How Venice Rigged the First, And Worst,
Global Financial Collapse
by Paul Gallagher
A former political prisoner in Virginia, Paul Gallagher is the
author of "Aeschylus' Republican Tragedies" (Fidelio, Vol. II, No.
2, Summer 1993) and "Population Growth Is Caused by Renaissances"
(Fidelio, Vol. II, No. 4, Winter 1993.
Six hundred and fifty years ago came the climax of the worst
financial collapse in history to date. The 1930's Great Depression
was a mild and brief episode, compared to the bank crash of the
1340's, which decimated the human population.
The crash, which peaked in A.C.E. 1345 when the world's biggest
banks went under, "led" by the Bardi and Peruzzi companies of
Florence, Italy, was more than a bank crashit was a financial
disintegration. Like the disaster which looms now, projected in
Lyndon LaRouche's "Ninth Economic Forecast" of July 1994, that one
was a blowup of all major banks and markets in Europe, in which,
chroniclers reported, "all credit vanished together," most trade and
exchange stopped, and a catastrophic drop of the world's population
by famine and disease loomed.
Like the financial disintegration hanging over us in 1995 with the
collapse of Mexico, Orange County, British merchant banks, etc.,
that one of the 1340's was the result of thirty to forty years of
disastrous financial practices, by which the banks built up huge
fictitious "financial bubbles," parasitizing production and real
trade in goods. These speculative cancers destroyed the real wealth
they were monopolizing, and caused these banks to be effectively
bankrupt long before they finally went under.
The critical difference between 1345 and 1995, was that in the
Fourteenth century there were as yet no nations. No governments had
the national sovereignty to control the banks and the creation of
credit; or, to force these banks into bankruptcy in an orderly way,
and replace fictitious bank credit and money with national credit.
Nor was the Papacy, the world leadership of the Church, fighting
against the debt-looting of the international banks then as it is
today; in fact, at that time it was allied with, aiding, and
abetting them.
The result was a disaster for the human population, which fell
worldwide by something like 25 percent between 1300 and 1450 (in
Europe, by somewhere between 35 percent and 50 percent from the
1340's collapse to the 1440's).
This global crash, caused by the policies and actions of banks which
finally completely bankrupted themselves, has been blamed by
historians ever since on a kingpoor Edward III of England. Edward
revolted against the seizure and looting of his kingdom by the Bardi
and Peruzzi banks, by defaulting on their loans, starting in 1342.
But King Edward's national budget was dwarfed by that of either the
Bardi or Peruzzi; in fact, by 1342, his national budget had become a
sub-department of theirs. Their internal memos in Florence spoke of
him contemptuously as "Messer Edward"; "we shall be fortunate to
recover even a part" of his debts, they sniffed in 1339.
A "free trade" mythology has been developed by historians about
these "sober, industrious, Christian bankers" of Italy in the
Fourteenth century"doing good" by their own private greed;
developing trade and the beginnings of capitalist industry by
seeking monopolies for their family banks; somehow existing in peace
with other merchants; and expiating their greedy sins by donations
to the Church. But, goes the myth, these sober bankers were led
astray by kings (accursed governments!) who were spendthrift,
warlike, and unreliable in paying debts which they had forced the
helpless or momentarily foolish bankers to lend them. Thus,
emerging "private enterprise capitalism" was set back by the
disaster of the Fourteenth century, concludes the classroom myth,
noting in passing that 30 million people died in Europe in the
ensuing Black Death, famine, and war. If only the "sober, Christian"
bankers had stuck to industrious "free trade" and prosperous city-
states, and never gotten entangled with warlike, spendthrift kings!
The Real Story
Two recent books help to overturn this cover story, although perhaps
that is beyond the intention of their authors. Edwin Hunt's 1994
book The Medieval Supercompanies: A Study of the Peruzzi Company of
Florence,* establishes that this great bank was losing money and
effectively going bankrupt throughout the late 1330's, as a result
of its own destructive policiesin Europe's agricultural credit and
trade in particularbefore it ever dealt with Edward III. "Indeed,
the great banking companies were able to survive past 1340 only
because news of their deteriorated position had not yet circulated."
Just as in 1995.
And Hunt adds a shocker for the historians, based on exhaustive
restudy of all the surviving correspondence and ledgers of the Bardi
and Peruzzi. He concludes that their lending to King Edward III was
done with such brutal "conditionalities"seizing and looting his
revenuesthat his true debt to them may have been no more than 15-
20,000 pounds-sterling when he defaulted. Mr. Hunt himself works for
an international bank, so he knows how such "conditionalities" of
lending work today. He probably knows that the true international
debt of Third World countries today is a small fraction of what the
banks and the International Monetary Fund claim they owe. He
definitely understands that Fourteenth-century England was a Third
World country to the Bardi, Peruzzi, and Acciaiuoli international
banks. They loaned Edward II and Edward III far less than their
promisesbut their promises have been dutifully added up as "total
loans" by historians, starting with their fellow banker Giovanni
Villani.
Even if we accept the highest figures ever given for Edward III's
1345 default against the bankers of Florence, the debt to them of
the city government of Florence (which they controlled) was 35
percent greater, and those bonds were also defaulted upon.
More revealing is the latest work of the historian of Venice,
Frederick C. Lane, Money and Banking in Medieval and Renaissance
Venice. This work shows that it was Venetian finance which, by
dominating and controlling a huge international "bubble" of currency
speculation from 1275 through 1350, rigged the great collapse of the
1340's. Rather than sharing the peace of mutual greed and free
enterprise with their "allies," the bankers of Florence, the
merchants of Venice bankrupted them, and the economies of Europe and
the Mediterranean along with them. Florence was the Fourteenth-
century "New York," the apparent center of banking with the world's
biggest banks. But Venice was "London," manipulating Florentine
bankers, kings, and emperors alike, by tight-knit financial
conspiracy and complete dominance of the markets by which money was
minted and credit created.
