MONEY AND PRICES
While it would hardly be correct to say that the early Middle Ages was a period during which a natural or barter economy prevailed in Western Europe, barter transactions must have been more common than money transactions, especially in local trade. The whole period of the Middle Ages was one in which there slowly emerged what we now call a money economy. Despite many setbacks and abuses the technique of minting was improved, money gradually came into more general use, the evils attendant upon debasing the coinage came to be recognized, interest was eventually legalized, the art of foreign exchange was developed, credit instruments came into being, and a clearer understanding of the functions of money was reached in the more enlightened areas.
While many attempts were made during the Merovingian period and by Charlemagne to bring order out of the existing currency chaos, none of these efforts had any permanency. The feudal tendency was for the nobility to acquire coinage and seigniorage rights, and thus the old abuses continued. Even a strong monarchy was no guarantee of a sound currency for debasing was the easiest and most tempting way of balancing the budget.
The Italian cities, which had great influence on the development of monetary, credit, and banking practices in Europe, apparently borrowed and improved on the financial institutions of the Byzantine Empire. From these cities came the generally accepted European coins such as the byzant, Jewish and Lombard moneychangers and moneylenders, traders in oriental goods, letters of credit and bills of exchange, and the development of deposit banking.
The problem of price regulation was closely related to problems of monetary control. The prevalence of monetary abuses made the