480 Ducats 20 Ducats

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1 ACTIVITY 21.1 Venice to London Cards 480 Ducats 20 Ducats 98 Pounds Sterling TO: Bank Branch in London Please pay the equivalent of 480 (Payee s Name Goes Here) Ducats (98 Pounds Sterling) from. (Payer s Name Goes Here) Signed: (Venice Banker Signs Here) Branch Manager in Venice FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY 365

2 LESSON 21 RENAISSANCE BANKING ACTIVITY 21.2 Banking in the Italian City-States Throughout the Middle Ages and the Renaissance, the Italian city-states of Florence, Genoa, Pisa, and Venice were the strongest economic powers in Europe. Italy had not yet become one country. Instead, the area was made up of a number of separate countries centered around important cities. Many traders from these cities were important traders of spices, cloth, and other goods. During this time, bankers in these city-states (in particular, Florence and Venice) were also very powerful. The bankers biggest customer was the Roman Catholic Church. Banks also provided services to kings, nobles, and business people throughout Europe. The bankers made it possible for money to get from one place to another because they had branch banks located in countries as far as way as England and Cyprus. In the early 1300s, a number of powerful companies developed in Florence. These partnerships centered on families with names like Bardi, Peruzzi, and Acciaiuoli and participated both in trading and in banking. They had many branches located throughout Europe. These companies went out of business just before the plague struck Europe. These companies were driven out of business primarily because they had made too many loans to kings, such as Edward III of England and Robert, King of Naples, that weren t repaid in full. THE MEDICI BANK In 1397, Giovanni di Bacci de Medici moved to Florence and founded the Medici Bank. The Medici Bank became the largest and most powerful bank of the 1400s, and members of the Medici family became some of the most wealthy and influential people in Florence and throughout Europe. Members of the Medici family were important politicians and huge supporters of the arts. They paid artists, writers, and builders to create some of the world s greatest art, literature, and buildings. The Medici bank conducted money changing, took in deposits, dealt in bills of exchange, and carried out foreign banking transactions. Money changers, such as the Medici Bank, converted foreign money into the local money and converted gold coins into silver coins for a fee. 366 FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

3 ACTIVITY 21.2, CONTINUED The Medici Bank went out of business because of bad management decisions during a period of bad business conditions in the general economy. In the second half of the 1400s, the Medici Bank struggled to coordinate the operations of its branches throughout Europe, and during a period of economic decline in the 1470s, it became increasingly difficult to do business. Throughout this period, many of its branches, including those in London and Bruges, went out of business. Back in Florence, members of the Medici family concentrated most of their attention on politics. Unfortunately, they were not careful enough in managing the operations of the bank. The bank made a lot of bad loans, which eventually caused the bank to go out of business in the 1490s. INTEREST IN THE RENAISSANCE The Roman Catholic Church forbade anyone from charging interest, which the church called usury. When people talk about usury today, they are talking about a very high interest rate. During the Renaissance, though, usury meant charging any interest at all. Since bankers were not able to charge interest, they had to find other ways to make a profit from lending. The primary way that Renaissance bankers such as the Medici got around the rules against charging interest was to use bills of exchange, like the one used at the beginning of the lesson. Built into the bill of exchange transaction would be a profit for the banker. These profits on transactions using bills of exchange were not considered usury. Bankers such as the Medici were respected citizens, well regarded by the Roman Catholic Church. The Medici were not considered usurers. In contrast, pawnbrokers were business people who lent money to individuals in exchange for holding onto those individuals belongings. Pawnbrokers were considered usurers, and they were not considered respectable citizens. The church banned pawnbrokers from communion, marrying in a church, and holding church funerals. Because bankers such as the Medici only made large loans to important and wealthy people such as kings, nobles, and business people, the pawnbrokers played a role in the Renaissance economy by allowing poor people to borrow money. Without pawnbrokers and some other money lenders that did business with the poor, the poor would not have been able to borrow money. SOURCE DeRoover, Raymond The Rise and Decline of the Medici Bank, Cambridge, MA: Harvard University Press. FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY 367

