Book Review: Beggar-Thy-Neighbor, Chapter 2
Usury in the early years of the renaissance was seen as a sin against humanity according to this chapter. It was under the power of the pope but he applied regulation very selectively. However interest was acknowledged as a necessary factor for commerce to be conducted. Ideas kept coming up concerning usury and interest hence discussions were bound to come up concerning these factors. Money use brought with it great potential for sin. Many praised it and saw it as a wonderful invention. Others saw the possibilities of doing infinite good by the use of money. People were to blame for the evil use of money and not the money itself according to some. There was need to understand the deeper qualities of money if it were to be used effectively (Geisst 72). One of these qualities was its ability for circulation. Both politicians and bankers saw huge potential in money and intended to exploit its qualities to the maximum for their benefit which went hand in hand with safeguarding their interests. Debasement was the major issue during that time. Money supply was constant throughout until this time. Prices began to rise as American gold and silver started coming into Europe. Early Roman Empire considered usury a violation of civil law since only God was allowed to interfere with the impact of time. A need for more goods meant a need for more money thus the supply had to be altered with. Inflation would definitely arise if this increase was to be absent. Excessive interest and the attitudes towards it however remained fairly unchanged. No action was being taken and business expanded throughout. Non-Jews were considered riskier to lend to than Jews (Geisst 83). A standard issue of interest therefore had to be established. Usury prohibitions were therefore necessitated by the explorations being made from this new invention.
Double Entendre
Princes were important in the explorations of usury. One of them, Phillipe the Fair became well known for debasing the currency. King and princes were considered great credit risk and couldn't be trusted with the preservation of the value of currency. Nicholas of Oresme stated that usury was the second worst thing that could be done with money, the first he considered to be debasing its value and monarchs were the guiltiest of this charge. They tampered with its value and heavily taxed their subjects. Jews and Templars were considered the villains as they implemented situations that were instigated by the monarchs (Geisst 123). A church council was established to discuss these troubles but the church also had serious issues in its backyard. It however to everybody's surprise took a liberal stand towards the montes. It considered the interest that was being charged by state- run organizations as not wrong but in fact an asset. Their reasons were purely practical. Interest in Mathematics increased which resulted in more sophisticated commercial practices. Such were better methods of bookkeeping and the introduction of double entry. Interest was disguised during teaching with the term profit. During the renaissance, golden ratio gained popularity as a tool to be used in design. Banking developed quickly in Europe and interest grew in the deep understanding of money.
Origins of Modern Insurance and Annuities
Business transactions were still very risky during this period. Usury was pretty rampant in the shipping industry and the church had very many regulations towards this practice. Shipping was conducted via contractual agreements and if usury collided with these agreements economic development would be interfered with. Partnerships were the main means of sharing risk in shipping ventures until the fourteenth century. Ambiguity of language used in these contracts meant they could easily maneuver through the usury prohibitions. Built-in loopholes in these contracts led to the development of insurance (Geisst 184). Viable insurance contracts were a process that evolved over years with the partners in the shipping business realizing that they had equal stakes in the venture. Earlier forms of annuities were a sequence of payments like the interest charged on a revenue bond but they didn't realize this. Insurance was however frowned upon as it seemed to benefit the bankers more.
The Rise of the Medici Bank
It was founded by the Medici family during the fifteenth century. Banking and accounting were some of the professions to which it contributed greatly. It pioneered the improvement of the general ledger system by developing the double entry to track debits, credits, withdrawals and deposits. A Venice branch of the bank loaned money to the Germans and this ended up being a terrible mistake. This branch began the practice of paying the general manager through shares (Geisst 231). Medici bank established itself by rapidly opening branches throughout Italy but their central base of operations remained in Florence. Control of the bank was passed within the family and its innovations made great contribution to the banking and monetary system of the time.
Critical Questions from the Chapter
1. What would have happened had the church maintained its strict stance on usury? Would we now have a totally different monetary system in the world? Would the people of the time have found a more elaborate way to deal with the renaissance?
2. If the general manager of the Medici bank had not loaned money to the Germans and got into trouble, would someone else have discovered remuneration of managers through shares?
3. Should the monarchs have had such immense power over the financial system of that time?
4. What comparisons are there between the monetary system of that time and the one currently in operation?
5. What improvements have been made to the earlier monetary system of that time?
Work Cited
Geisst, R Charles. Beggar Thy Neighbor. A History of Usury and Debt. University of Pennsylvania Press. 2013. Print.
