Chapter 73 - The Financial Collapse of 1345

I have put this chapter together about the financial crash of 1345 to show you the mechanics of a financial crash so that you might realise the importance of preventing the next one. The information is mostly from the following articles:

How Venice Rigged The First, and Worst, Global Financial Collapse by Paul B. Gallagher originally from the Winter 1995 issue of FIDELIO Magazine.

The Modern Anglo-Dutch Empire: Chapter 2 - The Venetian Empire, before and after the Council of Florence.

The Modern Anglo-Dutch Empire: Preface.

If you have time, please read the full articles. It will help to puzzle out the solution. Please also make a websearch for 'Financial Collapse of 1345'  websearch for 'Financial Collapse of 1345'. It makes interesting reading.

To understand our present financial system it is useful to study the history of the Venetian Empire which was a world-class financial power and trading centre. There was a Venetian oligarchy, the members of which, had inter-married over centuries with Byzantine (Eastern Roman) nobility and so it had created a form of a permanent oligarchy which remained powerful until around 1700. This Venetian financial and trading empire dominated Europe and elsewhere from the first Crusade in 1099 to the Black Death of 1347-1351. Venice possessed no industry except for a giant military and naval factory. Their power came from their control over the trade, money and banking. They had bank agencies in many countries which facilitated the trade between nations. They managed to manipulate the money issuance both in type and volume to their advantage and took handsome profits on currency exchange both as exchange fees and through manipulation of the exchange rates. Frederick Lane wrote:

Venice's rulers were less concerned with profits from industries than with profits from trade between regions that valued gold and silver differently. [734]

Venetian bankers, often called 'The Lombards' became worldwide masters in currency speculation during the century following before the financial collapse. Gold and silver bullion were their main targets. They would use their dominance of money to move bullion around to any place where they could make a great profit. The monarchs of the region had little control over the money in use in their country. The size of this bullion trade was huge and twice a year a 'bullion fleet' of twenty to thirty ships, with a naval convoy, sailed from Venice to Mediterranean ports, exporting deliberately overvalued silver and returning with gold. Venetian coinage began to dominate. Their dominance of coinage meant that they could manipulate the ratio of gold to silver and loot as a form of tribute. This is not much different to the manipulation of exchange rates supposedly driven by 'open trading' on Forex which is easily manipulated by big speculators to extract tribute from nations that have been 'encouraged' to be subservient and tolerate the legalized plunder.

With traders from other regions, they would manipulate exchange rates in their favour. Even when there was an excess of specie or currency, they could withhold and alter exchange rates, which just happens to be the reason why Jesus tipped over the money tables in the temple many years before.

Venice had an alliance with the Mongol Khans. The Mongols eliminated by slaughtering, citizens of any trading cities whose competition challenged Venice.The Mongols travelled to China with quantities of silver which was exchanged for Chinese Gold. The Venetians also traded in Mongol captured slaves. Frederick Lane writes:

The Venetians were able to raise the price of silver despite the existence of record quantities coming to Venice from Europe.

Paul Gallagher

Thus, in the late Thirteenth and Fourteenth centuries, Venice provided all the coinage and currency-exchange for the largest empire in history, which was looting and destroying the populations under its rule. Venice had taken over the currency trading and coining of what remained of the Byzantine Empire, and also of the Mamluk Sultanates in North Africa. Venice, over this period, took the East off a gold standard and put it on a silver standard (it was the richer region of the world, and being more intensively looted). It took Byzantium and Europe off a 500-year-old silver standard and put them on gold standards.

And the Venetian financiers and merchants were making annual rates of profit of up to 40 percent on very large, overwhelmingly short-term (six-month) investments...

