Yes, I’d like to buy your car. Would you let me pay you in tally-sticks? They’re just as valuable as real money. You can trade them in at any time. Yes, really!
Oh, you don’t know what they are? Maybe if I explain how they work you’ll accept my tally-stick.
Tally-sticks are a way of tracking debt between two people. They really had their hayday in Medieval England, but I believe they’re more widely used today than you might realize.
Tally-sticks are typically made in pairs from ash or willow because those woods have a very fine grain that is easy to split. When you want to record a debt of some kind, you mark a length of wood with notches equal to the value of the transaction, then split the wood in half. Think of the halves like the receipts from a credit card purchase — there is always a merchant copy and a customer copy, so that both parties can reference the transaction in the event of a dispute.
In medieval England, the lender’s half of the stick was called the stock, and the borrower’s half was called the foil. Tally-sticks really took off in England due to some tax policy by Henry the 1st. Basically, some people pay their taxes in advance and receive a tally-stick stock as proof of credit at the end of the year. When the sheriff comes to town and asks for the annual 10 shillings you owe, you can present a tally-stick “receipt” saying that you already paid 5. He’ll compare the stock to the foil to verify legitimacy, and you pay the remaining balance.
Paying your taxes is universally unpleasant, but the upside to paying in advance is that you can use your receipt as currency in the meantime. Someone else in town might be willing to sell you 4 shillings worth of flour in July in exchange for your 5 shilling tax credit that comes due in December. (If this deal makes no sense to you, keep reading.)
To translate all this into modern terms, imagine if our IRS issued tax-refund vouchers to people who have provided them with goods, services, or advance payment of owed taxes. Would you accept one of those vouchers as payment for your goods or services? Your answer will depend on a multitude of variables.
How much do you trust that the IRS will actually pay you?
How much is future cash worth relative to cash right now? (This is called your “time preference.”)
What other options do you have as stores of value? (IE: gold, commodities, real estate)
I don’t have to unpack all of these considerations for you, because you can do it yourself: how much would a $100 tax return voucher be worth to you, right now?
Think of an answer and hold it in your head.
You almost certainly wouldn’t pay $100 in cash for $100 voucher, but you might pay close to $100.
In the same way that you know exactly how much you trust the IRS and how badly you need the money now versus later, a medieval person can assess how much they trust the issuer of a tally-stick and the degree to which they prefer other, more immediate payments. Their calculations will be different from yours in one very important way: you take for granted that our currency moves lightning fast.
I can swipe a credit card to instantly transfer my dollars into someone else’s bank account. In medieval England, cash was scarce and generally had to be transported physically in order to transfer ownership. Transactions between the middle class were more likely to involve bulky commodities that may not even be shelf-stable (grain, fruit, etc.)
Being paid in grain, for example, could entail the very real chore of transporting and properly storing it in your stockpile, and then moving it again if you want to exchange the grain for something else. Don’t forget that you must put the grain to use or sell it before it spoils. There is a limit to how much wealth you can hold in grain because it simply doesn’t last long enough.
A modern person is likely to view a promissory note such as a written check as an inconvenience, requiring more steps to liquidate. A medieval person who trusts the issuer of the check is more likely to rub their aching back and exclaim, “you mean I don’t have to move all that grain from your barn to mine?!” They could conceivably place a premium on a tax voucher rather than a discount, just for the convenience!
Imagine the incredible savings on time and energy once this system is adopted by everyone! Don’t you want to be a part of it?
Let’s say Tom Miller has taken to offering tally-sticks in exchange for sacks of grain — the idea being that you come back later with your stick and Tom will give you the appropriate amount of flour. Milling takes time and there are a lot of customers ahead of you, so you go about your business in the meantime. Everyone knows Tom, even if he doesn’t know them, so that stick holds trusted value. If you offered a laborer one of Tom’s sticks notched for a sack of flour in exchange for them fixing your roof, they would probably do it. Whenever they want the flour they can go pick it up, because the sticks are backed by physical goods. It’s perfect!
Do you want my tally-stick yet?
Well, yes, there are some opportunities for fraud. Yes, I’m happy to explain them. My tally-sticks won’t be compromised.
The most obvious opportunity for fraud is through counterfeiting. If you decide to stop, you know, actually producing anything useful and instead just practice carving tally-stick stocks that look a lot like Tom Miller’s, you could make a tidy profit exchanging your fakes for all manner of valuable goods and services. At least until someone brings your phony stock to Tom Miller and he doesn’t have foil or flour to match it. Things go downhill for you very rapidly after that.
No, as with most things the real potential for fraud lies higher up on the chain of authority. If Tom Miller’s tally system really took off, and there were enough excess grain that it was never fully withdrawn at the end of the day, one of Tom’s stocks could circulate theoretically forever, paying for labor and other goods. Because Tom Miller always pays his debts… Right?
If Tom Miller knows that only 3 in 4 stocks ever come back to him on a given day, he could start making extra sticks and spending them in town. As long as the pattern holds and no-one compares the total stocks in circulation to his notably emptier storeroom, it will be fine.
In fact, Tom is doing his community a service! The more sticks he manufactures, the more he grows and stimulates the local economy! More production, more transactions… Everyone wins! Tom Miller has just invented a form of very sophisticated banking. What could go wrong?
Well, one day the grain crop will fail, and Tom Miller will find himself facing a crowd of angry, hungry people who thought they owned plenty of flour. But the flour doesn’t exist. Uncoupling Tom’s monetary system from real production means that people have been able to spend their scarce time and resources on projects and services that they could never afford to if they knew how empty the granary truly was.
Tom Miller may have a bigger house, and the people he paid to build it may have bigger houses, and so on, but at the end of the day someone is left holding the wrong end of the stick — literally. Tom Miller’s town can play this game of hot potato successfully for a very long time, but one day the music is going to stop, and everyone holding the phony stocks is going to be in very real trouble.
Anyway, will you please let me pay you with my tally stick now?
No? I talked you out of it?
Will you take U.S. dollars?
You’ve probably caught on at this point that I’m not actually trying to pay you in tally-sticks. I’m no conspiracy theorist, but I’ve actually been skeptical of this tally-stick system from the start. I was just trying to see if we were on the same page with my little story there.
I may have taken some liberties with the facts… Tally-sticks were used very widely England, and throughout Europe in general, but the corruption goes far beyond a small-time crook like Tom Miller. I don’t want to be an alarmist, but I think this tale of fraud and conspiracy goes all the way to the top — to the very King of England himself!
Now that we’re speaking the same language, I think we can move on to part two! What’s that? Oh it’s not published yet. If only I had some sort of newsletter… (Psst… click here for the scoop on the king)