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    Banking Origins

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    Eugene S. Globe III
    The origins of the multiplier definition in mathematical calculations can be traced back to ancient India. The Sanskrit scholar Pingala innovated the matrameru system where each number is the sum of the previous two, tending towards the golden mean. This system was introduced to Europe by Leonardo of Pisa or Fibonacci in 1202. It allowed for discounted future revenue streams and calculation of interest using decimals. Banking began with the Medici family in the 14th century after several Florentine houses defaulted on loans. The Medici pioneered foreign exchange and bills of exchange, circumventing usury laws. Fractional reserve banking was pioneered in Amsterdam, London, and Stockholm, allowing banks to lend amounts in excess

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    Banking Origins

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    Eugene S. Globe III
    135 views2 pages
    The origins of the multiplier definition in mathematical calculations can be traced back to ancient India. The Sanskrit scholar Pingala innovated the matrameru system where each number is the sum of the previous two, tending towards the golden mean. This system was introduced to Europe by Leonardo of Pisa or Fibonacci in 1202. It allowed for discounted future revenue streams and calculation of interest using decimals. Banking began with the Medici family in the 14th century after several Florentine houses defaulted on loans. The Medici pioneered foreign exchange and bills of exchange, circumventing usury laws. Fractional reserve banking was pioneered in Amsterdam, London, and Stockholm, allowing banks to lend amounts in excess

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    Tracing the history of the banking system.

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    The origins of the multiplier definition in mathematical calculations can be traced back to ancient India. The Sanskrit scholar Pingala innovated the matrameru system where each number is the sum of the previous two, tending towards the golden mean. This system was introduced to Europe by Leonardo of Pisa or Fibonacci in 1202. It allowed for discounted future revenue streams and calculation of interest using decimals. Banking began with the Medici family in the 14th century after several Florentine houses defaulted on loans. The Medici pioneered foreign exchange and bills of exchange, circumventing usury laws. Fractional reserve banking was pioneered in Amsterdam, London, and Stockholm, allowing banks to lend amounts in excess

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    135 views2 pages

    Banking Origins

    Uploaded by

    Eugene S. Globe III
    The origins of the multiplier definition in mathematical calculations can be traced back to ancient India. The Sanskrit scholar Pingala innovated the matrameru system where each number is the sum of the previous two, tending towards the golden mean. This system was introduced to Europe by Leonardo of Pisa or Fibonacci in 1202. It allowed for discounted future revenue streams and calculation of interest using decimals. Banking began with the Medici family in the 14th century after several Florentine houses defaulted on loans. The Medici pioneered foreign exchange and bills of exchange, circumventing usury laws. Fractional reserve banking was pioneered in Amsterdam, London, and Stockholm, allowing banks to lend amounts in excess

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    ORIGINS OF THE MULTIPIER DEFINITION IN MATHEMATICAL

    CALCULATIONS
    (By Judge Navin-Chandra Naidu)

    The Sanskrit scholar Pingala innovated the matrameru (mountain of


    cadence) system of mathematical calculations where the sequence of
    numbers are 0, 1, 1, 2, 3, 5, 8, 13, 21, 34 . . . in which each successive
    number is the sum of the previous two, and the ratio between the a number
    and its immediate antecedent tends towards a golden mean (around
    1.618).
    Leonardo of Pisa, or Fibonacci, introduced this Indian method of
    mathematics when he published his path-breaking book Liber Abaci (The
    Book of Calculation) in 1202 where the discounted value today of a future
    revenue stream could be applied to commercial bookkeeping, to currency
    conversions, and crucially, to the calculation of interest using the decimal
    system which came with the matrameru. (See William N. Goetzman,
    Fibonacci and the Financial Revolution, National Bureau of Economic
    Research Working Paper 10352 (March 2004).
    Usury was outlawed and its practitioners excommunicated in 1179 by the
    Third Lateran Council. Jews jumped at this opportunity to become moneylenders. But they found a get-out clause in Deuteronomy 23:20 unto a
    stranger thou mayest lend upon usury; but unto thus brother thou shalt not
    lend upon usury. Jews were expelled from Spain in 1492. By 1497, Jews
    were forced to adopt Christianity, and they sought refuge in the Ottoman
    Empire. In 1516 Venetian businessmen accepted Jews and their moneylending occupations and settled them in a special area of the city upon the
    site of an old iron foundry called the ghetto nuovo (ghetto means casting).
    BANKING began with the Medici family after the 1340s wiped out the
    Florentine lending houses of Bardi, Peruzzi and Acciaiuoli when Edward III
    of England and King Robert of Naples defaulted on their loans The Medici
    were foreign exchange dealers. The Papacy became an important client
    with all sorts of currencies flowing into their coffers. Giovanni di Bicci de
    Medici was the pioneer of this business. Geneva, Pisa, London became
    branches of Medici business.
    Bills of exchange (cambium per literas) was an important contribution by
    the Medici in the Middle Ages to finance trade. Medici drew up and sold the
    1

    BOE to a bank on discount for cash when a trader could only pay after the
    transaction was concluded. The bank collected from the trader with interest.
    The Medici thus circumscribed usury laws frowned by the Church. The
    Medici made a fortune in banking and finance. Competition came.
    Gradually, the Medici were phased out.
    Amsterdam, London and Stockholm led the next decisive wave of financial
    innovation. By lending amounts in excess of its metallic reserve, it
    pioneered fractional reserve banking exploiting the fact that money left on
    deposit could profitably be lent out to borrowers. Depositors seldom wanted
    their money out of the bank en masse, and only a fraction had to kept as
    reserves in the bank (bank policy). The liabilities of the bank thus became its
    deposits (on which it paid interest) plus its capital; its assets became its
    loans (on which it could collect interest) plus its reserves.
    BANK OF ENGLAND began 1694 primarily to finance war by converting
    a portion of the governments debt into shares in the bank which brought
    special privileges to the bank plus a special monopoly for the creation of
    banknotes (1742) and the usefulness of fractional reserve banking system
    based on $100.
    Example: You deposit $100 (M0) in Bank A. It keeps $10 on reserve and
    lends $90.00. The borrower takes the $90.00 to Bank B. This bank keeps
    $9.00 reserve (10%) and lends $81.00.
    M0 equals $100.00, but M2 = $271 (100 + 91 + 81) = creation credit =
    money = FRACTIONAL RESERVE BANKING.

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