August 5, 2025

[This is Part 2 of a 5-part series on the hidden history of money and power, continuing from “Before Money: 5,000-Years of Control.”]

“The past is never dead. It’s not even past.”

— William Faulkner, Requiem for a Nun

The Houses of Parliament burn in 1834, ignited by the incineration of centuries-old tally sticks - the “primitive” monetary system that funded the British Empire for 700 years. Print by W. Belch

Money Accidentally Burns Down Parliament, 1834 AD

On the evening of October 16, 1834, two workmen descended into the furnaces beneath the House of Lords with a simple task: dispose of some old wooden sticks. These weren’t just any sticks - they were the accumulated remnants of a monetary system that had financed English kings for over seven centuries. The tally sticks, split pieces of hazelwood that once represented the debts and credits of the realm, had been declared obsolete. Progress demanded their destruction.^[1]

The workmen, perhaps eager to finish their shift, overloaded the furnaces. The ancient wood, seasoned by centuries of storage, burned with unexpected fury. The fire escaped the furnaces, racing through the medieval wooden structure of Westminster Palace. By morning, both Houses of Parliament lay in ruins, the seat of British democracy consumed by the cremation of its former monetary system.^[2]

The symbolism is almost too perfect. The physical destruction of one monetary regime literally cleared the ground for another. The new Parliament buildings, those Gothic Revival monuments that tourists photograph today, rose from the ashes of wooden money. In its place stood the Bank of England’s paper notes - a “modern” system that would soon reveal itself as merely a more sophisticated method of creating money from nothing.

But here’s what they don’t teach in economics classes: that “primitive” wooden money was, in many ways, superior to our electronic systems. It was unhackable, required no banks, charged no fees, and served the public interest rather than private profit. The tally stick system wasn’t abandoned because it failed. It was destroyed because it succeeded too well - for the wrong people. People like you, today.

Unhackable Money Made of… Wood, 1100 AD

To understand why medieval wooden money threatens modern banking’s legitimacy, we need to examine how the system actually worked. The English tally stick system, formally established around 1100 CE under King Henry I, was ingeniously simple yet cryptographically sophisticated.^[3]

The process began when the Exchequer (the royal treasury, named after the checkered cloth used for calculations) needed to record a transaction. A wooden stick, typically of seasoned hazelwood about 8-9 inches long, would be selected. Using a precise system of notches, the amount would be carved into the wood:

* A palm-width notch = £1,000

* A thumb-width notch = £100

* A little finger width = £1

* A mere score mark = 1 penny^[4]

But here’s where medieval cryptography surpassed modern technology. After carving, the stick was split lengthwise through the notches. The longer piece with the handle, called the “stock” (origin of “stockholder”), was kept by the creditor. The shorter piece, the “foil” or “tally,” went to the debtor. Because wood grain is unique and the split irregular, the two pieces could only match each other - creating an unforgeable record.^[5]

“The Split Tally was a technique which was sublimely tailored to the technology of the medieval period. By the middle of the twelfth century, the Exchequer was the most sophisticated financial institution in Europe.”

— M.T. Clanchy, From Memory to Written Record

The system evolved beyond simple receipts. By the reign of Henry II (1154-1189), tallies had become transferable instruments - effectively government-issued money. A soldier paid with a £10 tally for military service didn’t need to wait for tax season. He could use it to buy supplies from a merchant, who could use it to pay customs duties, who could use it to settle debts. The tally circulated exactly like money because it was money - backed by the state’s promise to accept it for tax payments.^[6]

The Chinese Exception: When “Primitive” Money Outlasted Empires

As England cremated its tally sticks in 1834, declaring them primitive relics, Chinese merchants continued using similar systems well into the 20th century. The Smithsonian houses a Chinese tally stick from 1932 - made of ivory or bone, small enough to fit in a palm, yet representing the same cryptographic principles that medieval English kings used to finance empires.^[23]

This wasn’t an isolated artifact. Throughout the chaotic Republican era (1912-1949), as the Qing dynasty collapsed and warlords carved up China, traditional credit systems resurged precisely when “modern” money failed. While Western banks in Shanghai traded silver-backed notes that became worthless during the 1933 U.S. Silver Purchase shock, rural Chinese merchants continued using:

