Sunday, February 3, 2013

Banking Collapse of the 1340s

Chapels of the Bardi & Peruzzi families
in Santa Croce, Florence

Florence was the headquarters for some powerful families in the Middle Ages who used their wealth and business acumen (and the stability of the Florentine gold florin) to create the first international banking corporations. Two of the biggest, run by the Bardi and Peruzzi families, collapsed in 1346 and 1343, respectively. The excuse for the collapse is often given as Edward III of England's default on loans he took to pay for expenses during the Hundred Years War. Estimates put Edward's debts at 900,000 florins to the Bardi and 600,000 to the Peruzzi--an enormous sum in any age.

More recent assessments of the situation, however, spread the blame. Edward's expenses were incurred earlier, and the two banks survived for some years afterward. Also, a third bank, the Acciaiuoli, failed in 1343 without having loaned any money to England. Various Florentine banks also loaned money to finance a war against Castracane of Lucca, and to put down a peasant revolt in Flanders. Also, an uprising in September 1343 in Florence created vast property damage that would have affected the banks (according to the 16th century historian Giovanni Villani).

It is impossible to understand every aspect of the collapse of the 1340s, especially since records such as we expect modern companies to maintain were not kept, and records that were kept did not necessarily survive until today. We do know that, in a world where nations did not maintain careful accounting practices, or have "social safety nets" established, it took very little to create widespread economic turmoil.

1 comment:

  1. What was the actual result of of the financial collapses? For all my reading on the middle ages, I don't recall much mention of this (I have a vague memory of a mention of Edward's default, but no mention of consequences).

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