The early Middle Ages, from about 500 CE – 800 CE, operated largely on the basis of subsistence agriculture and a barter economy. Economies were almost entirely local; local lords and kings extracted wealth from peasants, but because there was nowhere to sell a surplus of food, peasants tended to grow only as much as they needed to survive, using methods that went unchanged for centuries. There was a limited market for luxury goods even among those wealthy enough to afford them, and the only sources of reliable minted coins were over a thousand miles away, in Byzantium, Persia, and the Arab kingdoms.
This descent into subsistence had happened for various reasons over the course of the earlier centuries. The fall of the western empire of Rome had strangled the manufacture and trade in high-quality consumer goods (a trade that had been very extensive in Rome). Centuries of banditry, raids, and wars made long-distance travel perilous. In turn, the simple lack of markets meant that there was no incentive to grow more than was needed, and the nobility sought to become more wealthy and powerful not by concerning themselves with agricultural productivity (let alone commerce), but by raiding one another’s lands.
Europe had enjoyed brief periods of relative stability earlier, culminating around 800 CE during Charlemagne’s rise to power. During the rest of the ninth and tenth centuries, however, the invasions of the Magyars, Saracens, and Vikings had undermined the stability of the fragile political order creating by the Carolingians. Many accounts written at the time, almost exclusively by priests and monks, decried the constant warfare of the period, both that caused by invaders from beyond the European heartland and that between European rulers themselves. Historians now believe that market exchange was growing as a component of the European economy by about 800 CE, but the period between 800 - 1000 was still one of political instability and widespread violence.
Things started to change around the year 1000 CE. The major causes for these changes were twofold: the end of full-scale invasions from outside of the core lands of Europe, and changes in agriculture that seem very simple from a contemporary perspective, but were revolutionary at the time.