* Bamboo tallies (錢籌) - Produced from the 1870s to 1940s across eastern China, inscribed with denominations and split for verification^[24]

* Fu sticks (符) - Split wooden or bamboo credit instruments dating back to the Han Dynasty (206 BCE)

* Merchant account tallies - Used to track credit between suppliers and customers when banks were scarce or unreliable

Ivory/Bone Chinese Tally Stick, 1932National Museum of American History Smithsonian, Record Id: nmah_1826618

These weren’t desperate measures by the ignorant - they were sophisticated responses to monetary chaos. When the Nationalist government’s fiat currency collapsed in the 1940s, when Japanese invasion disrupted banking networks, when warlords issued competing currencies, the tally stick endured. Why? Because it required no banks, no government backing, no complex infrastructure - just trust between two parties and a piece of split bamboo.

Modern blockchain enthusiasts like Sebastian Bilbao explicitly connect these ancient systems to distributed ledgers, noting that tally sticks “had very similar characteristics to those of a data block in a blockchain… two immutable parts that uniquely match together.”^[25] The persistence of Chinese tallies into the 1930s proves these “primitive” systems weren’t abandoned for technical superiority - they were suppressed because they bypassed institutional control.

The Knights Templar: God’s Investment Bankers, 1100’s AD

While English kings were perfecting wooden money, a military order of warrior monks was creating the world’s first international banking network. The Knights Templar, founded in 1119 to protect Christian pilgrims to Jerusalem, stumbled into finance through a practical problem: how to move wealth across a continent crawling with bandits, through territories controlled by hostile forces.^[7]

Their solution anticipated modern banking by 800 years. A nobleman planning a pilgrimage to the Holy Land faced a terrible dilemma. Carrying gold meant almost certain robbery. Leaving wealth unguarded invited theft by rivals. The Templars offered a third option: deposit your gold at the Temple in London, receive an encoded letter of credit, and withdraw equivalent funds at the Temple in Jerusalem.^[8]

The encoding system itself was remarkable. Each letter of credit contained:

* Complex ciphers unique to each commandery

* Seal impressions that couldn’t be forged

* Coded phrases that confirmed the bearer’s identity

* Hidden marks that indicated the exact amount deposited^[9]

But the Templars’ true innovation wasn’t technological - it was organizational. They created the first multinational corporation, with standardized practices across their network of 870 castles, preceptories, and subsidiary houses stretching from Scotland to the Holy Land.^[10] They invented international banking standards:

* Uniform accounting practices across all branches

* Regular audits sent to headquarters

* Standardized interest rates (yes, despite religious prohibitions)

* Letters of credit honored at any Templar house

* Safe deposit services for royal treasures

“The Templars were the West’s first bankers, and in their pride they proclaimed it. The cross on their mantles was red, they said, because they were ‘signed with blood.’ But their real signature was written in gold.”

— Desmond Seward, The Monks of War

By 1200, the Templars had become “God’s bankers,” managing the finances of kings and popes. The French crown used the Paris Temple as its treasury. King John of England stored the crown jewels with them. They collected papal taxes, financed crusades, and managed the estates of Europe’s nobility.^[11]

Their power seemed unassailable. They reported to no king, only the Pope. Their military might protected their financial network. Their reputation for incorruptibility made them trusted by Christian and Muslim rulers alike. They had discovered that controlling money flow was more powerful than controlling territory.

Which is exactly why they had to be destroyed.

The Medici Method: From Wool to World Power, 1400’s AD

The Templars’ destruction in 1307 (orchestrated by King Philip IV of France, who owed them massive debts) created a power vacuum in European finance.^[12] Into this gap stepped seemingly humble Italian merchants who would perfect the art of hiding financial power behind cultural patronage. None mastered this better than the Medici family of Florence.

The Medici began as wool merchants in the 13th century - about as gamey and unglamorous as origins get. But Giovanni di Bicci de’ Medici (1360-1429) recognized that the real profit wasn’t in wool but in the financial services surrounding trade. He established the Medici Bank in 1397 with a radical innovation: double-entry bookkeeping imported from the Islamic world.^[13]

This accounting system, which records every transaction as both a debit and credit, seems mundane today. But in medieval Europe, it was revolutionary technology. It allowed the Medici to:

* Track complex international transactions

* Hide profits from tax collectors

* Calculate precise interest while appearing not to charge it

* Manage multiple currencies across their branches

* Create money through fractional reserve lending^[14]

“Banking is the art of assisting God in His eternal plan for mankind - for a modest fee.”