4 LESSON 21 RENAISSANCE BANKING ACTIVITY 21.3 Deposits Deposits and Loans Worksheet CARD DRAWN (circle one) CALCULATE CARD VALUE #1 10 = #2 10 = #3 10 = #4 10 = #5 10 = TOTAL DEPOSITS = Loans Loans have different risks. The loans will pay according to the following table: Risk Level Loan pays NOTHING if card drawn is ONLY the loan amount is repaid if card drawn is Loan amount plus interest is repaid if card drawn is Very Low to A Low 2, to A High 2, 3, to A Very High 2, 3, 4, to A 368 FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

5 ACTIVITY 21.3, CONTINUED Loan # Chosen RISK LEVEL AMOUNT RESULT CARD DRAWN (circle one) OUTCOME 1. Total amount of deposits: 2. Total amount of loans made: 3. Total amount of loans repaid plus interest: 4. Did you gain or lose as a result of making these loans? (circle one) Gain Lose 5. By how much did you gain or lose? FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY 369

6 LESSON 21 RENAISSANCE BANKING ACTIVITY 21.4 Loan Specifics # BORROWER AND DESCRIPTION AMOUNT RISK OF DEFAULT AMOUNT PLUS INTEREST 1 A Venetian merchant, to expand his very profitable textile business 140 ducats Very Low 182 ducats 2 A French bishop, to improve his cathedral s chapter house 190 ducats Very Low 247 ducats 3 The Pope, to finance a small mission to the eastern Mediterranean 270 ducats Very Low 351 ducats 4 The doge, for repairs to the wall coverings in the library of his palace 70 ducats Very Low 91 ducats 5 A French Duke, for the expansion of his manor house 300 ducats Low Risk (L) 450 ducats 6 The Duke of Milan, for the equipping of new soldiers 220 ducats Low Risk (L) 330 ducats 7 A Benedictine abbot, to expand his monastery s school in Sicily 110 ducats Low Risk (L) 165 ducats 8 A successful Venetian printer, to purchase a new set of moveable type 94 ducats Low Risk (L) 141 ducats 9 A Florentine shopkeeper, to double the size of his shop 125 ducats High Risk (H) 225 ducats 10 An English earl interested in throwing an extravagant wedding for his son 275 ducats High Risk (H) 495 ducats 11 A Hungarian feudal lord, to purchase farming tools for use in wheat production on his estate 60 ducats High Risk (H) 108 ducats Continued on next page. 370 FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY

7 ACTIVITY 21.4, CONTINUED # BORROWER AND DESCRIPTION AMOUNT RISK OF DEFAULT AMOUNT PLUS INTEREST 12 A Venetian spice merchant, to purchase a shipment of peppercorns and cinnamon from the Spice Islands 155 ducats High Risk (H) 279 ducats 13 A Venetian merchant, to improve the decoration of the chapel in his palace 283 ducats Very High 622 ducats 14 A Sicilian sculptor, to create a new public statue in honor of a church martyr 58 ducats Very High 60 ducats 15 A Dutch sea captain, for personal supplies for a voyage to the Spice Islands 137 ducats Very High 301 ducats 16 A small-scale grape grower in Tuscany for the purchase of an adjoining plot of land 119 ducats Very High 262 ducats GLOSSARY abbot: The leader of a monastery. chapter house: A building attached to or near a church where priests meet. doge: The title given to the leaders of Venice and Genoa. Doges were elected for life by the citystates aristocracies. martyr: A person who chooses to die rather than go against his or her religious principles. Spice Islands: A group of islands in modern eastern Indonesia rich in spices, such as peppercorns and cinnamon, and controlled by the Dutch from the 17th century onward. FOCUS: MIDDLE SCHOOL WORLD HISTORY COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY 371

Overview. Financial institutions. Financial institutions

Overview. Financial institutions. Financial institutions Financial institutions Banking originated in medieval Italy but was based on mathematical knowledge acquired from wide-reaching trade interactions. Google Classroom Facebook Twitter Email Overview Banking