The first banks

Banks were not born for you. They were born for merchants, popes and kings.

Florence, thirteen ninety-seven. Giovanni de' Medici founded a bank that would become the most powerful in Europe.

His tool was nothing spectacular: an account book kept in double entry.

Each transaction is written twice. For the example, a loan of one hundred florins: one hundred leaving the till, one hundred owed to you.

The two columns must always be equal. One mistake, and the imbalance jumps out.

The Medici did not invent it, other Italians already used it. But they turned it into a machine for running branches across Europe.

And they became the Pope's bankers. Money opens the doors of power, and power protects money.

But lending to the powerful has a risk. Half a century before the Medici, the King of England had stopped repaying.

Two great Florentine banks, the Bardi and the Peruzzi, did not survive it. You cannot have a king's goods seized.

In the app, this chapter is animated and narrated, card by card. Start free trial.

Download on theApp Store

Let's change country. Augsburg, in Germany. The Fugger family grew rich from silver and copper mines.

In fifteen nineteen, a new emperor had to be elected. The votes of the prince-electors could be bought.

Jakob Fugger advanced more than half the sums paid. Charles the Fifth was elected. A banker had just made an emperor.

But a king's debt remains a king's debt. The Spanish crown's repeated defaults ended up wearing down their fortune.

Amsterdam, sixteen oh two. The Dutch East India Company was born.

To fund distant and risky voyages, it sold shares to anyone who wanted them. More than a thousand investors signed up.

And these shares were traded between investors, in Amsterdam. It is often presented as the birth of the listed share.

London, sixteen ninety-four. King William the Third was at war with France, and his coffers were empty.

Merchants lent him one point two million pounds. In exchange, they got the right to found a bank.

That was the Bank of England. It was born to fund a war. It would become a central bank.

The twist: each of these institutions was born from a need of those in power. A war, an election, an empire.

And each learned the same lesson. Whoever lends to power gains influence, but cannot force it to pay.

Double entry, the share, the central bank. The tools we use every day were invented for kings.

They outlived those kings. And today it is the ordinary saver who uses them.