Resilience in Rebellion: A Systemic Study of Local Currency Emissions in Catalonia during the Spanish Civil War.

Author: JAUME MONCLÚS I BORI

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1. JUSTIFICATION

Monetary analysis allows historians to understand the underlying mechanisms in an economy (such as price fluctuations, the impact and outcomes of various policies, international exchange, movements in the financial market, economic cycles. . . ), becoming essential for any rigorous investigation.

Monetary stability has historically been a reflex of reliability within a society and a push for good economic performance. In fact, financial stability appears to be a necessary condition for economic growth.¹

The case of municipal currency minting in Catalonia during the Spanish Civil War can be defined as unique due to its peculiarity, with special instances where coins and bills were made out of plastic, parchment, or wood. This diversity of materials and designs reflects the local communities’ adaptation to the exceptional circumstances of the war, as well as the use of currency as a means of propaganda, artistic expression, and a statement of political sovereignty.

As an Economic and Financial Historian aspirant, I am deeply concerned about both the power that states hold when minting their own money² and the legitimation that currencies have given to any form of government.

This case shows how different agents in an economy (Central government, Regional government, Local government and Businessman) fought for hegemonic territorial currency issuing during war-times (even if they were in the same side). It demonstrates a continuous struggle between political and even civilian institutions for their individual power legitimation and for the control of monetary issuing monopoly.

In a possible future independence process in Catalonia, one of the first questions that may arise will be related to the new monetary system organization. Even if I consider myself as a pro-euro, I firmly believe that it is important to learn about previous experiences on currency issuing in our lands, so we can learn on history and take better decisions in the future. Moreover, not everything is white or black. A fixed exchange rate, a currency board or other alternative forms of monetary relationships may arise from this hypothetic monetary experiment.³

2. AREA

Each specific local currency that was issued in Catalonia between 1936 and 1937 was limited to be used as a medium of exchange within the same municipality or group of municipalities. But as we all know, market always goes ahead regulation: there are enough evidences to affirm that it was also used at practice in the Aragonese war front, as well as in Andorra and Valencia.

Data estimates that from all 1075 municipalities in Catalonia, just 687 minted their own currency (91% of population lived in those municipalities). A large part of the ones that didn’t mint, took advantage of their neighbor’s city currency by agreements between local governors (for instance, suburbs near to Barcelona). The others, stablished the previous most popular local private token as main local currencies (such as the token from the main cooperative agricultural businesses running in these countryside areas), providing these retailers with the exclusive monopoly of money issuing within the village (Turró 1982).

Some villages manufactured beautiful works of art as forms of money, while others just used precarious means like simple stamps on pieces of paper (Guía Numismática 2004).

Even if some towns started minting their currency towards the end of 1936, the vast majority of them were constituted throughout 1937 (Guía Numismática 2004).

3. ORIGINS

It originally wanted to readdress the lack of small coins (or low-denominated currency) within the region. This shortage arose due to the accomplishment of Gresham’s Law: small Spanish peseta’s coins where originally minted from precious metals, and consequently people would start storing them instead of using coins as a medium of exchange. Just the “pesetas” bills kept on circulation. There existed even some laws not allowing citizens storing coins⁴. This situation got even worst when the Central Spanish Government, through the Bank of Spain, withdraw great part of these metals from circulation to use
them as inputs for ammunition and weapons industry.

At first, when the problem appeared, people couldn’t use Spanish banknotes since they constituted large bills (or high-denomination bills), while prices were very low (in nominal terms). “It is only necessary to remember that in 1936 a worker’s salary was 8 to 12 pesetas a day and that, for example, the price of a kilo of bread was 75 cents (it went to 95 cents on August 3, 1937 ), the newspaper was worth 10 cents and a litre of milk was worth 80 cents, the tram 10 or 15 cents, depending on the route, the postage of a letter was 25 cents, that of a kilo of potatoes 35 cents, sugar 1.50 pesetas per kilo, olive oil cost 2.25 pesetas per litre and soaked cod 2.10 pesetas per kilo” (Turró 1982).

As a consequence, stores and other kinds of private initiative would start to mint a wide punch of tokens, exclusively accepted in each of their own enterprises, with no other value than a private IOU between the seller and the buyer. This rapidly generated tension within the society, since it created strong dependences between agents, as well as conflicts related to faked coupons. People had wide different amount of tokens, each of them only available for specific shops.

Trying to solve that mess the autonomous institutional body of the Catalonia’s region, the Generalitat de Catalunya, created new smaller-denominated peseta banknotes⁵. As we will see in the following question, it didn’t work as planned so at the end of the day the Regional Government allowed each city hall to create a currency board and issue their own small coins.

