History of Usury - Book Report/Review Example

History of Usury Part One (58-63). the basis of this question was how usury grew from being a sin reprehended by the church to a trait embraced by all. Discuss the development of usury in the middle Ages. According to the church, usury was considered a sin against humanity yet it was practiced everywhere during commercialism. Usury was under the power of the pope’s office, for this reason, it regulated finances. There was a circulation of many ideas on usury and its interests. The church considered these ideas as leads to rise of sins. Other than usury as the original sin, other sins like monopoly, devaluation of coins and buying and selling church offices were also inclusive. Despite of people’s negative attitude towards interests from the act of usury, businesses were expanding in a remarkable manner. There was a great cultural paradox. In the early centauries, despite of a significant number of people mostly the church condemning the act of usury, masses embraced it businesswise. The church antagonized usury because usury for various reasons. It believed there would be unfairness. This is would come up because the interests charged would be lenient to a number of people because some would pay one and half unit for being loaned one unit while others would end up paying two units. The fact that there were no discussions on rates of interests anciently would expedite unfairness. There was presence of credit risk. In the Bible in Deuteronomy, Jews could not charge fellow Jews interests. They considered it risky lending money to the gentiles because the gentiles were not from their tribe (Geisst, 2013). The concept of interests from loans that were in the early grew to compound interest calculated mathematically to the nineteenth century. This shows the development of usury in the early times. In conclusion, the church considered usury as a potential sin. The basis of this argument was on its unfairness among the people and the doctrine did not condone it. Despite of all this, usury has shown development from ancient times and transits to the modern world of banking and economy at large. (59, and 61-63). This question arose seeing how Bernado Davanzatis simple idea grew to a major idea of inflation embraced economically. Explain Bernardo Davanzati’s concept about money Bernardo Davanzati was a famous Italian writer. He came up with this concept in a speech delivered in 1588 at the Academy of Florence. He said money was an instrument of doing well. People who violate this by using it for bad intensions should blamed and punished. He also added that every state must have money as each body has blood. He explained further and said that money should circulate just as blood circulates in the body for its proper functioning (Geisst, 2013). This shed a lot of light on economic thinking. His main concern was to address on inflation. Inflation may result from the governing power charging high taxation. A lot of money goes to the government side leaving its subjects with less money. This impedes economic growth. Owing to Davanzati’s concept, there will be no circulation of money. Owing to his analogy, this will be like blood circulating to one side of the body. As blood, circulating to one end of the body will cause health complications, so will inflation cause harm to a state. The ancient leaders were prone to inflation. Besides the kings and princes being poor in money lending, they could not preserve the value of money. They were the worst enemies in maintaining money value. They would often degrade the value of money and heavily tax their subjects making money worthless. This was what Davanzati tried to curb in his concept. Just to conclude, Davanzati’s idea about money was a simple idea that explains about money. He brought up how inflation hinders growth in a state. This concept widely applies economically even to date. He also showed the good intentions of money. Blames were to be on the people caused harm through money. (60-61). Interest and usury were considered almost the same thing but interest was never discussed until it accumulated huge interests. Discuss the concept of interest in the Middle Age. Attitudes towards excessive interest remained constant through the late middle ages but held for discussion as business continued to expand. Fibonacci’s discussion of compound interest served as a reminder that calculation of interest was in complicated terms. The ancients were very much against usury, which was a practice spread widely. To begin with, there was no discussed rate of interest only the number of units which to be paid back. The concept of rate charge and frequency of compounding be known by early mathematicians or bankers but is not clearly mentioned. According to Fibonacci’s original problem, using 14.355 percent interest compounded semi-annually over a five-year period to invest one unit will result in a value of two units. He never mentioned this in his discussion. It was much easier to state the rate in percentage terms given that it was difficult to state the interest in terms of the desired outcome. Without using the percentage rates of interest, the only method to solve the problem of usury that the churchmen and bankers were to use was to admit that it was more demanding than one and a half units were. If a professional lender was to charge interest, the medieval answer was that the rate was usurious regardless of the implied one. Whenever a return was paid, church authorities took it under close inspection to determine its moral qualities (Geisst, 2013). Usury was involved by lending the return to another. Parties involved were careful not to be guilty of violating church laws. Thanks to the idea of compound interest, people’s understanding of usury was well that interest paid more frequently was unjust. (62). monarchs and the church were opponents when it came to the financial sector and each had an impact on the growth of the industry. Roles played by the Monarchs and the church in the financial sector. The activities of the medieval forms of government, the kings and the princes played a huge role in the development of usury. Philippe the Fair, one of the princes, was not only a widely recognized debaser of currency but also subjugated the pope’s office. Kings and princes were not trustworthy where preserving the value of money was involved, in addition to being poor credit risks. Nicholas of Oresme, a French churchman, stated in his Treatise on the First Invention of Money that the second worst thing done on money is usury. The first being currency debase. Monarchs and princes often debased currency making it valueless. They also expelled Jews from their territories, impoverished their subjects and heavily taxed them. Monarchs and princes were the main inciters behind monetary problems while the Jews and the Templar were the bogeymen of medieval usury and banking. The last church council to discuss usury was the Fifth Lateran Council held between 1512 and 1517. They specifically addressed the montes, which was becoming popular in lending to the poor. They concluded that the montes, whom