The Economics Book

26

MAKE MONEY

FROM MONEY

FINANCIAL SERVICES

H

umans have long engaged

in borrowing and lending.

There is evidence that

these activities took place 5,000

years ago in Mesopotamia (present-

day Iraq) at the very dawn of

civilization. But modern banking

systems did not emerge until the

14th century in northern Italy.

The word “bank” comes from

the Italian word for the “bench” on

which the bankers sat to conduct

business. In the 14th century the

Italian peninsula was a land of city-

states that benefited from the

influence and revenue of the papacy

in Rome. The peninsula was ideally

located for trade between Asia,

Africa, and the emerging nations

IN CONTEXT

FOCUS

Banking and finance

KEY THINKERS

The Medici family

(1397–1494)

BEFORE

13th century Scholastic

writers condemn usury.

AFTER

1873 British journalist Walter

Bagehot urges the Bank of

England to act as “lender of last

resort” to the banking system.

1930 The Bank for International

Settlements is founded in

Basel, Switzerland, leading

to international rules

of banking regulation.

1992 US economist Hyman

Minsky publishes The

Financial Instability

Hypothesis, which has proved

useful in explaining the

2007–08 financial crisis.