Tag: banking

Evolution of Money Part II: And we move on with our exciting series about the history of money and its evolution until today. Now, we reach the Age of Shylocks and Banking. We just delivered the next part. In this episode, we are moving on to paper money. Take a cup of tea/bottle of wine and enjoy this educational piece. Trading & Money education is, by the way, just one of the many strengths of Telegram Crypto groups. The Evolution of Money Series 🔹Part I: The Past, Present, and the Future 🔹Part II: The Age of Shylocks and Banking 🔹Part III: The Gold Standard of Money and the Rothschild Banking 🔹Part IV: The Attack of the FED 🔹Part V: The Commercial Banks Strike Back 🔹Part VI: A New Hope 🔹Part VII: The Force in Dormancy The success of the Lydian Stater spread to Europe, particularly Greece, where the potential of money as a system of mutual trust was adopted, adapted, and rapidly improved in the 6th century. The result was the profound transformation of the Greek economy, the growth of its cities, and the emergence of a more sophisticated society. Before the arrival of coin money, the ancient Mediterranean world used a primitive currency that would not have powered the kind of revolution that Greece underwent. Over 4,000 years ago, people in ancient Mesopotamia used clay tablets to record specific financial transactions. With the success of agriculture came the need for people to exchange the surplus goods they produced for those they lacked. These transaction promises, written on clay, did not have inherent value, unlike bars of gold or silver coins, but they functioned as money because the parties involved in the transaction trusted them. It is justifiable to say that money has evolved to be what it is because people trust it. The money counting problem of Europe Evolution of Money II: The use of coins as money was quickly embraced across Europe and Asia. It became a big hit where it was introduced. In some societies, coins were minted from precious metals such as gold and silver. Wherever they were accepted, commerce thrived, and economies boomed. The age of shylocks was coming soon! By 1200 AD, independent states in Europe that had arisen with the fall of the Roman Empire were coexisting and even engaging in commerce with one another. There was, however, the problem that each state developed its own coinage, which hindered smooth trade to a large extent. For instance, in popular commercial cities such as Pisa and Venice, it was not uncommon for traders to use as many as seven different types of coins. This is a really complicated business, such that even the smallest transactions require complicated calculations. Furthermore, these states used the Roman numeral system, which was ill-suited to complex mathematical and financial calculations. With this development came the need for merchants to keep records of their money as they traded. This, in turn, led to the invention of the Abacus, the first computer. In the East, the Suni Muslim Caliphate, the Indians, and the Chinese Empire were far more advanced in money technology than those in Europe. In fact, Europe only began to catch up with them with the introduction of the Hindu-Arabic numeral system after the publication of the book Liber Abaci (Book of Calculation) by Leonardo of Pisa, best known by his nickname Fibonacci in 1202 AD. The new number system was more practical for bookkeeping and currency conversion. However, it led to the introduction of two new functions of money that changed the history of finance: credit and interest. Evolution of Money II "Banking and the age of shylocks" The emergence of credit and money lending Evolution of Money II: Coin money served limited functions when it was introduced to feuding states in modern-day Northern Italy. Fibonacci’s publication unlocked more potential for money as it was discovered how one person can rely on another to borrow money and pay it back at some future date. By the time Giovanni Medici established the Medici bank in 1397, the new number system had taken root. It was much easier to calculate percentages, dates, and other factors of finance and for this reason, money lending emerged as a trade. The Latin word ‘Credo’ means ‘I believe’, which evolved to be ‘Credit’, was first used by money lenders when advancing money to merchants. Venice, the hometown of Shylock, the moneylender popularized in Shakespeare’s The Merchant of Venice, grew to become the greatest money lending city in the world. The true age of shylocks was upon us. The early money lenders were not respected and nobody thought in the begining of the age of shylocks as a derogatory term. If anything, they were seen as pariahs because lending money at an interest was a sin according to the Bible. Because of this, the Jews, who were exempt from the commandments of the Bible, were the only people who could lend money at interest to the majority Christian merchants as far back as 1516. In the age of shylocks this created jealously. With the increase in the number of merchants borrowing money from the Venetian Jews, these ventures grew to become the