As long ago as the 1950's, in fact, one historianFernand Braudel
consciously demonstrated that Venice, leading the Italian bankers of
Florence, Genoa, Siena, etc., willfully intervened from the
beginning of the Thirteenth century, to destroy the potential
emergence of national governments, "modern states foreshadowed by
the achievements of Frederick II."§ Frederick II Hohenstauffen was
the Holy Roman Emperor in the first half of the Thirteenth century,
an able successor of Charlemagne's earlier achievements in spreading
education, agricultural progress, population growth, and strong
government. The great Dante Aligheri wrote his seminal De Monarchia
in a vain attempt to revive the potential of imperial government
based on Divine Law and Natural Law, which had been identified with
Frederick's reign.
Wrote Braudel, "Venice had deliberately ensnared all the surrounding
subject economies, including the German economy, for her own profit;
she drew her living from them, preventing them from acting
freely. ... The Fourteenth-century saw the creation of such a
powerful monopoly to the advantage of the city-states of Italy ...
that the embryo territorial states like England, France and Spain
necessarily suffered the consequences." In addition to what Braudel
shows, Venice intervened to stop the accession of Spain's Alfonso
the Wise, as successor to Emperor Frederick II.
This triumph of "free trade" over the potential for national
government, rigged the Fourteenth century's global human
catastrophes, the worst onslaught of death and depopulation in
history. It was not until the Renaissance created the French nation-
state under Louis XI, one hundred years later, and then England
under Henry VII, and Spain under Ferdinand and Isabel, that the
human population would begin to recover.
Population: The Fundamental Measure
The clearest measure of the destruction wrought by the merchants and
bankers of Venice and its "allies" in the financial crash of the
Fourteenth century, is shown in Figure 1. What had been 400-600
years of increasing population growth in Europe, China, and India
(altogether, three-fourths of the human population), was reversed.
The world's population collapsed. Famines, bubonic and pneumonic
plagues, and other epidemics, killed more than 100 million people.
Wars, dominated by military slaughters of civiliansas in Rwanda and
Bosnia todayraged throughout Eurasia; Mongol armies alone
slaughtered between 5 and 10 million people. This depopulation did
not begin with the 1340's banking crash, however, although it
accelerated after that for nearly a century. The policies of
Venetian-allied finance were already reversing human population
growth for forty to sixty years before their speculative cancer
completely exhausted what it monopolized, bringing on the 1340's
rolling crash of all the major banks that had not collapsed earlier.
How did free-enterprise finance, with no government able to control
it, collapse all the economies of the Eurasian continent? How could
banks concentrated in one part of Europetiny on the scale of modern
bankswork such a global catastrophe?
See Box I on Population
A Cancer on Production
In the Eleventh, Twelfth, and into the Thirteenth centuries the
growth and development of population both in Europe and particularly
in China, was accelerating. China's population doubled in two
hundred years during the Neo-Confucian Renaissance of the S'ung
Dynasty, to 120 million; meanwhile, the population density of
northern France and northern Italy began to approximate the levels
these regions have today. As a result of huge increases in the
amount of agricultural land productively cultivated, Europe's
population had been growing at a steadily increasing rate for seven
hundred years up to A.C.E. 1300, following the collapse and
depopulation of the Roman Empire from A.C.E. 300 to 600. In
addition, there had been several periods in which the rural
technologies for using the plow, seed, animal power, water power,
and wind power, leaped forward. Classical education of youth in
monastery schools (oblates) was spreading up through the Twelfth
century, when the great cathedral-building movement arose in France.
These advances spread particularly rapidly, owing to the impetus of
Charlemagne and his English and Italian allies from 750-900, and
then again from 1100-1250, the period of the Hohenstauffen Holy
Roman Emperors in Germany, Italy, and Sicily, ending with Frederick
II.
But about the turn of the Fourteenth century, the growth of food
production and of population stopped in Europe (China's population
was already being devastated, on which more below). There were major
famines (multiple successive crop failures or extreme shortages) in
1314-17, 1328-29, and 1338-39. One historian concludes that "we
gather from [the Italian chronicler] Villani's statements, that a
scarcity of more or less severe character put in an appearance about
three times each decade. About once each decade the scarcity became
so intense, as to assume the proportions of a famine." The most
productive rural regions of northern Italy and northern France began
to be depopulated from about 1290 onward, while the population of
the towns and cities merely stagnated. (The Milan region was a
counter-example, owing to aggressive construction of government
infrastructure, water-management works, three thousand hospital beds
in a city of 150,000, etc.)
The production of wool in England began to decline from about 1310.
English and Spanish wool were the basis of European clothing
production, although cotton cloth was just beginning to be
produced. "In England, beginning with the reign of Edward I (1291-
1310) and reaching a climax with Edward III, the Bardi and Peruzzi
had acquired a status that gave them a practical monopoly of the
procuring and export of wool ... ."
>From 1150 onward, the famous Champagne Fairs had been the hub of
trading in cloth and clothing, ironwork, woodwork, wool,
agricultural implements and food for all of Europe; year-round fairs
were held in six cities in the Champagne region around Paris.
Merchants had been accustomed to make profits of 3-4 percent
annually in hard-cash and goods trading here. The Venetian and
Florentine bankers intervened into these fairs with large amounts of
credit and bank branches, and with luxury goods "from the East," and
took them over. By 1310, an Italian banker from Lucca boasted that
he could raise 200,000 French livres tournois in credit on the spot
at the Fair of Troyesbut the actual trade in physical goods at the
fairs was declining. Hunt's analysis of the successive sets of books
of the Peruzzi bank shows that the Florentine bankers expected 8-10
percent annual profit up to 1335. This was far above the rate at
which the physical economy of Europe was producing real surplus; in
fact, that physical rate of production was falling. The Venetians
expected much higher rates of profit still, for reasons outlined
below. "At the end of the Thirteenth century, a slowdown in trade
hit commodities first; credit operations kept going longer, but the
fairs went into severe decline," wrote Braudel.