They also manipulated monarchs to their advantage and ensured that monarchs were in their debt. Venice had become a corporate state controlled by banking families. The modern version of this is more hidden. Its enforcers were the armies of the compliant regions this included armies from the Norman nobility of Europe, particularly from France and England. It was the Normans who acted as the mercenary soldiers for Venice's wars of conquest, known as the Crusades. These so-called Christian Crusades from 1099 to 1291 were arranged to expand and strengthen the maritime commercial empire of Venice. Venice provided the ships to take the Crusaders to the Middle East along with loans of money and instructions on which cities to capture or ransack. This gave Venice greater control of trade routes and associated ports. [731] Venice also controlled the Black Guelph party of the northern Italian cities, allied with the Pope. [735]

Paul Gallagher

Venice was also the 'banker', slave market, and intelligence support service for the Mongol Khans. [731]

Fernand Braudel

Venice was the greatest commercial success of the Middle Ages - a city without industry, except for naval-military construction, which came to bestride the Mediterranean world and to control an empire through mere trading enterprise. In the Fourteenth century she was in the ascendant to her greatest periods of success and power.

Fernand Braudel

Venice had deliberately ensnared all the surrounding subject economies, including the German economy, for her own profit; she drew her living from them, preventing them from acting freely. ... The Fourteenth-century saw the creation of such a powerful monopoly to the advantage of the city-states of Italy ... that the embryo territorial states like England, France and Spain necessarily suffered the consequences.

Just like the financial vultures operating today, the Venetian bankers indebted the citizens and nations and used the debt as a means of asset stripping. The extraction was magnified by manipulation of exchange rates. Many of the governments had effectively been 'privatised' by the actions of the banks and the 'conditionalities' were similar to the modern day 'conditionalities' imposed by the IMF and the current 'Free Trade' arrangements where foreign corporations have more rights than nations and their citizens.

One of many such privatization arrangements is as follows: In 1325, a Venetian bank owned the revenues of the Kingdom of Naples which encompassed the southern half of Italy. This was a productive grain growing area. [731] They owned and organised the King of Naples' army, collected his taxes, appointed the officials of his government, and above all sold all the grain from his kingdom. [731] They encouraged wars with Sicily to reduce Sicily's grain production. [731]

The Beginnings of Virtual Bank Credit

In 1171, the government of the Republic of Venice had extracted forced loans of specie from their wealthy citizens. The government kept registers of the amounts it owed individual citizens but otherwise issued no paperwork. [730] The citizens received four percent interest per year, but the government did not make repayments of the principal. The citizens began to pass the ownership of these government debt obligations as a means of payment. This effectively made them into money. [730] The act of recording the transactions in books was much more convenient than making payments in coin particularly where large sums were involved. Soon the citizen would entrust their money to banks and transfer the book entries as means of payment. This Venetian practice of banking using the security of government loans has continued through history to today where currency is issued against supposed of gold or whatever the people believe is backing their notes. Private banks use a similar system where citizens believe they have deposited money in the banking system and believe that their bank balance is backed by real government issued legal tender. Payments being effected by transfer of 'credit' between accounts.

The main family banks of Venice had branches in many countries including England, Netherlands, North Africa and the Middle East. Much of their profit was derived from fees levied on the exchange of currency, which in modern times is the area controlled by a private corporation masquerading as the Bank for International Settlements. The loaning of credit is good business until the magnitude of the loans exceeds common sense and default occurs as asset stripping reaches its limit. The creation of credit with attached debt by double entry accounting works well until it someone calls their bluff.

Venice purposefully intervened to prevent the emergence of national governments. [Fernand Braudel]

In the 1330s, the Big Venetian banks lent vast sums of Bank Credit to King Edward III of England. England was equivalent of a third world nation at the time. Their lending to King Edward III was done with brutal 'conditionalities' which enabled them to seize and loot his revenues. [732] The IMF uses similar 'conditionalities' in its lending to current third world countries. King Edward's national budget was small compared to that of Venetian banks and by 1342, he was effectively under bank servitude. The Venetian banks had also rigged the exchange rate against King Edward in much the same way as exchange rates continue to destroy Third World Nations today. As is typical of usury, it is impossible for all to repay and the banks started to lend even more to prevent a collapse. These days this is called a 'bailout' rather than 'lunacy'. The Venetians had encouraged Edward to wage war with France, war being a profitable business for banks. By 1343, as the 'Hundred Years War' with France (1339-1453) was not going well for Edward, he refused payment to the disliked foreign bankers. His opinion was later shared by Shakespeare. The problem of lending to kings was later overcome by revolution to replace kings with pliable parliaments that would happily follow instructions.