On the other hand, from an historical, political and sociological perspective, we have to consider that controversial decision as a sovereignty act. Some sources have concluded that this monetary experiment would be the starting project for a prospective full monetary system, for sure aligned with the
secessionist movement, since there existed some drawn models for banknotes of higher denomination value. Other projected values were bills worth 1, 25, 50, 100, 500 and 1000 “pesetas” (Guía Numismática 2004). We must take into account that there was a relatively recent attempt of independence (the 6th of
October in 1934) and the context of Europe close to the Second World War, a great opportunity to fight for self-determination ideals.

The Public Services, Economics and Finances Department of the Generalitat de Catalunya (name for the autonomous Catalan institution) designed the whole decentralized monetary system. This Ministry was ruled by Josep Tarradellas.

Josep Tarradellas, seeing all the problems descripted above, and the ineffectiveness of the Central Spanish Government, ordered to confiscate all the funds that the Bank of Spain had in its Barcelona’s headquarter (basically gold and currencies), and with that collateral the department minted bills of 10, 5 and 2.5 “pesetas”. Then they established those new banknotes as legal tenders in Catalonia, coexisting legally with Spanish legal tender bills (Crusafont 2023).

But that wasn’t still enough small coin (low-denominated currency) supply. Bills values were still too high. Therefore, the Generalitat de Catalunya published a legal decree⁶ that indirectly authorized city councils and local governments minting their own municipal currency. The conditions for that were the following:

1. All tokens must be established with a currency board (using either Spanish or Catalan “pesetas” as a collateral).
2. The currency would be enforced to be used exclusively for local trade relationships.
3. These new tokens could just worth for low-denominated currency.

The majority of municipalities used this tool, creating “pesetas” tokens equivalences and their divisors (Crusafont 2023). The design of the Generalitat’s bills was in charge of the “noucentista” artist Josep Obiol (Guía Numismática 2004). On the other hand, each particular local currency design was decided or organized by the corresponding town hall.

4. END

The Republican government rejected the whole decentralized Catalan monetary system through the constitutional imposition of central minting monopoly. Even if the Central Government commanded its destruction in 1938⁷, some particulars, as well as some institutions, illegally preserved a part of them for the posterity. The currency board was dismantled, exchanging by force all those tokens for the unique legal tender Spanish banknotes.

The Generalitat, concerned about the huge numismatic interest that this decentralized monetary system had abroad, started to sell some sample of those token coins and banknotes at international markets with the aim of getting more funds to help internal refugees while the Francoist side was expanding through the peninsula.

After the defeat of the republican side, the Francoist regime didn’t even considered the possibility of converting neither the old republican currency nor other derivatives, burring even deeper any national regional political aspiration.

Empirical evidence shows that each municipality minted a relative proportionate amount of money in relation to its population; being the Barcelona’s (and other important cities) bills the more abundant (also today in the second hand market) (Crusafont 2023).

The major part of villages emissions were done on paper bills, but there existed some few special cases in where metallic coinage, celluloide (plastic) bills and coins, parchment bills or wooden coins were minted (Crusafont 2023).

Since it worked as a currency board, it’s general value of capitalization by monetary unit was ultimatelly the same as the Spanish peseta one. However, there isn’t any objective or unbiased database related to its value due to various factors: Spain was in a civil war, and consequently the government had huge
discretionary and confidential operational management. Moreover, it has to be considered that those currency boards were made not only against Spanish but also Catalan Government Pesetas, which value of capitalization should not be asumed to be equal to the Spanish. Finally, everyone agrees that having that much variation of currencies in a country (take into account that various regions had similar aproaches to it) substracts credibility to the whole monetary system in an international point of view.

We must suppose that its maximum value of capitalization was achieved when the currency was relised, due to the seigniorage dinamics during wars. Also notice that both the local and catalan government currencies had initially a very good reception by public (probably due to a combination of ignorance
and provincialism).

Nowadays this monetary system is not working anymore, and then its current value of capitalization is just composed by collectionists willingness to pay, which can’t be found in any centralized market but summing OTC market prices. So I need perfect information, if USSR couldn’t achieve that I am very
sure I won‘t. What it can be said it that its price ultimatelly depends on its singularity, being the currencies of those smaller towns the ones that are more highly demanded, as well as those which were made from weird materials.

5. CLASSIFICATION

Substantially, we can consider that these tokens had a Consensual nature, meaning that the currency is only circulating because it is a consensus; money is only a social institution and reflects completely the social agreement.

