In the 12th century European bankers latched on to a scam familiar with gold & silver enthusiasts. What was the scam they invented? Paper manifestations of silver and gold….
Bankers past and present devise creative schemes to manipulate finances. European governments in the 12th century engineered the concept of funding through government debt.
Thereafter, Venice seized the opportunity to provide transportation for the Fourth Crusade. But the crusaders could not pay for chartering the ships. The emperor of Venice, a doge named Enrico Dandolo, offered to delay the crusader’s payment in exchange for military support to capture troops that had rebelled against Venetian rule in 1183. Venice placed itself under the dual protection of the Papacy and the King of Hungary. Venice was successful in this 1202 war due to the help of 10,000 Byzantine soldiers plus 500 Knights and the service of the Byzantine navy (20 ships.) Finally, Venice received 200,000 silver marks to help pay off the Crusaders’ debt that had been deferred by Enrico Dandolo.
The history of present day financial instruments begins with the issuing of municipal bonds.
The practice was created by the Venetian government who had banked large volumes of gold and silver. Venice needed a quick infusion of income for military purposes but did not want to part with its silver and gold. #PMWT – Precious Metals Warfare Theory
Venetian bankers levied a compulsory loan on its taxpaying citizens. It promised the citizens five percent annual interest and allowed the “bonds” or contracts to become negotiable which created a market in government debt. These bonds had no specific date of maturity, their market prices fluctuated wildly with the city’s political and military fortunes. Skepticism emerged regarding the likelihood that these “war bonds” would ever be repaid.
Similar practices quickly spread to the other Italian states and to northern European merchant enclaves. The United Provinces of Holland financed their long war of independence against the Hapsburgs (1568-1648) largely through a series of forced loans. Meanwhile they floated numerous voluntary bond issues as well. It was these manipulations of money creation that caused the inflation and collapse of prices, not the influx of bullion.
In the sixteenth century merchants were using bills of exchange to settle debts. Government debt took on the following manifestations:
These annuities became the real credit money of this age. These paper swaps changed everything.
Townsfolk and villagers were once independent. Now they were hammered into the ground and reduced to wage laborers working for those who had access to these higher forms of credit. In Seville, bullion was taken directly to the warehouses of bankers in the Republic of Genoa. These deposits of bullion became the basis for complex credit schemes.
The value of the bullion was loaned to the emperor to fund military operations in exchange for papers entitling the bearer to “interest-bearing annuities” from the government papers that could in turn be traded as if they were money.
Bankers could almost endlessly multiply the actual value of gold and silver they held. In the 1570s Seville in Spain was known for their” factories of certificates” and transactions were exclusively in paper.
This created increasing uncertainty because no one knows the outcomes of war. A paper promise was fragile because these notes were transferable. This is the introduction of counter party risk.
There was great counter party risk surrounding the validity of paper notes. Paper notes were promises. It was unknown if the Spanish government could actually pay these debts so the bills circulated at a discount. Bonds began circulating throughout the rest of Europe causing inflation.
You begin seeing this repeat over and over again. The process by which the bankers “endlessly-multiplied” their gold and sold paper bonds that infected the population.
Things get even worse. The Bank of England starts circulating promissory notes instead of government bonds. At least some government bonds did pay. Moreover, promissory notes did not carry interest.
The Bank of England was created by a syndicate of forty London and Edinburgh merchants. These forty men had already made loans to King William III. The viewpoint of these forty merchants was no one in the land could be considered a better creditor. So these forty men extended a £1.2 million loan to help finance a war against France.
Now they had leverage on the King so they convinced King William III to allow them in return to form a corporation with a monopoly on the issuance of banknotes.
These were promissory notes for the money the king now owed them. This was the first independent national central bank, and it became the clearinghouse for debts owed between smaller banks; the notes soon developed into the first European national paper currency.
When bankers controlled the governments they also controlled the armies.
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