The crisis of European bags (and the consequent “domino effect”,) generated by the closure of the Silicon Valley Bank and the rescue in extremis of the Swiss banking giant Credit Suisse, are an old story for savers. The failure of banks, ghost bonds and speculative bubbles are born already in the Middle Ages, we see how, through the article “The first financial crack“by Matteo Liberti, taken from the archives of Evidence Network History.
Yesterday as today. Insolvent governments, banking cracks, liquidity crisis and racing at the counters. We are not in Silicon Valley after the closure of two banks (Silicon Valley Bank and Signature Bank) by the American government in 2023, nor in the 2008 New York (year of the bankruptcy of the business bank Lehman Brothers and the explosion of the crisis economic of the third millennium). And not even in that of 1929 (collapse of Wall Street and beginning of the Great Depression). We are in the fourteenth century Florence, the heart of the economy of time. Here, in the middle of the Middle Ages, a large financial crisis linked to the collapse of the banks of the Peruzzi and Bardi families, until then the flagship of European finance.
Insolvent. It all began due to a sovereign with pulled pockets: Edoardo III Plantageneto, King of England. On the throne since 1327, after working against the Scottish, he launched a military campaign against France in 1337, starting the war of one hundred years. The new belliginally initiative, however, has dry the state coffers and the king found himself forced to ask for money on loan from the Florentine commercial companies, already active in Great Britain (from where the wool for Tuscan manufactures came from, among other things). These companies had arisen in various Italian cities with merchant purposes, but since the mid -thirteenth century they had started specializing in credits, deposits and funding. Some, organized around the capital of powerful families, became similar to modern banks, offering advantageous interests to those who deposited their capital.
Rich land. The Italian imposed itself as the language of finance, and in the sector the Tuscan companies and in particular those of the Bardi and Peruzzi, “multinationals” with branches throughout Europe and in the Near East, stand out. Among the beneficiaries of their loans were principles and sovereigns, who abused them to cover the incessant military expenditure. In return, the banking institutions received very high interests or, alternatively, exemptions and privileges of various kinds (noble titles, exploitation of customs and land), thus expanding their power also in the political field.
First failures. As for Edoardo III, his debts with the Bardi and Peruzzi quickly touched the million and a half of gold florins, including commissions. An exorbitant sum even for a king, especially since the war in which he had become bogged down was not giving the desired results. “The prestige of the sovereign entered into crisis, and many perceived the instability of the two giants of Florentine finance as imminent, so much so that in 1339 Pope Benedict XII decided to give up the services of the Bardi and Peruzzi for the management of pontifical finance”, Tell the historian Lorenzo Tanzini, author of the essay 1345. The bankruptcy of Florence. A story of bankers, failures and finance (Salerno). As feared, Edoardo refused to pay his debts, formalizing his condition of insolvency. Today it would be said that the sovereign declared the “default”.
Bank Run. The bankruptcy of Edoardo III strengthened the fear of an imminent liquidity crisis of the Bardi and Peruzzi, and to be frightened, among others, the king of Naples Carlo d’Angiò and all the Neapolitan nobility, who had important deposits at the Florentine bankers. “Previously, the merchants of the city of Giglio had fueled the conquest of the kingdom of Naples by the Carlo d’Angiò himself, receiving in exchange for tax income and commercial privileges”, says the historian.
Panic. The Florentine companies, however, were now perceived as agonizing, and for many the fear of not reviewing the filed money anymore was transformed into panic. Stoles in large and small investors hurried to withdraw their liquidity from the banks, kicking off one of the first cases of Bank Run (“Race to the counters”) of all time. In a few months, the Florentine bankers found themselves without funds, also because their loans were often risky and not supported by solid capital. After some minor institutes, even the most powerful collapsed: between 1343 and 1346 the insolvency of Edoardo III and the race to the withdrawal forced the Bardi and Peruzzi to formalize their bankruptcy.
Contagion effect. And since 1345 the contagion of bankruptcy affected another long series of subjects: together with other banking institutions (including that of the steel, illustrious like the other two), craftsmen, traders and entrepreneurs who had invested their earnings, collapsed, collapsed The real estate market and many small savers had to say goodbye to the filed nestly.
“In addition to the loss of money, there was a collapse of trust in every merchant and banker, even if not directly involved in the disaster”, the expert remarks. “And, as you know, the market is essentially based on investors’ trust.”
Collateral events. At the initial optimism for finance, a general depression was therefore taken over, even more after the same municipality declared itself unable to pay public qualifications (the loans made by citizens). In short, after the reverse of the Bardi and Peruzzi, “who share hills of their traffic much of the trafficking of the Mercatantia “, it did not remain” almost a substance of pecunia in our citizens“, As the merchant Giovanni Villani, reporter of the time, noted. In his opinion, never in Florence, not even at war, there were”Major Ruinae defeat“. A series of floods contributed to worsening the situation that compromised the crops of 1346, and the following year, the” black plague “, which in 1348 halved the population of Florence (from 90 thousand to 45 thousand inhabitants).
The recovery. After the collapse, the situation slowly started improving. “For example, the city authorities decreed that all the debt items lit by the Municipality over the years were merged into a single management called” mountain “; Name that well expressed the huge amount of debts to manage, “explains Tanzini. The new management was based on a huge register (drawn up since 1347) with the names of all the creditors of the Municipality, to which new interests were offered on the old deposits and the possibility of redeeming the entire credit if they had invested further money.
The “market” of public qualifications thus finished the Florentine Republic, and in a few years the crisis returned. Merchants, bankers and entrepreneurs resumed their business. Paradoxically, the plague also had positive effects: the decrease in labor made the wages rise by increasing consumption.
Short memory. A positive economic cycle was starting again. Many began to reflect on the collapse, caused by an uncontrolled euphoria of investors and financial operators. “The truth must not be silent for (…) memory of these things, to give for example to those who are to come to use the best guard“, The villani warned. In economics, however, the memory is often short, and on the continent they did not delay in looming on the horizon new speculations and crises even of a wide range. In Florence, new powerful powerful families are shortly to influence political and financial level.
Among these will push that of doctors.
