. And one thing you can never put into a display case at a museum is a system of trust and exchange—which ultimately is what modern money is.
Those tally sticks, by the way, met an unfortunate end. The tally stick system was finally abolished and replaced by paper ledgers in 1834 after decades of attempts to modernize. To celebrate, it was decided to burn the sticks—six centuries of irreplaceable monetary records—in a coal-fired stove in the House of Lords, rather than let parliamentary staff take them home for firewood.
Burning a cartload or two of tally sticks in a coal-fired stove, it turns out, is a wonderful way to start a raging chimney fire. So it was that the House of Lords, then the House of Commons, and almost the entire Palace of Westminster—a building as old as the tally stick system itself—was burned to the ground. Perhaps the patron saints of monetary history were having their revenge.