Chapter three Outline and Questions
Chapter three of ‘A History of Usury and Debts’ entails an insight of the role that monetary systems and religion played in the acquisition of debts in the medieval ages, which reflects the current status of financial markets. Religious laws and regulations antagonized debt and usury in the old ages (Geisst 107). For instance, the Roman Catholics believed that debt and banking were morally wrong, and did not portray good biblical beliefs. Therefore, Roman Catholics did not engage in any form of debt or usury. Because of the restrictions imposed on idealists, only Protestants practiced debt and usury(Geisst 107). However, restrictions began to collapse with the increase in population and hence increase in forms of commerce to sustain the swelling population.
Forms of usury began to take route after economic actors started seeking capital to expand their production. Moreover, lenders to entrepreneurs were integrated into the economic setting, after a realization that they played a bigger role than any other economic actor (Geisst 109). The Roman Catholic leaders believed that usury did not call for a sound and legitimate interests to the resourced owed to debtors. As need for more capital grew, also the populations grew uncontrollably, and fear of eminent plagues drove economic actors to become more aggressive. Thomas Malthus argued that the current achievements that the modern society thought to have achieved had not even reached the threshold that some ancient civilizations were considered to have achieved (Geisst 108). Both economically and demographically, the current society was just a fraction of what the ancient civilizations used to be. Hence, Wallace sought the need to invest, to provide for the rising urge to satisfy food security needs.
Therefore, in order to fund for bigger production units required, annuities emerged to provide more major landings with a longer repayment period. Annuities were later used as bonds as the development of debt finance thrived. Lorenzo Tonti developed easier means of acquiring large borrowings and finance from members’ equity (Geisst 111). The tontine system was adopted by many wealthy individuals and involved a scenario where wealth could be passed down ages as it accumulates in value. However, the last holder of the tontine would remit the accumulated value to the state on his demise (Geisst 112). In addition, methods for calculating risk attached to lending and borrowing were invented by Jason Banouli, and the invention strengthened the popularity of debt and usury.
States or countries which adopted the tontine system including France and Dutch accumulated a lot of wealth realized from interest payments, and also the industries grew rapidly in conciseness to population growth (Geisst 112). Furthermore, the tontine system is what later led to the development of the stock market in New York, which traded in securities and annuities (Geisst 136). The risks of lending and borrowing could be passed from one individual to another in the form of stock jobbing. In this regard; stock brokers preferred to trade securities and debts with old stock brokers, who could enjoy benefits for a short while, and then debts pertaining the state would be scrapped off. Apparently, the growth of usage of annuities and other forms of debts was adopted by wealthy companies and even the state. For instance, the Britain war in 1692 fosters annuities, as the forms government turned to the public to source funds to support the war (Geisst 114).
The development of mercantilist ventures and enterprises made entrepreneurs more conversant to the types of debt and their benefits (Geisst 125). The use of debts and usury grew uncontrollably to a point where the state built prisons for debtors who could not pay off their debts. In consequence of the establishment of debtor prisons, eventualities led to the development of the bankruptcy law, which prohibited many cases of incarceration (Geisst 115). The increase of borrowers created the need to provide an organized system for borrowing and lending (Geisst 140). Therefore, merchants started organized lending and borrowing to a large scale of people. The first merchant was Campbell, who specialized in small backings (Geisst 140).
Peterson created the first bank to create a link between the government and citizens, to ease and facilitate large-scale practice of debt and usury. Banks promoted the developments of trade between nations, and also the practice of debt and usury. However, in order to facilitate smooth trade, international banking systems were set up with adaptable configurations, such as the sinking fund system (Geisst 140). Bank such as the House of Rothschild were initiated. Because of the nature of debts, costs of securities fluctuated, and sometimes cause cases of inflation in the economy (Geisst 146).
Questions
Thomas Malthus argues that populations had not yet matched the nature of populations and use of debt and usury as a counter to plagues in the ancient civilizations (Geisst 108). How does the use of debt and usury vary in usage in the face of economic revolution?
During the glorious revolution, John Grant believed that older annuitants stood a greater chance to enjoy benefits from their annuities that young annuitants. What made the sudden turnaround for the young annuitants begin enjoying more benefits after the war?
The question will help in the understanding of the fluctuating nature of an annuity, and the significance of mortality on investing in annuities or bonds.
Works Cited
Charles R. Geisst. Beggar thy neighbor: a history of usury and debt. Penn. University of Pennsylvania Press.2013. Print.