first banks. The word ‘Bank’ evolved from Banco Rosso, the name of the building the Jews operated from at the entrance of their ghetto in Venice. Money as the new tool of power The price that the Jews had to pay for money lending was social exclusion. They were confined to the Ghetto because while their service was a sin to the Christian world, it became increasingly necessary to the economy of Venice. With time, however, moneylending spread from the Jewish ghettos to become the preserve of the most affluent merchants in the city. In fact, moneylending was the most profitable financial activity in the city of Venice. This created notoriety in the age of shylocks. With the increase in the number of borrowers, the number of people risking eternal damnation just to provide loans at higher interest rates has risen. This led to competition among money lenders and eventually decreased interest rates. As more and more individuals entered the banking business, one particular family, the Medici of the Republic of Florence (present-day Florence City in Italy), emerged as the most successful money lenders to usher in the age of shylocks. No other name in history better symbolizes the success of the money business, and in particular, credit services. Money lending ceased to be irrefutable; it became the most glorious business anyone could get into. Within a short time, those in the banking business became the new power brokers. They had the most influence over the economy of a city and even a state. Unlike in the past, where Kings had absolute say in the running of a state, bank owners established a kind of legacy. No one could have anticipated this legacy. To understand just how influential the bankers became, in just over 400 years, the Medici family produced two queens of France. Furthermore, three became popes in Rome. In fact, the Medici family played a significant role in the French Renaissance from the 15th to the 17th centuries AD. The money-changing business Evolution of Money II: By the early 16th century, money became increasingly accepted as a measure and storage of value. Almost every kingdom and state across Europe and Asia began producing its own money. This was also a period when commerce bloomed, and the shipping industry took shape. Additionally, credit enabled more merchants to take bigger risks and travel more widely to trade. The banking business, though still frowned upon, was the most lucrative trade. Only those with the money to lend succeeded in it. Bankers made even more money by charging a small commission to convert money between currencies. With time, the church relaxed the anti-usury laws that made it a sin to charge interest on money lent and banks, which meant the business became legitimate and even more profitable. Gradually, bookkeeping technology evolved, and in no time, banks were using the double-entry system to maintain their checks and balances. Under Giovanni, the Medici bank remained a trailblazer in banking and soon expanded from Florence to Venice and Rome. This scale of diversity meant that more regions benefited from banking services, and bank owners had greater influence over how cities grew. Paper money Evolution of Money II: Paper money was first used by the Chinese around 618 AD during the Tang Dynasty. The money was mostly in the form of private bills of credit and later exchange notes. However, due to the overproduction of notes, inflation soared. Their value eventually plummeted around 907 AD. Paper money was completely eliminated in China in 1455. It was replaced by a kind of round coin with square corners called kai-yuans, the origin of the word "cash". The literature on Marco Polo's travels to China introduced the idea of paper money to Europe in 1290 AD. Before this, the most developed states in Europe still used coins minted from precious metals such as gold and silver. Florence, the most industrious financial state at the time, used the Florin, a gold coin that was most widely accepted as currency across Europe and in overseas kingdoms where merchants frequented for trade. Because inflation was not so bad at the time, paper money did not catch on until around 1661. Then, the Swedish Stockholms Banco began issuing the first paper money in response to the Swedish kingdom minting new coins that were lighter in weight than the previous ones. Conclusion: The Gold standard of money & Banking Evolution of Money II: With the evolution of the banking business came the need to standardize money to preserve its value. 17th-century Europe was a more connected region that thrived in commerce. The wealthiest members of society were judged by how much money they had. Having more money meant greater influence over the outcomes of wars, who became king, and which state the world could do business with. In the next article, we will delve deeper into the emergence of currency into modern money: the first stable currencies (like the Byzantine gold coin and the Frankish denarius penny), and the roles the Roman Empire and the British played in its evolution.

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