Economic History of Money and Business

Economic Systems Evolved:
- Transition from bartering (natural economy) to a monetary economy beginning in the 16th century.
- Movement towards coinage and the establishment of currency around 1000 B.C.
First Coinage:
- Carolingian Reforms established metallic coinage around 781 A.D.
- Use of silver in currency, leading to a monometallism after 785 A.D.

Types of Value in Currency:
- Intrinsic Value: Value based on the material used for coins.
- Extrinsic Value: Value assigned by political authorities which may differ from intrinsic value.
Monetary Authority:
- National authorities assign extrinsic value to currency, influencing the economic dynamics.

Major Shifts:
- 11th century marked by high demand for currency.
Proliferation of Mints:
- Emergence of mints in various parts of Europe (Germany, Italy, France, England) to cater to growing economic needs and demand.

Devaluation in Medieval Europe:
- Causes of General Decline in the Value of Precious Metal Coins:
- Increased state obligations leading to excessive minting.
- Attempt to increase the money supply resulted in the downgrading of currency value.
- Natural shortages and dependence on the metal quality determined by authorities, leading to tosatura (clipping).
Impact of the Hundred Years' War:
- Instability in monetary systems due to constant devaluation and appreciation attempts across the various regions in Europe, especially during the 13th century and the fragmented political landscape.

Significant Changes:
- By the 15th century, new monetary policies in cities like Genoa and Venice began to stabilize the economy while experiencing phases of depreciation without consistent guarantees.
- Introduction of coins (denaro, grossi) by Milan, Venice, etc.

Transformative Monetary Revolution of the 15th Century:
- Introduction of large quantities of precious metals from mines in the Americas (Spanish and Portuguese) into Europe.
- Illustrating the economic ramifications of the process, for example, how Spanish coins became a currency of transactions in places like Peru and Mexico.

Emergence of Financial Instruments:
- Introduction of new instruments and intermediaries in the XII-XIII century bridging the gap in investment opportunities.
Detailed Financial Constructs:
- Commenda: A preliminary investment agreement, where profits would be split across different stakeholders (investors and merchants) based on negotiated terms.
- Profit Risk Sharing:
  - Investors would take ¼ of the profits while the merchants would retain ¾, reflecting their risk burden and potential for gain.
Developmental Shifts in Societies:
- Company structures evolved, with businesses evolving from familial to collective efforts, incorporating external financiers alongside traditional commerce.

Creation of Banking Systems in the 14th Century:
- Italian bankers began facilitating various financial transactions, marking the rise of modern banking.
- Principles of fractional reserve banking emerged, allowing economies to leverage savings for investments.
Ecclesiastical Constraints and Economic Practices:
- The church condemned usury, impacting the dynamics of lending and borrowing, particularly in collaboration with Jewish mercantile interests.
Economic Precarity:
- Bank failures (such as in Florence during the 1340s) caused by insolvencies and high-risk loans leading to government involvement as the last resort.

The complex transitions within monetary systems across Europe from natural bartering to the more structured monetary economy significantly influenced finance and enterprises, establishing foundations for modern economic systems.