Larry Neal, How it all began: the monetary and financial architecture of Europe during the first global capital markets, 1648–1815

The Treaty of Westphalia created the modern nation-state system of Europe and set the stage for the long-term success of financial capitalism. The new sovereign states experimented with competing monetary regimes during their wars over the next century and two-thirds while they extended and perfected the financial innovations in war finance developed during the Thirty Years War. The Dutch maintained fixed exchange rates, the French insisted on exercising monetary independence, while the English placed priority on free movement of international capital. In struggling with the trilemma of choosing among the goals of maintaining fixed exchange rates, monetary independence and free movement of capital, the governments of early modern Europe learned many valuable lessons. By the time of the Napoleonic wars, the innovations that emphasised reliance on financial markets rather than on financial institutions proved their superiority.