Tales of Soft Money — Cotton on Cape Verde
Another 'Money in Africa'-themed British Museum research publication, this time by Carlos. F. Liberato, inadvertently captures some interesting dynamics of hard and easy (or soft) money as well. The 15th to 18th century European - mainly Portuguese - meddling in the Guiné region of West Africa often makes people think of the slave trade. The trade in human beings was of course pivotal there, but seldom is it told what the Europeans used to actually pay for their cargo. The surprising answer is: they used cloth strips as money, not for a limited period of time, but over centuries.
Cape Verde is an archipelago in the Atlantic Ocean, west of what today is Senegal. Portuguese explorers found the uninhabited islands in the 15th century and decided to colonize them. As it were, it turned out cotton could grow on some of the more rain-heavy parts, which, given the landscape of Guiné in the centuries thereafter, incidentally made the islands a base for money production. Alvise Cadamosto, who visited the region in 1455 and 1456, was one of the first Europeans to document the fact that cotton was already grown and cultivated on the African mainland by locals. The Portuguese, quick to notice how relatively valuable cotton cloth strips were for the coastal inhabitants of upper Guiné, proceeded in setting up cotton plantations themselves around their newly claimed settlements.
As early as the 16th century, cloth strips had evolved as a well established form of money in Senegambia, by the coast as well as further inland. The area had important cultural and historical ties with the cotton cloths introduced over the past centuries by Muslim traders from north of Sahara. Even on Cape Verde the barafula (cloth strips sewn together) became the standard currency in which taxes, as well as soldier wages were paid. Despite cloths being produced locally by African tribes as well, the Portuguese were more efficient, which led to a profitable but perverse slave supply chain to Cape Verde, financed by de facto money the slaves themselves cultivated on the island plantations. Scottish historian Christopher Fyfe described this ecosystem:
Some of the slaves were weavers by profession, and wove the cotton into country cloths as they had done on the mainland. New elaborate patterns of North African type were introduced, and from the middle of the 16th century Cape Verde panos [cloth strips] were regularly exported to Guiné to be exchanged for slaves. As elsewhere in West Africa, European traders were forced to adopt African methods of accounting, and panos became recognized as units of account, just as bars and cowries were in other regions. 
To strike a balance between standardization and different 'denominations', the Cape Verde panos initially came in three broad categories: grossos (rough), ricos (intricate), and tecido fino (delicate) fabric. It is easy to see the conceptual similarity to how coins often were ranked historically (copper, silver, gold). Despite these standardization efforts, Portuguese civil and military officials operating at various African trading posts often opposed the use of cloths as money. They had to make do, because only in 1864 did Portuguese overseas territories get an official provincial currency with the help of the Banco Nacional Ultramarino.
Liberato continues by mentioning that the panos circulating in the Rivers of Guiné fetched a value surpassing the level that could be derived from their practicality and immediate consumption. A widespread use of panos as a shroud for funeral corpses probably exacerbated this property. The more important the deceased, the higher number of panos were used in the burial gathering, which meant the cloth strips were functioning as a public show of wealth and status. The relatively high market price clearly was money premium at work, and portrays the exact same dynamics that gold does when trading for a much higher price than what could possibly be explained by its glimmer or malleability alone. Further corroboration of the money properties of cloth strips came from a certain Francisco de Andrade in 1582:
[...] nothing is traded [a long the Nuno River] other than loaves of dye, like sweet bread, that are then loaded on ships that go to the São Domingos River [Cacheu], to be used by the Negroes to color their cloth black so it [the dyed cloth] can be used as money all along the other Rivers of Guiné. 
It should be noted that the Portuguese of Cape Verde not only relied on the production of cotton. In this sense, they of course did other, conventional trading with non-monetary commodities. Yet, even here they managed to in a way, create wealth 'from nothing', as Dutch shipmaster Dierich Ruiters complained about in 1623:
The trade we called 'coastal' is mostly undertaken in small ships, pinnaces and launches, by Portuguese who live on Santiago Island. First they load these with salt, which they conveniently obtain for nothing on the islands of Maio and Sal (Cape Verde Islands) and they sail to Serra-Lioa with the salt and trade it for gold, ivory and kola. Then from Serra-Lioa they sail again to Joala and Porto d'Ale (in Senegal), where they trade a portion of the kola for cotton cloths. They also sometimes trade ivory obtained in Serra-Lioa for Cape Verde cloths [so called because many are made at Cape Verde]. From there they sail again east to Cacheo where they trade the rest of their kola and their remaining goods for slaves. They acquire fifty to sixty slaves in exchange for the goods they have obtained by trade along the coast, and each slave is worth 150 reals to them, or pieces-of-eight. So they make 9,000 -10,000 reals out of nothing, in a matter of speaking. 
