Posts Tagged ‘economics’

Alexander Del Mar, in his book, Money and Civilisation (Burt Franklin, 1969), makes the suggestion that in the reign of King Edward 1 of England, the state of the economy was so bad that he had to resort at one point to issuing leather money. The debasement of the currency prior to this was due to the inheritance of the bad practices and abuses of coin under the previous monarch, Henry 111. Coin-clipping was rife, and consequently many coins were found to be lower in value per weight of precious metals than their actual value in cash.

LM1

The leather money probably took the form of lozenges of cured leather, stamped or branded with the royal insignia. This was suggested to be the chief form of payment for the labourers who built the Welsh castles in the 1290s: Caernarfon, Conwy:

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and Beaumaris:

LMbeaumaris2

I have this vision of cattle from the Welsh Marches driven to London markets, and their hides returned to Wales as money.

Why this huge castle-building programme, in a period of already rocky finances?
Following the prolonged disturbances and shifting alliances of the last Welsh prices, and particularly the rebellion of Llywelyn the Great, these castles were strategic to the suppression of the North Welsh stronghold of his supporters.
Immediately prior to this were the extensive campaigns in Ireland under the previous monarch to further establish an English hegemony; and later on were the Scottish campaigns against William Wallace and Robert the Bruce. All the participants were played off against each: Wales was used as a base for English expeditions into Ireland; and Welsh interests were exploited to weaken support for Scottish independence. These long campaigns were, of course, enormously expensive.

And then, in 1290, he finally expelled the Jewish population from England.
This followed over a century of sporadic but intensifying hostility. The Jewish people were only allowed to work in the fields of money lending and finance schemes; Crown Princes and Kings used their expertise. And then Edward banned them from that, and tried to force them to work only as traders, artisans, farmers. Ten years later they were forbidden to work as merchants.

Money lending, along with interest payments, was considered a highly unchristian occupation (Jesus ejecting the money-lenders from the temple etc) and so only suitable for non Christians. In later years banks, for instance the Medici Bank, manipulated accounts through foreign exchanges in highly complex schemes, in order to gain the best rates. These schemes were used knowingly on the accounts of archbishops and even a Pope. It was all to avoid being labelled as ‘usurers’.

LMMedici

The end product was virtually the same, of course.

By expelling the Jewish citizens Edward 1 hoped to recoup more cash by this squalid tactic of seizing their assets. In effect he further crippled the economy.
And the tight reins he held on import and export licenses prevented expansion of markets; it held Britain in stagnation.

Nice one, Edward One!

The use of leather money was a practice borrowed initially from Russia; it was also known in China, India, Venice, and even France in later centuries.

Reposted from 2011

 

In 2005 English writer Tim Parks, long resident in Italy, published MEDICI MONEY (Profile Books, 2005).

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It is another take on Renaissance Italy, Florence, the Medicis, and the complexities of the period. It was also very prescient – in three years’ time major Western banks would go bust, much as the Medici, and before them the Bardi and Peruzzi banks had gone bust.

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The Medicis’ added little if anything to the practice of banking. All innovations had already occurred by their time: double-entry book-keeping, bill of exchange (cheque), letter of credit, deposit account. In the Medici long-game of power-acquisition, marriage was arranged between Cosimo and the available daughter of the long-established Bardi banking family. Nothing, it would seem, was beyond them in the build-up and establishment of the family name, wealth and prestige.

But banking was always a risk business; the bank cannot predict how their customers will behave in uncertain situations. Means can be developed to ensure that customers/clients are only of repute, and liquidity. But neither kings nor cardinals were beyond unscrupulous, unwise acts and projects.

Tim Parks traces the English contribution to the cause of an earlier bank collapse. He writes: The Bardi and Peruzzi banks (… ) both collapsed in the 1340s, when Edward III of England reneged on huge debts.

In the 1470s we find the Medici bank in the same straits, through a similar source, this time King Edward IV of England. At this point in time it seems the London branch of the Medici bank was already owing huge amounts to the Rome branch. Agnolo Tani, ex-banker was brought in to clear up the mess. As he made his way from the London branch to Rome, the War of the Roses broke out in its second phase. Of course, Edward was financed by the Medici banks, and when he lost the throne, the chances of repayment also fell. He re-grouped, fought back and regained the throne.

There was also the little matter of who financed his opponents – the Medici bank, of course. They were, after all, nobles, titled men from established families.

A no-win situation, because whoever won power was at the expense of their opponents; the bank lost either way. To regroup and regain Edward needed money – once more he borrowed heavily from the bank.

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The English main produce was finished wool cloth. There was a hair-raising interlude when Florence branch general director Francesco Sassetti refused to advance monies for cloth, until, he asserted, the cloth had been sold. Merchants and bankers could not be relied on to be in synch; the whole history of banking relates the discordant harmonies of these two.

Previous to finished wool cloth the main English export had been bulk wool. The key to wool use is in the treating. This is a science in itself – how to get the course, wiry, lanolin-rich wool into usable state. The Scots Gaelic Waulking Songs all came out of this home industry. They used the livers of dogfish.

