NEW BOOK: MONEY & PROMISES

For millennia, money was a physical object, from Chinese cowrie shells to Roman coins. It ably served its societies, but only to a point. Over time, a new possibility emerged: the concept that the promise to pay a debt can become money itself, something to be recorded, traded, credited and debited across an infinite number of parties.

Paolo Zannoni's "Money & Promises" is an ode to this transformation. He advances no grand theory or polemical critique but rather takes us on a flaneur's amble through history, digging through archives to present richly illustrated vignettes from Renaissance Italy to revolutionary-era Russia. He is most interested in the roles of banks and governments: The endless exchange of debts between them, he says, has presented great opportunities, though they are "fraught with dangers."

The action picks up in Pisa, Italy, in the late 14th century, where the port city was thriving but strained by the limited supply of gold florins to meet the needs of its artisans and traders. Eagerly prowling Italian archives, Mr. Zannoni reviews the dealings of a small bank whose records have survived to the present. They show how "bank money"—his term for the transformation of debt to money—was replacing coinage as a means of trade. In one case, a wool merchant who was owed 36 florins used that debt, in turn, to pay off 36 florins of his own debts, with the bank keeping detailed ledgers to ensure that the offsets were accurate and fair. A trivial matter? Mr. Zannoni views it as revolutionary.

One key to such a system was trust in the institutions that traded in debt. Mr. Zannoni recounts the nuances of finance in Venice, where banks were swamped by foreign merchants of dubious creditworthiness and routinely found themselves with too little hard currency to back their own balance sheets. In 1496, Mr. Zannoni says, Venice was home to about 10 banks. Within 50 years, they had all gone bust. The wise men of Venice reacted as their 21st-century counterparts did: They regulated the banks, enforcing more hard-currency requirements and less speculative forms of "bank money."

The state moves more fully into the picture with the creation of the Bank of England in 1694. Back then, Mr. Zannoni tells us, England's banks used tally sticks to keep track of debts, typically for taxes owed to the government. These sticks—literally willow-tree limbs notched in patterns to record financial information—were a kind of ersatz database.

To read the complete article (subscription required), see:
‘Money & Promises' Review: How to Spend What Is Owed (https://www.wsj.com/arts-culture/books/money-promises-review-how-to-spend-what-is-owed-e98d3e0d)

	NBS (coinbooks.org) Web