When it comes to the origin of Western financial markets, bills of exchange cannot be avoided, because bills of exchange are not only the earliest among all financial instruments in terms of time, but also have great significance and affect the overall situation. Without bills of exchange, a long-distance trade system cannot be developed. Without long-distance trade, a global market cannot be formed. Without a large market, it is impossible to evolve a very detailed social division of labor. If this cannot be achieved, the entire Western capitalist system will be out of the question, it cannot be achieved.
(1) Food and pay for the Crusades
Western bills of exchange, it should be said that it has a very close relationship with the church. Isn't this money order for international trade? How did it originate in the church? How could it be related to the church? This is the more interesting part. Many core components of the Western financial system now originate from the church.
Bills of exchange originated in the church, to speak of the First Crusade. In 1095, the pope launched a Christian country to attack Jerusalem. What was the single greatest problem facing the pope throughout the war? military pay. The front line has already been fought, and the military pay needs to be supplemented. If there is no money, everyone will stop fighting.
But what about the military pay? You must know that they are all gold and silver coins, and such a large-scale transportation problem is involved, which stumps the Pope. If we look at the terrain at that time, we will find that if you want to transport military pay from Italy to Jerusalem, you can go by land, and you have to go through Turkey and cross Turkey.
But who was Türkiye then? Seljuk Turks, these people are not easy to mess with, they fight hard, and they are also Muslims. The small groups of crusaders were often wiped out by them in this place. As for the caravans of other Christian countries, they dare not go this way, and they must be robbed. So overland is out of the question.
It is possible to go directly by sea, but there are also problems with the sea, and the risk of the sea is also great. In winter, the wind is rough and the waves are high, and shipwrecks often occur, and you will encounter enemy ships of the other side, etc., as well as pirates. This is also a problem. But if the front is not supplied for a long time, the front will not be able to support it.
The Pope is very distressed about this matter. In times of crisis, a group of people stood up and said that we will help you solve this problem. Who are these people? Knights Templar.
Back then, the Knights Templar was indeed dominant. It was founded in 118 AD, near the Temple Mount in Jerusalem. After its establishment, the Pope gave them a lot of preferential policies. It is actually a "hybrid". On the one hand, he is a feudal knight and on the other hand, he is a monastery. It is both a monk and a knight.
Badge of the Knights Templar
(2) The Knights Templar comparable to the country
What is the biggest characteristic of this group of people? property and taxes. No matter how much money they make, no matter how much land they use, they don't pay a penny, neither to the king nor to the church. This is the special policy offered by the Pope to encourage these men to fight at the front.
Otherwise, who will go to the front and work hard. The main military power of the countries on the east coast of the Mediterranean that Christianity conquered was the Knights Templar. When the number of knights is the highest, it can reach thousands of people.
Thousands of knights don't seem to be a big deal, we have tens of thousands of people at every turn. But in Europe, knights are not a general concept. The knight's horses, as well as his full body armor, all kinds of equipment are extremely expensive and cannot be afforded by ordinary families. It must be a rich family, and only rich people can afford to support a knight.
Moreover, the knight did not fight alone. He brought a team of followers, including archers, guards with swords, and people who served the knight in daily life. With the scale of several thousand knights, tens of thousands of troops can be mobilized on the entire eastern coast of the Mediterranean Sea at most. What kind of concept is this?
If you compare it with other feudal kingdoms in the same period, is the King of France good enough? The king of France can only support three or four hundred knights in his own territory, let alone other countries. Therefore, tens of thousands of troops can rival any big country in medieval Europe, and they are very powerful.
In addition to this, there is another feature. The Knights Templar not only has branches in places such as the east coast of the Mediterranean Sea and Islam, but also has branches all over Europe and many islands in the middle of the Mediterranean Sea.
For example, the Knights Templar in France, the Knights Templar in Paris, and London, Germany, Italy, Spain and other major countries, it is a huge network throughout Europe and the Mediterranean region. During the more than 200 years of the Crusades, the Knights Templar made a lot of money through trade, which was used to buy land, acquire assets, and engage in financial business and so on. The Knights Templar amassed their wealth in a fairly rapid fashion. Throughout Europe, they control more than 9,000 castles, and they have a large amount of land in various European countries.
