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World Futures: Money, Trade, Value And Time Part 2

on October 20, 2017 - 8:30am

World Futures: What Do We Need?

Los Alamos World Futures Institute

In last week’s column, we looked at Uruk 5,000 years ago and saw the emergence of cuneiform, a system of writing, apparently used to document trades and inventory.  

Flash forward to 1394 A.D. and Prato, Italy. Francesco di Marco Datini ordered wool from Mallorca, an island off the coast of Spain about 1,342 km away.  

Remember, the order had to be written and delivered before any product fulfillment could be achieved and there was no airmail or Internet. Six months later the sheep were shorn and several months later the wool arrived in Prato, via Barcelona, 39 bales in all. It was early 1396.

Datini sent 21 bales to a customer in nearby Florence and had the remaining 18 bales processed and converted into six long cloths. The cloths were shipped back to Mallorca but didn’t sell.  

Eventually, Datini sold the cloths in Valencia and North Africa, that last being sold in 1398, nearly four years after placing his initial order. Datini was a very slow motion entrepreneur.

Clearly, because of the torpid pace of business, Datini was doing other things concurrently. After all, he needed to eat every day and receive services from other elements of the stratified society.  

He had to engage in other daily business to ensure a continuing value flow and make a profit. He had to use his profits to trade for other things of value. But he also had to keep track of every facet of his business. Datini used a bookkeeping system called alla veneziana, later known as double-entry bookkeeping.

Datini ordered wool and converted it to cloth and kept his books to show his profit. It took time, a lot of time, by today’s standards. Did he use clay objects like in Uruk 4,000 years before?  

No, he used gold florins of the Republic of Florence (each worth approximately 140 US dollars today). The florin was a coin of nominally pure gold, weighing 0.1125 troy ounces. More importantly in the 14th century, there were many Florentine banks with branches across Europe.

Under the Tang dynasty in China (618-907 A.D.) paper money was used with merchants. At the time, purchases were made with copper coins which were inconvenient for merchants to carry over large distances when paid by the government.

To ease this problem, the government would pay the merchant with “paper money” that could be converted back into coins on return home. These were banknotes and were dubbed “flying cash.”

In 1099, with the First Crusade, Jerusalem had been captured from the Fatimid Caliphate. As a result, pilgrims began to stream (or was it trickle) in. Assume you lived in London and wanted to be one.  

How would you sustain yourself enroute and how would you pay for things when you arrived?  You needed food, transport, and a room somewhere. But if you carried large amounts of acceptable “money” with you, you were at great risk.

Enter the Knights Templar. In the Temple Church in London a pilgrim could deposit money and receive a letter of credit. On arrival in Jerusalem, the pilgrim could take his letter of credit to the “local Templar branch” and receive “money” or local “currency”.  

An analogy if going to LANB in Los Alamos, turning in 100 one dollar bills, and receiving a letter of credit that could be exchanged at a Santa Fe branch for 100 dollar bills, for a fee of course. Sounds a bit silly and it is. But remember, The Knights Templar private bank was 918 years ago. There has been a lot of “progress” since then.

One last thing. The Knights Templar also made loans. Ask King Henry III of England. Till next week….

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