Medici Money: Banking, metaphysics and art in fifteenth-century Florence

He signs the note. But it is not the signature that is important. It is all the handwriting on the bill. Whoever is to pay out the cash in London will have an example of that handwriting and match it carefully with the bill. In general, all the branches of the Medici banks and all those acting as correspondents for them will have examples of the handwriting of all the managers who have the authority to order payments.

When and how will our client repay us? The “how” is easy. His agent in London will pay our correspondent. In sterling. Or rather our correspondent in London will go to his agent’s office, probably a bank, and hence Italian, someone we know, to demand payment on the appropriate day.

What day? Well, how long does it take to get from Florence to London? How long is a piece of string? It depends how you travel. Overland or galley, in haste or at leisure. The English Channel can be rough, never mind the Bay of Biscay. Fortunately, the Exchangers’ Guild has laid down what is the maximum time that a whole range of journeys from one financial center to another can require. Florence to Bruges, sixty days. Florence to Venice, ten days. Florence to Avignon, thirty days. Florence to Barcelona, sixty days. The time to London is ninety days, or three months. That is what the bill means when it says, “as is the custom.” It is referring, very discreetly, to the time between the payment in florins and the repayment in sterling. If our man has taken his florins on June 15, the custom is that the pounds should be ours on September 13. We could agree on an earlier day if we wanted. But we can’t postpone it, because in that case the whole thing would begin to look rather like a loan and not an exchange deal at all.

In the early days, the Medici bank didn’t have a branch in London, but they had trusted correspondents there. Often the bank’s allies abroad were neighbors, perhaps rivals at home. It is easier to feel solidarity abroad. Copies of the bill of exchange are made and the original is sent to Totto Machiavelli and Ubertino de’ Bardi and company in London. The names are always familiar. The banks run their own courier system. The day comes. In return for a small commission, our correspondent sends a clerk to our client’s agent, who, again in return for a commission, pays out the pounds and pennies. The exchange deal has taken place. How can anybody object?

But where is the return for us, the bank? The bank — this is the official position of all those involved — speculates on the shifting exchange rate in the hope that when it gets its pounds changed back into florins, they will be worth more than the 1,000 florins originally lent. But a child could see that in that case, the bank would always be hesitant to accept a deal. There would be periods when the florin was rising and no one would give you the money because it would doubtless be worth less when it came back in pounds. “Pro e danno di cambio,” reads the entry in the Medici bank’s accounts. Profit and loss from exchanges. Out of sixty-seven exchanges for which we have records among London, Bruges, and Venice, only one resulted in a loss for the banker, while the remaining sixty-six saw him making gains that range between 7.7 and 28.8 percent. How?

The exchange rates are fixed daily, Sundays and holidays excluded, by paid bill brokers meeting together with merchants and bankers in the open street. In rainy Lombard Street in London. On the breezy Rialto in Venice. They don’t meet in anyone’s premises, since that would be an acknowledgment of that person’s supremacy. They consider trends in trade. They are aware of currencies whose coins are subject to a little trimming. Any member of the Exchangers’ Guild caught trimming his coins is liable to immediate expulsion! And the same goes for anyone passing on trimmed coins. Directly upon minting, the florin is sealed in leather bags, the so-called fiorino di suggello, or sealed florin. This to avoid trimming. But everybody knows that some people open the bags, replace the coins or trim them down, then reseal them. The florin is under observation. It is losing value against the Venetian ducat, and the Roman florin, not to mention Geneva’s golden mark. These experts know which mints are reducing or increasing the gold content, which currencies are silver based and which gold. Milan’s silver imperial just goes down and down. They know which governments are trying to intervene in the market, which way the speculators are moving. They get together daily and fix the rates as honestly as they can. Why, then, is the florin always worth about 4 pence more in Florence than it is in London?