In the late 1330's, the beginning of the Hundred Years War between
England and France led to the clothing industry of Flandersthe main
clothing production region of Europebeing boycotted and completely
shut off from wool; by the late 1340's, this industry was in
complete decline, and was actually moving out of the towns and
cities into tiny "cottage industries" in the countryside.
On top of all this, from the 1320's on, there was a "massive flight
of silver oltremare ["over the sea," that is, to Venice's maritime
empire in the Middle East and ByzantiumPBG], which upset the
equilibrium of Europe in the mid-Fourteenth century." Venetian
exports of silver from Europe from 1325-50 equalled "perhaps 25
percent of all the silver being mined in Europe at that time."
Standard silver coin had been the stable currency of the Holy Roman
Empire in Europe, and of England, since Charlemagne's time. This
massive export from Venice to the East "created chronic balance of
payments problems as far away as England and Flanders," and severe
problems in making payments in trade. France "was emptied of silver
coinage." King Phillip's mintmaster estimated that 100 tons of
silver had been exported "to the land of the Saracens" (the Islamic
Middle East).
Thus, production of the most vital commodities in Europe had been
severely reduced, and the trade and circulation of its money
completely disrupted, over the decades before the 1340's crash, by
Italian banks which appeared to be making usurious rates of
profit. "The Florentine supercompanies resembled very closely in
their operations the huge international grain companies of today,
such as Cargill and Archer-Daniels Midland," writes Hunt. "They used
loans to monarchs to dominate and control trade in certain vital
commodities, especially grain, and later wool and cloth." Their
dominance and speculation progressively reduced the production of
these commodities.
We can see this in more detail, but keeping in mind that the story
of the Florentine bankers and the Fourteenth-century crash and Black
Death, is itself a coverup. These bankers were operating on an
international scale limited to Western Europe and some Mediterranean
islands. It was the maritime/financial empire of Veniceand Venice
onlywhich was speculating on the scale of all of the Eurasian
landmass; and on this evidence alone, it had to be the merchants of
Venice who rigged the devastation and depopulation of the majority
of the human race in the Fourteenth century. The Florentine bankers
were sharks swimming in Venice's seas. The catastrophe of the Black
Death in Europe, so often described, was exceeded by death rates in
China and Islamic regions under the homicidal rule of the Mongol
Khans from 1250, until nearly 1400. The Islamic chronicler Ibn
Khaldun wrote: "Civilization both in the East and the West was
visited by a destructive plague which devastated nations and caused
populations to vanish. ... Civilization decreased with the decrease
of mankind."
Venice was also the "banker," slave market, and intelligence support
service for the Mongol Khans.
The Black Guelph
The Bardi, Peruzzi, and Acciaiuouli family banks, along with other
large banks in Florence and Siena in particular, were all founded in
the years around 1250. In the 1290's they grew dramatically in size
and rapaciousness, and were reorganized, by the influx of new
partners. These were "Black Guelph" noble families, of the faction
of northern Italian landed aristocracy always bitterly hostile to
the government of the Holy Roman Empire. Charlemagne, five hundred
years earlier, had already recognized Venice as a threat equal to
the marauding Vikings, and had organized a boycott to try to bring
Venice to terms with his Empire. Venice in 1300 was the center of
the Black Guelph faction which drove Dante and his co-thinkers from
Florence. In opposition to Dante's work De Monarchia, a whole series
of political theorists of "Venice, the ideal model of government"
were promoted in north Italy: Bartolomeo of Lucca, Marsiglio of
Padua, Enrico Paolino of Venice, et al., all of whom based
themselves on Aristotle's Politics, which was translated into Latin
for the purpose. The same "coup" made the Bardi, Peruzzi, et al.
Black Guelph banking "supercompanies," suddenly two or three times
their previous size and branch structure. Machiavelli describes how
by 1308, the Black Guelph ruled everywhere in northern Italy except
in Milan, which remained allied with the Holy Roman Empireand was
the most economically developed and powerful city-state in
Fourteenth-century Italy.
The charter of the Parte Guelfa openly claimed that it was the party
of the Papacy, and with Venice, the Black Guelph openly pushed for
the Popes to change usury from a mortal sin to a venial (minor) sin.
Lane remarks that the Venetians seemed to enjoy an effective
exemption from the Popes' injunctions against usury, and also from
their ban on trading with the infidelthe Seljuk and Mamluk regimes
of Egypt and Syria.
A century earlier, in the 1180's, Doge (Duke) Ziani of Venice had
provoked hostilities between the two leaders of Christendom, the
Pope and the Holy Roman Emperor, Frederick Barbarossa, the
grandfather of Frederick II. Doge Ziani, in time-worn Venetian
style, then personally mediated the "Peace of Constance" between the
Pope and the Emperor. The Doge got his enemy, Emperor Frederick, to
agree to withdraw his standard silver coinage from Italy, and allow
the Italian cities to mint their own coins. Over the century from
that 1183 Peace of Constance to the 1290's, Venice established the
extraordinary, near-total dominance of trading in gold and silver
coin and bullion throughout Europe and Asia, which is documented in
Frederick Lane's book. Venice broke and replaced the European silver
coinage of the Holy Roman Emperors, the Byzantine Empire's silver
coinage, and eventually broke the famous Florentine "gold florin" in
the decades immediately leading into the 1340's financial blowout
which blew out all the financiers except the Venetians.