Apparently, the Portuguese were secretive regarding these lucrative trade routes in order to not dilute profits. Despite these other traded commodities, panos were still the main money used in the area. On occasion, certain slave trades could not be made without the use these Cape Verdean cloth strips, and with this exclusivity came power. The monopoly-like situation caused Portuguese authorities to outlaw the sale of panos to other ships, with the very real warning of capital punishment if unheeded. The islanders often sold them to Dutch, British or French captains anyway, who then could use them to acquire slaves for their colonies.
In the 18th century, the Grão Pará and Maranhão Company was founded to facilitate trade between Portugal, West Africa, and the Portuguese colonies in South America. It established a state-sponsored monopoly on the production of panos, meaning all Cape Verde producers had to supply the company's warehouses on the islands, from where cloths were shipped to the trading posts. Even then, hundreds of years after the first Portuguese started using cloth strips as currency when bartering with the West Africans, did the panos act as money. The company collected taxes and fees in panos, meaning it was legal tender at the time. It's monopoly also made it a large facilitator of slave trades. Not only did the semi-private Grão Pará and Maranhão Company have the right to collect taxes, it was given the right to organize and station soldiers as well - something that of course is remarkable in today's standard.
The company continued the islands' exports to the West African tribes for decades. Not until later in the 18th century, when the French introduced even more efficient Indian-woven cloth strips from Pondichéry, did the Portuguese panos face true competition. It was yet another example of production efficiency causing supply inflation, and it is easy to imagine Portuguese cloth warehouse owners bitterly cursing the French dilution of not just their commodities, but of their very money. This dilution wave was of course inevitable, as was the one the Portuguese initially brought on to the region. The fact that any increase in the money premium of cotton cloths leads to more and expanding cotton plantations and textile workshops puts a severe dent in cotton cloths' store-of-value property. This is the characteristics of easy money, whereas hard money on the other hand struggles mightily with increased production quantities despite an increase in price.
It is worth adding that while Portuguese families or companies that stored value under this fundamentally inflationary protocol very well could see inter-generational wealth decrease, the situation was obviously worse for certain Africans. The realization is sobering; Africans experienced some of the worst possible outcomes imaginable from the fact that their own, easy money could be mass produced by unscrupulous foreigners. When different value protocols are facing each other in a free market, it will always be the harder one that breaks the easy (or soft) one.
When thinking of cloth strips as money, it also begs the question why the involved parties did not instead apply a more well-known commodity to the problem, like scarce gold or silver. It is somewhat outside the scope of the easy and hard money focus on this article, but a guess is that, when on the brink of starvation and other hardships, having a value protocol where the tokens themselves are also inherently useful to humans probably can have it's advantages.
 Liberato, C.F. (2009). Money, Cloth-Currency, Monopoly, and Slave Trade in the Rivers of Guiné and the Cape Verde Islands, 1755-1777. British Museum Research Publication 171. Liberato refers to: Fyfe, C. (1980). The Cape Verde Islands, Tarikh 6(4): 20-30. Needs final verification.
 Liberato, C.F. (2009). Money, Cloth-Currency, Monopoly, and Slave Trade in the Rivers of Guiné and the Cape Verde Islands, 1755-1777. British Museum Research Publication 171. Liberato refers to: Brásio, A., 1963. Monumenta missionária africana: II. África Ocidental, 1500 -1569. 2nd series, Lisbon. Needs final verification.
 Liberato, C.F. (2009). Money, Cloth-Currency, Monopoly, and Slave Trade in the Rivers of Guiné and the Cape Verde Islands, 1755-1777. British Museum Research Publication 171. Liberato refers to: Hair, P.E.H., 1974. 'Sources on early Sierra Leone (2): Andrade, 1582; Ruiters, 1623; Carvalho, 1632' Africana Research Bulletin 5(1) (Oc tober): 47 - 56. Needs final verification.