Throughout Europe, production of the essential daily commodities was severely reduced and the trade and circulation of its money completely disrupted in the decades leading up to the 1345 crash of the Venetian banks. [735]

In 1345, the world's biggest banks went under, starting with two big banking companies of Florence. It was more than a bank crash, it was a financial disintegration. All Bank Credit simply disappeared. In my graphs, that would represent a disappearance of the green section. Only the orange currency would remain for trading. So the Money Supply fell to a fraction of its former value. Trade and exchange dried up. Hunger, created by bank profiteering, became famine and poverty.

The credit was created out of thin air by registry entries and it disappeared back to where it came from - thin air. When banks create credit-from-thin-air and demand greater amounts of credit in return, it is an impossible contract. When the inability to pay exceeds the ability to asset strip the debtors. More and more credit is advanced until the whole credit-from-thin-air system collapses. The whole of the economic system collapses. No food, no money for wages, no farm produce moves, savings are destroyed. The well-off join the beggars looking for non-existent food scraps and finish up eating grass, if they are lucky enough to find grass. The credit-from-thin-air system collapses suddenly, without warning. Suddenly may mean overnight.

The continuous financial looting and economic profiteering over many years had damaged the real economies of the subordinate nations. This affected prices for essential commodities and caused a general decline in output and a decline in living standards. City infrastructure became decayed, whilst their population swelled as farm production had fallen. Nutrition levels fell. Education declined. When the financial crash occurred, it hit hard and the towns and cities were not in a good position to control the situation. Farm production was already down.The upheaval caused terrible famines. The plague arrived shortly afterwards to magnify the problem. Europe was not in a good situation to take preventative measures. The regions lacked good governance due to Venetian interference, money was in short supply and the society was not functioning well. Food production had declined and city populations had swelled.

After the financial crash and the entry of the plague, Europe's population fell for a hundred years, from perhaps 90 million, to roughly 60 million. [Paul Gallagher]

It is possible that the plague killed more than half of the population. Some believe that 70% of the population died. [739]

"Between 1348 and 1350 at lease a quarter of the European population was wiped out by the black death nad by 1400 a third of the population had dies. Florence lost half its population of 90,000 people and Siena about 27,000 out of its 42,000. From 1348 to 1374 the total population of England dropped from 3.8 to 2.1 millions. In Western and Central Europe as a whole, the death roll was so great that it took nearly two centuries for the population level of 1348 to be regained. [Biology and the Social Crisis by John Keith Breirley]

It took two hundred years for the population to grow to its 1345 level. I cannot verify this graph, which appears in a number of places:

Population of Europe [738]

From 1350 through to about 1420, the population continued to fall as economic devastation, disease, famine, collapse of the social fabric and lack of political systems caused continued misery. The Venetian bankers were gradually expelled from country after country and a great dislike for Venetian banking and money systems continued for a long time. Nations gradually started to take control of their own affairs. Fortunately for modern bankers, we have forgotten the history of this 1345 financial lunacy. We just get Shakespeare's softened down version of events as if it was just an interesting story for art buffs to jabber on about. Unfortunately, we will be reminded of the 1345 financial crash by reliving the event in the near future. In those days, people lived closer to the land and food supplies and they still suffered. Nowadays our cities are far from food resources. A controversial police shooting creates riots and looting. So we have little chance if every ATM and all credit vanishes. A gun and stored food will be your only chance of survival.