We can say that the Monetary Authorities were the Local Governments and Citizens. Population demand or supply tokens and the Municipal Government creates or destroys their currency tokens in relation to Spanish/Catalan pesetas’ deposits or withdrawals.
Ultimately, its limit was related to the Spanish and Catalan currency minting limit, which were fiat currencies (ex-ante, no limit). Their respective Monetary Authority (Spanish National Bank and the Treasury of the Generalitat de Catalunya) determined the amount on circulation. It’s also worth mentioning that the Francoist side tried to devalue the republican ’peseta’ through massive sales in international markets (Asiaín, 1999).

The Carrier were tokens represented through coins and bills. These were often carried in wallets, purses, or pockets.

Now, referring to the Monetary Unit: there were some different cases, but the wide majority of token (for simplicity) just copied the ordinary Spanish Monetary System: Peseta / Pesetas, Ptas, Decimal division monetary system: 100 cents were equal to 1 peseta. Colloquial term for the 5 Ptas coin: “Duro”.

Money changed owner through Physical transfers. The transmission was done by ordinary cash transactions.

We must mention the institutions that hold the system. According to Weber’s interpretation of the term, we could define institutions as established systems of social relationships and norms that guide behaviour and interactions (Weber 1978).
The institutions that take part on it are Active minting municipal governments (with a legislation allowing them doing so). They depend on Spanish and Catalan pesetas owners (citizens) demanding lower-denomination currencies. Also we may consider confidence as an institution. People must be convinced that these IOUs would always be guaranteed in the currency board by the local legislator, and that other people within the municipality will accept it.

This system obviously had a collateral. It consisted on a Currency board against Spanish/Catalan Pesetas. The valuable assets with fixed price were corresponding Catalan or Spanish pesetas currency, which value was relatively controversial during wartimes.

The tokens were created against the Spanish or Catalan pesetas, while terminated through exchanging for collateral.

6. SYSTEMIC ANALYSIS

The typical functions of money are the Medium of Exchange and the Storage of Value [this last one can be related to others such as Worldwide Reserve and Stabilizing functions].⁸

Although, we can also considered others, such as the Statutory function [including other Social functions and the Wergeld function], Unit of Account function [connected with informational, allocative and clearing unit functions], Money laundering, Standard of deferred payments, Investment function and Political function [which can be also related to Redistributive and Stimulation for desired behaviour functions, and with power function].

This specific kind of currencies can perform extremely well the medium of exchange function, as well as for those related to statutory functions. Unit of accounting is irrelevant since it was a currency board, but of course it can also perform well that function. Money laundering could be done through standard pesetas as well, since it was an exclusive cash system. Moreover, there was a war being fight.

The investment function has being taking a place nowadays, a lot of years after the end of the war (and thus, the end of the monetary system), due to the hobby of collecting.

In the political functions, we described the huge power and legitimization that the system gave to both local and regional governments. However, is like a zero sum game: what is gained by those is lost by central government. Additionally, those functions related to nudge policies or redistributive couldn’t be done in such decentralized system.

The Storage of Value was impossible since those tokens were established in a currency board against very unstable currencies. The Standard of deferred payments function was complicated or even impractical to achieve due to the specificity of the use of the token in territorial limits.

It must be kept in mind that the original idea was simply the introduction of lower-denominated value coins in the local economy, as well as indirectly protecting the local industry (since those couldn’t be used in other villages).

Economically, there wasn’t a competition between tokens since all of them were complementary. We can talk about competition in a political and statutory way, since local institutions aimed to create their own token to legitimize its sovereignty over the other towns, as well as its superiority when talking about fancy designs and materials used.

The history of the currency was a huge trouble itself: the lack of “judicial security” (such as contradiction between laws and a currency board against two different currencies), the shortage of inputs and the constant devaluation of the peseta represented huge handicaps for the survival of the system. So the currency maintained alive during its year of existence not due to the central or Catalan government but despite them. However, since they were local currencies and population wasn’t really concerned about monetary issues, it surprisingly had a good reception between citizens, solving temporarily the problems it was design for avoid (Guía Numismática 2004). Probably, partially due to the same endogeneity.

Thus, the main drivers were the lack of currency and the necessity of exchanging goods and services. Also, businessmen were probably in favour of the system due to the indirect protectionism against other villages, and politicians due to the political relevance of minting tokens (holding even more power).

7. PERSONAL VIEW

I would recommend since the very beginning a different approach: creation of a regional (instead of a wide amount of local) currency board against Spanish pesetas to introduce small-denominated token coins, with the aim of ending with the lack of currency problem. Additionally, the creation of an independent entity, such as a Catalan Central Bank, instead of direct dependence on the government.

