Part 205

"The business of money-changing seemed thoroughly at home here, and it is not surprising that the invention of bills of exchange, which we first meet with in 1199 in the relations between England and Italy, should be ascribed to Florence. The money trade seems to have flourished as early as the twelfth century, towards the end of which a Marquis of Ferrara raised money on his lands from the Florentines. In 1204 we find the money-changers as one of the corporations. In 1228, and probably from the beginning of the century, several Florentines were settled in London as changers to King Henry III.; and here, as in France, they conducted the money transactions of the Papal chair in conjunction with the Sienese. Their oldest known statute, which established rules for the whole conduct of trade (Statuto dell' Università della Mercatanzia) drawn up by a commission consisting of five members of the great guilds, is dated 1280. Their guild-hall was in the Via Calimaruzza, opposite that of the Calimala, and was litter included in the buildings of the post-office, on the site of which, after the post-office had been removed to what was formerly the mint, a building was lately erected, similar in architecture to the Palazzo of the Signoria, which stands opposite. Their coat of arms displayed gold coins laid one beside another on a red field. At the end of the thirteenth century their activity, especially in France and England, was extraordinarily great. But if wealth surpassing all previous conception was attained, it not seldom involved loss of repute, and those who pursued the calling ran the risk of immense losses from fiscal measures to the carrying out of which they themselves contributed, as well as those which were caused by insolvency or dishonesty. … The names of Tuscans and Lombards, and that of Cahorsiens in France, no longer indicated the origin, but the trade of the money-changers, who drew down the ancient hatred upon themselves. … France possessed at this time the greatest attraction for the Florentine money-makers, although they were sometimes severely oppressed, which is sufficient proof that their winnings were still greater than their occasional losses. … The Florentine money market suffered the severest blow from England. At the end of the twelfth century there were already Florentine houses of exchange in London, and if Pisans, Genoese, and Venetians managed the trade by sea in the times of the Crusades, it was the Florentines mostly who looked after financial affairs in connection with the Papal chair, as we have seen. Numerous banks appeared about the middle of the thirteenth century, among which the Frescobaldi, a family of ancient nobility, and as such attainted by the prosecutions against it, took the lead, and were referred to the custom-house of the country for re-imbursement of the loans made to the kings Edward I. and II. Later, the two great trading companies of the Bardi and Peruzzi came into notice, and with their money Edward III. began the French war against Philip of Valois. But even in the first year of this war, which began with an unsuccessful attack upon Flanders, the king suspended the payments to the creditors of the State by a decree of May 6, 1339. The advances made by the Bardi amounted to 180,000 marks sterling, those of the Peruzzi to above 135,000, according to Giovanni Villani, who knew only too well about these things, since he was ruined by them himself to the extent of 'a sum of more than 1,355,000 gold florins, equivalent to the value of a kingdom.' Bonifazio Peruzzi, the head of the house, hastened to London, where he died of grief in the following year. The blow fell on the whole city. … Both houses began at once to liquidate, and the prevailing disturbance contributed not a little to the early success of the ambitious plans of the Duke of Athens. The real bankruptcy ensued, however, in January 1346, when new losses had occurred in Sicily. … The banks of the Acciaiuoli, Bonuccorsi, Cocchi, Antellesi, Corsini, da Uzzano, Perendoli, and many smaller ones, as well as numerous private persons, were involved in the ruin. 'The immense loans to foreign sovereigns,' adds Villani, 'drew down ruin upon our city, the like of which it had never known.' There was a complete lack of cash. Estates in the city found no purchasers at a third of their former value. … The famine and pestilence of 1347 and 1348, the oppressions of the mercenary bands and the heavy expenses caused by them, the cost of the war against Pope Gregory XI., and finally the tumult of the Ciompi, left Florence no peace for a long time. … At the beginning of the fifteenth century industry was again flourishing in all its branches in Florence, financial operations were extended, and foreign countries filled with Florentine banks and mercantile houses. … In London the most important firms had their representatives, Bruges was the chief place for Flanders, and we shall see how these connections lasted to the time of the greatest splendour of the Medici. France is frequently mentioned. The official representatives of the Florentine nation resided in the capital, while numerous houses established themselves in Lyons, in Avignon (since the removal of the Papal chair to this town), in Nismes, Narbonne, Carcassonne, Marseilles, &c. … The house of the Peruzzi alone had sixteen counting-houses in the fourteenth century, from London to Cyprus."

