Medieval Banking- Twelfth and Thirteenth Centuries

Ohio State University Department of History ^ | prior to 1-10-2008 | Roberto Naranjo

[Covenantor]

What's the mystery? The Moslem Hawala system was already in place in the Holy Land by the 8th, adopted from the Indians via Silk Road trade...

From wiki:

"In the most basic variant of the hawala system, money is transferred via a network of hawala brokers, or hawaladars. It is the transfer of money without actually moving it. In fact, a successful definition of the hawala system that is used is "money transfer without money movement". According to author Sam Vaknin, while there are large hawaladar operators with networks of middlemen in cities across many countries, most hawaladars are small businesses who work at hawala as a sideline or moonlighting operation.[3]

G Hawala example transaction; see text for an explanation

The figure shows how hawala works: (1) a customer (A, left-hand side) approaches a hawala broker (X) in one city and gives a sum of money (red arrow) that is to be transferred to a recipient (B, right-hand side) in another, usually foreign, city. Along with the money, he usually specifies something like a password that will lead to the money being paid out (blue arrows). (2b) The hawa calls another hawala broker M in the recipient's city, and informs M about the agreed password, or gives other disposition of the funds. Then, the intended recipient (B), who also has been informed by A about the password (2a), now approaches M and tells him the agreed password (3a). If the password is correct, then M releases the transferred sum to B (3b), usually minus a small commission. X now basically owes M the money that M had paid out to B; thus M has to trust X's promise to settle the debt at a later date.

The unique feature of the system is that no promissory instruments are exchanged between the hawala brokers; the transaction takes place entirely on the honour system. As the system does not depend on the legal enforceability of claims, it can operate even in the absence of a legal and juridical environment. Trust and extensive use of connections are the components that distinguish it from other remittance systems. Hawaladar networks are often based on membership in the same family, village, clan, or ethnic group, and cheating is punished by effective ex-communication and "loss of honour"—leading to severe economic hardship.[3]

We at FreeRepublic, after September 11, 2001, learned that this Islamic global system is still in place and a constant problem in tracking terrorist fundmovement.Given the documented interaction of the Knights Templat and their immense wealth it's reasonable that they used the proven, workable, and secure system already in place. A Christian religious order with a secure network just as their Islamic adversaries

[Pelham]

I think what hard money adherents miss is that interest involves a flow of money. Collecting interest is possible even in a fixed-quantity money regime.

The initial loan + interest isn’t handed over in one lump sum, it’s done in increments. There isn’t a need for the quantity of money to expand in order for interest to be paid, which I suppose Plato didn’t get.

All the same, “credit money” as opposed to hard money, is as old as those 13th century banks and trade houses. They began balancing accounts by exchanging and circulating each other’s bills. If you were a trusted house/bank no one bothered to demand gold itself.

[SunkenCiv]

/bingo

[SunkenCiv]

Lending at interest is much older than that in the Med basin, having been practiced by Roman Empire era lenders. One reason Roman emperors gave up on adding territories to the Empire was that their financial underwriter(s) had a say on how much could be spent, and that would be influenced by the best-case after success.

[SunkenCiv]

LOL

[Rockingham]

My guess is that the Templar letter of credit and money transfer system was based on passwords, which is how the Muslim hawala system of alternative banking works. Hawala developed in India in the Fifth Century. It became part of Muslim trade relations with medieval Italy, was widely adopted into European banking, and even prompted European development of the law of agency to recognize how hawala worked. Perhaps the Templars had a different system, but the lack of evidence for that suggests otherwise.

[Bob Ireland]

I have read variously that the Templars were the first international bankers. If not, they were among the earliest. Whatever their methods and codes, they appear to have worked. Their mistake was loaning to royalty, a mistake that perhaps Nicholas Flammel had some experience with.

[Rockingham]

The ancient Greeks and Romans also had a sophisticated banking system, and with a legal framework that was so well-conceived and durable that it became the foundation for Europe’s commercial and banking law. The Templars made the fundamental mistake of forgetting in their pride that, even if utterly in the right, you risk your very existence if you tell a monarch no. It is far better to say, yes, of course, Sire — and then raise all sorts of delays, conditions, and practical objections.

[Covenantor]

While we're on about the Templars, sort of, the BBC just added the video yesterday.

The Templars 'Mystical' Place of Power