Evidence from wages and prices on the limited utility of Germany's first paper money (1772-1873)

Saxony’s Kassenbillets (1772–1873) are widely referred to as Germany's first ‘successful’ paper money, yet no systematic analysis has examined what made them successful. This paper challenges this consensus by testing whether Kassenbillets could practically be used to cover essential purchases across different income groups. Using a historical consumer price index for Leipzig and Dresden (1763–1803) and wage data, the analysis compares the cost of annual consumption baskets against income levels and evaluates whether Kassenbillets aligned with actual purchasing patterns. Three critical problems limited their use as everyday currency: extreme price volatility with the consumer price index (212.81% increase); structural insufficiency of wages with 26.09% of incomes falling below basic consumption costs; and systematic exclusion of lower income groups, as 57.33% of wages fell below one Taler weekly, making even the smallest denomination impractical. Contemporary sources recognised that the average income was 50 Taler annually, yet authorities introduced one Taler as the smallest denomination, effectively designing a financial instrument inaccessible to most. While Kassenbillets were designed to support state debt financing, they failed as a medium of exchange for the broader population, demonstrating that monetary innovations can serve elite interests whilst excluding the wider population.