commodities, or receive taxes in grain, live-stock or dairy products. Traders were finding that barter, or the exchange of goods, must be supplemented by a more convenient medium of exchange. Local coinage of town or feudal lord had to be replaced by a royal or state currency which should be sound, which should maintain its face value and which could be readily accepted over the whole state. The process of introducing such an important change was by no means as simple as it may seem. With all the power at the disposal of kings, it was no easy matter to create confidence in coinage, or to call in the old, debased coins and replace them by new, honest money. An attempt was made, in 1560, during the reign of Queen Elizabeth to begin a recoinage in England, but it was not until 1696 that the job was finished. The completion of the task was presided over by a group of famous men, among whom were John Locke and Sir Isaac Newton. Comparatively late as the date of this achievement was, most other countries were even slower in completing this difficult task; a stable and uniform coinage was not established in France, for example, until the time of Napoleon.

As the amount of money in circulation increased, as business transactions multiplied, a veritable financial revolution was brought about. The coming into existence of the money economy, of which we have spoken, produced larger accumulations of money. These accumulations are conveniently called capital. The rise of capital soon began to contribute to the extension of trading and industrial activities on all sides. Money became available for investments in

new ventures and for the development of existing trade on a larger scale. Profits bred profits and big fortunes began to appear. The great wealth of Jacques Cœur in France (1400-1450) and of the families of Fugger and Welser (16th century) in Germany are interesting examples of the accumulation of capital from various kinds of industry and trade. These men invested their money in constantly growing activities and in new ventures. Jacques Cœur, the son of a rich merchant of Bourges, began an extraordinary career as his father's agent in the Levant. At Damascus and other Syrian markets he purchased oriental goods for the French trade. His activities did much to establish a flourishing commercial business for France in the Eastern Mediterranean. He accumulated a colossal fortune, opening business offices in almost every European city of importance and operating as a banker, wholesale merchant and retailer.

Among the many rising German capitalists such as the Welsers, Haugs, Hochstetters and Imhofs, the Fuggers were clearly the most spectacular. "Thanks to judicious loans to the Hapsburgs, they had acquired enormous concessions of mineral property, silver and quicksilver mines in Spain and Germany, and controlled banking and commercial businesses in Italy, and above all in Antwerp. They advanced the money which made Albrecht of Brandenburg archbishop of Mainz; repaid themselves by sending their agent to accompany Tetzel on his campaign to raise money by indulgences and taking half of the proceeds; provided funds with which Charles V bought the imperial crown, after an election conducted with the publicity of an

auction and the morals of a gambling hell; browbeat him when the debt was not paid, in the tone of a pawnbroker rating a necessitous client, and found the money with which Charles raised the troops to fight the Protestants in 1552. The head of the firm built a church and endowed an almshouse for the aged poor in his native town of Augsburg. He died in the odor of sanctity, a good Catholic and a Count of the Empirehaving seen his firm pay a fifty-four per cent dividend for the preceding sixteen years.

Large amounts of money to be handled, a growing system of credit and the increasing financial obligations of governments which constantly became more complex, demanded new facilities for transacting business. Public banks, larger and with broader functions than those of the earlier banks of which we have spoken, began to come into existence. We have noticed above the appearance of the Italian families devoted to banking. Important city banks, such as those in Venice, Genoa and Amsterdam, had also been established; but these were private undertakings, with limited spheres of action. Now, almost at the same time that England finished the institution of a real currency, the Bank of England was founded (1694). An earlier State bank had been founded, in 1656, in Sweden, which is still in existence. But the Bank of England really marks the beginning of finance on a scale, national in extent, which was big enough to cope with the vast expansion of trade and commerce which was taking place.

During the period which saw the changes we have been noting, particularly from about 1400 to 1700,

another conspicuous phenomenon was occurring, one which touched even more intimately the life and interest of almost every one. The cost of living was going up steeply and steadily. People who did not realize, perhaps, that they were living in the midst of extensive commercial changes knew quickly enough that they had to pay increasing prices for nearly everything which they bought. For this unwelcome, but nevertheless important, development, the Commercial Revolution was partly responsible. As a result of the explorations and discoveries in the New World, large amounts of gold and silver began to find their way to Europe, especially through Spain. At the same time, increased demands for money for trade, as well as for other things, led to an increased production of existing European precious metals; better means of mining and refining were worked out. Much of this new supply of gold and silver was minted by the Spaniards, or their subjects in the Netherlands; it was they who first made the dollar famous, along with doubloons and pieces of eight.

Higher prices resulted from this increased amount of money. The explanation of this lies principally in the consideration that, generally speaking, the more money there is in circulation the more money is asked for commodities. This may not be an adequate or complete explanation, but it is one which many people hold. We see it illustrated after a fashion in the practice of some professional men to-day who fix their charges for service according to what they think their clients can pay-or, as we say, at what the traffic will bear. The richer a client, the more he is charged. Similarly, the

richer the community in supplies of precious metals, the more the community is charged for commodities. Such a simple explanation, as we have remarked, may not account for every phase of the great rise in prices during the 16th and 17th centuries, but it is one of the theories still accepted. People of the time did not understand the causes of the phenomenon, but naturally were much concerned. They endeavored to find reasons, and in their thinking about the subject we find another contribution to the body of knowledge and speculation which has subsequently been classified as "economics."

Questions of higher prices were obviously associated with the other phenomena which we have been observing: trade expansion, trade with colonies, the manufacture of the goods used in trade, coinage, banking and so on. It became increasingly clear that all these factors might be connected. People began to think that possibly underlying them were general laws or principles. If these principles could be found out, governments could make laws in harmony with them. The result would be beneficial for every one-for government revenue, for the merchants, and for the population as a whole. Knowledge of these principles would enable merchants to conduct their business more intelligently and more profitably.

Such ideas on these matters as had existed in the Middle Ages were slight in amount and deeply influenced by the religion and philosophy of those times. No great need existed for much "economic" thought when there was comparatively little trade or large scale industry. Spiritual interests predominated in medieval