Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Historical Violations of the Legal PrinciplesGoverning the Monetary Irregular-Deposit Contract 593BANKERS IN THE LATE MIDDLE AGESThe fall of the Roman Empire meant the disappearance ofmost of its trade and the feudalization of economic and socialrelationships. The enormous reduction in trade and in thedivision of labor dealt a definitive blow to financial activities,especially banking. The effects of this reduction lasted severalcenturies. Only monasteries, secure centers of economic andsocial development, could serve as guardians of economicresources. It is important to mention the activity in this field ofthe Templars, whose order was founded in 1119 in Jerusalemto protect pilgrims. The Templars possessed significant financialresources obtained as plunder from their military campaignsand as bequests from feudal princes and lords. As theywere active internationally (they had more than nine thousandcenters and two headquarters) and were a military and religiousorder, the Templars were safe custodians for depositsand had great moral authority, earning them the trust of thepeople. Understandably, they began to receive both regularand irregular deposits from individuals, to whom theycharged a fee for safekeeping. The Templars also carried outtransfers of funds, charging a set amount for transportationand protection. Moreover, they made loans of their ownresources and did not violate the safekeeping principle ondemand deposits. The order acquired a growing prosperitywhich aroused the fear and envy of many people, until Philipthe Fair, the King of France, decided to dissolve it. He condemnedthose in charge to be burned at the stake (includingJacques de Molay, the Grand Maître), with the prime objectiveof appropriating all of the order’s riches. 3737 See, for example, Jules Piquet’s book, Des banquiers au Moyen Age: LesTempliers, Étude de leurs opérations financièrs (Paris, 1939), cited by HenriPirenne in his work, Histoire Économique et Sociale du Moyen Age (Paris:Presses Universitaires de France, 1969), pp. 116 and 219, and also Ignaciode la Torre, Los templarios y el origen de la banca (Madrid: EditorialDilema, 2004). Piquet believes he sees the beginnings of double-entrybookkeeping and even a primitive form of check in the records kept bythe Templars. However, it appears the Templars’ accounting practiceswere, at most, mere direct predecessors of double-entry bookkeeping,