_A. van Reumont, Lorenzo de' Medici, book 1, chapter 4 (volume 1)._

"The three principal branches of industry which enriched the Florentines were—banking, the manufacture of cloth, and the dyeing of it, and the manufacture of silk. The three most important guilds of the seven 'arti maggiori' were those which represented these three industries. Perhaps the most important in the amount of its gains, as well as that which first rose to a high degree of importance, was the 'Arte del Cambio,' or banking. The earliest banking operations seem to have arisen from the need of the Roman court to find some means of causing the dues to which it laid claim in distant parts of Europe to be collected and transmitted to Rome. When the Papal Court was removed to Avignon, its residence there occasioned a greatly increased sending backwards and forwards of money between Italy and that city. And of all this banking business, the largest and most profitable portion was in the hands of Florentine citizens, whether resident in Florence or in the various commercial cities of Europe. We find Florentines engaged in lending money at interest to sovereign princes as early as the first quarter of the twelfth century."

_T. A. Trollope, History of the Commonwealth of Florence, book 4, chapter 1 (volume 2)._

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MONEY AND BANKING: Genoa. The Bank of St. George.

"The Bank of St. George, its constitution, its building, and its history, forms one of the most interesting relies of mediæval commercial activity. Those old grey walls, as seen still in Genoa, begrimed with dirt and fast falling into decay, are the cradle of modern commerce, modern banking schemes, and modern wealth. … This Bank of St. George is indeed a most singular political phenomenon. Elsewhere than in Genoa we search in vain for a parallel for the existence of a body of citizens distinct from the government—with their own laws, magistrates, and independent authority—a state within a state, a republic within a republic. All dealings with the government were voluntary on the part of the bank. … But, far from working without harmony, we always find the greatest unanimity of feeling between these two forms of republics within the same city walls. The government of Genoa always respected the liberties of the bank, and the bank always did its best to assist the government when in pecuniary distress. … To define an exact origin for the bank is difficult; it owed its existence to the natural development of commercial enterprise rather than to the genius of anyone man, or the shrewdness of any particular period in Genoese history. The Crusades, and the necessary preparation of galleys, brought into Genoa the idea of advancing capital for a term of years as a loan to the government on the security of the taxes and public revenues; but in those cases the profits were quickly realized, and the debts soon cancelled by the monarchs who incurred them. However, the expeditions against the Saracens and the Moors were otherwise, and were undertaken at some risk to Genoa herself. … Now large sums of money were advanced, the profits on which were not spontaneous; it was more an investment of capital for a longer term of years, which was secured by the public revenues, but the profits of which depended on the success of the expedition. In 1148 was the first formal debt incurred by the government, and to meet the occasion the same system was adopted which continued in vogue, subject only to regulations and improvements which were found necessary as time went on, until the days of the French Revolution. The creditors nominated from amongst themselves a council of administration to watch over the common interests, and to them the government conceded a certain number of the custom duties for a term of years until the debt should be extinguished. This council of administration elected their own consuls, after the fashion of the Republic governors. Every hundred francs was termed a share (luogo) and every creditor a shareholder (luogatorio). … Each separate loan was termed a 'compera,' and these loans were collectively known as the 'compere of St. George,' which in later years became the celebrated bank. Each loan generally took the name of the object for which it was raised, or the name of the saint on whose day the contract was signed; and when an advance of money was required, it was done by public auction in the streets, when the auctioneer sold the investment to the ever ready merchants, who collected outside the 'loggia,' or other prominent position chosen for the sale. In a loud voice was proclaimed the name and object of the loan, and the tax which was to be handed over to the purchasers to secure its repayment. So numerous did these loans become by 1252, that it was found necessary to unite them under one head, with a chancellor and other minor officials to watch over them. And as time went on, so great was the credit of Genoa, and so easy was this system found for raising money, that the people began to grow alarmed at the extent of the liabilities. So, in 1302, commissioners were appointed at a great assembly, two hundred and seventy-one articles and regulations were drown up to give additional security to investors, and henceforth no future loan could be effected without the sanction of the consuls and the confirmation of the greater council of the shareholders. … During the days of the first doge, Simone Boccanegra, great changes were to be effected in the working system of the 'compere of St. George.' To this date many have assigned the origin of the Bank of St. George, but it will be seen only to be a further consolidation of the same system, which had already been at work two centuries. … In 1339, … at the popular revolution, all the old books were burnt, and a new commission appointed to regulate the 'compere.' … Instead … of being the origin of the bank, it was only another step in the growing wish for consolidation, which the expanding tendency of the 'compere' rendered necessary; which consolidation took final effect in 1407, when the Bank was thoroughly organized on the same footing which lasted till the end. Every year and every event tended towards this system of blending the loans together, to which fact is due the extensive power which the directors of the bank eventually wielded, when all interests and all petty disputes were merged together in one. … As time went on, and the French governor, Boucicault, weighed on the treasury the burden of fresh fortifications, and an expensive war; when Corsican troubles, and the Turks in the East, caused the advance of money to be frequent, an assembly of all the shareholders in all the loans decided that an entire reorganization of the public debts should take place. Nine men were elected to draw up a new scheme, in 1407, and by their instrumentality all the shares were united; the interest for all was to be seven per cent., and fresh officials were appointed to superintend the now thoroughly constituted and re-named 'Bank of St. George.' And at length we behold this celebrated bank. Its credit never failed, and no anxiety was ever felt by any shareholder about his annual income, until the days of the French Revolution. … This Bank of St. George was essentially one of the times, and not one which could have existed on modern ideas of credit; for it was a bank which would only issue paper for the coin in its actual possession, and would hardly suit the dictates of modern commerce. It was not a bank for borrowers but for capitalists, who required enormous security for immense sums until they could employ them themselves. … One of the most interesting features in connection with the dealings of the bank with the Genoese government, and a conclusive proof of the perfect accord which existed between them, was the cession from time to time of various colonies and provinces to the directors of the bank when the government felt itself too weak and too poor to maintain them. In this manner were the colonies in the Black Sea made over to the bank when the Turkish difficulties arose. {2208} Corsica and Cyprus, also towns on the Riviera, such as Sarzana, Ventimiglia, Levanto, found themselves at various times under the direct sovereignty of the bank. … It is melancholy to have to draw a veil over the career of this illustrious bank with the Revolution of 1798. The new order of things which Genoa had learnt from France deemed it inconsistent with liberty that the taxes, the property of the Republic, should remain in the hands of the directors of St. George; it was voted a tyranny on a small scale, and the directors were compelled to surrender them; and inasmuch as the taxes represented the sole source from which their income was derived, they soon discovered that their bank notes were useless, and the building was closed shortly afterwards. In 1804 and 1814 attempts were made to resuscitate the fallen fortunes of St. George, but without avail; and so this bank, the origin of which was shrouded in the mysteries of bygone centuries, fell under the sweeping scythe of the French Revolution."