— Apocryphally Attributed to Cosimo de’ Medici

Under Cosimo de’ Medici (1389-1464), the bank evolved into Europe’s most powerful financial institution. But Cosimo understood something the Templars hadn’t: visible power attracts destruction. Instead of flaunting wealth, he cultivated an image as “father of the poor” while secretly controlling Florence’s government through debt relationships.^[15]

The Medici’s true innovation was disguising usury (charging interest, forbidden by the Church) through creative accounting:

* “Discretionary deposits” that earned “gifts” rather than interest

* Exchange rate manipulation that hid interest in currency conversions

* “Dry exchanges” - fictional currency trades that generated real profits

* Commission fees that definitely weren’t interest (wink wink)^[16]

By 1450, the Medici Bank had branches in London, Geneva, Bruges, Avignon, Milan, Rome, and Venice. They held the papal accounts, making them God’s new bankers. They financed kings, elected popes, and commissioned Renaissance art that still draws tourists to Florence to this day. They had transformed money from a tool of exchange into an instrument of cultural and political power.

The Goldsmiths’ Revolution, 1640’s AD

While Italian bankers were perfecting international finance, English goldsmiths stumbled onto the secret that would define modern banking: you can lend money that doesn’t exist.

The goldsmiths’ transformation began innocently enough. After the English Civil War (1642-1651), wealthy merchants needed secure storage for their gold. The Royal Mint, traditionally used for this purpose, had proven unreliable when King Charles I had “borrowed” depositors’ gold in 1640.^[17] Goldsmiths, with their strong vaults and security, offered an alternative.

Depositors received receipts for their gold - simple acknowledgments of storage. But London’s merchants discovered these receipts were more convenient than the gold itself. Instead of withdrawing gold to make payments, they simply endorsed their receipts to others. The goldsmith receipts began circulating as money.^[18]

Then came the revelation that changed finance forever. Goldsmiths noticed that depositors rarely all demanded their gold simultaneously. If only 10% of gold was ever withdrawn at once, why keep the other 90% idle in the vault? They began issuing receipts for gold they didn’t have, lending these “fictional” receipts at interest.

“The Goldsmiths of Lombard Street…do certainly make above £100,000 per annum purely by their Credit, they having seldom above £10,000 or £15,000 lying dead by them.”

— Anonymous pamphlet, 1676

This was the birth of fractional reserve banking - creating money from nothing more than confidence and accounting entries. A goldsmith with £1,000 in actual gold could issue receipts for £10,000, earning interest on £9,000 of fictional money. As long as everyone didn’t demand their gold at once, the scheme worked beautifully.^[19]

The goldsmiths had discovered what the Templars and Medici only approximated: the alchemical power to create money from nothing. They didn’t need the King’s mint or the Pope’s blessing. They needed only ledgers and the public’s trust.

The Bank of England: Legitimizing the Scam, 1694 AD

The goldsmiths’ money creation might have remained a profitable but small-scale fraud if not for a fiscal crisis that threatened the English crown. In 1694, King William III needed £1.2 million to finance his war against France. Traditional revenue sources were exhausted. Enter a Scottish entrepreneur named William Paterson with a audacious proposal.^[20]

Paterson’s scheme was breathtaking in its simplicity and audacity:

* Wealthy merchants would lend the government £1.2 million in gold

* In return, they’d receive the right to operate as “The Bank of England”

* The bank could issue notes up to the value of their capital

* These notes would be backed by the government’s promise to repay

* The bank could then lend these notes at interest^[21]

Think about what this meant: the merchants lent real gold to the government and received paper notes in return. They then lent those same paper notes to the public at interest. They were earning interest twice on the same capital - once from the government, once from private borrowers. The government got its war funds, the merchants got a money-printing monopoly, and the public got… debt.

“The Bank hath benefit of interest on all moneys which it creates out of nothing.”

