Richard Nisley

Money and Metaphysics
History - World Released - Aug 13, 2017

You have to wonder about a book with the words, “banking and metaphysics” in the subtitle. What does banking have to with metaphysics? Quite a lot, actually.

The full title of the book is, “Medici Money: Banking, Metaphysics, and Art in Fifteenth-Century Florence.” The author, Tom Parks, makes a compelling case regarding money and metaphysics, and he’s not alone. Adam Smith in “The Wealth of Nations” made the same case way back in 1776. A more recent example is “The Alchemists” by Neil Irwin. This book, however, is focused specifically on the Medici family business, which in fifteenth-century Florence was dealing in woolen and silken fabric: importing it, dying it, and shipping it to cities throughout Europe. This, in turn, involved money in its many forms: bills of exchange, promissory notes, letters of credit, and usury. Before the advent of wire services, overnight couriers, railroads and armored trucks, payment in gold and silver over long distances wasn’t easy or safe. Thus, a great deal of business was transacted with paper, with actual payment in hard currency being made some time in the future, thus tying up large sums of money over long periods of time. This involved banks—and usury.

Usury is charging interest on bank loans, and changes the game significantly. “With interest rates, money is no longer a simple and stable metal commodity that just happens to have been chosen as a means of exchange,” writes the author. “Projected through time, it multiplies, and this without toil of the usurer. Everything becomes more fluid. A man can borrow money, buy a loom, sell his wool at a high price, change his station in life. The usurer, or banker, meanwhile, lending lots of money, grows richer and richer.” This is where the Medicis come in. They started out as dealers in fabric, with client cities throughout Europe, making untold thousands on textiles. They ended up as bankers, making untold millions in the shuffling paper. “No sooner does money project itself through time and space then it generates vast quantities of writing,” says Parks. “It becomes a thing of the mind, fluid and fickle.”

Cosimo de’ Medici (the genius behind the family business) was a master banker. “Banking,” he said, “involves manipulation, risk, power. It’s magic that works.” Where others saw risk, he saw opportunity. Banking became his passion: “I would be a banker even if money could be made by waving a wand.” Having so much wealth means you must do something with it. Medici knew hoarding money decreases its value, while spending increases it. The act of money moving from hand to hand spreads wealth and benefits everyone. His hometown of Florence grew rich under his watch. He became a great patron of the arts, gave to charities, financed municipal building projects, and was a large benefactor of the Catholic Church (mostly to save his soul from hell, as usury was considered the greatest of all sins). At its height, the Medicis owned banks in Florence, Rome, Naples, Milan, Venice, London, Geneva, Lyon, Ancona, Basle, Pisa, Bruges, and Avignon.

As rich and as generous as he was, Medici preferred staying out of the spotlight. He did not flaunt his riches. “He mixed power with grace,” writes Machiavelli, a contemporary. “He covered it over with decency.” “Whenever he wished to achieve anything,” says Vespasian da Bisticci, “to avoid envy he gave the impression, as far as was possible, that it was they who had suggested the thing, not he.”

With the death of Cosimo, the Medici empire gradually receded. Bank after bank shuttered it doors and eventually the Medici business collapsed, 30 years after Cosimo’s death.


The Medici empire expired, but the lesson of creating wealth through banking and paper money was not lost. Following in their tracks were the Netherlands, England, the early American Republic, and eventually all of Europe. The results were stunning. Tying money to the traditional forms of wealth—to land and to material substances, particularly gold and silver—was limiting. It was a zero sum game, one in which if any player gained, another lost in proportion. The 20th-century economist Sumner Slichter has calculated mathematically that through human history the annual production of wealth could not, in fact, have increased a great deal from, say, the days of Adam and Eve until approximately the year 1750. That is the time when banking and paper money took hold in Western Europe, and an explosion of wealth followed that benefitted the many.

The same phenomenon began in the U.S. in 1790 when Alexander Hamilton became Treasury Secretary. Where others saw the Revolutionary War debt as a national curse and recommended repudiation, Hamilton saw opportunity. He monetized the debt by converting the vast unpaid public debt into federal securities, which traded on what would become the New York Stock Exchange. Then he created the Bank of the United States (B.U.S.) to insure the value of these securities never dropped below par. In America’s cash-strapped economy, these securities passed as money among businessmen. Coupled with the Federal government’s newly-acquired power to tax, America was able to issue dividends and begin paying back foreign creditors. Within two years, America’s credit rating rose from the world’s worst to the world’s best. In turn, B.U.S. was able to make loans to U.S. businesses and charge interest on these loans. Instead of decreasing, national wealth increased dramatically. The depressed national economy took flight, and the war debt was retired in the time Hamilton had prescribed—in 20 years. Metaphysics? You bet.

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