Economic Development and Urban Growth in the High Middle Ages 183for storing it safely. A fee was normally charged for
this service. As the number of customers grew, the
likelihood that they would try to redeem their de-
posits at the same time decreased. As long as the
banker maintained an adequate reserve, a portion of
his deposits could be loaned out to other businessmen
at a profit.
Aware that a stable coinage was essential to a trad-
ing community, Venice and Florence established the
ducat and the florin, respectively, at fixed values that
made them the currency of choice throughout Europe
and much of the Middle East. The rulers of other coun-
tries often reduced the precious metal content of their
coins so that they might pay off their debts in depreci-
ated money. Investors preferred currencies that pro-
tected them from this inflationary practice and,
wherever possible, deposited their money with the Ital-
ians. To facilitate this, and to take advantage of the need
for capital in other, less developed parts of Europe,
Florentine, Venetian, and Milanese bankers established
branches in leading centers of trade throughout the sub-
continent.
By the thirteenth century, Italian bankers were the
dominant force in international moneylending. Though
in theory Christians could not loan money at interest,
the Italians used their branch banks and the natural
variations in exchange rates at different locations to
avoid the church’s ban. Bills of exchange would be is-
sued at the Venetian rate, for example, and redeemed
after a fixed period or usance at the higher London rate
(see document 10.2). The difference between the two
exchange rates would reflect the cost of the loan. Many
churchmen probably were not fooled by this, but the
technical requirements of theology were satisfied.
Additional Italian wealth was invested in manufac-
turing. A major problem with the eastern trade was that
at first the East had little or no interest in Western mer-
chandise and tended to demand payment for its goods
in cash. A real chance existed that the trade would be
destroyed by balance of payment problems similar to
those that had beset the later Roman Empire. Many of
the wiser merchants began to invest in the creation of
products that would attract Eastern consumers. Among
them were fine finished cloths based on merino wool
from Spain, which were dyed and woven according to
specialized techniques in Italy. Florence took an early
lead in this trade, as it did in the production of fine
leather goods. Silk, too, became an important Italian
export when it was discovered that the mulberry trees
on which silk worms grew could survive in southern
Italy. The technique of spinning and weaving silk was
mastered, and though the primary market for this com-
modity remained European, imports from the east were
reduced and a highly profitable sideline was developed
(see map 10.1).
As a result of these activities, Italy was perhaps fifty
years ahead of the rest of Europe in economic develop-
ment, but other areas enjoyed remarkable growth as
well. The Catalans were formidable competitors in the
Mediterranean trade. In the Baltic, German traders
achieved a commanding position after the decline of
their Scandinavian rivals in the tenth and eleventh cen-
turies. The north German towns, of which Lübeck was
the most important, dealt in salt herring, furs, amber,DOCUMENT 10.2
A Bill of Exchange
This sample bill of exchange demonstrates how the system
worked. Barna, in Avignon, orders his correspondents, the
Bartoli of Pisa, to pay off a loan of 4.5 percent from Tancredi
Bonagiunta and partners. Landuccio Busdraghi and com-
pagni (partners) were Bonagiunta’s correspondents in Lucca,
which is only a few miles from Pisa. Several copies of such
documents were usually sent to avoid accidental loss in tran-
sit. This one is marked “First” as the original.Avignon, October 5, 1339
In the name of God, amen. To Bartolo and
partners [compagni], Barna of Lucca and partners
[send] greetings from Avignon.
You shall pay by this letter on November 20
[1]339, to Landuccio Busdraghi and partners of
Lucca, gold florins three hundred twelve and three
fourths for the exchange [per cambio] of gold florins
three hundred, because I have received such
money today from Tancredi Bonagiunta and part-
ners at the rate [raxione] of 4 1/2 per 100 to their
advantage. And charge [it] to our account. Done
on October 5 [1]339.
Francesco Falconetti has ordered us to pay
in your behalf 230 gold scudi to the Acciajuoli
compagnia.
[Address on outside:]
To Bartolo Casini and Partners, in Pisa First.Lopez, Robert S., and Raymond, Irving W. Medieval Trade in
the Mediterranean World.New York: Columbia University
Press, 1955.