The tally stick was a unique form of money that seemingly existed on the power of thin air through the fiat principle. They were most prominent in medieval England and also used to a lesser degree in France, Germany and numerous other nations and settlements of ancient times.
Tallies in one form or another have existed from prehistoric times but the most significant use of them was began by King Henry I in England in 1100 AD and were in use for an amazing 726 years. The split tally was accepted as legal proof in medieval courts and the Napoleonic Code of 1804 still makes reference to the tally stick in Article 1333.
The tally sticks owed their prominent financial use to King Henry’s response to a dire economic situation when he assumed the throne. He discovered that the Crusades had siphoned off most of the gold and silver that could be used as money. He found himself in a similar situation to Lincoln before the Civil War. He either had to borrow at excessive interest from the money lenders of the day or improvise with a system of his own.
Just as Lincoln chose to create a fiat money that did not borrow from any lender even so did Henry create a tally system that was backed by no commodity and was interest free. There was a huge difference on how the two financial instruments were used. The greenbacks bought war materials that were either destroyed or of little use after the war. These added little or nothing to the nation’s actual wealth.
On the other hand, many of the tallies were used to finance agriculture, construction and essential trades that helped the people live more abundant lives.
Some critics of fiat money have claimed that the tally stick was not fiat, or even money but merely IOUs that had to be paid off in gold or silver coin.
This presentation is extremely misleading and distorted. First there was very little gold and silver in the kingdom as most of it was shipped out of the country for the Crusades. Many of the tallies were redeemed for commodities instead.
As for whether they were fiat or not – let us examine how they worked and see.
“A tally was a stock about nine inches or so long with each of the four sides about ½ inch wide. On two of the sides, the value of the “tally” was carved into the wood. On the other two sides, the amount was printed in ink. “The tally was then split in half lengthwise. One half remained in the treasury and the other half was given to soldiers for their pay, to farmers for wheat, to armorers for armor, and to laborers for their labor. From War Cycles – Peace Cycles by Richard Hoskins, Virginia Publishing (2000)
There were a number of advantages for using the tally sticks.
(1) They could be used like money, but they were interest free.
(2) They were virtually impossible to counterfeit. Each tally had different grains in the wood and different records and notches engraved that appeared on both halves. To be legal you had to match your half with the King’s half.
(3) They did not need any gold or silver to back them but were backed by commodities that did not even exist at the time of issue. These commodities could be future produce, something manufactured or even gold or silver that the person hoped to acquire.
(4) They were basically inflation proof. Unlike money in our current system they could not be produced in unlimited amounts. The number of tallies made would be limited by the estimated production or wealth of the people. Then when the tallies were turned in for taxes or payment during Michaelmas (the harvest time) they no longer existed within the system and new ones had to be created. There could only be an increase in tally sticks if there was a corresponding increase of anticipated production and since each person was responsible for the value of his tally stick there was little desire to inflate its value.
(5) Tally sticks were widely accepted by the people for two reasons. First, tally sticks of some kind have been used for elementary record keeping since civilization began and people trusted them. Secondly, the king insured its equivalency to money by issuing a fiat that they can be used to pay taxes. In addition the various kings used tally sticks for money themselves.
It wasn’t long before the value of tally sticks in circulation far exceeded gold and silver money. Richard Hoskins (cited earlier) estimates that by the end of the seventeenth century the tallies in circulation had a value of about fourteen million pounds yet the coined metals at the time never exceeded a half million pounds in value.
By 1694 the tally sticks evolved into being represented by paper bills and by 1697 they circulated interchangeably as money with banknotes and bankbills.
The amazing thing is that life was a good during the height of the tally system. Contrary to popular belief the people prospered and had to work much fewer hours to make a living than they do today.
Monetary author Ellen Brown makes this interesting observation: “Modern schoolbooks generally portray the Middle Ages as a time of poverty, backwardness, and economic slavery, from which the people were freed only by the Industrial Revolution; but reliable early historians painted a quite different picture. Thorold Rogers, a nineteenth century Oxford historian, wrote that in the Middle Ages, “a labourer could provide all the necessities for his family for a year by working 14 weeks.” Fourteen weeks is only a quarter of a year! The rest of the time, some men worked for themselves; some studied; some fished. Some helped to build the cathedrals. Web of Debt by Ellen H. Brown, 2008, Page 60
She continues: “Economic historians like Rogers and Gibbins declare that during the best period of the Middle Ages – say, from the thirteenth to the fifteenth century, inclusive – there was no such grinding and hopeless poverty, no such chronic semi-starvation in any class, as exists to-day among large classes in the great cities . . . . In the Middle Ages there was no class resembling our proletariat, which has no security, no definite place, no certain claim upon any organization or institution in the socio-economic organism. Page 61
The great cathedrals were not only built with mostly unpaid voluntary labor but they were also maintained by volunteers. The people had free time and used it to increase the wealth of the kingdom and took pride in keeping public buildings and works of art in good shape.