Privatization
The Black Guelph bankers of Florence did not simply loan money to
monarchs, and then expect repayment with interest. In fact, interest
was often "officially" not charged on the loans, since usury was
considered a sin and a crime among Christians. Rather, like the
International Monetary Fund today, the banks
imposed "conditionalities" on the loans. The primary conditionality
was the pledging of royal revenues directly to the bankersthe
clearest sign that the monarchs lacked national sovereignty against
the Black Guelph "privateers." Since in Fourteenth-century Europe,
important commodities like food, wool, clothing, salt, iron, etc.,
were produced only under royal license and taxation, bank control of
royal revenue led to, first, private monopolization of production of
these commodities, and second, the banks' "privatization" and
control of the functions of royal government itself.
By 1325, for example, the Peruzzi bank owned all of the revenues of
the Kingdom of Naples (the entire southern half of Italy, the most
productive grain belt of the entire Mediterranean area); they
recruited and ran King Robert of Naples' army, collected his duties
and taxes, appointed the officials of his government, and above all
sold all the grain from his kingdom. They egged Robert on to
continual wars to conquer Sicily, because through Spain, Sicily was
allied with the Holy Roman Empire. Thus, Sicily's grain production,
which the Peruzzi did not control, was reduced by war.
King Robert's Anjou relatives, the Kings of Hungary, had their realm
similarly "privatized" by the Florentine banks in the same period.
In France, the Peruzzi were the cooperating bank (creditor) of the
bankers to King Philip IV, the infamous Franzezi bankers "Biche and
Mouche" (Albizzo and Mosciatto Guidi). The Bardi and Peruzzi banks,
always in a ratio of 3:2 for investments and returns, "privatized"
the revenues of Edward II and Edward III of England, paid the King's
budget, and monopolized the sales of English wool. Rather than
paying interest (usury) on his loans, Edward III gave the Bardi and
Peruzzi large "gifts" called "compensations" for the hardships they
were supposedly suffering in paying his budget; this was in addition
to assigning them his revenues. When King Edward tried forbidding
Italian merchants and bankers to expatriate their profits from
England, they converted their profits into wool and stored huge
amounts of wool at the "monasteries" of the Order of Knights
Hospitalers, who were their debtors, political allies, and partners
in the monopolization of the wool trade. It was the Bardi's
representatives who proposed to Edward III the wool boycott which
destroyed the textile industry of Flandersbecause by 1340 it was
the only way to continue to raise wool prices in a desperate attempt
to increase King Edward's income flow, which was all assigned to the
Bardi and Peruzzi for his debts! Genoese bankers largely controlled
the royal revenues of the Kingdom of Castille in Spain, Europe's
other supplier of wool, by 1325.
In the first few years of the Hundred Years War, which began in
1339, the Florentine financiers imposed on England a rate of
exchange which overvalued their currency, the gold florin, by 15
percent relative to English coin. Edward III, in effect, now got 15
percent less for his monopolized wool. Edward tried to counterattack
by minting an English florin: the merchants, organized by the
Florentines, refused it, and he was defeated. By this action, the
Bardi and Peruzzi themselves, in effect, provoked Edward's famous
default, and demonstrated his complete lack of sovereignty at the
same time.
Even the famous account, by banker and chronicler Giovanni Villani,
of the default of Edward III that triggered the final crash,
acknowledges that his debt to the Bardi and Peruzzi included huge
amounts he had already paidjust like the curious arithmetic of the
I.M.F. to Third World debtors today: "the Bardi found themselves to
be his creditors in more than 180,000 marks sterling. And the
Peruzzi, more than 135,000 marks sterling, which ... makes a total
of 1,365,000 gold florinsas much as a kingdom is worth. This sum
included many purveyances made to them by the king in the past, but,
however that may be ... ."
Even larger revenue flows came to the Papacy in the collection of
its church contributions and tithes. Under John XXII, the Black
Guelph Pope from 1316-1336, "Papal tithes skyrocketted," reaching
the apparent value of 250,000 gold florins per year. All were
collected by agents of the Venetian banks (for France, the largest
source of Papal revenue) and the Bardi bank (for everywhere else in
Europe except Germany). They charged the Papacy sizable "exchange
fees" to transfer the collections. "Only they [the Venice-allied
bankers] had the reserves of cash at Avignon [in France, temporary
seat of the Papacy for about seventy yearsPBG] and in Italy, to
finance Papal operations. They transferred collections from Europe,
and loaned them to the Popes in advance." Thus, Venice controlled
the Papal credit, and hence the continuing hostilities between the
Papacy and the Holy Roman Emperors.
Perpetual Rents
In Italy itself, these bankers loaned aggressively to farmers and to
merchants and other owners of land, often with the ultimate purpose
of owning that land. This led by the 1330's to the wildfire spread
of the infamous practice of "perpetual rents," whereby farmers
calculated the lifetime rent-value of their land and sold that value
to a bank for cash for expenses, virtually guaranteeing that they
would lose the land to that bank. As the historian Raymond de Roover
demonstrated, the practices by which the Fourteenth-century banks
avoided the open crime of usury, were worse than usury.
In the Italian city-states themselves, the early years of the
Fourteenth century saw the assignment of more and more of the
revenues of the primary taxes (gabelle, or sales and excise taxes)
to the bankers and other Guelph Party bondholders. From about 1315,
the Guelph abolished the income taxes (estimi) in the city, but
increased them on the surrounding rural areas, into which they had
expanded their authority. Thus, the bankers, merchants, and wealthy
Guelph aristocrats did not pay taxesinstead, they made loans
(prestanze) to the city and commune governments. In Florence, for
example, the effective interest rate on this Monte ("mound" of debt)
had reached 15 percent by 1342; the city debt was 1,800,000 gold
florins, and no clerical complaints against this usury were being
raised. The gabelle taxes were pledged for six years in advance to
the bondholders. At that point, Duke Walter of Brienne, who had
briefly become dictator of Florence, cancelled all revenue
assignments to the bankers (i.e., defaulted, exactly like Edward
III).