they had earlier protested against, were an asset to the church and the poor. This was after they addressed the charge that the state-run organizations were charging interests and by doing so were doing harm to the poor. Reasons for the church’s support on the montes were practical and this was an indicator that commercial development had a positive impact on the church. The council concluded that as long as the interest paid was to cover the costs of lending, then usury was no longer an issue. This made the montesnon-profit institutions and named by the council as credit organizations. They were at the time low interest lenders. In conclusion, the church protected the banking rights and was heavy condemners of usury. On the other side, they faced stiff challenges from the monarchs and princes whose goal was to degrade the value of money. (63-66). commercial practices began to develop when usury was diminishing. What were the advancements in the development of commercial practices? High curiosity in mathematics and learning was a milestone in the development of these practices. A publication of mathematical work made a change on the conduction of businesses and it began with a simple process. In the late fifteenth century, this publication played a role in acknowledgement of accounting method. This made accounts uniform and accurate when one needed to know the costs and profits in businesses. A mathematician first introduced the idea of the double-entry method rather than a businessperson. The idea at the time was innovative and it led to the success of most accounting practices. An Italian mathematician Luca Pacioli first exposed the concept of double entry in 1494. He had contributed to major success businesswise to his employer. He then went to various universities. In that year (1494) he published his first article |Summa de Arimetica, Geomatria, Propotioni, ET Proportionalitawhich was written in Italian rather than Latin so as for many readers to be businesspersons(Geisst, 2013). Fibonacci’s book The Abacus was major influence on Pacioli’s article. The increase in commercial texts assisted in the growth of commercial practices. They aided businesspeople in computing finances and interests. They also helped in the growth of manuals known as commercial “arithmetic”. The manuals referred interest as profit or merits and compound interest to mean the amount charged at the loan’s term end added to the repayment of the principal. Calculation of the compound interest tried to determine profit made without referring to the stated rate of interest. Though the concept of double entry was based nPacioli’s idea traditionally, business people used it widely in different forms in the early centuries. The concept of loan was initially present where in ancient times, once one acquired a loan there was a tally of sticks. Sticks were broken in half when one acquired a loan and kept together after loan clearance. Owing to double entry concept, banking systems started growing in the ancient ages. This led to development of theories about understanding of the concept of money. In summary, commercial practices ere witnessed from the early ages. The concept of double entry comes up as the backbone of the development in commercial practices. It connects accounts, loans and interests in the modern world. It also played a major role in development banks and the banking system at large. This shows development in commercial practices. Part Two (59). people had different opinions when it came to the matter of usury. What was the people’s perception about usury? (59). the church considered money as an instrument to influence sins like selling of church offices. Explain the sins caused by the use of money as perceived by the church in the Middle Ages. (60). credit was assessed in the middle ages as even in the church, credit was more given to Jews while when it came to lending gentiles credit, it came with interests because they were from a different tribe. Discuss the assessment of credit risk in the middle Ages. (60). Church laws conflicted with usury as it had power over it. Explain the relation between usury and the church law. (61). money became part of the lives of the medieval people economically and politically in the Middle Ages. Discuss the role-played by money in economic and political grounds in the middle Ages. (62). Davanzatis idea was based on circulation of money in the society and this is what inflation is based on. Explain the relationship between Bernardo Davanzati’s concept and inflation. (62-63). this was the last council by the church to discuss about usury. What did the Fifth Lateran Council held between 1512 and 1517 discuss? (64). Luca Pacioli was the first to expose the double-entry bookkeeping method. Describe the double-entry bookkeeping method according to Luca Pacioli. (64). The Venetian system was a system developed by Luca Pacioli when he looked at the rules used by the Venetian government. Describe how Luca Pacioli calculated a firm’s profit using the Venetian system of accounting. (66). Italians were the first to embrace the banking system. What led to the rapid development of banking in Italy? (66). as any business transaction, the medieval had several risks they underwent. What were the risks involved in the business transactions? (67). in the medieval business transactions, there were several risks that were involved but the businesspeople found a way to share the cost of risks. How they shared risk in business adventures? (68). this extraction is from the paragraph on the most popular financial product. What made annuities a popular financial product in the Middle Ages? (69). the banking system embracement started at the beginning of the fifteenth century. Explain the development of banking at the beginning of the fifteenth century. (71).This was extracted from the topic Medici Bank. Explain the history of the Medici bank. (71). this was because the Italians wanted conceal and try making usury a good thing to do yet they knew it was a sin. How did the Italian bankers conceal their charges of usury? (72). this was because despite of Medici banks thirty years of success, it finally declined. What led to the fall of the Medici bank despite thirty years of success? (73). Reformers started to rise and made different impacts on the issue of interest and usury. Discuss the role of the reformers on the change in attitudes towards usury and interest. (76). after heavy condemnations by the reformers, the governing council made changes to the laws that regulated usury and interest. Discuss the changes made to the laws governing usury and interest. (78). Charles Dumoulin was a scholar in the 16th century and had great ideas on the issue of usury. Explain the Scholastic ideas brought up by Charles Dumoulin concerning usury. References Geisst, C. (2013). Embracing Shylock.Beggar thy Neighbor: A History of Usury and Debt. Philadelphia: University of Pennsylvania Press. Print. Sigler, L. (2012). Fibonacci’s Liber Abaci: Translation into Modern English of Leonardo Pisano’s Book of Calculation.New York: Springer Science and Business Media. Print. Read More