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A History of Money, Part 4

By Edited Nov 13, 2013 0 0

Banking re-emerged in Europe largely as the result of the Crusades, a series of military campaigns originally intended to overthrow Muslim rule in Jerusalem. Bills of exchange were already in demand due to the need of Roman, Venetian and Genoese traders to transfer substantial sums of money without having to carry the physical gold and silver with them as they travelled, which would have made them an easy target for raiders. After the first Crusade began in 1095, supplies, troops, and large quantities funds needed to be safely and rapidly transported over great distances, so an even greater demand for banking emerged. 

The Knight's Templars began providing banking services with the Church's permission, despite anti-usury laws that prevailed elsewhere in Europe. Bills of exchange written in cipher codes allowed merchants and travellers to place their money in the Templar's care, and withdraw the equivalent amount once they reached a Templar office at their destination. The Templars used the wealth they held in security to make loans to a wide variety of customers, including kings and bishops.

The earliest foreign exchange contract on record was made between Genoese traders and banking agents in Constantinople in 1156, allowing the traders to borrow a sum of Genoese pounds and reimburse the bankers with an agreed upon sum of bezants (a gold coin of the Byzantine Empire) upon arrival. Although such contracts had most likely been in use even earlier than this first known example, their use greatly increased after this point.

Domestically, England experienced the familiar problem of currencies being debased by the mint masters. King Henry I dealt with the problem by having the mint masters' right hands cut off as punishment, resulting in a temporary improvement in the value of the coinage. The problem persisted, however, until in 1158 Henry II introduced more broad reforms that effectively improved the quality of English coinage, which remained a sound currency for the next four hundred years. He also replaced mandatory military service with the scutage tax, which allowed his vassals to make cash payments that Henry II then used to establish a permanent army of professional mercenaries. 

Over the following decades the Crown repeatedly levied new taxes to support the Crusades, and this continued into the reign of Henry II's successor Richard the Lionheart. At one point Richard was captured and held for a huge ransom of 100,000 marks, but England was prosperous enough to raise the needed sum remarkably quickly. 

During the reign of the highly unpopular King John, however, resentment over taxation and other transgressions increased dramatically among English Barons. In 1215 the Barons took up arms against King John and forced him to sign the Magna Carta, which (among other provisions) forbade the Crown from levying any unusual new taxes without the consent of the Great Council, in which the Barons had a say.

After the signing of the Magna Carta, Barons began to influence commerce via legislation from Parliament, and both this change and the natural evolution of commerce began to put pressure on the old model of the feudal system.

The changes over the last century had also subjected the ruling classes to more public scrutiny when it came to monetary affairs. The first recorded Trial of the Pyx had already taken place in 1282. The Master of the Mint was required to save a coin from every ten pounds of silver used for the trial, which was conducted every three months, and place it in a boxwood chest called the Pyx. The box would then be brought to the ceremony, where the purity of the coinage would be publicly tested. This ceremony was repeated regularly. (In fact, it still continues today in England, though it is now a ceremonial ritual rather than a viable public testing of the currency, which is no longer backed by gold, silver, or any other form of real assets.) 

This history of money will continue in Part V, featuring the sweeping changes following the onslaught of the Black Death in Europe.


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