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Entry 138 of 240Economic

The Bardi & Peruzzi Collapse

1345 CE/Italy/Florence
Today Florence, ItalySpan Florentine banking · 14th c. CE

The Bardi and Peruzzi were the greatest banks of their age, financiers to kings from their base in Florence. When England's King Edward III defaulted on the enormous loans that funded his war with France, the shock cascaded home and toppled both houses, dragging Florence's economy down with them. A sovereign had stiffed its bankers and detonated a financial crisis — and the banks had been too central to the economy to fail quietly.

◆ Worth knowingOur word 'bankrupt' comes from this Italian banking world — from 'banca rotta,' the 'broken bench' of a money-changer smashed to show he could no longer pay his debts.
◆ The mechanismDebt / credit cycle

Credit expands faster than the real capacity to repay; the gap is eventually closed by crisis, default, relief, or reset.

Also: Mania & panic · Trade-route shift

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