How Did Merchant Familes Hide Their Money
The Medici family had a long and powerful influence in European history for hundreds of years. They were well known for their banking prowess and are synonymous as an unparalleled patron of the arts during the Italian Renaissance. Early on historical records betoken to some of the first Medici's being active in political affairs starting in the 13th century.
But information technology wasn't until the late 14th and 15th century that the family truly came to power with the cosmos of the Bank of Medici. Giovanni de' Medici opened up one of the outset family unit banks in 1397 in Florence, the city which would get and remain a central hub for the family for the next 4 hundred years. Throughout the years they saw their fortunes grow and flounder through a diverseness of ventures.
From running 1 of the largest banks in Europe to shifting their fortunes to patronage and control of the papacy and other political posts, the Medici'due south reign was a complex affair. This is how they rose to financial prominence because of their banking success and their eventual downfall. The family took their once groovy banking kingdom and authorization and turned it into a dynastic legacy that afflicted Europe and the globe as we know information technology today.
Palazzo Medici Riccardi, Artistic Commons
Origins of the banking empire
Ane of the beginning nifty Medici bankers was Cosimo de Medici, who managed to build up the peachy financial empire. Past expanding the banking concern and starting off a trend that would follow with his sons and grandsons, he gave patronage to the construction of churches. Cosimo was a practical man whose advice to his family was to "Exist inoffensive to the rich and strong, while existence consistently charitable to the poor and weak."
Running in tandem to him consolidating power inside the banking company, he was as well cultivating a tradition of patronage that would run into the mature renaissance flow. Donatello, who is well known for his sculpture of David, was ane of the offset benefactors of the Medici patronage. This would go on every bit his grandson Lorenzo the Magnificent would provide patronage to Leonardo Da Vinci and Michelangelo amongst many other bang-up artists and projects of the era.
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It was due to Cosimo'due south meticulous and advanced cyberbanking practices which led to the substantial generation of their wealth, the Medici's would apply this impetus of a fortune to bankroll their political power in Florence and sponsor the greatest artists and projects during the Renaissance period. During this time, Pope Pius 2 said of Cosimo that: "He is rex in everything but proper name."
From the time of Giovanni and for the adjacent hundred years, the Medici banking dynasty became one of the largest banks ever seen throughout Europe and the globe. From Florence, Rome, to even Barcelona and London it expanded its banking activities at an extraordinary stride. Many of its banking branches were partnerships that upwardly until 1455 were nether a central belongings company. The idea of a property company is considered a Medici invention. During this period of banking authority, the Medicis utilized a number of banking innovations which are even so in utilise today.
Medici banking organization sets the standard of the era and beyond
The appearance of double-entry bookkeeping was put into practice by Giovanni de Medici who popularized its use. The sheer amount of capital flowing through their banking company generated by traders during this time needed to be accurately tracked. Keeping the books in check and eliminating mistake was a necessity in this time as the mercantile grade had created a smash in the economy.
Double-entry bookkeeping uses a ledger where the bookkeeping equation of "Assets = Liabilities + Equity" is put to use. This means that both debits and credits are recorded, which can then be used to create an overview of how much money the business concern has and in what function information technology is being used. It helped bankers and merchants proceed a improve eye on their accounts to brand smarter financial decisions. It's a simple yet highly effective tactic that helped build Medici'south reputation.
Along with this more than efficient bookkeeping method, the Medici'southward utilized letters of credit, which allowed international trade at the time to flourish. Letters of credit are agreements in which a heir-apparent's bank guarantees to pay back the seller's banking concern once appurtenances or services have been delivered. For instance, i political party would exist authorized to receive pounds at the London banking concern in exchange for the florin (Florence's currency at the time.)
During this fourth dimension it was as well hard and dangerous to transport big sums of money beyond Europe. For this reason, traders would deposit their coin for a Medici letter of credit. More than just assisting in the flow of trade and maintaining a successful commercial enterprise, this was a way for the Medici'due south to circumvent an overly religious zealous civilisation. During the Middle Ages, the church had made usury (which is the lending of money for involvement) a sin. A letter of credit was able to sneakily build interest into the transaction without existence an outright usury. Currencies then traded under the auspices of commutation would and then be utilized every bit a way for the Medicis to receive involvement on loaned payments. It was because of advancements and financial solutions like these that the Medici banking company became and then powerful. But the bank soon began to overstretch its reach and just as fast as it had risen to power information technology began to fall.
'Portrait of Leo X', Raphael, 1519. The ball on top of the chair is supposed to correspond the Medici family unit.
The downfall of the bank and transfer of wealth to patronage and politics
With increased size comes more overhead. As many different branches and departments began to grow, there were problems in coordination between administrators in disconnected branches and even other governments. Without a potent leading presence to acquit out the banks' function and governance, post-obit Cosimo'due south death in 1464 the seeds for disintegration were already set. His son Piero and grandson Lorenzo were less apt to the banking business organisation than their elderberry.
Piero who was bedridden because of gout had no experience in the cyberbanking sector nor did his son, who put more stock on the Medici family's fortune rather than standing to run the banking company. As these descendants lost their grip on the banking empire, economical troubles with debt-ridden foreign nationals and the Pazzi conspiracy – a coup by rival banking families backed by the Catholic Church to usurp Medici control in Florence – had brought the Medici Bank to an terminate. By 1494 the bank had closed all of its branches and was nearly bankrupt.
Although the bank was lost, the fortune was non. Dealing with coups and exiles, the Medici family unit went through a tumultuous time during the end of the Renaissance. Lorenzo carried on with the Medici fortune and name, consolidating new forms of ability from their riches and sponsoring the likes of Botticelli and Michelangelo. The one time fiscal kingpins and businessman had shifted their expertise to the artistic and political realm.
Throughout the years they would install Medici men as popes and would wed their lineage to far reaching kingdoms in French republic and England. Although the Medici regained their power after the bank fell in Florence, they'd never once again rebuild the Medici Bank, instead, the dynasty would move on to influence the world in ways across coin.
Source: https://bigthink.com/culture-religion/how-the-medici-family-created-and-lost-their-banking-empire/
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