The Dirty Little History of Banking (Part I)

bankingBanks haven't always been with us but we can trace the beginning of the idea of loaning money and charging interest to the period of the Babylonian captivity of Judah, which kicked off some time around 600 B.C. Two influential families by the name of Egibi and Iranu, who were part of the the first wave of captives, hatched a scheme by which they would loan money at a certain rate of interest. Lest the reader think these names are simply made up and only used for purposes of illustration, both appear on ancient cuneiform tablets. In particular, Jacob Egibi, as well as any, could be called the father of modern banking, with evidence that he collected a substantial amount of wealth through interest payments.

Along the way, as works with most nefarious schemes, those who were in proximity to Jacob began to learn the business and put their own twisted “improvement” on it, such as the practice of loan sharking, which is, essentially, loaning money to desperate people at very high rates of interest, perhaps as much as 30% to 50%.

By the time Jesus Christ appeared on the scene, he was aghast at the financial practices accepted as commonplace in the region. His response was to throw the money-changers from the temple. The banking system's retaliation was to crucify him, evidence that even 2,000 years ago you did not want to mess with Big Finance.

It was around the time of Christ that records reveal a quite developed banking system complete with deposits, withdrawals, loans, and broker fees. This continued unchanged until the rise of the Christian era and the growth of the church as a powerful entity in all areas of society. Christian rulers had a teensy bit of a problem with charging interest, since it seemed to them to be prohibited by the Bible. English kings like Alfred the Great (849 – 901 A.D.) and James I (1566 – 1625 A.D.) both wrote that the punishment for usury (charging unconscionably high interest rates) would result in the confiscation of property and expulsion from the country.

Prior to the widespread influence of international trade, there wasn't even such a thing as “national” money. Each bank minted its own coins, all of which had differing values, created mass confusion when it came to trade between countries. But in 1694, came a banking development that reached forward through the centuries to leave us in the economic mess we're in now – the creation of the Bank of England and the printing of paper money.

Tune in next time to learn about King William III's desperate deal with a group of well-heeled men.

The American Monetary Team

American Monetary Association

Flickr / mrmaccc

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