The history and emergence of money in the Middle Ages is marked by periods of regression, innovation, and economic recovery.

For example, when the Roman army left Britain, no more Roman coins entered the island. Around 435 AD, the use of coins disappeared completely in Britain, a phenomenon unique in the former Roman provinces. For almost two centuries, the British economy went without coinage until the 7th century, when Merovingian and continental-inspired coins gradually reappeared.

From the 8th century onwards, Christian influence contributed to the reintroduction of coinage in Northern Europe. The key figure in this period was Pepin the Short, King of the Franks, who introduced the denarius in 752, later adopted by his son Charlemagne. Charlemagne widely extended the use of the silver denarius, creating a European monetary standard for several centuries.

In England, coinage enjoyed a significant revival with the production of the silver penny under King Offa of Mercia around 765. This currency became so important that it remained virtually unchanged for 500 years.

As reproduction of an English penny from that period is shown below.

During the High Middle Ages, Europe fell into feudalism following the collapse of the Roman monetary system. The majority of the population used low-value copper or bronze coins, often subject to currency debasement, thus limiting trade over long distances.

The return of coinage as a means of payment occurred gradually, culminating in the 13th century with the appearance of the gold florin in Florence in 1252, followed by the gold ducat in Venice. These gold coins were widely used thanks to the expansion of trade and the growing need for reliable, internationally accepted means of payment.

In England, however, they did something clever. The monetary system was protected from debasement thanks to innovative fiscal policies, like the land tax introduced by William the Conqueror after 1066, which allowed them to preserve the quality of the penny sterling. The introduction of this tax was a significant development, as it allowed the state to be financed through taxation rather than monetary debasement, thereby helping to maintain currency stability.

However, the temptation to profit through monetary debasement led to crises, as in the reign of Henry I in the 12th century, when the quality of coinage fell dramatically. Severe reforms, sometimes accompanied by violent measures against coiners, temporarily restored confidence in the currency.

The Middle Ages also saw the emergence of sophisticated financial practices, such as the use of tally sticks in England to circumvent the ban on usury and extend credit. The Church was not very keen on interest-bearing loans, so various techniques were used to circumvent the prohibition on the use of interest.

These innovations were a response to the chronic shortage of metallic money, and encouraged the emergence of an embryonic financial market.

The Crusades, meanwhile, stimulated Mediterranean trade, fostering the development of international exchanges and new banking practices, notably through the Order of the Knights Templar. The Knights Templar became important financial intermediaries, enabling crusaders to obtain liquidity far from home, foreshadowing the modern European banking system.

To make the link with the Templars, a French medieval coin from this era is shown below, featuring a prominent cross, a common motif on coinage of the time.

Finally, major crises such as the Black Death (1346-1353) brought about profound economic transformations. The sharp fall in population led to a sharp rise in wages, defying government attempts to maintain previous levels of remuneration.

At the same time, the Hundred Years' War (1337-1453) forced states to adopt more aggressive fiscal policies to finance their armies, contributing to the weakening of the feudal system.

The Middle Ages were thus marked by a constant tension between the need for reliable money for trade and the constant temptation for rulers to dilute money for immediate profit. This conflict profoundly shaped European monetary development, laying the foundations for modern economic systems.

To conclude this section, it is worth noting a major paradigm shift that occurred in England regarding state indebtedness. According to Glyn Davies in "History of Money", the rise of Parliament transferred the burden of debt from the sovereign to the representative body. Before this shift, the debt was the personal obligation of the king and could be extinguished upon his death or bankruptcy.

However, once Parliament gained control over debt creation, the concept of sovereign debt as we understand it today emerged. This debt was no longer tied to the life of a monarch but to the continuity of the state itself, making it potentially unlimited. This development forced the state to develop new methods for refinancing and spreading this perpetual debt over time. The burden of guaranteeing and repaying these debts shifted from the monarch to the nation and its citizens.