Debt: The First 5,000 Years

by David Graeber

It is often held that the first pioneers of modern banking were the Military Order of the Knights of the Temple of Solomon, commonly known as the Knights Templar. A fighting order of monks, they played a key role in financing the Crusades. Through the Templars, a lord in southern France might take out a mortgage on one of his tenements and receive a “draft” (a bill of exchange, modeled on the Muslim suftaja, but written in a secret code) redeemable for cash from the Temple in Jerusalem. In other words, Christians appear to have first adopted Islamic financial techniques to finance attacks against Islam. The Templars lasted from 1118 to 1307, but they finally went the way of so many medieval trading minorities: King Phillip IV, deep in debt to the order, turned on them, accusing them of unspeakable crimes; their leaders were tortured and ultimately killed, and their wealth was expropriated.128 Much of the problem was that they lacked a powerful home base. Italian banking houses such as the Bardi, Peruzzi, and Medici did much better. In banking history, the Italians are most famous for their complex joint-stock organization and for spearheading the use of Islamic-style bills of exchange.129 At first these were simple enough: basically just a form of long-distance money-changing. A merchant could present a certain amount in florins to a banker in Italy and receive a notarized bill registering the equivalent in the international money of account (Carolingian derniers), due in,...