For example, in the Champagne region of France, the Knights Templar owns 15,000 acres of land, and they have their own independent army, independent judicial system, independent financial system, independent tax system, everything is independent. That is to say, they are more like an independent kingdom than kings and churches.
Why did they want to destroy the Knights Templar later? The big tree attracts the wind, which angered many kings and some people in the church, and finally joined hands to destroy the Knights Templar. However, the power of the Knights was still very strong back then. The Knights Templar should be the world's first complex of armed finance and real estate trade in the Middle Ages, and it was quite powerful.
When the Pope asked the Knights Templar to escort the military pay, the choice was still very safe. Because the Knights have their own naval fleet and their own armed forces, it is the safest for them to escort them away from the sea.
(3) Origin of bill of exchange
In addition to this, it has a large number of branches, which are all doing business, all doing trade, having money and activities all over the place. The pope asked them to transport these military salaries, which was a matter of transferring money for them. There is no need to use the ship every time, and the final liquidation is done after the transfer. When you need money, get a boat to go to the local branch and you're done. So it can naturally evolve a remote exchange system.
In the history of the Middle Ages, the kings of France, England, and knights who participated in the Crusades in various places often used this remote exchange system of the Knights Templar. How does this system work ? You hand over the money to him, and he will issue a money order for you. With this money order, you can travel all over Europe and withdraw cash at any time, as long as you go to its branch, there is no problem with getting money.
This was the first time Europeans encountered such a phenomenon, so money orders replaced gold and silver coins and circulated in large quantities in the market. Regarding this system, you may ask a question. Since ancient times, the credit we have talked about is not owed money?
After you owe money, don’t you build your personal credit by paying back the money on time? Of course, this thing has existed since ancient times and came out in the Middle Ages. It is not only about credit, but also refers to the flow of credit. For example, in this system, bills of exchange are negotiable and negotiable. Personal credit is only you on yourself, it cannot flow. Therefore, this kind of credit and the new concepts generated by its flow can be said to have created a real financial revolution in the Middle Ages, and many countries have been inspired by it.
However, when it comes to the origin of bills of exchange, it is actually a hot topic of debate in the world. There are several groups of people, including British scholars, American scholars, and German scholars. This system created by the Germans is believed to have originated in the Champagne trade fair, in Flanders, which is where we operate.
However, the Latins and Italians said that you were far behind us at that time, and this system may have been developed by us in Italy, because our commerce and trade were very developed at that time. Some scholars may be more fair, saying that all this set of things actually originated in the Islamic region. Is there any truth to this statement?
It actually makes sense. In English, our current international commercial terms, customs, tariff transactions, and warehousing are all in Arabic, that is, Muslims back then. The Arab region was highly prosperous back then, far exceeding Europe. Of course, it is also said that China must be the first to invent money orders, because we had flying money in the Tang Dynasty.
At present, the Tang Dynasty may be the first country to invent bills of exchange, but the bills of exchange invented by the Tang Dynasty cannot directly affect the financial system of the West, mainly because it is too far away and there is no direct communication. The topic we are discussing is Western What is the soil for this set of things? What is the background of its generation?
Don’t think about the issue of the Tang Dynasty. Islamic countries are also similar. The origin of Islam may be similar to that of the Tang Dynasty, because the park has achieved a large expansion in the seventh and eighth centuries, spreading its sphere of influence around the world. At the same time, it has established a global commercial and trade network. To cause it to do long-distance trade, it must use a system like a bill of exchange. There must be two important conditions for the emergence of bills of exchange.
(4) Conditions for the formation of bills of exchange
First, there must be an international system or an international network. Who first built the network? Knights Templar, 1118. When did Italian businessmen cross the Italian peninsula?
Now it can be found from the data that they went to France in 1200 and believed in the trade fair, they arrived in England around 1250, and they arrived in Flanders in 1300, which was nearly a hundred years behind others. Therefore, it is most likely that the Knights Templar will issue a bill of exchange. The earliest money order was discovered in 1199. Obviously, Italian merchants had not yet internationalized and formed a global trade network.