Thus were the rural, food-producing areas of Italy depopulated and
ruined in the first half of the Fourteenth century. The fertile
Contado (county) of Pistoia around Florence, for example, which
reached a population density of 60-65 persons per square kilometer
in 1250, had fallen to 50 persons per square kilometer in 1340; in
1400, after fifty years of Black Plague, its population density was
25 persons per square kilometer. Thus, the famines of 1314-17, 1328-
9, and 1338-9, were not "natural disasters."
Some of the famous banks of Tuscany had failed already in the
1320's: the Asti of Siena, the Franzezi, and the Scali company of
Florence. In the 1330's, the biggest banks, with the exception of
the Bardi, (the Peruzzi, Acciaiuoli, and Buonacorsi) were losing
money and plunging toward bankruptcy with the fall in production of
the vital commodities which they had monopolized, and which their
cancer of speculation was devouring. The Acciaiuoli and the
Buonacorsi, who had been bankers of the Papacy before it left Rome,
went bankrupt in 1342 with the default of the city of Florence and
the first defaults of Edward III. The Peruzzi and Bardi, the world's
two largest banks, went under in 1345, leaving the entire financial
market of Europe and the Mediterranean shattered, with the exception
of the much smaller Hanseatic League bankers of Germany, who had
never allowed the Italian banks and merchant companies to enter
their cities.
Already in 1340, a deadly epidemic, unidentified but not bubonic
plague, had killed up to 10 percent of many urban populations in
northern France, and 15,000 of Florence's 90-100,000 people had died
that year. In 1347, the Black Death (bubonic and pneumonic plague),
which had already killed 10 million in China, began to sweep over
Europe.
Venice, the World's Mint
"Venice," wrote Braudel, "was the greatest commercial success of the
Middle Agesa city without industry, except for naval-military
construction, which came to bestride the Mediterranean world and to
control an empire through mere trading enterprise. In the Fourteenth
century she was in the ascendant to her greatest periods of success
and power."
And most importantly, Frederick Lane writes, "Venice's rulers were
less concerned with profits from industries than with profits from
trade between regions that valued gold and silver differently."
Between 1250 and 1350, Venetian financiers built up a worldwide
financial speculation in currencies and gold and silver bullion,
similar to the huge speculative cancer of "derivatives contracts"
today. This ultimately dwarfed and controlled the speculation in
debt, commodities, and trade of the Bardi, Peruzzi, et al. It took
all control of coinage and currency from the monarchs of the time.
The banks of Venice were deceptively smaller and less conspicuous
than the Florentine banks, but in fact had much greater resources
for speculation at their disposal. The Venetian financial oligarchy
as a whole, which ruled a maritime empire through small executive
committees under the guise of a republic, centralized and supported
its own speculative activities as a whole. The "Republic" built the
ships and auctioned them to the merchants; escorted them with large,
well-armed naval convoys of their empire, with naval commanders
responsible to the ruling "Council of Ten" and the magistrates for
the convoys' safety. This same oligarchy maintained several public
mints and did everything possible to foster the centralization of
gold and silver trading and coinage in Venice.
As Frederick Lane demonstrates, this was the dominant trade of
Venice by no later than 1310. Like today's "mega-speculators" in
currencies and derivatives, such as the Morgan- and Rothschild-
backed George Soros and Marc Rich, the Venetian banks and bullion-
dealers were backed by large pools of capital and protection.
The size of the Venetian bullion trade was huge: twice a year
a "bullion fleet" of up to twenty to thirty ships under heavy naval
convoy, sailed from Venice to the eastern Mediterranean coast or to
Egypt, bearing primarily silver; and sailed back to Venice bearing
mainly gold, including all kinds of coinage, bars, leaf, etc.
The profits of this trade put usury in the shade, although the
merchants of Venice were also unbridled in that practice. Surviving
instructions of Venetian financiers to their trading agents in these
fleets, specify that they expected a minimum rate of profit of 8
percent on each six-month voyage from the exchange of gold and
silver alone: 16-20 percent annual profit.
One astonishing speech to the Council of Ten by Doge Thomasso
Mocenigo, from a time after the 1340's financial crash, goes
further. Compare the magnitude of these figures to those discussed
earlier for the Papacy, for England, and for Florence (keeping in
mind that the Venetian standard coin, the gold ducat, was roughly
comparable to the Florentine gold florin): "In peacetime this city
puts a capital of 10 million ducats into trade throughout the world
with ships and galleys, so that the profit of export is 2 million,
the profit of import is 2 million, export and import together 4
million [from the two annual voyages, 40 percent profitPBG]. ...
You have seen our city mint every year 1,200,000 in gold, 800,000 in
silver, of which 5,000 marks (20,000 ducats) go annually to Egypt
and Syria, 100,000 to your places on the mainland of Italy, to your
places beyond the sea 50,000 ducats, to England and France each
100,000 ducats ... ."
How was this possible? Not by private enterprise, but by imperial
Venetian "state usury." The gold from the East was being looted out
of China (until then the world's richest economy) and India by the
murderous Mongol Empires, or being mined in Sudan and Mali in Africa
and sold to Venetian merchants, in exchange for greatly overvalued
European silver. The silver from the West was being mined in
Germany, Bohemia, and Hungary, and sold more and more exclusively to
Venetians with bottomless supplies of gold at their disposal.
