Figure 1.--. |
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The history of money and credit is in large measure the history of civilization. This is because civilization began with settled agriculture and the creation of wealth beyond what hunter gathers could accumulate. This also involved a specilization in labor. With the specialization of labor pure bartar was akward leading to the development of money. The development of writing appears to have developed out of a need for accounting records. Early money was metal coins which had intrinsic value. Money was invented in Mesopotamia. The next step was credit. Modern banking traces its origins to the Templars. Christian pilgrims needed a way of transfering money to the far away Middle East and the Templars established a system to do this. It was the Medeci in Florence that established the foundation of modern banking (15th century). Banking was contrained in Europe because of the Church procriotion against paying interest which was consider usurious. For that reason Jews were commonly involved in lending money during the Middle Ages. From early times there has been a populist reaction to money lenders and banks. This was an element in European anti-Semitism. Even the Medici faced a populist uprising led by Savanarola. He is best known for his religious teachings, but populist sentiment was an important factor in the rising against the Medici. Populist sentiment against banking has continued to this day. While populist has generally blamed banks for economic problems, throughout history it has been the lack of an efficent banking system that has impeded economic growth, not the presence of banks. The Dutch took the next step in inventing capitalism which was adopted by the British. An efficent banking and economic system is an important factor in the victory of the English speaking people over Catholic absolutists (Spamush and French), the hegemonic German Empire and 20th Century totalitarians (NAZI and Soviet). Along with money and credit has come economic cycles and financial bubbles. These have included the South Sea Bubble and the Dutch tulip bubble. Bubbles of course are not just historical. Americans are familr with the dot.com bubble (2001) and the credit bubble (2008).
The history of money and credit is in large measure the history of civilization. This is because civilization began with settled agriculture and the creation of wealth beyond what hunter gathers could accumulate. This also involved a specilization in labor. With the specialization of labor pure bartar was akward leading to the development of money. The development of writing appears to have developed out of a need for accounting records. Early money was metal coins which had intrinsic value. Money was invented in Mesopotamia.
The next step was credit. Modern banking traces its origins to the Templars. Christian pilgrims needed a way of transfering money to the far away Middle East and the Templars established a system to do this. It was the Medeci in Florence that established the foundation of modern banking (14th-15th century). Banking was contrained in Europe because of the Church procriotion against paying interest which was consider usurious. For that reason Jews were commonly involved in lending money during the Middle Ages. From early times there has been a populist reaction to money lenders and banks. This was an element in European anti-Semitism. Even the Medici faced a populist uprising led by Savanarola. He is best known for his religious teachings, but populist sentiment was an important factor in the rising against the Medici. Populist sentiment against banking has continued to this day. While populist has generally blamed banks for economic problems, throughout history it has been the lack of an efficent banking system that has impeded economic growth, not the presence of banks. One historian writes, " ... poverty is not the result of rapacious financiers exloiting the poor. It has much more to do with the lack of financial institutions, wih the absence of banks, not their presence." [Ferguson]
The Dutch took the next step in inventing capitalism which was adopted by the British. An efficent banking and economic system is an important factor in the victory of the English speaking people over Catholic absolutists (Spamush and French), the hegemonic German Empire and 20th Century totalitarians (NAZI and Soviet).
Along with money and credit has come economic cycles and financial bubbles. These have included the South Sea Bubble and the Dutch tulip bubble.
Bubbles of course are not just historical. Americans are familr with the dot.com bubble (2001) and the credit bubble (2008).
Milton Friedman isapostle of monetarism. He argued that the supply of money is the key to managing the modern economy.
Ferguson, Niall. The Ascent of Money.
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