Today, the credits are as familiar to us as hot water or the wheel. But where did they come from and how did they get to the way we see them now? Let’s first see what credit is in a nutshell: Further editorial at http://tqs-inc.com
A credit is a loan granted by a person or organization to another person or organization. This generates an “interest,” which is the financial compensation that the borrower pays the lender for using the resource. These two concepts will be important in the following paragraphs.
We will see biblical personalities and former rulers who talked about the subject, in addition that the 100% interest rate was allowed, “the markets” where they could be obtained, who banned usury and why they still asked for loans.
The task of finding the roots of credit is difficult, almost impossible. Lending things and resources is the second nature of man and we cannot say exactly what the origin of today’s financial loans is. However, historical records can help us with some interesting facts about credit history and its evolution.
Up to 100% interest in ancient Greece
Several centuries before the New Age, merchants, landowners or individuals and, sometimes, the same state provided loans. This is also the case in ancient Greece. Loan interest rates ranged around 12%, but could reach 100%. The reason was that many merchant sailors could not finance their own navigation and borrowed from the State or merchants, to whom they later sold the merchandise. And since maritime navigation was a risky trade, the interest rate was often so high.
The first commoner banks in Rome and the credit “market”
In ancient times, many empires had central and regional “state banks”, where wheat, gold and other materials were preserved. The credit was mainly made between these central authorities, politicians, wealthy individuals and among them. The first beginnings of commercial banks as we know them today appear in Rome.
It all started with the opening of the first public bank, again, of the State, whose idea was to provide access to financial resources to common people, commoners. The action dates back to around 350 BC and only three decades later the first testimonies about private “credit markets” appear. The lenders, mostly merchants, stacked their “stalls” in long stands in the square, called “banks” (bancu), which gave rise to the current name of the bank. Often, instead of granting loans, foreign exchange was exchanged, but that activity as a whole did not develop rapidly over the next few centuries.
End of lending for 13 centuries
With the spread of Christianity, the world begins to change significantly, albeit slowly. In 325 AD the Roman emperor Constantine I called the First Ecumenical Council in Nicea. One of his decisions was the ban for priests to participate in loan matters. The accumulation of interests, whatever, and during any period, was considered usury and prohibited. Later, this “stigmatization” also expanded to ordinary people. All those accused of being usurers, here up to 1% interest was considered usury, were expelled and a Christian funeral was prohibited for them.
Naturally, the loans continued to exist, illegally, in secret or modified. Like the Lombardo credit, invented in Lombardy, Italy, where it was lent in exchange for a title, securities or others. In practice, lenders and creditors have been everywhere, often touring the cities and not staying, they simply were not part of an institution. In the thirteenth century, King Juan organized the mass persecution and executions of the Jews, exposing usury as a reason. Logically, their money and assets were appropriated by the royal court.
But what did Edward I and other kings do at the same time, and the high priests of the Vatican with the Italian bankers? They lent credits.
The reform returns the credits
In the 16th century the Reformation reached its climax. A century earlier, a Protestant current opposed the Roman Catholic Church and insisted on reducing its influence on social processes.
The breaking point came with a sharp drop in key interest rates, those that determined the cost of state money. As part of this process, loans began to resurface; first in Holland, then in England. There is a process of changes in laws, ceilings of interest, bans and loan restoration. Gradually, the beginnings of the banking system in northern Europe emerged.
Following the changes produced by the Reformation, between the seventeenth and nineteenth centuries, banking developed rapidly and formed as the system we now know. Central banks appeared in this period, as a regulatory institution and no longer as a gold warehouse. Different modifications of banking activities such as deposits, currency exchange and different types of loans arose. But about that, you’ll read more in the next part of the article. And if to date, in the 21st century you need a loan, you already know: it is time for fast loans. Since Liza Little goes hand in hand with time, Liza Little Plus is accessible with a few clicks and completely online.