Working in bulk, though – the importers had to discover the best and easiest means of treatment. It was found to be alum.

As much as there was a fortune to be made from wool, the ownership of the source of alum became a key factor. And this is what we find in the book. At a later stage in the Medici bank history we see Lorenzo currying favour with a Cardinal by granting him an alum mine.

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One of the main sticking points in early banking was how to make a profit on what was entrusted to them.

Clearly, charging interest was out – Jesus expelling the money-lenders from the temple ruined that one. St Luke wrote: Give, without hope for gain. The Lateran Church Council of 1179 denied Christian burial to usurers; the General Church Council of Lyon, 1274, confirmed the ruling.

The way round this was intriguing. And Cardinals, even a Pope, benefitted from it. It was to use the exchange rates of different  States, countries. This meant that quantities of money in various forms, that is, acceptable to the source banks, had to be conveyed around Europe, from banking centre to banking centre. Each destination was chosen for its productive rate of exchange. This proved a workable system.

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Another interesting insight to come out of this is how unsteady the economy proves to be.
In diaries from the last thirty to forty years I notice approximately ten-yearly cycles of recession. How easily we forget once employment is the norm once again.images (1)

Consider:

Most people imagine that if they borrow from a bank, they are borrowing other people’s money.  In fact, when banks and building societies make any loan, they create new money.  Money loaned by a bank is not a loan of pre-existent money; money loaned by a bank is additional money created.” Michael Rowbotham, Grip of Death (1998)

“Where did the money come from? It came – and this is the most important single thing to know about modern banking – it came out of thin air.  Commercial banks – that is, fractional reserve banks – create money out of thin air.” Murray Rothbard, The Mystery of Banking (2008)

“… by far the largest role in creating money is played by the banking sector… When banks make loans they create additional deposits for those that have borrowed the money.” Paul Tucker

And the payoff to this, to use a phrase that shows how of deeply ingrained financial methods have become to us, consider the following:

 With respect that the above implications have with respect to our national debt, it should now be obvious that any attempt to pay off our national debt will ultimately be deleterious, as paying of debt is tantamount to extinguishing it from circulation which will  collapse the supply of money available.  This is how depressions arise due to there being a shrinkage of the money supply due to banks failing to lend.

What is the likelihood of anyone now paying off their National Debt? Western nations in their most positive and humane incarnations cancelled 3rd World Debts. That is possibly the only way the situation can be dealt with.

Do we now have to consider a life flipped where red is black, in accounting terms?
Have we perhaps been living there for longer than we imagine, going off the above quotes?

Alexander Del Mar, in his book, Money and Civilisation (Burt Franklin, 1969), makes the suggestion that in the reign of King Edward 1 of England, the state of the coinage was so bad that he had to resort at one point to issuing leather money. The debasement of the currency prior to this was due to the inheritance of the bad practices and abuses of coin under the previous monarch, Henry 111. Coin-clipping was rife, and consequently many coins were found to be lower in value per weight of precious metals than their actual value in cash.

The leather money probably took the form of lozenges of cured leather, stamped or branded with the royal insignia. This was suggested to be the chief form of payment for the labourers who built the Welsh castles in the 1290s: Caernarfon, Conwy and Beaumaris.

I have this vision of cattle from the Welsh Marches driven to London markets, and their hides returned to Wales as money.

Why this huge castle-building programme, in a period of already rocky finances? Following the prolonged disturbances and shifting alliances of the last Welsh princes, and particularly the rebellion of Llywelyn the Great, these castles were strategic to the suppression of the North Welsh stronghold of supporters. Immediately prior to this were the extensive campaigns in Ireland under the previous monarch to further establish an English hegemony; and later on were the Scottish campaigns against William Wallace and Robert the Bruce. All the participants were played off against each: Wales was used as a base for English expeditions into Ireland; and Welsh interests were exploited to weaken support for Scottish independence. These long campaigns were, of course, enormously expensive.

And then, in 1290, he finally expelled the Jewish population from England. This followed over a century of sporadic but intensifying hostility. The Jewish people were only allowed to work in the fields of money lending and finance schemes; although Crown Princes and Kings used their expertise. And then Edward banned them from that, and tried to force them to work only as traders, artisans, farmers. Ten years later they were forbidden to work as merchants.

Moneylending, along with interest payments: usury, was considered a highly unchristian occupation (Jesus ejecting the money-lenders from the temple etc) and so only suitable for non Christians. In later years banks, for instance the Medici Bank, manipulated accounts through foreign exchanges in highly complex schemes, in order to gain the best rates. These schemes were used knowingly on the accounts of archbishops and even a Pope. It was all to avoid being labelled as ‘usurers’. The end product was virtually the same, of course.

By expelling the Jewish citizens Edward 1 hoped to recoup more cash by seizing their assets. In effect he further crippled the economy. And the tight reins he held on import and export licenses prevented expansion of markets; it held Britain in stagnation.
Nice one, Edward One!

The use of leather money was a practice borrowed initially from Russia; it was also known in China, India, Venice, and even France in later centuries.