The second condition is remote exchange. Why do many people say that Flanders and Champagne first evolved money orders? In fact, there is a problem with this statement. Generally speaking, regional trade does not require remote remittance, and cash transactions are fine, unless international merchants intervene and become transnational trade, which involves the issue of remote payment. If the Italians came here and they brought the money order system, of course it must be too late.
From this perspective, the Knights Templar should be the first to invent and use bills of exchange in Europe. However, although the Knights Templar was the first to create a bill of exchange, it did become very developed in the hands of Italian businessmen, and the concept immediately became popular. up. What's going on here?
(5) Popularization of bills of exchange and redevelopment of the banking industry
From the bottom of their hearts, the members of the Knights Templar are still knights, feudal lords, and their ideas are relatively narrow. They are not real businessmen. They make money by relying on the special condition of armed escort. Put it on the land, mainly land. This is the way of thinking of the old and the rich. If you have money to buy land, that's why there is such a large amount of land in Europe.
Italian businessmen are different from them. What do Italian businessmen invest in when they have money? investment in industry and trade. For example, wool spinning and wool spinning industry were the special skills of the Italians back then. And this industry was like the current super-profiteering industry back then, very profitable.
Italian businessmen have made money, and they continue to invest in this industry, and then they can make more money by rolling it up. The financial strength is getting stronger and stronger. This brings up a new problem, how to put away so much money? You can't have that much cash piling up at home, it's not safe either. So this will stimulate the development of the banking industry.
Banking certainly didn't originate in this era, it's a very old industry, as far back as millennia BC, temples were the first banks, but banking shrank after the collapse of the Roman Empire because the Roman Empire collapsed , The monetary economy has shrunk, and people don't use cash for transactions, so at that time, of course, no one in the bank saved money, and they couldn't lend money, and it shrank more and more and became an economic dwarf.
After the 12th century, when the textile industry developed and trade developed, huge profits flowed in, and the banking industry was greatly stimulated and began to develop. The development of the banking industry was later than the start of the trade and woolen industry, and one of its most important development areas was Florence.
Florentine bankers developed enormously during the 60 years between 1250 and 1310. And gained the trust of all Christian countries within 60 years. For example, around 1200, these Florentine bankers in Italy marched into the Champagne Bazaar.
// Here is a brief introduction to the Champagne Grand Bazaar. At the end of the 11th century and the first half of the 12th century, with the rise of urban merchants, a large number of bazaars appeared in Europe. This is a place where professional merchants gather regularly and is a trading center, especially a wholesale trade center. Among the large and small markets, the Champagne market is the largest market. It is located in the Count Ridge of Champagne, France, at the intersection of two traffic arteries between Flanders and Italy, and between Germany and Spain. At this point, goods from Italy, wool from England, lemons from Flanders and other goods were traded again, so the Champagne Fair became an unprecedented commercial center, and in the second half of the 13th century Reached its heyday.
(6) Early banks
In fact, the bank at that time was very simple, a long bench, plus a table, spread a cloth on the table, put two balances, plus a few bags of coins, this is all the facilities of a bank, it does not need Too much stuff to have a booth like this at the Champagne trade.
Doing business at that time was very interesting. Why did you put a few bags of coins on the table? It was for currency exchange. For example, when businessmen from various countries came, they took their own currency. currency to do business. So you have to exchange with the banker, but these are small money, not a big deal, the real big deal is a loan issued by a bill of exchange.
At that time, many of the champagne markets were big foreign businessmen. The quantity purchased by these people was counted by the number of ships. This quantity was very large. It was impossible for him to carry so much cash with him. It was not safe and convenient. .
Then he wants to make large-scale purchases at the champagne trade fair, where does the money come from? I have to borrow it, who can I borrow it from?
Just find those bankers. When the banker hears that you want to borrow money, okay, fill out a form. What is this form called? Bazaar certificate. Bazaar certificates are essentially the prototype of commercial bills of exchange.