Moving Forward

The dramas of the following times provoked thinking about man and his relationship to the universe. New ideas in government and society emerge. A German churchman Nicholas of Cusa refuted some previous thinking and established the principle of the Commonwealth, a nation state based on the principle of the 'Common Good', including a basis for peace amongst nations. [735] In 1439, leaders from throughout Europe descended on a Council of Florence where they agreed on the principles for a new civilization based on human reason, the Common Good, and national sovereignty proposed by Nicholas of Cusa. In 1461, Louis XI became King of France and establish the first modern sovereign nation-state. Louis proceeded to build ports, roads, schools, printing houses, industry, and infrastructure. He provided support for the cities, created a national currency, and broke the power of the feudal barons. Food production, national income, and population increased. [735]

Henry Tudor had exiled himself to France and Brittany from England as a young man during the War of the Roses. He returned to England to claim the monarchy from Richard III at the Battle of Bosworth, in 1485. There was a lot of complexities to the succession at the time. The new king, Henry VII used the same methods of national economic development and sovereignty, that Louis had pursued in France. Like Louis, he attacked the power of the feudal nobility, and implemented national policies inspired by the principle of the Common Good. Food production, national income, and population all increased, for the first time in more than a century. [735] This same nation building occurred in Spain and elsewhere and was a buffer against the power of Venice and its usury. A new era of national sovereignty was occurring at the time Columbus' trans-Atlantic voyage in 1492 and the feudal oligarchic order was being replaced. [735] In 1508 king of France and the Austrian emperor created 'The League of Cambrai' for the dismemberment of Venice which soon included France, Spain, Germany, the Papacy, Milan, Florence, Savoy, Mantua, Ferrara, and others. In April 1509, the Venetian mercenaries were defeated and Venice temporarily lost eight hundred years of land conquests. By clever diplomacy, Venice survived by bribing the Pope Julius II Della Rovere to break up the League of Cambrai. [733]

Venice created the Protestant Reformation with the aim of dividing Europe in religious wars. The leading figure of the Protestant Reformation was Venetian. [733] A leading Protestant, Contarini pioneered the Protestant doctrine of salvation by faith alone, with no regard for good works of charity. An agent was sent to England to support King Henry VIII's plan to divorce Catherine of Aragon. As a result, Henry created the Anglican Church and opened a phase of hostility to Spain. Henceforth, the Venetians would use England for attacks on Spain and France. The agent also created a Rosicrucian-Freemasonic party at the English court. [733]

As time went by, the networks split into two wings. One was pro-Protestant who supported networks in France, Holland, Scotland and England. The other was supportive of repression and the Inquisition along with Venetian agents in the Vatican and the Hapsburgs. Thus, Venice was supporting two opposing sides, much as is done with the support for opposing political parties in modern times. Agents in Prague, Heidelberg, and Vienna provoked and supported the Thirty Years War, which killed half the Germany's population and one-third of the Europe's population. [733]

Venetians were transferred into Bank of Amsterdam, and later to the new Bank of England. The Venetians grew in influence and power during the reign of 'Bloody' Mary, the Stuart period, the civil war in England, the dictatorship of Cromwell, the Stuart Restoration, and the 1688 installation of William of Orange as King of England by the pro-Venetian English oligarchy. [733]

Similar to the situation where King Edward III had been encouraged into debt for money that he could have created himself, international banks have encouraged nations into debt for virtual Bank Credit that the nations are capable of self-creation. Just as King Edward required further loans to cover past interest, the same is happening today as further loans of Bank Credit, disguised as bailouts, are being extended to nations cannot make the impossible payments. One indebted nation could the debts invalid and repudiate its debts and the whole charade could collapse. If for example a government receiving Euro-denominated credit from the IMF doubted that the money came from the authorized issuer, the ECB, the game could be over for the banks. Unfortunately, the world relies on Bank Credit for its operations. In 1994, Lyndon LaRouche's predicted in his '9th Economic Forecast' a blow-up of all major banks and markets in Europe. The authorities even locked him up to quiet him. The risk of ignoring his warnings is too great. Please do a Lyndon LaRouche  websearch on 'Lyndon LaRouche' or 'larouchepac' or 'Glass-Steagall' . In Australia, the CEC carries his message. Get on their email list. They send fascinating updates. The rest of us have taken twenty years to catch-up on what Lyndon LaRouche was telling us.

