The great inventions

In the Middle Ages, a merchant from Florence wants to buy wool in Bruges. He has to cross Europe with a bag of gold.

Weeks on the road, bandits, tolls. Gold is heavy, and it attracts thieves.

Italian bankers found a way round it: the bill of exchange.

The merchant deposits his gold with a banker in Florence. He receives a simple letter.

In Bruges, he presents this letter to the banker's correspondent. And he receives the equivalent, in local currency.

The money travelled without moving. Only a piece of paper made the journey. It is the ancestor of the bank transfer.

And the exchange often hid something else: interest. The Church banned lending at interest. The exchange rate let it slip in.

Second invention: the deposit bank. At first, you simply entrust your gold to someone solid, for safekeeping.

In London, in the seventeenth century, these were often goldsmiths. They had vaults, and they gave a receipt.

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Soon, the receipts themselves circulated. People paid with the receipt, without fetching the gold.

Then the goldsmith noticed something. Depositors never all come back at the same time.

For the example, out of one thousand coins deposited, he keeps two hundred. And he lends the other eight hundred, with interest.

The receipts are still worth one thousand. The coins lent, eight hundred more. One thousand eight hundred circulate, for one thousand real coins.

Keep, then lend. The modern bank was born. And with it, the risk that everyone comes back on the same day.

Third invention: the exchange. The French word bourse is said to come from Bruges, from a merchant family, the Van der Beurse.

In the sixteenth century, Antwerp built a building just for trading between merchants, open every day.

Then Amsterdam, in sixteen oh two. The East India Company sold shares to anyone. And those shares changed hands.

For the first time, you could own a piece of a company, and sell it to a stranger, without waiting.

Last invention: the cheque and the transfer. Money becomes just a line in a ledger, moved from one account to another.

Here is the twist: each invention made money lighter, and more abstract. And each added a trusted middleman.

The banker, the goldsmith, the exchange, the bank. At each step, you gain speed. And you depend a little more on someone.

Understanding these inventions means understanding the question still asked in every crisis: what if this middleman fell?