Coinages not of Venetian origin were disappearing, first in the
Byzantine empire in the Twelfth century, then in the Mongol domains,
and then in Europe in the Fourteenth century.
The Crusades and The Mongols
The so-called Christian Crusades (the first in 1099, the seventh and
last major one in 1291) had had only one strategic effect: expanding
and strengthening the maritime commercial empire of Venice to the
East. Venice provided the ships to take the Crusaders to the Middle
East; Venice loaned them money, and Venetian Doges often told them
what cities to try to capture or sack. Through the Crusades, Venice
gained effective control of the cities of Tyre, Sidon, and Acre in
Lebanon, and Lajazzo in Turkey, and strengthened its domination of
commerce through Constantinople. These were the coastal entry-points
for the "Silk Routes" through the Black Sea and Caspian Sea regions
to China and India. During the Mongol Empires (1230-1370), these
routes were virtual "Roman Roads" maintained by Mongol cavalry.
The empire of the Mongol Khans was for a century the largest and
most murderous empire in human history [See Box II]. The Mongols
eliminated, by slaughter and disease directly in their domains,
perhaps 15 percent of the world's population, and destroyed all the
greatest cities from China west to Iraq and north to Russia and
Hungaryincluding all the trading cities whose competition bothered
Venice. The strategic alliance between Venice and the Mongol Khans,
up to and through the financial collapse of the 1340's, has been
treated as a historical curiosity of the adventures of Marco Polo's
family. But it gave Venice final control of the trade to the East,
and along with the trade through Egypt for the gold mined in Sudan
and Mali, it gave them huge amounts of gold with which to dominate
world currency trading in the decades leading to the financial
disintegration of the Fourteenth century.
The Mongols, in their genocidal rule of China, looted all the gold
of S'ung China and of the part of India under their control,
replacing it with silver currency, and for the lower castes (i.e.,
the Chinese), with paper money. Mongol middlemen met Venetian
merchants at the Mongol-ruled Persian trading cities of Tabriz and
Trebizond, and the Black Sea port of Tana, and traded gold for
silver from Europe. A large-scale trade in slaves from Mongol
domains was associated with this currency trading. This was the so-
called "tanga gold," from the tanghi or uncoined pieces bearing the
seal of the Mongol Khans, as well as bar and leaf gold. The silver
was in small Venetian ingots called sommi, which "were the common
medium of exchange throughout the Mongol and Tatar Khanates. ... [T]
he demand for silver in the Far East was continually increasing,"
writes Lane. "The Venetians were able to raise the price of silver
despite the existence of record quantities" coming to Venice from
Europe.
The Crusades also consolidated the alliance of Venice and its allied
Black Guelph-ruled cities, the Papacy, and the Norman and Anjou
kings, against the Holy Roman Empire centered in Germany, which
Dante and his allies were struggling to restore to its potential. By
the late Thirteenth century, the Mongols were a conscious part of
this Venetian-led alliance, and the Mongol rulers of Persia even
proposed Crusades to the European kings and the Popes! Pope John
XXII granted Venice the sole license to trade with the infidel
Mamluk sultans of Egypt in the 1330's. This was over-valued European
silver and Mongol slaves for gold from Sudan and Mali.
`Derivatives'
Thus, in the late Thirteenth and Fourteenth centuries, Venice
provided all the coinage and currency-exchange for the largest
empire in history, which was looting and destroying the populations
under its rule. Venice had taken over the currency trading and
coining of what remained of the Byzantine Empire, and also of the
Mamluk Sultanates in North Africa. Venice, over this period, took
the East off a gold standard and put it on a silver standard (it was
the richer region of the world, and being more intensively looted).
It took Byzantium and Europe off a 500-year-old silver standard and
put them on gold standards.
And the Venetian financiers and merchants were making annual rates
of profit of up to 40 percent on very large, overwhelmingly short-
term (six-month) investments, in a world economy characterized at
its most productive, by perhaps 3-4 percent annual rates of real
physical "free energy": surplus wealth [Figure 2]. The other Black
Guelph Italian bankers' operations were subsumed by Venetian
financial manipulations, but they were also realizing rates of
profit far above the rate of physical reproduction of the economies
of Europe. Because of the dominance of these speculative cancers,
all the major real physical economies were shrinking.
What was the effect of this Venetian global currency speculation on
the European economies before the 1340's crash and the Black Death?
It was the short-term vise that caught the other European bankers
and rigged the crash itself.
>From 1275-1325, the ratio of the average gold price, to the average
silver price, steadily rose, though with continual short-term
fluctuations, from about 8:1 to, finally, about 15:1. In this
period, Europe's large production of silver was looted through
Venice's command of Mongol and African gold. "Venice had the central
position as the world's bullion market," writes Lane, "and attracted
to the Rialto [Venice's "Wall Street"PBG] the acceleration of
buying and selling stimulated by the changing prices of the two
precious metals." From 1290 into the 1330's, prices rose sharply for
the most crucial commodities.
In this process of quickening speculation, Venice "ensnared all the
surrounding economies, including the German economy" where
production of silver, iron, and iron implements was concentrated. By
the 1320's, Venetian merchants no longer even travelled to Germany
to trade: they compelled German producers and merchants to come to
Venice and take up lodgings near the large Fondaco dei Tedeschi
("Warehouse of the Germans") where their goods were stored for sale.
Venetian bankers on the Rialto (and Venetian bankers alone in the
world at this time) made cashless bank transfers among merchants'
accounts, allowed overdrafts, gave credit lines on the spot,
created "bank money," and speculated with it. They did this not out
of cleverness, but by simple control of currency speculation
worldwide: they had the reserves.
