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Renaissance Venice was one of the most developed financial markets
in Europe, and even in the public sector it was unrivalled. Recourse to the
public debt became an increasingly common choice in deficit spending.
Yet it is necessary to underline the largely forced nature of these loans.
Indeed, Venetians who were registered in the fiscal books were obliged to
pay a sum in relation to their assessed wealth. In exchange, they received
5 per cent interest until the restitution of the loans. Moreover, those who
held these state bonds were permitted to put them on the market. This
possibility opened the door to the formation of a veritable market for
shares in the state debt, subject to supply and demand and conducted
with the presence of specialists and intermediaries. Naturally, the market
offered attractive opportunities for speculation: a high demand for loans
on the part of the government provoked an increase in the selling of these
bonds among citizens, who were forced to find new liquidity with which
to fund the new loans. A heightened supply contributed to lower market
prices to the advantage of those who were able to purchase the devalued
bonds. Then, when the negative period passed, prices of the securities
rose again and could be sold with high profits. The growing state debt
caused serious delays in interest payments, so that those claims came to
be bought and sold.
This mechanism of state credit had important consequences in both
economic and socio-political terms. First, government debt was a potent
instrument for the redistribution of resources: interest was generally paid
through indirect taxation, which by definition weighed more heavily on
the lower strata of the population than on the well-to-do, who possessed
notable shares of the debt. Yet it must be noted that a share of the taxes
destined to make these interest payments was, in fact, sustained by for-
eign consumers who paid for products imported from Venice. A period of
political expansion with its relative economic and financial benefits, then,
permitted the government to bear the burden of debt without undue diffi-
culties, as occurred until the end of the 14th century. Therefore, it is likely
that the state debt enjoyed a wide social consensus, unlike what hap-
pened in Florence. During the following century, the situation worsened
as a consequence of sustained military activity. Interest payments came to
accumulate enormous delays, and the price of securities collapsed. In 1482
the entire debt was consolidated in the Monte Vecchio and a new series of
titles was offered in the so-called Monte Nuovo. The various phases of the
Italian Wars caused further problems, so that the government launched
other series (the Monte Nuovissimo, the Monte del sussidio) for the pur-
pose of collecting mainly forced loans.