Nial Ferguson in the video starts by discussing the way in which people have demonstrated the need of money historically. He explains that Barter trade is less efficient, and no money-less society has ever made it or has proven sustainable. Ferguson backtracks the history of coins and how it has been used historically. He quotes the Greeks, Turks, Romans and the Chinese.
In the video, Ferguson explains how the chronic lack of silver was only solved by the conquest of Lima and Potosi, which had rich silver mines. Ferguson further narrates how the silver flow led to inflation in Europe.
Ferguson further highlights how Christians refused any individual to lend money with interest. Nial explains how the Jews had to negotiate and fight their way out of the ghetto by giving out loans. They were persecuted by the Christians, but a market had to have someone who could give out loans.
Nial explains how the Medici’s family came into the picture of money lending business. He narrates that the Medici came from a clan of gangsters, and they developed to become one of the influential bankers in Europe. They were the first to apply proper book keeping and records. The Swiss, Dutch and Brits copied this style which later developed to banks as explained by Ferguson.
Ferguson further elaborates how the financial innovation in England fueled industrialization in Europe. At the helm during this period was the Bank of England who was the last resort when it comes to financial matters. Additionally, he explains how the United States did not incorporate the Idea of a national bank and how they suffered during the great depression as a result.
Questions
1. Where and how exactly does Prof. Ferguson describe how the word “bank” come into being.
According to Ferguson, the bank came into being after the Medici family exploited the market which had no lenders. This was after the Jews were persecuted by the Christians. This was during the sixteenth century. This happened in Europe in Italy.
2. How do the operations of the Medici family bank sound similar to the Rothschild family bank?
Like the Medici’s family, the Rothschild family depended on the bullion business. The precious metal has been one of the most sought after materials in the world. The Rothschild held most of the precious material and controlled it worldwide during the Napoleonic war. As such, the depended on the war just like the Medici gangster undertakings. Both bullied the market through unconventional ways to create a bank.
3. What can we learn from this part of the series for today’s economics? In other words, what economic and political similarities do we have in today’s economic world?
From this part, we can learn that an economy needs to have a system where it could control the flow of money. When a government imposes any ban, the market will find itself adjusting in some way. It is important for the economic world to create a reliable system where people could transact and where equality exists.
