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‘ISTORY OF BANKS practically all of which was interest-free. Problems could and did arise in a private banker's dealings with kings. If the king politely requested a private banker to make a loan to him, the private banker did—or came under his displeasure. The problem was com- pounded if the king rode off to war and got himself killed. In these cases the debt was sel- dom paid and the private banker was ruined. On other occasions the private bankers might allow good merchant customers to borrow from him to cement their relationship. If the mer- chant wasn't able to repay, the banker was in trouble, During one forty-two year period fol- lowing the expulsion of the Jews from England and France, the following Italian banks were ruined for lack of specie to honour their obligations: F: many years the private bankers did most of the business for merchants and kings— The historical saga cnn 1312 - Macci of the battle 1315 - Frescobal ; between interest- 1300 - Cherchi Bianchi ° ~ Fermzzi charging and non- 1345 - Acciaiuoli 1346 - Bardi ° ° interest-charging The banking houses of Bardi and Peruzzi of Florence failed when Richard III of H H England went bankrupt following the 100 Years War with France. Wooden tallies (see banki ng emp If es, article in previous issue of NEXUS) were fine at home, but gold was needed for foreign Sg G wars. Kings and their governments could make wooden tallies, but they couldn't make is one you wi Il not gold. They ruined many private bankers by their forced loans to obtain it. M Hy The existence of the non-usurious (non-interest-charging) private banks was further Fr ead m th e h IS. tor y endangered by the arrival of Marano usury (interest-charging) bankers from Spain starting i] in 1492, These people quickly made alliances with local rulcrs desperate for cash. Soon b ooks today 0 the combined activities of ruler preference and usurers siphoning off the floating money supply put most of the private bankers and many of the merchants out of business. It also brought on depression and unemployment. The failure of a bank was a serious event. The repercussions went far beyond the indi- viduals involved. Trade treaties between cities and countries could be jeopardised, and entire manufacturing industries shut down if the financing of the operations ceased. To prevent powerful merchants and princes and newly arrived usury bankers from putting undue pressure on private banks, the cities of Europe took over the banking busi- ness by establishing municipal banks. The Municipal Bank of Amsterdam The most famous of the city-run banks was the great Bank of Amsterdam. This inter- est-free bank was established in 1609. Since half of Europe's commerce was carried in Dutch ships, Amsterdam had need of such a bank. This was the largest and wealthiest bank in the world. practically all of which was interest-free. Problems could and did arise in a private banker's dealings with kings. If the king politely requested a private banker to make a loan to him, the private banker did—or came under his displeasure. The problem was com- pounded if the king rode off to war and got himself killed. In these cases the debt was sel- dom paid and the private banker was ruined. On other occasions the private bankers might allow good merchant customers to borrow from him to cement their relationship. If the mer- chant wasn't able to repay, the banker was in trouble, During one forty-two year period fol- lowing the expulsion of the Jews from England and France, the following Italian banks were ruined for lack of specie to honour their obligations: F: many years the private bankers did most of the business for merchants and kings— 1304 - Francosi 1312 - Macci 1315 - Frescobaldi 1320 - Cherchi Bianchi 1343 - Peruzzi 1345 - Acciaiuoli 1346 - Bardi The banking houses of Bardi and Peruzzi of Florence failed when Richard III of England went bankrupt following the 100 Years War with France. Wooden tallies (see article in previous issue of NEXUS) were fine at home, but gold was needed for foreign wars. Kings and their governments could make wooden tallies, but they couldn't make gold. They ruined many private bankers by their forced loans to obtain it. The existence of the non-usurious (non-interest-charging) private banks was further endangered by the arrival of Marano usury (interest-charging) bankers from Spain starting in 1492, These people quickly made alliances with local rulers desperate for cash. Soon the combined activities of ruler preference and usurers siphoning off the floating money supply put most of the private bankers and many of the merchants out of business. It also brought on depression and unemployment. The failure of a bank was a serious event. The repercussions went far beyond the indi- viduals involved. Trade treaties between cities and countries could be jeopardised, and entire manufacturing industries shut down if the financing of the operations ceased. To prevent powerful merchants and princes and newly arrived usury bankers from putting undue pressure on private banks, the cities of Europe took over the banking busi- ness by establishing municipal banks. The Municipal Bank of Amsterdam The most famous of the city-run banks was the great Bank of Amsterdam. This inter- est-free bank was established in 1609. Since half of Europe's commerce was carried in Dutch ships, Amsterdam had need of such a bank. This was the largest and wealthiest bank in the world. Its main purpose was to facilitate and expedite trade. It did not make loans for its own account. If a captain had a ship's cargo and no crew, he might come to the Bank of Amsterdam. The Bank might locate investors who would be willing to invest the needed money to hire a crew for 20% of the profits of the voyage. If a captain needed a cargo, he might lease his ship to bank investors for the length of his expected voyage and hire himself on as captain with a bonus of 15% of the profits. The bank got a moderate fee for arranging these deals. If the ship was lost at sea—like the other such contracts—it was insured. Chests of gold would come in the front door of the bank in the moming and leave by the rear door that evening. Gold was considered a commodity to be traded. It could be ; Extracted from the book War Cycles, Peace Cycles by Richard Kelly Hoskins Published by The Virginia Publishing Company PO Box 997, Lynchburg, VA 24505, USA NEXUS ¢ 17 DECEMBER 1993 - JANUARY 1994