Bazaar certificates have a certain standard operating mode. Two officials from the bazaar must be invited to testify. Then you have to write clearly how much you borrowed, how long you borrowed, the date of return and the place of return. There are two copies of the certificate, one is given to the officials of the market, and the other is held by the banker.
At this time, what the loan merchant takes is the certificate. After taking the certificate of the bazaar, he starts to purchase. At all the stalls in the market, when the seller sees the bazaar certificate, everyone recognizes it. This is called credit.
After paying the voucher, you can pick up the goods, and you can leave after picking up the goods. The merchant who sold the goods received the bazaar voucher, and he could choose to wait for it to expire. For example, after 6 months, when it is due, it is time to pay. He will take the voucher and then go to the banker to get the money.
But what if he's short on cash and wants a quick turnaround? It can also be sold on the street. For example, a 10% discount? No problem, this is called discounting. Therefore, this system is the prototype of the earliest commercial draft. What if the merchant who picks up the goods does not pay when the time comes? Breach of contract and non-repayment. What is the solution?
Of course there are. Generally speaking, if you want to participate in commodity trade fairs, you will not come empty-handed, you will bring goods, so your goods will have a warehouse there. If there is a breach of contract, the banker will go to the count of champagne, and the count of champagne will send someone to seize his position, see how much goods are still in it, and then use this goods to compensate for the loss.
But if he has no goods there, the Earl of Champagne will report to the French king at this time, and the French king will search all the goods of this person throughout the country. If this buddy has no goods in France, it is estimated that he will pass the Pope, and the Pope will issue a red notice.
But this is rarely the case. In fact, we will find that in the era of the Middle Ages, merchants had already firmly established the concept of credit. They understood that if you want to grow your business, you have to have a lot of credit, so they attach great importance to the issue of credit. It may sound like the bank is also easy to do, just a table, a bench, and then add a scale and a few bags of money? not that simple.
Italian businessmen or bankers in Florence, first of all, have a huge network. His money orders are issued from the Champagne Bazaar, and they can be withdrawn in Venice or London. Therefore, the essence of finance is that there must be a network, and there is nothing to talk about without the network. Some people may ask, who was more powerful than the Jews or the Florentine merchants at that time?
We all know that the Jews have a commercial and trade network all over the world, but in the area of the Champagne Bazaar, the Florentine bankers are the most powerful and the Italians are the most powerful. The Jews are marginalized, they mainly do some pawn shops, why does this phenomenon occur?
Back then, the main financial strength of Italian bankers came from its strong industry. The wool spinning industry and wool trade were very powerful, so its funds were constantly replenished. Of course, the Jewish pawn is actually a kind of usury, including land, including lending. In terms of turnover, it is weaker than Italian bankers.
(7) The King of England forcibly breached the contract
We have seen why Florentine bankers have controlled the economy and trade of many countries after 60 years of development. Britain is such an example. The wool trade in England was monopolized by Florentine bankers. What happened?
Before the outbreak of the Hundred Years War between Britain and France, in 1337, the then King Edward III of England was preparing to raise money because a war was about to begin. As a result, the British Parliament resolutely opposed it and was unwilling to fight, which was useless. Parliament objected, failed to pass, could not levy taxes, what should I do?
Then only borrow money, how to borrow? After much deliberation, the King of England handed over the monopoly of the country's most profitable wool trade to a Florentine merchant and borrowed a large sum of money. Because there were no competitors in Florence, the merchants forcibly lowered the price, and then sold it to other countries at a high price, making huge profits in the middle. Why not give the monopoly to native British businessmen? It's very simple. The capital accumulation of local businessmen is not as good as that of Florentine businessmen, and they can't spend so much money.
Why the Hundred Years War between Britain and France? From the perspective of the battlefield, the British army always had the upper hand in the initial stage and fought beautifully, but it cost money to fight, and the capital consumption was too large. As the war progressed, the debts of Britain became more and more serious. In the end, the king of England was besieged by all sides. to someone else.
