The Babylonian priests, never letting the grass grow under their feet, discovered that most of the people depositing valuables for safekeeping seldom came to reclaim their gold and other precious items.
As we saw, Sunday, our desert island Troubadour, performed only the first of the services of banking, keeping custody of the money or means of exchange: fish, game, fibers, rope, tools, etc. Let’s take a look at how “full-service” banking was invented and by whom.
In 604 B.C.E, the Babylonian ruler Nebuchadnezzar decreed that gold would be the medium of exchange in his empire.
You hear that people! That’s 2613 years ago that Gold was already used as the reserve currency.
The Babylonian temples contained strong rooms where people brought their gold and other precious items for safekeeping by the temple priests. The customers were given small clay tablets as receipts for their valuables.
The priest-bankers demanded that the people pay twenty percent interest for guarding their valuables–not a bad racket. Some Swiss banks today charge interest for securing deposits, but most modern banks pay depositors interest on the money they keep in their accounts.
The Babylonian priests, never letting the grass grow under their feet, discovered that most of the people depositing valuables for safekeeping seldom came to reclaim their gold and other precious items. Instead, the people began using the clay receipt tablets as a means of exchange–money.
Now, thought the priests, the people believe that the clay tablets are backed by gold and other valuables, yet the deposits are seldom if ever claimed. We can issue ten times as many clay tablets as are backed by gold and grow rich. The priest-bankers issued clay tablets unredeemable by gold, loaned out the clay tablets at interest and were soon living the life of luxury. Greed had found another outlet.
The crafty Babylonian priests had invented all the features of modern full-service banking:
‚Ä¢ Custody of money: gold and other precious objects in safekeeping in the temple vaults
‚Ä¢ The issuing of currency (something in circulation as a means of exchange): clay tablets
‚Ä¢ The charging of interest: money charged by banks for securing a depositor’s money or money charged for a loan
‚Ä¢ The loaning of money: loaning of clay tablets at interest
‚Ä¢ The issue of fiat money: money not convertible into a commodity (such as gold or silver) of equivalent value-unsecured clay tablets
Old Neb gave us two other important stratagems which have lasted through the centuries to clutter our lives:
– The technology of war
– State fiscal policy
More about that in Part 4
and videos every morning!