Encyclopedia of Money: QUATTRINI AFFAIR

The quattrini was one of the three silver coins that circulated in fourteenthcentury Florence. The “quattrini affair” refers to a devaluation of the quattrini in 1371 that set in motion a course of events leading in 1378 to a popular uprising and a brief dictatorship of the proletariat.

The Florentine money of account was the lira, originally meaning a pound of silver, and in the Florentine currency system 240 denarii equaled 1 lira, 60 quattrini equaled 1 lira, and 8 grossi also equaled 1 lira. Florence also minted the florin, a gold coin that circulated mainly in international trade and among the wealthiest members of society. The exchange rate between silver coins and florins varied with the silver content of silver coins.

The money stock of a 14th-century Italian city-state consisted of a varying medley of domestic and foreign coins and the rate of coinage depended on the amount of private silver brought to the mint. Private persons took their silver to city-state mints that struck coins with the greatest excess of face value per weight of silver. A city-state such as Florence could debase the silver content of its currency, increasing the face value of its

coinage relative to silver content, and attract more silver to its mint. The system encouraged cities to engage in competitive devaluation, and devaluation became a plague that spread from one city to another.

Florentine authorities balked at currency devaluation, and by the mid-14th century the coinage of denarii, quattrini, and grossi came to a halt because no silver was brought to the mint. Currency from Pisa invaded the Florentine economy, driving out Florentine currency in accordance with Gresham’s law that bad money drives out good. In 1366, the Florentine authorities gave way and slashed the silver content of the denaro, the most

overvalued of the Florentine coins, by 36 percent. The authorities also banned the circulation of petty foreign currency, apparently under the expectation that the ban would have no practical significance.

Next, Florentine grossi and quattrini came under pressure as Pisan grossi and quattrini with the same face value but less silver content were exchanged for the Florentine coins. Florentine grossi stood only slightly above Pisan grossi in silver content, and in 1366, Florence debased the grossi by 2.5 percent, a sufficient

debasement to bring Florentine grossi into parity with Pisan grossi.

The Florentine quattrini, overvalued relative to Pisan quattrini by a good 18 percent, now came under pressure. The Florentines had sought to avoid devaluing the quattrini because local prices were most often quoted in quattrini and the whole domestic price structure and monetary stability depended on quattrini. The

invasion of devalued Pisan currency again forced the hand of the Florentines, and in 1371, the silver content of Florentine quattrini fell by 18 percent and Florentine denarii by 5 percent.

Silver flowed into Florentine mints with the rise in face value relative to silver content, and soon a boom in the

coinage of quattrini and denarii was underway. As supplies of quattrini and denarii soared, the forces of currency depreciation made themselves felt with a merciless logic, in time sending a thunderclap through the Florentine economy.

The florin rose in value as the silver content of the silver coinage fell, prices rose faster than wages, and discontent rose to a boiling point among the minor artisans. In 1378, Michele di Lando, a barefoot workingman, led the wool carders in a proletarian revolution against the financial oligarchy that ruled Florence. The revolutionaries dismissed the government officials, established a dictatorship of the proletariat, and set out

to reform society, repealing laws against unionization, enfranchising unions of lower-paid workers, imposing a 12-year debt moratorium on debts of wage earners, and reducing interest rates. Businesses fought back by closing down and recruiting outside forces to overthrow the government. The proletarians split into factions between more conservative skilled labors and unskilled labors sympathetic with communistic ideas. An armed

force from the countryside overthrew the government in 1381, but not before the government had melted down large quantities of quattrini in an effort to end the pressures for currency depreciation.

The quattrini affair gives some support to Lenin’s comment that the best way to destroy the capitalist society is to debauch its currency. Inflation and monetary instability have attended all major revolutions, including the French Revolution, the Russian Revolution, and the Chinese Revolution.