— William Paterson, founder of the Bank of England

But here’s where medieval wooden tallies proved superior to modern banking. When the crown issued tallies, it spent them directly into the economy for goods and services. No interest was owed. The money was created debt-free. The Bank of England’s system, by contrast, meant that all money was created as interest-bearing debt. Every pound in circulation represented a pound of debt plus interest owed to private bankers.^[22]

The Bank’s charter was supposed to be temporary - just long enough to finance the war. But wars have a way of extending indefinitely when they’re profitable for the lenders. By 1720, the Bank of England had become permanent, its notes circulating as the primary currency of the realm. The tally stick system, which had served England for 700 years, was gradually phased out in favor of the Bank’s interest-bearing notes.

Why They Burned the Evidence, 1834 AD

The parallel existence of tally sticks and bank notes created an embarrassing comparison. Tallies represented public money created for public purpose. Bank notes represented private money created for private profit. As long as tallies remained in circulation, they posed a threat to the Bank’s monetary monopoly.

The official abandonment came in 1826, but physical tallies remained valid and continued to circulate. It wasn’t until 1834 that Parliament ordered their destruction - not because they didn’t work, but because they worked too well. They reminded people that money creation didn’t require banks, debt, or interest. They were evidence of an alternative system that served the public rather than private shareholders.

The fire that destroyed Parliament was more than an accident - it was a cremation of institutional memory. With the tallies went the physical proof that England had once created money as a public utility rather than private property. The new Parliament that rose from those ashes would be forever in debt to the Bank of England and its successors.

“It is no coincidence that the century of the Bank of England was also the century in which the National Debt increased from £1 million to £850 million.”

— Christopher Hollis, The Two Nations

The Pattern Repeats

The transition from tally sticks to bank notes established a pattern repeated throughout history:

* Public Innovation: A government creates a monetary innovation to serve public needs (tallies, colonial scrip, greenbacks)

* Private Capture: Private interests recognize the profit potential and lobby for control

* Crisis Creation: A war or economic crisis provides the excuse for “temporary” private control

* Permanent Takeover: The temporary becomes permanent through regulatory capture

* Historical Erasure: The public alternative is eliminated and its history obscured

The medieval period reveals that our ancestors weren’t primitive in their monetary understanding - they were sophisticated enough to create systems that served public purpose rather than private profit. The Knights Templar proved international banking could operate on trust and service. The tally sticks demonstrated money creation without debt. Even the Medici, for all their faults, invested their profits in public beauty rather than offshore accounts.

These systems weren’t abandoned because they failed. They were destroyed because they succeeded - for the wrong class of people. Every monetary innovation that democratizes finance, from medieval tallies to modern cryptocurrencies, faces the same opposition from those who profit from complexity, opacity, and debt.

Bitcoin As a Digital Tally Stick?

As we stand at another monetary crossroads with CBDCs and cryptocurrencies, the medieval period offers crucial lessons. The tally stick system had features that no modern money can match:

* Unhackable: Physical splitting made counterfeiting impossible

* Decentralized: No central point of failure or control

* Transparent: Anyone could verify a tally match

* Debt-free: Money created by spending, not lending

* Public purpose: Served the crown and commonwealth, not private profit

Bitcoin advocates claim to recreate these features digitally. But Bitcoin, like gold, must be mined at great cost. CBDCs promise efficiency but threaten total surveillance. Perhaps what we need isn’t a high-tech solution but a return to the simple principle the tally stick embodied: money should be a public utility, not a private monopoly.

The ashes of Parliament have long since been swept away, but the questions raised by burning those ancient tallies remain:

* Why does money creation require debt?

* Why do private banks profit from public currencies?

* Why is monetary history hidden from economic education?

* What would happen if people understood the alternatives?

The elites who gathered those tally sticks for burning in 1834 understood something important: physical evidence of alternative systems is dangerous. It suggests that current arrangements aren’t natural or necessary but chosen - and what is chosen can be changed.

[This investigation continues in Part 3: “Revolution and Greenbacks: America’s Monetary Insurgency” - exploring how the American experiment became a battleground between democratic and private control of money, from colonial scrip to Civil War greenbacks to the Federal Reserve’s questionable origins.]

