The article offers a new interpretation of Martin Luther as an economic thinker, as well as the monetary economic origins of the Reformation of 1517. The argument is presented in six sections. The first one outlines key points in Luther's biography relevant for the present purpose. A second section discusses the basic features of Luther's economic “theory.” This gives rise to a brief discussion of the development of the money supply in Germany in the period and the most likely development in the velocity of the circulating coins. Both are important for setting the context of the quite peculiar economic discourses on pilgrimages, balance-of-payment deficits, and indulgences that were prominent in the early 1520s in the German lands. Martin Luther picked up directly on the economic situation and economic discourses of his day, which were marked by crisis and depression. Debates on indulgences and balance-of-payment constraints waged by the humanists and early reformers of the 1520s thus “created” the Reformation of 1517. These debates also stood at the heart of a long proto-Keynesian tradition in Continental European economic thought that emphasized, since the Middle Ages, the need to spend or invest money rather than letting it lie idle.

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