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The History of Banks | How They've Changed through the Years

https://www.worldbank.org.ro/about-banks-history

worldbank.org.ro

The History of Banks | How They've Changed through the Years
For as long as civilization has existed, banking has existed. In fact, even before civilization existed, there were ‘bank-like’ systems.

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The Earliest Banking Systems

The Earliest Banking Systems
  • The earliest banking systems date back to 8000 BCE when trade was recorded in a log, keeping a written note of the transactions.
  • Mesopotamia was the home of the first proper banks, with lending activities in temples and palaces. As cash wasn’t invented yet, seeds and the produce of farmers was used.
  • Records of credit exist in the Asian civilization, hinting at banking activities.
  • The Temple of Artemis was a deposit for cash and there were records of debts held there.

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Banking Systems In The Medieval Period

Brokerage and loans started in an advanced form with merchant banks, though crop loan was still used for lending and credit activities.

Italy was the home of the earliest banks (which evolved into the modern banks), and even the word ‘bankrupt’ comes from the Italian word ‘Banca Rotta’.

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Banks Between The 17th And The 19th Century

  • London was where the biggest action was in the banking world, with the Goldsmiths of London being the first proper bank. Services like vaults, bank debts, deposits (made inside the bank) and loans became popular.
  • Banknotes were first offered by the Bank Of England and were called promissory notes. Soon other services like cheques and overdrafts followed.
  • The Rothschilds started their financing business in the 19th century, eventually becoming the richest family in history.

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Banks In The 20th Century

  • Post-WWII, banks started lending money to other countries (like World Bank) and retail banking flourished across the country.
  • Technology started being a part of banking with SWIFT payments and ATM machines coming in the picture.

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SIMILAR ARTICLES & IDEAS:

Paper Money

The instruments of trade and finance, like paper money, are groundbreaking inventions, put to use by collective acceptance using authority and seals of trust.

Money's Worth

The financial crisis of 2008 showed that the system can buckle anytime and money may not always be worth the same.

As we get hyper-connected, the state-backed authority of currency, and what Money is really worth, is being rethought. Society has historically tried to invent new forms of currency, most recent being Bitcoin, a cryptocurrency.

The Idea of Libra Currency

The idea of Facebook's Libra, an attempt to create a new currency made from the architecture that powers Bitcoin, is that the value of new money is not derived from state authority, but a combination of mathematics, global connectivity, and trust that resides in people using Facebook.

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A financial crisis

A financial crisis

A financial crisis is often associated with a panic or a bank run where investors sell off assets or withdraw money from savings accounts.

  • Asset prices drop in value.
  • Consu...

Causes of a financial crisis

Generally, a crisis is caused if institutions or assets are overvalued, and can be worsened by panic and herd-like investor behaviour.

Contributing factors include systemic failures, unexpected or uncontrollable human behaviour, regulatory absence or failures, or contagions that is like a virus that spread from one institution or country to the next. If left unchecked, an economic crisis can cause a recession or depression.

Financial crisis examples

  • The Stock Crash of 1929. On Oct. 24, 1929, share prices collapsed after a period of wild speculation and borrowing to buy shares. It led to the Great Depression, which was felt worldwide. One trigger of the crash was a drastic oversupply of commodity crops, which led to a steep decline in prices.
  • The 20007-2008 Global Financial Crisis. This was the worst economic disaster since the Stock Market Crash of 1929. It started with a subprime mortgage lending crisis in 2007. Then it moved into a global banking crisis with the failure of investment bank Lehman Brothers in September 2008.

A shift in measuring well-being

A shift in measuring well-being

People in societies such as ancient Greece, imperial China, Medieval Europe, and colonial America did not measure people's well-being in terms of monetary earnings or economic output.

Measuring well-being: people vs money

The turn toward financial statistics means that instead of considering how economic developments could meet our needs, it instead is to determine whether individuals are meeting the demand of the economy.

Until the 1850s, social measurement in 19th-century America was a collection of social indicators known as "moral statistics," which focused on the physical, social, spiritual, and mental conditions of the people. Human beings were at the center, not dollars and cents.

Measuring progress and prosperity

What led to the pricing of progress in the mid-19th century was capitalism.

Capitalism is not just the existence of markets. It is also capitalised investment, where elements of society and life - including natural resources, technological discoveries, works of art, urban spaces, educational institutions, and people - are changed or "capitalised" into income-generating assets that are valued by their ability to make money and yield future returns.