In fact, the famous "bills of exchange" of the Florentine bankers,
were really a crude form of the "derivatives contracts" of the
1990's speculative cancer. The Bardi et al. charged fees to those
involved in trade, for exchanging currencies, since there were so
many regional and city currencies. These exchange fees were a cost
looted out of all production and trade, and a usurious profit to the
bankers. But the banker made the "bills of exchange" even more
expensive, to hedge against their own potential losses in currency
fluctuations being manipulated by Venetian bullion merchants. Thus
bills of exchange in the Fourteenth-century cost 14 percent on
average, worse than borrowing at interest (usury).
Venice switched Europe to gold by force of looting silver. England,
for example, from 1300-1309 imported 90,000 pounds-sterling in
silver for coining; but from 1330-1339, it was only able to import
1,000 pounds. "But in Venice there was no lack of silver at all in
the 1330's." The Florentine bankers, with their famous gold florin,
enjoyed great speculative profits in this process.
However, from 1325-1345, the process was reversed. The ratio of gold
price to silver price, dominated by Venetian manipulation, now fell
steadily from the 15:1 level, back down to 9:1. When the price of
silver started rising in the 1330's, there was an unusually large
supply of silver in Venice! And through the 1340's, "the
international exchange of gold and silver greatly intensified
again," Lane shows, and there was another wave of sharp commodity
price increases.
Now the Florentine bankers were caught, having loans and investments
all over Europe in gold, whose price was now falling.
After Venice triggered the fall of gold with new coins in the late
1320's, the Florentines did not attempt to follow suit until 1334
when it was too late; the King of France did not follow until 1337;
and last came the pathetic effort of the King of England in 1340,
mentioned above.
As Lane shows: "The fall of gold, to which the Venetians had
contributed so much by their vigorous export of silver and import of
gold, and in which they found profits, hurt the Florentines. In
spite of their being the leaders of international finance ... the
Florentines were not in a position, as were the Venetians, to take
advantage of the changes that took place between 1325 and 1345."
Venetian super-profits in global currency speculation continued
right through the bank crash and financial market disintegration of
1345-47 which they had rigged, and beyond.
In the period 1330-1350, the Black Death had spread through southern
China, killing between 15 and 20 million people, as the Mongols'
looting process came to exhaustion. The Mongols' "horse culture"
(they grazed huge herds of horses for hunting and warfare) had
destroyed the infrastructure of agriculture wherever they went. It
had also moved the population of plague-carrying rodents from the
small area of northwest China where it had been isolated for
centuries, down into southern China and westward all the way to the
Black Sea.
In 1346, Mongol cavalry spread the Black Death to towns in the
Crimea, on the Black Sea, and from there it was carried by ship to
Sicily and Italy in 1347, and spread throughout Europe. The European
population had stagnated for forty years while becoming more
concentrated into cities, where water and sanitation infrastructure
had decayed. In Florence, for example, all the city's bridges had
been built in the Thirteenth century, none in the Fourteenth.
Nutritional levels had already fallen as grain production declined.
During the Crusades, the practice of Classical education in
monasteries had been viciously attacked by the "preacher of the
Crusades," Bernard of Clairvaux, and his Cistercian order. In 1225,
the Papacy had finally forbidden the presence of young students
oblatesin monasteries. Europe's broadest form of education had
disappeared.
After the financial crash and the entry of the plague, Europe's
population fell for a hundred years, from perhaps 90 million, to
roughly 60 million.
No More Venetian Methods
God allows evil, so that we will become better by fighting it, said
Gottfried Leibniz, who founded the science of physical economy in
the Seventeenth century. The Black Death in Europe gave the lie to
the idea, later popularized by Malthus, that fewer people would mean
better life for the survivorsagainst it, came the Renaissance idea
of the dignity and sanctity of each individual life. The chronicler
Matteo Villani wrote in the 1360's: "It was assumed, on account of
the lack of people, that there would be an abundance of everything
the law produces. But on the contrary, because of man's ingratitude,
everything was in unusually short supply ... and in some countries
there were terrible famines. It was thought there would be a
profusion of clothing and of everything the human body needs besides
life itself, and just the opposite occurred. Most things cost twice
as much or more than they did before the plague, and wages increased
disjointedly to double."
The marked price rises in the aftermath of the Black Death and
subsequent epidemics, lasted more than a generation. This then led
to a sharp deflation and collapse of wages from about 1380.
After 1400, in the years which led to the Golden Renaissance,
political forces turned against the methods of the Italian "free
enterprise" bankers. In 1401, King Martin I of Aragon (Spain)
expelled them. In 1403, Henry IV of England prohibited them from
taking profits in any way in his kingdom. In 1409, Flanders
imprisoned and then expelled Genoese bankers. In 1410, all Italian
merchants were expelled from Paris. When Louis XI became King of
France in 1461, he organized national forces to make it the first
strong and sovereign nation-state. Along with the development of
ports, roads, and support for the cities, Louis XI insisted on a
single, standard national currency, created and controlled by the
crown. For both Louis XI and England's Henry VII in the same
period, "mercantilist forms of economic nationalism were combined
with a pronounced hostility to Italian techniques of credit and
clearing."
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Box I
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Population Grows through Renaissances of Science and Culture
The basis of human economic progress is clear and common to all
three great monotheistic religions, as set forth first in the Book
of Genesis of the Hebrew Scriptures: "And God blessed them, and God
said unto them, Be fruitful, and multiply, and replenish the earth
and subdue it" (Gen. 1:28). The human species' uneven progress to
fulfill this injunction has taken hundreds of thousands of years;
succeeding through scientific renaissances and the creation of
cities and great nations through which individuals could make their
contributions, to climb from a few million to more than 5 billion
people alive today.
History proves that whenever a nation achieves political
sovereignty, economic development, individual rights, and general
educationAbraham Lincoln's "government of, by and for the people"
its population and population density grows rapidly, even if its
inhabited territory expands.
