We live in a money economy, more or less. That’s pretty new for most people. Even in the 1600s, a lot of business was done by barter. However, as Adam Smith pointed out in 1776, it’s hard to make change with a cow. Before 1500, silver and gold were very, very expensive in terms of the amount of what they could buy, and even after 1550, the bulk of the rural population rarely saw or used coin for expenses aside from some taxes and trade.
For long-distance trade, fabric along with coin, then letters of credit and spices often served as standards of trade. Silver was generally accepted, no matter where the coin started, so long as it weighed properly. But not always. That’s where “money changers” came in. They knew all the currencies and the exchange rates, and charged a fair fee for trading your Florentine duckets for Lübek thalers, or what have you. The Church and public opinion held money changers down there with pawn brokers, even though both provided a much-needed service. Keep in mind, for many, trade was inherently suspect*, because merchants didn’t make the goods they sold and bought. They just moved them around without adding value, yet they charged more than the basic “fair price.” “Bank” comes from the Italian “banca,” meaning the bench where the money-changer sat as he worked. Sort of like the “bank” in “bankrupt.” Except in that case, you add the Flemish/low German term for overturned. A bankrupt literally had his bench overturned and his papers scattered.
However, not everyone wanted the risk of carrying silver, especially if they had to travel overland. And not all coins were equal. As a result, letters of credit and institutions sort of like exchange bureaux developed in the 1200s. Among the Hansa cities of the Baltic and North Sea, the coins and trading houses of the major cities were recognized as “good” for credit. It wasn’t banking as we think of it, but if you were from a respected business or family (or both) in Italy, you could take goods and a letter of credit to Champagne, say, or one of the other great trade fairs, or to Burges in Burgundy, and do business without having coin of your own. Someone coming south would bring the letter of credit back, perhaps counter-signed by a third merchant, and so business proceeded. If you think about Merchant and Magic, Tycho Rhonarida has a letter of credit with his (much detested) brother-in-law. He can go to his brother-in-law’s remove office in Milunis, present the letter, pay the fee, and draw on his b-i-l’s credit in the city. When Tycho returns to Rhonari, he will pay back his relative, or if business goes well, he will repay that Milunis branch of the business. Because Tycho and his relative don’t like each other personally, it works very well – there’s no risk of favoritism.
In some towns, local currency that remained within a certain distance of the town existed. It replaced “real” coin and supplemented barter. Readers of White Gold of Empire saw it at work in Halfeld Fluss. People in the local market had two price levels – one for outside coin, and one for local tokens. When coins are scarce, but barter’s not ideal, then you get some intermediary. In this case, it is a town token. They are only valid inside the walls or nearby, but they fill the gap. Saxo will see both, as well as the bits of broken silver ring, whole rings, and the occasional copper coin that serve as small change. A standard exchange rate for silver rings always exists.
People will find a way to buy what they want or need. It may be cowery shells, copper ingots, bronze ingots or ax heads, coiled silver or copper arm rings, official coins, whatever. As Adam Smith observed, it’s hard to make change with a cow.
*This seems to be nearly universal, because China and Japan, and other places, considered merchants very, very inferior to those who actually grew or made things.