Already the Romans had a sophisticated financial sector. Coins were used for smaller payments. Larger payments were made with "Littera" or "Nomina", in effect debt obligations or bonds redeemable in coins. And of course Rome knew how to make profits from money creation through debasement (by reducing the intrinsic value of coins through mixing precious metals with cheaper material). Following the downfall of the Roman Empire, there was no comparable central power in Europe. Europe was populated by numerous smaller and larger kingdoms and principalities, where exchange among inhabitants took place in a primitive credit system instead of a monetary system. Only after a longer pause did a new monetary order develop in the early Middle Ages, which reflected the political dismemberment of Europe. Most of the ruling houses issued their own money in order to collect the "seigniorage," which promised a more stable source of income than taxes. The term comes from the French word for feudal lord who had the right of coinage in the Middle Ages. Seigniorage emerges when the costs of money production are below the revenue from money issuance. This is the case in coin production, when the nominal value of the coins is higher than the material value and the production costs.
The issuance of money is subject to an inherent conflict. On the one hand, the user has a strong interest in the stability of the purchasing power of money that he uses as a means of transaction and store of value. On the other hand, the issuer wants to maximize the seigniorage of money production by issuing as much money as possible, which undermines its purchasing power. This conflict played a decisive role in the history of money.
--Thomas Mayer, Austrian Economics, Money and Finance, Banking, Money and International Finance 8 (London: Routledge, 2018), Kobo e-book.
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