The Great Wave: Price Revolutions and the Rhythm of History

by David Hackett Fischer

Other sources of instability were financial in their nature. In the late thirteenth century, a major crisis led to the disruption of credit and banking in the western world. The great Italian banks dangerously overextended themselves by lending heavily to monarchs and private borrowers. These loans were highly lucrative—for a time. They brought prosperity to the north of Italy, and especially to the city of Siena, which in the words of one leading historian was “for seventy-five years the main banking center of Europe.” As Siena flourished in the thirteenth century, its citizens began to build a great cathedral which was intended to be the largest in Europe. The magnificent architecture of its central square, which today delights so many tourists, was created by the prosperity of this era.50 In the year 1298, Siena’s banking boom came suddenly to an end, with the failure of its greatest bank, the Gran Tavola of the Buonsignori. This was a world bank, with agents throughout Europe and the Mediterranean basin. Among its borrowers were great merchants, cities, nobles, kings and even the Pope himself. Increasing numbers of these loans went sour. In the year 1298, a banking panic began in Siena. The Buonsignori managed to hold things together for nearly a decade, but finally in 1307 the great bank collapsed. Many lesser enterprises failed with it.