On the other hand, by the end of the war (if victorious), stabilizing the system through asset-backed monetization, similar to what was done with the Rentenmark during the Weimar Republic.
All of these would prevent the spreading of confusion and gaining the desired stability, while readdressing the lack of riskless securities problem after wartimes.

Now, in terms of investment recommendations. As exposed during previous sections, this monetary system isn’t working anymore. Thus, nowadays any investment done can just be related to collectionism. As in a great part of historical currencies, I wouldn’t recommend investing due to various factors:

1. Prices are very volatile, based on periods of demand and supply. Those are negotiated in OTC markets, since there are few units of them and are dispersed.
2. It has zero intrinsic value or practical functionality, other than the historical approach.
3. There are a lot of falsifications that only experts can detect and differentiate from the original.

On the other hand, museums and other cultural institutions may invest on them as an important part of their currency collection, since they constituted a very interesting part of our monetary history, and their existence is very limited due to both the Republican and Francoist persecution.

FOOTNOTES

1. ON THE ONE HAND: Creel, J., Hubert, P., & Labondance, F. (2015). Financial stability and economic performance. Economic Modelling, 48, 25-40. ON THE OTHER HAND: Schinasi, M. G. J. (2005). Safeguarding financial stability: theory and practice. International Monetary Fund. ↩︎
2. With cryptos this monopoly has temporarily ended! ↩︎
3. To explore further on the topic: Cuadras-Morató, X. (2019). Political independence and the monetary question: A comparison of the cases of Quebec, Scotland and Catalonia. Generalitat de Catalunya. ↩︎
4. Department of Finance. (1936, August 7). Decree prohibiting the hoarding of silver and banknotes in Catalonia. Official Gazette of the Autonomous Government of Catalonia, Number 220, page 946. AND ALSO: Department of Finance. (1936, September 4). Decree formally prohibiting the hoarding of gold coins and bullion in Catalonia. Official Gazette of the Autonomous Government of Catalonia, Number 248, page 1332. ↩︎
5. Department of Finance. (1936, December 11). Order arranging the circulation through the branches of the Bank of Spain in Catalonia of Treasury bills issued by the Generalitat under the Decree of September 21 of this year. Official Gazette of the Autonomous Government of Catalonia, Number 346, page 949. ↩︎
6. Department of Interior Security. (1936, October 11). Decree issuing norms for the constitution and functioning of the municipalities of Catalonia according to the current demands. Official Gazette of the Autonomous Government of Catalonia, Number 285, page 140. ↩︎
7. Ministry of Finance and Economy. (1938, January 8). First decree of the Ministry of Finance and Economy. Gaceta de la RepÚblica, number 8, page 108. AND ALSO: Ministry of Finance and Economy. (1938, February 25). Second, Third and Fourth decrees of the Ministry of Finance and Economy. Gaceta de la República, number 56, pages 1021-1022. ↩︎
8. A glossary can be found at the end of the document. ↩︎

Glossary of Money Functions

• Medium of exchange: Transitional instrument used to settle the trade of products and services.
• Storage of value: Key for postponement of consumption.
• Worldwide reserve: Universally acceptable money for international trade.
• Stabilizing: Serving as an anchor for other currencies.
• Statutory: A method of keeping score, akin to the points given in Tetris—a ’virtual status symbol.’
• Other social: They are bound to a transaction. However, the transaction is merely a secondary manifestation of an altered social relationship between the agents, such as in the case of a marriage.
• Wergeld: A price paid by a person who has committed a crime consist on the loss of status.
• Unit of account: Standard numerical unit of measurement of the market value.
• Informational: Conveying crucial economic information, such as prices and values, which helps individuals and businesses make informed decisions.
• Allocative: Distributing resources efficiently within an economy.
• Clearing unit: Compensation of mutual debts.
• Money laundering: Making illegally obtained money appear legitimate.
• Standard of deferred payments: Common tool for repaying debt.
• Investment: The practice of using money to generate additional financial returns.
• Political: Uniting people under a sovereign authority.
• Redistributive: Way to facilitate the transfer of wealth within a society.
• Nudge: Money’s ability to act as a motivator.
• Power: The market advantage held by those who control money creation.

Sources

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• Museu d’Historia de Catalunya. (2018). Paper moneda català del 1936 al 1939 [Catalan paper money from 1936 to 1939]. Museum of History of Catalonia. https://www.mhcat.cat/enmhc/check_the_collection/the_museum_presents/papel_moneda_catalan_del_1936_al_1939. [Visited on October 31, 2024]
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