September 28, 2008, (LPAC)--The Saturday edition of the German daily Frankfurter Algemeine Zeitung featured a lengthy historical article, detailing the 14th century collapse of the Lombard banking system, and its consequences, making the obvious comparison to the current global financial disintegration. Up until the publication of the FAZ article, Lyndon LaRouche had been the only leading voice, drawing the parallel between the 14th century Dark Age and the present. What follows are extensive rough translated excerpts from the Sept. 27, 2008 FAZ: Greed, which marches over corpses by Dirk Schümer.
[The kicker is as follows:]
In 1342 already, the crash of some Tuscan credit institutes drove the depositors into ruin through no fault of their own. And with the tulip mania too, which gripped Holland in 1637, the innovativeness of the investment was decisive for the success of the creative transfer of capital. Since the Middle Ages, the story of capitalism knows the high flyings (Höhenflüge) of the speculators as well as the worries of sudden impoverishment.
[The article itself starts in the following way:]
Had there, centuries ago - and since then again and again - not been banking and stock market crashes, then banking houses like the Bardi, Peruzzi, Accaiuoli would still exist today. But something, at some time went colossally wrong with the big Tuscan financial institutions. The crash of the Bardi and Peruzzi, for example, which ruined entire national economies in 1345, bears not-so-surprising congruencies to the Wall Street investment bankers of the fatal early autumn 2008. The technical methods may have radically changed, but the players in this ruinous competition still act according to the same principles. At first view, the computerized hustle and bustle of a contemporary broker's office resembles in nothing to a canny Florentine office in 1300. But a bank like the House Peruzzi reached astonishing dimensions in its time and, in fifteen offices from Rodos to London, kept the vital communication about interest, harvests, wars, changes of government [Thronwechsel], and prices. Approximately one hundred employees made money-deals for the old Florentine parent company [Stammhaus] in all of the known world. They advanced capital for the transport of Neapolitan wheat to the upper Italian industrial cities, financed the troops of the English kings or sold Flemish cloth on the Arabian market, aided by the Order of Saint John in Rhodos.
The historians are arguing, why exactly, in 1342, the banking houses of the Peruzzi and Bardi crashed. But in its raw traits the bankruptcy seems to be reconstructed [i.e. understood]. It was based on a ruinous, system-blowing greed, which marched over corpses. To put it in simple terms, the liquid finances in the late Middle Ages could be increased most rapidly when a bank financed the luxury budget of a ruler and snatched for that [as the countervalue, so to speak] the income through taxes and customs duties [tolls], mining and agricultural activities. The Tuscans, as practiced controllers, didn’t object to taking over the British export of wool for devalued sterlings and had the King certify the import of luxury goods as their monopoly. England bled to death, and the banks made marvelous profits for a while, but in the end the King was so deeply indebted to the Bardi and Peruzzi, that his and his countries inability to pay ended in the crash.
Like cancer, to get the totality of the economic organism into one's hands, to have it work according to one's own plan and to perish, finally, with this. (Such information in the evening news from the stock market today is how it also worked with the banking boom in the upper Italian cities after 1300.) At times, the politically active bankers succeeded in freeing themselves from duties and taxes. In Florence the totality of the burden was shifted to the surrounding countryside, whose landowners and peasants finally had to sell everything to the bankers.
Because of that, the primary production of food for example, went down, so the global players of the Middle Ages switched to more distant markets in Flanders or made good profits through the import of grain, the export of which they had bought at a low price from the cash-strapped King of Naples. That at some time they would perish, together with the common weal which they had looted as much as they could, didn't occur to even the most clever bankers - then as today.
Decisive for short-term success - and the long-term breakdown of creative transfer of capital, is the innovativeness of the product, to which the rest of society is not responsive yet. Today it is the internet, then [people] couldn’t put anything against the quick money from bill jobbing [Wechselspekulation] around the Mediterranean and the North Sea. It came over them like a tsunami. Like today’s short-sellings or the trade with foul obligations, the bets on the caprices of a European potentate, or piracy in the Aegean Sea were, in the last analysis, it is nothing else but a pilot game, in which the one who enters last, has to pay the bill. Until these suicidal practices were banned by the authorities, if those authorities weren’t identical with the bankers, it was too late. The second factor, the methodic expansion of the deals into regions, which had not been infected, usually allowed the speculators to prolong the deals when they were not profitable anymore in the looted homeland. In the Middle Ages, the crusades were financed by speculators, especially in Venice but also in France.
There are many examples for the methodical decoupling of banking from everyday economic activities. For the late Middle Ages, historians consider the introduction of a gold currency as such an expropriation of primary production. With the gold currency being rare, the production of local food and manufactures wasn’t profitable anymore. Whole areas in Tuscany became desolate, while the profits of the banking houses continued to rise momentarily. You can draw parallels to the alleged global power of the United States, who can keep ready a war machinery for trillions and fire it worldwide as required, but cannot offer medical supply and adequate schools to poor children at home. A common weal, which is not able to seal the dykes of New Orleans but, in the twinkling of an eye, burdens one million times one million dollars on the general public, has to be regarded as hostage of a manic financial sector, hell-bent on anything.
Also in Tuscany around 1340, the big cities finally lived miserably from the loans, which the bankers from these towns had advanced to them. As all real income - customs duties, coinage, taxes, harvests - had been pawned to the same credit sharks long ago, even the flourishing Florence was not able to get out of the debt spiral and was de facto bankrupt. Only the breakdown of occidental society through the black plague reshuffled the cards. The ruinous looting of the debtors, be it city states or homeowners, with whom the banks sank. Then they called for help from the common weal. This is only one chapter of the story of capitalism.
[He then goes into the smaller and traditionally working banks of the Hanseatic league area and also one Francesco di Marco Datini from Prato, Italy as an example for a good Catholic, who worked more in the traditional, more modest way] His [Datinis] foundation for the poor in Prato still works today.
[He the goes into the tulip mania of the Netherlands and sums it up by stating:] The bubble only burst, like last week in Wall Street, when a flood of selling set in and suddenly there was no demand for the crazy product [i.e. the tulip onions]. The Dutch General States at least wanted to repair the damage caused to the purchasers, in the beginning with ten, later with pathetic 3.5 percent of the contracts value, but the real price had already sunk way below that.
It is interesting, how the economy of the Netherlands absorbed the tulip mania surprisingly well. [He goes into the fact, that actually only a restricted elite had participated in the mania. The rest of the country had not, and its businesses was continuing to go well. He ends the article in the following way:]
And the plaintiffs among the stock brokers, who demanded juridical and financial help from the state, were outmaneuvered by the law of the Dutch Republic in a clever way. The asset acquisition, the tribunal determined, had been done under conditions of mental incapacity[i.e. insanity]. Such business - not different from dog-fighting or lotteries - is part of compulsive gambling and thus not protected by any law. Would American courts today muster that much pragmatic wisdom?
BACKGROUND:
Winter, 1995 - How Venice Rigged The First, And Worst, Global Financial Collapse