They also had free time for learning, which explains why many great universities, libraries and centers of learning were established during that time.
There is an interesting book in the public domain by James J. Walsh called “The Thirteenth, Greatest Of Centuries” detailing how this was actually the most wonderful century in which to live that set the foundations to many of the amenities we value today. This was also the century when the use of the tally stick matured and came into almost universal use and acceptance in England.
The tally stick worked great and everyone was happy except the bankers. They were not getting their cut in interest from the tallies and decided to act as soon as they had the opportunity.
That opportunity came near the end of the seventeenth century after lengthy and costly wars with France and the Netherlands. The tally sticks did a great job of keeping the internal economy functioning, but external wars demanded large expenditures of gold and silver which were accepted outside the country. Goldsmiths were charging 30-80% interest on small loans and what coinage was left was clipped about 50%. The public lost millions of pounds because of goldsmiths going bankrupt.
Bankers proposed creating a Bank of England to solve the money problems. With a name like this it sounded like a government bank but in reality it was a private bank composed of private investors. The bank practiced fractional reserve banking and loaned the government money that it could have created for itself. Government debt went from 1.4 million pounds in 1694 to 16 million in 1698. The prices of most things doubled.
It is interesting that tallies were one of the sources used to finance this bank yet after it became established the bank saw the tallies as competition and from that point on sought to destroy them. Even so, some continued to be used until 1826 when they were removed from circulation and stored in the houses of Parliament.
In 1834 the tallies were ordered to be burned in the two furnaces in the House of Lords. This wound up starting a fire that got out of control and burned down both Houses of Parliament. It almost seemed like divine retribution for trashing a money system that worked so well.
Those with a negative view of fiat money cannot deny that the tally system was successful so they save face by saying that it was not fiat money at all, or not even money but merely like a promissory note. Others have said they were used like a modern day credit card.
No matter how you look at it the fiat principle was behind the use of the tally stick. Yes, the tally stick was like a promissory note, but a note authorized to be used as money. Many promissory notes of today or yesterday are not backed by gold, silver or any commodity. They are a promise to pay only backed by fiats of the issuers and the power of their good names. Just like our fiat dollars today are promissory notes from the Federal Reserve and are used as money even so were the tally sticks individual promissory notes also used as money.
There was a huge difference however. The tally sticks did not involve interest and never drove the government deeper into debt and did not contribute to inflation. This was why they were successful for numerous centuries.
Then the tallies had the fiat of the King authorizing them to be used as money to pay taxes. It’s difficult to see the reasoning as to why some critics do not see the Tallies as fiat money when two different fiats were involved and they were virtually backed by thin air. Just because they do not exactly fit the parameters of fiat money of today does not mean they were not based on the fiat principle.
Another criticism is the tallies were not even money because they were sometimes discounted or that discounting them was as bad as paying interest.
If an owner waited for the tally to mature then he received the full value but if he needed the value early in or if he had to use it in another country he had to trade them at a discount for commodities or coins. For internal use they were traded as money at a standard value just as money is today.
The occasional discounting does not alter the fact that they were used as money and had a more consistent value than does the fiat money of our age. Even in our time promissory notes and contracts are used as money on a number of levels, but the tally had the additional legal monetary authorization of the King.
The tallies were not in the same category money loaned at interest today for they drew no interest. First, only a small number were discounted whereas all new money today is created through loans at interest. Secondly, the tallies did not add to the public debt as is the case with today’s money.
Unless one takes the path of splitting hairs there is no other way to view the era of the tally sticks then as one of a successful fiat money.
Sources: War Cycles – Peace Cycles by Richard Hoskins, Virginia Publishing (2000)
Web of Debt by Ellen H. Brown, 2008
The Thirteenth, Greatest Of Centuries, James J. Walsh
The Secret World of Money by Andrew M. Gause, 1996
The Lost Science of Money By Stephen Zarlenga
The Tally Stick: The First Internal Control? by Nicholas Apostolou and D. Larry Crumbley http://www.bus.lsu.edu/accounting/faculty/lcrumbley/Tally%20Stick%20Article.pdf