_J. T. Bent, Genoa, chapter 11._

See, also, GENOA: A. D. 1407-1448.

MONEY AND BANKING: 16-17th Centuries. Monetary effects of the Discovery of America.

"From 1492, the year of the discovery of the New World, to 1500, it is doubtful whether [the mines of Mexico and Peru] … yielded on an average a prey of more than 1,500,000 francs (£60,000) a year. From 1500 to 1545, if we add to the treasure produced from the mines the amount of plunder found in the capital of the Montezumas, Ténochtitlan (now the city of Mexico), as well as in the temples and palaces of the kingdom of the Incas, the gold and silver drawn from America did not exceed an average of sixteen million francs (£640,000) a year. From 1545, the scene changes. In one of the gloomiest deserts on the face of the globe, in the midst of the rugged and inhospitable mountain scenery of Upper Peru, chance revealed to a poor Indian, who was guarding a flock of llamas, a mine of silver of incomparable richness. A crowd of miners was instantly attracted by the report of the rich deposits of ore spread over the sides of this mountain of Potocchi—a name which for euphony the European nations have since changed to Potosi. The exportation of the precious metals from America to Europe now rose rapidly to an amount which equalled, weight for weight, sixty millions of francs (£2,400,000) of our day, and it afterwards rose even to upwards of eighty millions. At that time such a mass of gold and silver represented a far greater amount of riches than at present. Under the influence of so extraordinary a supply, the value of these precious metals declined in Europe, in comparison with every other production of human industry, just as would be the case with iron or lead, if mines were discovered which yielded those metals in superabundance, as compared with their present consumption, and at a much less cost of labour than previously, just in fact as occurs in the case of manufactures of every kind, whenever, by improved processes, or from natural causes of a novel kind, they can be produced in unusual quantities, and at a great reduction of cost. This fall in the value of gold and silver, in comparison with all other productions, revealed itself by the increased quantity of coined metal which it was necessary to give in exchange for the generality of other articles. And it was thus that the working of the mines of America had necessarily for effect a general rise of prices, in other words, it made all other commodities dearer. The fall in the value of the precious metals, or that which means the same thing, the general rise of prices, does not appear to have been very great, out of Spain, till after the middle of the 16th century. Shortly after the commencement of the 17th century, the effects of the productiveness of the new mines and of the diminished cost of working them were realised in all parts of Europe. For the silver, which had been extracted in greater proportion than the gold, and on more favourable terms, the fall in value had been in the proportion of 1 to 3. In transactions where previously one pound of silver, or a coin containing a given quantity of this metal, had sufficed, henceforth three were required. … After having been arrested for awhile in this downward course, and even after having witnessed for a time a tendency to an upward movement, the fall in the value of the precious metals, and the corresponding rise in prices, resumed their course, under the influence of the same causes, until towards the end of the 18th century, without however manifesting their influence so widely or intensely as had been witnessed after the first development of the great American mines. We find, as the result, that during the first half of the 19th century, the value of silver fell to about the sixth of what it was before the discovery of America, when compared with the price of corn."

