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

Historical Violations of the Legal PrinciplesGoverning the Monetary Irregular-Deposit Contract 41the irregular deposit by bankers and authorities in three differenthistorical instances: the Greco-Roman world; the Mediterraneantrading cities of the late Middle Ages and the beginningof the Renaissance; and finally, the emergence of the firstimportant government banks beginning in the seventeenthcentury. Moreover, the evolution of banking in these three separatehistorical instances produced to a large extent the samecharacteristic results. Indeed, in each case we observe that aspeople began to violate traditional legal principles, harmfuleffects followed, not only in the shape of bank failures, butalso profound financial and economic crises. In the followinghistorical examples the same frauds are committed, followedby the same typical stages and results, and the same failedattempts to enforce traditional principles of safekeeping. Thesame damaging effects then inexorably follow, and this processis repeated again and again, up to the present day. Let us nowexamine the violation of legal principles and authorities’ complicityin banking frauds and abuses throughout history.2BANKING IN GREECE AND ROMEIn ancient Greece temples acted as banks, loaning moneyto individuals and monarchs. For religious reasons templeswere considered inviolable and became a relatively saferefuge for money. In addition, they had their own militias todefend them and their wealth inspired confidence in depositors.From a financial standpoint the following were amongthe most important Greek temples: Apollo in Delphi, Artemisin Ephesus, and Hera in Samos.TRAPEZITEI OR GREEK BANKERSFortunately certain documentary sources on banking inGreece are available to us. The first and perhaps most importantis Trapezitica, 4 written by Isocrates around the year 3934 Raymond de Roover points out that the current term banker originatedin Florence, where bankers were called either banchieri or tavolieri,because they worked sitting behind a bench (banco) or table (tavola). The