Financial History 141 Spring 2022 - Page 31

Illustration of Société des Moulins de Bazacle in Toulouse , France , the world ’ s oldest shareholding company dating to 1369 .
current prices . He bought all the olive presses he could find from discouraged growers and made a fortune when the predicted bumper crop arrived . As recounted later by Aristotle in his famous Politics , Thales “ succeeded in proving it is easy for philosophers to become rich if they so desire , though it is not the business in which they are really about .”
In the fourth century bce , the wellknown Greek orator Demosthenes was grappling with an investment issue . His father , with the same name , had died owning a furniture factory , a weapons factory , several loan investments and other assets — early evidence of an investment portfolio — believed to be valued at over $ 11 million today . The estate , however , was mismanaged by his guardians , so when Demosthenes turned 21 , he took them to court . In his argument , he sought to establish both the original value of the estate and what it should have been valued had it been managed properly , performing what today would be called a net present valuation calculation . He was successful before the court but ultimately only received a fraction of the estate ’ s value .
Around 221 bce , the first emperor of China , Qin Shi Huangdi , introduced the standardized bronze coin as the first currency of the now-unified empire and as its only acceptable currency , although archaeological records show that similar coins may have been produced hundreds of years earlier . These coins are important because , as with present-day money , they were fiat currency and not backed by any precious metals , such as gold . They only had value because of decree and convention . Once coins became accepted as fiat currency and the weight and type of metal of the coin were no longer important , it was only a matter of time until paper currency became accepted . Bank notes , the most common form of currency today , originated in China during the Tang dynasty ( 618 – 907 ce ).
The precursor to government bonds occurred in Venice in 1172 . The republic of Venice was in a struggle with Byzantium , the eastern successor to the Roman Empire , over control of the Adriatic Sea . On fabricated charges that the Venetians had set fire to a neighborhood in Constantinople , the emperor of Byzantium , Manuel I Komnenos , created a hostage crisis by seizing Venetian merchants , locking them in prison and taking their goods . The doge of Venice , Vitale II Michiel , needed to quickly build a fleet of ships to wage a war in order to free the hostages and recover the Venetian property . Due to religious usury laws , however , loans were illegal . To fund the fleet , the doge devised a borrowing scheme known as a prestito , like a mandatory tax but with a promise to pay 5 % interest until the debt was retired . The scheme created a lenderborrower relationship between the city and its citizens , rather than putting creditor control in the hands of a few investors . Unfortunately for the doge , while his fleet was anchored off the coast of Asia Minor , Komnenos stalled for time by promising a negotiated resolution . However , the Venetian fleet was suddenly ravaged by plague . Thousands died , with only about a quarter surviving . The mission was cut short , and the survivors returned home in defeat . When the Venetians saw the doge had survived while so many others perished , a mob chased him down and executed him . The world ’ s oldest shareholding company dates back to 1369 , when a group of
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