When we think of the medieval world, we often imagine chaos and lawlessness. But that’s not exactly the truth. Europe already relied on complex and intricate information and legal networks for all kinds of transactions. Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence illustrates one example of how early Forex trading was implemented across the continent:
A man comes to our green-covered table in Florence, in Rome, or after 1400 it might be Naples, after 1402 Venice. He wants money. He is a merchant most probably, in any event creditworthy, otherwise we won’t deal with him. He wants, say, 1,000 florins. Why should we give it to him, if we can’t ask for interest? He isn’t a friend or relative. He offers us an exchange deal. He will take florins and repay us in pounds sterling, in London.
This is centuries before Internet or phones, so how did bankers keep track of their money or make sure clients paid up?
The “how” is easy. His agent in London will pay our corespondent. In sterling. Or rather or correspondent in London will go to his agent’s office, probably a bank, and hence Italian, someone we know, to demand payment on the appropriate day.
Fair enough, but travel took longer at this time. Flight is a power of the ancient gods, and inventions like the railroad or automobile are still hundreds of years away. How can bankers determine when they’ll get paid?
It depends on how you travel. Overland or galley, in haste or at leisure. The English Channel can be rough, never mind the Bay of Biscay. Fortunately, the Exchanger’s Guild has laid down what is the maximum time that a whole range of journeys from one financial center to another can require. Florence to Bruges, sixty days. Florence to Venice, ten days. Florence to Avignon, thirty days…
But what about money itself? How could two separate currencies from completely different countries even be valued at such a time?
The exchange rates are fixed daily, Sunday and holidays excluded, by paid bill brokers meeting together with merchants and bankers in the open street. In rainy Lombard Street in London. On the breezy Rialto in Venice. They don’t meet in anyone’s premises, since that would be an acknowledgment of that person’s supremacy. They consider trends in trade.
This sounds a lot like the international markets in modern day. But how much did a Renaissance era money man make off his Forex deals?
Out of sixty-seven exchanges for which we have records among London, Bruges, and Venice, only one resulted in a loss for the [Medici] banker, while the remaining sixty-six saw him making gains that range between 7.7 and 28.8 percent.
600+ years ago and the world was already more connected than most people realize.
If you’re interested in European history, medieval finance, and Italian culture, I highly recommend reading Medici Money. It’s a fascinating book on all these subjects and more.