Footnotes

^[1]: Accounts of the 1834 fire from: Shenton, Caroline, The Day Parliament Burned Down (Oxford University Press, 2012), pp. 45-67. The workmen were Richard Weobley and Patrick Furlong.

^[2]: Parliamentary records of damage: “Report from the Select Committee on the Houses of Parliament,” House of Commons Papers, 1835, Vol. 18, pp. 1-24.

^[3]: Jenkinson, Hilary, “Medieval Tallies, Public and Private,” Archaeologia, Vol. 74 (1925), pp. 289-351. The most comprehensive study of the tally system.

^[4]: The notch measurements from: Clanchy, M.T., From Memory to Written Record: England 1066-1307 (Blackwell, 1993), p. 95.

^[5]: Hall, Hubert, “The Tally and the Chequer,” Economic History Review, Vol. 2, No. 2 (1930), pp. 204-218.

^[6]: Baxter, W.T., “Early Accounting: The Tally and Checkerboard,” The Accounting Historians Journal, Vol. 16, No. 2 (1989), pp. 43-83.

^[7]: Barber, Malcolm, The New Knighthood: A History of the Order of the Temple (Cambridge University Press, 1994), pp. 1-25.

^[8]: Templars’ financial innovations: Ferris, Eleanor, “The Financial Relations of the Knights Templars to the English Crown,” American Historical Review, Vol. 8, No. 1 (1902), pp. 1-17.

^[9]: Encoding systems from: Parker, Thomas W., The Knights Templars in England (University of Arizona Press, 1963), pp. 58-72.

^[10]: The 870 figure from: Nicholson, Helen, The Knights Templar: A New History (Sutton Publishing, 2001), p. 4.

^[11]: Royal banking relationships: Lord, Evelyn, The Knights Templar in Britain (Pearson, 2002), pp. 175-198.

^[12]: The 1307 arrests: Demurger, Alain, The Last Templar: The Tragedy of Jacques de Molay (Profile Books, 2004), pp. 139-167.

^[13]: De Roover, Raymond, The Rise and Decline of the Medici Bank, 1397-1494 (Harvard University Press, 1963), pp. 35-52.

^[14]: Double-entry impact: Gleeson-White, Jane, Double Entry: How the Merchants of Venice Created Modern Finance (Norton, 2012), pp. 61-89.

^[15]: Cosimo’s political control: Kent, Dale, Cosimo de’ Medici and the Florentine Renaissance (Yale University Press, 2000), pp. 291-318.

^[16]: Disguising usury: De Roover, Raymond, “The Concept of the Just Price: Theory and Economic Policy,” Journal of Economic History, Vol. 18, No. 4 (1958), pp. 418-434.

^[17]: Charles I’s seizure: Horsefield, J. Keith, British Monetary Experiments, 1650-1710 (Harvard University Press, 1960), pp. 6-7.

^[18]: Goldsmith receipts as currency: Richards, R.D., The Early History of Banking in England (P.S. King & Son, 1929), pp. 40-68.

^[19]: Fractional reserve origins: Joslin, D.M., “London Private Bankers, 1720-1785,” Economic History Review, Vol. 7, No. 2 (1954), pp. 167-186.

^[20]: Bank of England founding: Clapham, John, The Bank of England: A History, Volume 1 (Cambridge University Press, 1944), pp. 1-21.

^[21]: Paterson’s scheme: Giuseppi, John, The Bank of England: A History from its Foundation in 1694 (Evans Brothers, 1966), pp. 1-15.

^[22]: Debt-based money creation: Dickson, P.G.M., The Financial Revolution in England: A Study in the Development of Public Credit, 1688-1756 (Macmillan, 1967), pp. 39-75.^[23]: Chinese tally stick: Smithsonian National Museum of American History, Catalog Number 77.61.081, Stack Family Collection. Bone/ivory tally stick, 86mm length, associated date 1932.

^[24]: Bamboo tally history: "Bamboo Tallies," Wikipedia, detailing use from 1870s-1940s in Shandong, Jiangsu, and Zhejiang provinces as supplementary currency during monetary instability.

^[25]: Bilbao, Sebastian, "From Tally Sticks to Block Chains," Economics Conference of the Goetheanum, October 22, 2022. Connects medieval accounting technology to modern blockchain systems.

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