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.

Compurgators

The ultimate character witness.

Throughout several centuries and many countries, establishing your innocence or trustworthiness in a court of law could be done by the use of compurgators. The word comes from Latin com (with) + purgare (cleanse; hence the modern word "purge").

If you were accused of wrongdoing, you would gather compurgators to appear for you in court. Ideally, you would find 12 of the most respected members of the community who would be willing to stand there and say that they believe you when you say you are innocent. Mind you, if you were found standing over a dead body with a bloody knife in your hand, compurgators were not likely to save you. This worked well when you were accused of cheating on a debt or stealing a spoon and hard evidence did not exist against you...unless you had friends who were determined to protect you.

The opportunities for abuse of such a system were rampant.

Henry II, or instance, in 1164 made sure that compurgation would not be allowed in felonies; he did not like the fact that a cleric (priest) might literally get away with murder in an ecclesiastical court by merely being defrocked, while the royal courts would use capital punishment for capital crimes. The use of compurgation in any way as a defense in England was eliminated from the court system in 1833.

Nicholas Oresme

Nicholas Oresme (c.1325-1382) likely came from humble beginnings; we assume this because he attended the College of Navarre, a royally funded and sponsored college for those who could not afford the University of Paris. He had his master of arts by 1342, and received his doctorate in 1356. He became known as an economist, philosopher, mathematician and physicist.

One of his published works was:

Livre du ciel et du monde
(The Book of Heaven and Earth)
In this work he discussed the arguments for and against the rotation of the Earth.

• He dismissed the notion that a rotating Earth would leave all the air behind, or cause a constant wind from east to west, pointing out that everything with the Earth would also rotate, including the air and water.
• He rejects as figures of speech any biblical passages that seem to support a fixed Earth or a moving sun. (Keep in mind even today we unanimously speak about the beauty of the sun setting when it's really the Earth rising!)
• He points out that it makes more sense for the Earth to move than for the (presumably more expansive and massive) heavenly spheres and Sun to move.
• He assures his readers that all the movements we see in the heavens could be accounted for by a rotating Earth.
• Then he assures the reader that everyone including himself thinks the heavens move around the earth, and after all he has no real evidence to the contrary!

Years later, Giordano Bruno (1548-1600) wrote his theories out in a way so similar to Oresme's that it is assumed he had access to Oresme's writing.