Evolution of Banks

Published on 11/04/2021
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Ever since the first coins were minted, the banking industry has always existed, perhaps even before, in one form or another. Currency, significantly cash, came from taxes. As an empire expands, a functional system is needed to collect taxes and distribute wealth. The history of banking began when the realm required something that could easily be exchanged for the payment of foreign goods and services. Coins of different sizes and different metals have over time replaced fragile and fickle bills. However, cash must be stored safely, and ancient families did not have steel safes. According to the Encyclopedia of World History, the wealthy of Ancient Rome kept their coins and jewelry in the temple’s basement. The presence of priests or temple personnel and armed guards who consider themselves pious and honest increases the sense of security.

Evolution Of Banks

Evolution Of Banks

First Bank

The Romans were professional builders and administrators who freed the temple from banking and placed it in various buildings. During this period, lenders continue to make a profit, as does current usury, but most legal business, and almost all government spending, involves institutional banks. According to the Encyclopedia of World History, Emperor Caesar gave the first example of allowing bankers to confiscate land rather than pay off a loan in a decree that changed Roman law after assuming power. This is an essential transfer of energy between creditor and debtor because the landed aristocracy was inaccessible for most of history. The debt is passed on to future generations until the origin of the creditor or debtor disappears.

Royal Visa

In the end, all the monarchs who ruled Europe saw the advantages of banking institutions. Since the existence of the banks is conditioned by the grace of sovereignty and, at times, by clear rules and contracts, the royal government began to grant loans to compensate for the difficult period of the Royal Treasury, generally by the terms of the King. This easy funding leads kings to unnecessary waste, costly wars, and arms races with neighboring countries, often resulting in massive debt. In 1557, Philip II of Spain imposed so much obligation on his kingdom (due to several senseless wars) that it caused the first country in the world – and the world as a whole – to declare bankruptcy, the second, third, and fourth in rapid succession. . This is because 40% of the country’s gross national product (GNP) is used to pay the debt. 5 The tendency to turn a blind eye to trust in large customers continues to haunt banks today.

Adam Smith And Modern Banking

When Adam Smith introduced the theory of the invisible hand in 1776, the banking industry in the British Empire was already very mature. Supported by their vision of an automated economy, lenders and bankers have succeeded in limiting government involvement in the banking sector and the economy as a whole. 1 This type of free-market capitalism and competitive banking has found fertile ground in the emerging new world of the United States of America. Initially, Smith’s ideas did not benefit the American banking sector. The average life expectancy of a US bank is five years, after which the bills of most banks in default are devalued. After all, these national banks can only issue banknotes with their holdings of gold and silver coins.

Adam Smith And Modern Banking

Adam Smith And Modern Banking

Commercial Bank

Except for conventional banking services such as loans and corporate finance, most of the economic responsibilities that the national banking system had to fulfill fell into the hands of the large commercial banks because the national banking system was sporadic. During this turbulent period, which lasted until the 1920s, these commercial banks used their international relations to gain political and financial power. These banks include Goldman Sachs, Kuhn, Loeb & Co., and J.P. Morgan & Co. Initially, they relied heavily on commissions for selling foreign bonds from Europe, and there was little profit from US bonds traded in Europe. This allows them to accumulate capital.

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