_M. Chevalier, On the Probable Fall in the Value of Gold (translated by Cobden), section 1, chapter 1._

MONEY AND BANKING: 17th Century. The Bank of Amsterdam.

"In 1609, the great Bank of Amsterdam was founded, and its foundation not only testifies to the wealth of the republic, but marks an epoch in the commercial history of Northern Europe. Long before this period, banks had been established in the Italian cities, but, until late in the history of the Bank of England, which was not founded until nearly a century later, nothing was known on such a scale as this. It was established to meet the inconvenience arising from the circulation of currency from all quarters of the globe, and to accommodate merchants in their dealings. Anyone making a deposit of gold or silver received notes for the amount, less a small commission, and these notes commanded a premium in all countries. Before the end of the century its deposits of this character amounted to one hundred and eighty million dollars, an amount of treasure which bewildered financiers in every other part of Europe."

_D. Campbell, The Puritan in Holland, England, and America, volume 2, pages 323-324._

MONEY AND BANKING: 17th Century. Indian Money used in the American Colonies.

Sea shells, strung or embroidered on belts and garments, formed the "wampum" which was the money of the North American Indians (see WAMPUM). "Tradition gives to the Narragansetts the honor of inventing these valued articles, valuable both for use and exchange. This tribe was one of the most powerful, and it is asserted that their commercial use of wampum gave them their best opportunities of wealth. The Long Island Indians manufactured the beads in large quantities and then were forced to pay them away in tribute to the Mohawks and the fiercer tribes of the interior. {2209} Furs were readily exchanged for these trinkets, which carried a permanent value, through the constancy of the Indian desire for them. The holder of wampum always compelled trade to come to him. After the use of wampum was established in colonial life, contracts were made payable at will in wampum, beaver, or silver. … The use began in New England in 1627. It was a legal tender until 1661, and for more than three quarters of a century the wampum was current in small transactions. For more than a century, indeed; this currency entered into the intercourse of Indian and colonist. … Labor is a chief factor in civilized society and the labor of the Indian was made available through wampum. As Winthrop shows, 10,000 beaver skins annually came to the Dutch from the Great Lake. The chase was the primitive form of Indian industry and furs were the most conspicuous feature of foreign trade, as gold is to-day, but wampum played a much larger part in the vital trade of the time. Wampum, or the things it represented, carried deer meat and Indian corn to the New England men. Corn and pork went for fish; fish went for West India rum, molasses, and the silver which Europe coveted. West India products, or the direct exchange of fish with the Catholic countries of Europe, brought back the goods needed to replenish and extend colonial industries and trade. … As long as the natives were active and furs were plenty, there appears to have been no difficulty in passing any quantity of wampum in common with other currencies. The Bay annulled its statutes, making the beads a legal tender in 1661. Rhode Island and Connecticut followed this example soon after. … New York continued the beads in circulation longer than the regular use prevailed in New England. In 1693 they were recognized in the definite rates of the Brooklyn ferry. They continued to be circulated in the more remote districts of New England through the century, and even into the beginning of the eighteenth."

_W. B. Weeden, Indian Money as a Factor in New England Civilization, pages 5-30._

MONEY AND BANKING: 17th Century. Colonial Coinage in America.