The Medici Family Made Their Money Through Banking
The Medici family had a long and powerful influence in European history for hundreds of years. They were well known for their banking prowess and are synonymous as an unparalleled patron of the arts during the Italian Renaissance. Early historical records bespeak to some of the get-go Medici's being agile in political diplomacy starting in the 13th century.
Simply information technology wasn't until the late 14th and 15th century that the family truly came to power with the creation of the Bank of Medici. Giovanni de' Medici opened up one of the first family unit banks in 1397 in Florence, the urban center which would become and remain a central hub for the family unit for the side by side 4 hundred years. Throughout the years they saw their fortunes grow and flounder through a multifariousness of ventures.
From running one of the largest banks in Europe to shifting their fortunes to patronage and control of the papacy and other political posts, the Medici's reign was a circuitous affair. This is how they rose to financial prominence because of their cyberbanking success and their eventual downfall. The family unit took their once bully cyberbanking kingdom and dominance and turned information technology into a dynastic legacy that affected Europe and the world as we know it today.
Palazzo Medici Riccardi, Artistic Eatables
Origins of the banking empire
Ane of the commencement great Medici bankers was Cosimo de Medici, who managed to build up the not bad financial empire. By expanding the banking company and starting off a tendency that would follow with his sons and grandsons, he gave patronage to the construction of churches. Cosimo was a applied human being whose advice to his family was to "Be inoffensive to the rich and stiff, while being consistently charitable to the poor and weak."
Running in tandem to him consolidating ability within the banking company, he was also cultivating a tradition of patronage that would run into the mature renaissance catamenia. Donatello, who is well known for his sculpture of David, was one of the offset benefactors of the Medici patronage. This would continue equally his grandson Lorenzo the Magnificent would provide patronage to Leonardo Da Vinci and Michelangelo amid many other great artists and projects of the era.
It was due to Cosimo's meticulous and advanced banking practices which led to the substantial generation of their wealth, the Medici's would apply this impetus of a fortune to bankroll their political power in Florence and sponsor the greatest artists and projects during the Renaissance period. During this time, Pope Pius Ii said of Cosimo that: "He is king in everything but name."
From the time of Giovanni and for the next hundred years, the Medici banking dynasty became i of the largest banks e'er seen throughout Europe and the world. From Florence, Rome, to even Barcelona and London it expanded its banking activities at an extraordinary stride. Many of its banking branches were partnerships that up until 1455 were under a key belongings company. The idea of a belongings company is considered a Medici invention. During this flow of banking authority, the Medicis utilized a number of banking innovations which are still in use today.
Medici banking system sets the standard of the era and beyond
The appearance of double-entry bookkeeping was put into practise by Giovanni de Medici who popularized its use. The sheer amount of capital flowing through their banking company generated past traders during this time needed to be accurately tracked. Keeping the books in check and eliminating error was a necessity in this time equally the mercantile class had created a boom in the economic system.
Double-entry bookkeeping uses a ledger where the accounting equation of "Assets = Liabilities + Equity" is put to utilise. This means that both debits and credits are recorded, which can so be used to create an overview of how much money the business has and in what role information technology is being used. It helped bankers and merchants keep a better center on their accounts to make smarter financial decisions. Information technology's a simple yet highly effective tactic that helped build Medici'due south reputation.
Along with this more efficient bookkeeping method, the Medici's utilized letters of credit, which immune international merchandise at the time to flourish. Letters of credit are agreements in which a buyer'southward bank guarantees to pay back the seller's bank once goods or services have been delivered. For example, 1 party would be authorized to receive pounds at the London bank in exchange for the florin (Florence's currency at the time.)
During this fourth dimension information technology was besides difficult and dangerous to ship big sums of coin across Europe. For this reason, traders would eolith their money for a Medici alphabetic character of credit. More than just assisting in the period of trade and maintaining a successful commercial enterprise, this was a way for the Medici's to circumvent an overly religious zealous civilisation. During the Middle Ages, the church had fabricated usury (which is the lending of coin for interest) a sin. A letter of credit was able to sneakily build interest into the transaction without beingness an outright usury. Currencies then traded nether the auspices of substitution would and so be utilized as a way for the Medicis to receive involvement on loaned payments. It was considering of advancements and financial solutions like these that the Medici bank became so powerful. Merely the banking company shortly began to overstretch its reach and but every bit fast as it had risen to power it began to fall.
'Portrait of Leo X', Raphael, 1519. The ball on top of the chair is supposed to represent the Medici family.
The downfall of the banking company and transfer of wealth to patronage and politics
With increased size comes more overhead. Equally many different branches and departments began to grow, at that place were problems in coordination between administrators in disconnected branches and even other governments. Without a strong leading presence to carry out the banks' role and governance, following Cosimo'due south death in 1464 the seeds for disintegration were already prepare. His son Piero and grandson Lorenzo were less apt to the banking business than their elderberry.
Piero who was bedridden considering of gout had no experience in the banking sector nor did his son, who put more stock on the Medici family's fortune rather than continuing to run the bank. As these descendants lost their grip on the banking empire, economic troubles with debt-ridden foreign nationals and the Pazzi conspiracy – a coup by rival banking families backed by the Catholic Church to usurp Medici control in Florence – had brought the Medici Bank to an end. By 1494 the bank had airtight all of its branches and was virtually bankrupt.
Although the bank was lost, the fortune was not. Dealing with coups and exiles, the Medici family unit went through a tumultuous fourth dimension during the finish of the Renaissance. Lorenzo carried on with the Medici fortune and proper noun, consolidating new forms of power from their riches and sponsoring the likes of Botticelli and Michelangelo. The once financial kingpins and businessman had shifted their expertise to the artistic and political realm.
Throughout the years they would install Medici men as popes and would wednesday their lineage to far reaching kingdoms in France and England. Although the Medici regained their power afterwards the bank fell in Florence, they'd never again rebuild the Medici Bank, instead, the dynasty would move on to influence the world in ways across coin.
Source: https://bigthink.com/culture-religion/how-the-medici-family-created-and-lost-their-banking-empire/#:~:text=Origins%20of%20the%20banking%20empire,to%20the%20construction%20of%20churches.
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