Finally, the King of England ordered all the Florentine bankers to be arrested and sent to prison. Do you still owe money to you? If you owe me, stay here. If you say no more, I will let you out. The King of England forcibly defaulted. When the news came, the entire banking industry in Italy suffered an avalanche. Because so much money was lent to you to fight the war, it was the savings of many banks, so a large number of banks in Florence were drained, most of them were drained, and only a few few survivors.
This illustrates a problem. In the Middle Ages, the whole of Europe did not evolve sovereign credit or the concept of national debt. Who came up with this concept? Venetian. There is no feudal lord class in the Venetian ruling class at all, and all the people in power are businessmen, which is called
commercial oligarchy. The way of thinking of merchants is completely different from that of landowners. For example, in 1157, Venice encountered serious financial difficulties, lack of money, economic downturn, and trade shrinkage. What should we do?
If he is a landed nobleman, he will consider raising taxes, but he cannot raise taxes because they are the merchant class. Business trade, which is already weak, will get worse with a tax hike. Venice also doesn't have much land mortgages, so it has to be innovative.
(8) Public bond banks
After much deliberation, I came up with the world's first national sovereign bond. How was it issued? First set up a public bond bank, and then let the common people subscribe for the shares of the public bond bank. It is similar to stocks, but it is not a stock, but a public bond. After the shares are subscribed, the Ministry of Finance will take a roster to record. How many shares Zhang San subscribed for and how much money he spent are all recorded in the files, and dividends are distributed every year.
How can we guarantee that this public bond bank can make money? The Venice government allocates part of its fiscal revenue to banks every year to ensure that public debt banks have money to pay dividends. Then Venice used the funds raised to expand its territory overseas, expand its trade network, and earn more money. Over time, the shares of the public bond bank could be circulated in the market.
Then it evolved into fixed-income bonds, and the government allocated part of its fiscal revenue to pay the interest on the bills. In this way, Venice has gradually become the world's first sovereign bond, which is also a major conceptual innovation.
(9) Emergence of shareholding system
It is a bill issued with the government's fiscal revenue as collateral. This looks a bit like a shareholding. But the original of the joint stock system is Genoa. Genoese people like to do nautical trade very much. Starting from Genoa to Egypt, they can earn 5000% profit, which is very high, so the upper class people in Genoa basically invest in nautical trade.
There is a problem with seaborne trade, which is extremely risky. The profits are high, but the risks are also high. Winter storms in the Mediterranean region are very severe. When sailing and trading, we must avoid winter, which is very long, which is a problem. Second, wars are often fought in the Mediterranean Sea, and pirates are often haunted. If the ship sinks or is ransacked by pirates, it is basically a waste of work.
The Genoese have been thinking about how to diversify risks and raise funds to make bigger deals? This problem was not solved until the 13th century. In that era, shipbuilding technology advanced by leaps and bounds, and the scale of merchant shipbuilding became larger and larger. The cabin is bigger and there are more places for loading. The Genoese came up with a very genius idea.
Divide a large cabin into many small compartments, and then each compartment can be sold, so that many less wealthy people can buy a warehouse and store some goods. After this innovation came out, it caused a sensation, and more people joined in.
Due to the invention of the position, all the people of Genoa went to sea. Sailors, bakers, textile workers, farmers, all people invested in the position, and the price of the position began to skyrocket. What should I do? The Genoese came up with a solution, which was to split their shares. Divide a position into half, divide it into half again, and finally make it as small as 1/24 of the original position, and the result is still in short supply.
The innovation of the Genoese was later recognized by law. This position has become a commodity that can be traded in the market, and it can be used to mortgage loans, pay employees' wages, and even purchase goods. Finally, it becomes an inheritance and can be inherited .
Inspired by this innovation, Genoese merchants established joint-stock companies in the true sense.
In fact, China's financial innovation is not later than that of Europe. For example, Feiqian in the Tang Dynasty was the earliest bill of exchange, which was hundreds of years earlier than Europe, and Jiaozi (paper money) in the Song Dynasty was hundreds of years earlier than Europe. Why has China never evolved national debt? Let's talk about it later when we have a chance.
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