China's population stagnated at 60 million for eight hundred years
(A.C.E. 200-1000), but with the Tenth- and Eleventh-century Neo-
Confucian Renaissance of science and the unification under the S'ung
Dynasty, the Chinese population doubled in two hundred years, to 120
million by A.C.E. 1200. Then, when China split into three kingdoms
and was conquered by the Mongols, its population growth ceased, and
its population was only 150 million in 1700: a growth of just 30
million in five hundred years!
The populations of Egypt, Iraq, Turkey, Syria, and Iran grew rapidly
in the Ninth, Tenth, and Eleventh centuries during the great Islamic
Renaissance of science, philosophy, and art, when the Caliphates
were far more powerful, densely populated, and urbanized than was
Europe. Their populations fell when that renaissance of learning was
ended in the Twelfth century, leading also to Mongol conquest. These
nations only recovered their Eleventh-century population levels in
the Twentieth century.
The Fifteenth-century "Golden Renaissance" of European civilization
formed powerful, unified nation-states and set off a population
growth which dwarfs all others in human history. The populations of
the European nations grew by 10-14 times in five hundred years or
so, reaching the highest population densities on Earth.
But within Europe, Austria's population did not grow with the rest,
until the educational and political reforms of Emperor Joseph I at
the time of the American Revolution. Thereupon, Austria's population
tripled within a century.
Japan's population was 29 million in 1700, and still only 32 million
in 1850; but after the Meiji Renaissance and unification of Japan
from the 1860's on, its population surged to 45 million in 1900, 84
million in 1950, and 110 million in 1975.
India and Pakistan's combined population grew only 50 percent in the
Nineteenth century under British colonial oppression, but has nearly
quadrupled in the Twentieth century, in which their independence was
won.
The United States' population grew by ten times in one century after
the American War of Independence. Speaking of one state (New York),
James Fenimore Cooper wrote, "Within the short period we have
mentioned (1785-1831), the population has spread itself over five
degrees of latitude and seven of longitude, and has swelled (from
200,000) to 2 million inhabitants, who are maintained in
abundance. ... Those settlements have conduced to effect that
magical change in the power and condition of the State, to which we
have alluded." In the 1860's, President Abraham Lincoln confidently
expected the U.S. would have 500 million people before the year 2000.
PBG
Back to Article
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Box II
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The Mongol Empire that Venice Controlled
Although the empire of the Mongol Khans was for a century the
largest empire in human history, the Mongols were a people who "had
no idea of the social function of a city," according to the
historian R. Grousset. "All they knew was to destroy it and massacre
its inhabitants. ... The value of agriculture was unknown to [them].
Crops, harvests and farms were burned. Towns were plundered and then
destroyed, along with their [infrastructural] works." (See map of
Mongol Empire)
In the Thirteenth century, the Mongols' empire conquered all of
China, the most populous areas of India, from today's Pakistan west
to Syria, all of Russia, Turkey and the Balkans, and eastern Europe.
In 1242, they were moving on western Europe when Ogedei Khan died
and the Mongol commanders withdrew. The Mongols themselves lived at
a very low standard of diet, housing, and productivity, not to
mention education and literacy. Their culture allowed only a very
low potential population-densitythey and their allies on the
steppes never exceeded two million in population, and were far
outnumbered by their horses, which grazed down huge areas.
The Mongols set out, simply, to impose this low population-density
on all the peoples they conquered, taking their wealth and harvests
and "culling them down" by massacres, leaving only traders,
artisans, military engineers, translators, and others they wanted
usually as soldiers. For example, speaking of Mongol rule in
Afghanistan and Iran [Khorassam], the Islamic chronicler Ibn Khaldun
wrote: "Towns were destroyed from pinnacle to cellar, as by an
earthquake. Dams were similarly destroyed, irrigation channels cut
and turned to swamp, seeds burned, fruit trees sawed to stumps. The
screens of trees that had stood between the crops and invasion by
the desert sands were down. ... This was indeed, as after some
cosmic catastrophe, the death of the earth, and Khorassam was never
wholly to recover."
The Mongol armies destroyed both the urban infrastructure of cities
and the rural infrastructure of agriculture systematically, seeking
constantly to seize or create new grassy plains for their great
herds of horses. They conquered Syria three times, for example, each
time grazing it down in one to two years, and then leaving. Three
hundred thousand Mongol horses grazed down the plains of Hungary in
two years. Today's environmentalists and anthropologists would call
their culture "admirably suited to the sustainable coexistence with
their natural environment."
By the time the Mongol armies reached Islamic regions of West Asia
in the 1220's, the intelligence service of Venice had reached
agreements with the Mongol aristocracy to be their intelligence
against courts and rulers all over Eurasia. Under Doge Sanuto and
then a second Doge Ziani, Venice instructed the Mongol commanders as
to which major cities to destroy, and which to leave alone. At the
top of the Venetians' "hit list" were the biggest producing and
trading cities on the North-South rivers of central Europe: Kiev and
Pest (Budapest). The Mongols completely destroyed these cities,
killing their entire populations. Later, a Papal envoy found only a
few houses standing in Kiev's locationoccupied by Venetian
merchants!
The Venetian-Mongol partnership vastly increased slavery on a world
scale. The largest trade, involving millions of human beings over
more than a hundred years, was the Mongols' enslavement of Russian
and South Central Asian peoples they conquered. They depopulated
whole areas, selling the conquered through a Venetian monopoly to
the North African caliphates and sultanates.
These were the "Mamelukes," who eventually made up the entire army
of the Egyptian sultan, for example. Venice was the banker to both
the sultan and the Khans. East-West trade had virtually become a
Venetian merchants' monopoly, through Mongol and Templar destruction
of their competitors.
PBG
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