Venice did not give up on its ambition to control through the feudal imposition of usury by force and bloodshed. Venice still controlled the bullion trade, had power over the seas, controlled the slave trade, and had an extensive political intelligence operation. Venice allied itself with the Hapsburg dynasty of Austria, then Spain. Venice banks reappeared under the agency of Jacob Fugger, an Austrian trader living in Venice. Fugger's bank financed the Austrian Hapsburgs. Strategic marriages enabled the Hapsburgs to take control of Spain. After the Spanish bankruptcy of 1575, the Fuggers were replaced by another Venice puppet, Genoa. The Venetian counteroffensive used barbaric terror. The Spanish Inquisition started in 1478 and Europe was drenched in blood. Waves of mass killings and persecution occurred, all for the purpose of preventing the creation of sovereign nation-state commonwealths so that Venetian usury, financial control and economic looting could continue. [735]

The terror strategy of Venice with its religious and political allies eventually did not work, just as, hopefully, the current terror bombing campaigns against recalcitrant, predominantly Muslim nations will not work.

In 1582, a political revolution in Venice brought to power the Giovani party. This was the birth of what might be called Anglo-Dutch System. The centre of control was moved to Amsterdam with the creation great Bank of Amsterdam, and then to London as the Bank of England. New procedures in finance, trade, international law, and government were developed which enabled oligarchical rule to continue. These procedures continue to present times. [737] It has developed to become the system of looting through national finance where there is more debt than can be paid, international finance where all nations are heavily in debt to private corporations masquerading as world banks and monetary funds, 'free trade' arrangements where looting can occur across international borders, floating exchange rates that are openly manipulated against the interests of nations, privatisation where public assets are extorted by usury and political control is obtained by political funding and an army of lobbyists and advisors. The servitude by force is now replaced with an understanding that "mental chains" are more effective than armies in enforcing human servitude. Both debt and propaganda is part of this. Debt keeps them working hard and propaganda modifies public opinion. We are told who the bad guys are which then allows the military to terrorize and kill at will. We are told we are moving to a 'post-industrial economy'! A 'global economy' is touted whilst out financial system becomes dominated by private corporations masquerading as international funds and world banks dictating ruling the world. News is issued as fact from corporate controlled think tanks. Credit to small business is stifled to the advantage of corporate chains. We are forced to donate to a corporate slush fund in the name of a superannuation system. Corporate lobbyists, with billion dollar budgets, have greater influence than the voters whilst debts are built up that will be impossible for the next generation to pay. We return to return to a world controlled by a private financial elite that has historically cared little for the welfare, health and happiness of the people. Although this elitism is alien to most of us, they are brought up by their ilk to believe they are the chosen ones and to be successful, they need to become rich or famous. We are trapped by our upbringing rather than strict class-belonging. Our mothers say: "My child is doing well, he/she has passed exams." Which means they will become a good work slave for someone.

Further reading:

'How Venice Rigged the First, and Worst, Global Financial Crash' by Paul Gallagher

'Venice's War Against Western Civilization.'

'The Modern Anglo-Dutch Empire: Preface.'

'The Modern Anglo-Dutch Empire: Chapter 2 - The Venetian Empire, before and after the Council of Florence'

[730] The Encyclopedia of Money by Larry Allen

[731] 650 Years Ago: How Venice Rigged the First, and Worst, Global Financial Crash by Paul Gallagher (Printed in the American Almanac, September 4, 1995.)

[732] Edwin Hunt 1994 'The Medieval Supercompanies: A Study of the Peruzzi Company of Florence'

[733] Venice's War Against Western Civilization.

[734] Money and Banking in Medieval and Renaissance Venice, by Frederick C. Lane

[735] The Modern Anglo-Dutch Empire Chapter 2 - The Venetian Empire, before and after the Council of Florence

[736] Napoleon: The Man. by Robert McNair Wilson

[737] The Modern Anglo-Dutch Empire Preface

[738] The figures shown on this chart derive from estimates by students of population; actual data for this era are scarce. By Langer W.L. 'The Black Death' Scientific American February 1964

[739] Medieval Population Dynamics Part C