Medieval Jewish Money Lenders, Bankers and Whatnot

[AK]

Right. I seem to be forgetting. Why was it that it was mostly Jewish people that were money lenders and bankers in medieval Europe? Also any other information on the subject would be greatly appreciated.

[RED DAVE]

Here's a good beginning:

The Jewish Question - Abram Leon (http://www.marxists.de/religion/leon/)

RED DAVE

[Small Geezer]

Apparently there was some law that forced them into that limited sphere of the economy, at least thats what my Dad told me.

[Rusty Shackleford]

Right. I seem to be forgetting. Why was it that it was mostly Jewish people that were money lenders and bankers in medieval Europe? Also any other information on the subject would be greatly appreciated.

i think it was because christian rulers were still against usury so they would have non christians do the job.

i think the scapegoating of jews became a big thing around that time too because they were handing the money, and if any money problems come up in a kingdom, they are instantly to blame.

[BAM]

the Catholic church forbade usury and excommunicated Christians who practised it. Jews were already marginalised in medieval society (again because of the church) and forced into unpopular jobs like tax-collecting and some may even have been forced by feudal lords to perform the money-lending function, thereby becoming the focus for popular resentment. There's a clear line here from the medieval pogroms against the Jews to the Nazi propaganda image of Jewish finance "behind the scenes".

EDIT: Marx writes in Vol III of Capital how usury in pre-capitalist mode of production meant that artisans had to borrow not simply for their consumption, but for their means of production. In this way, the usurer was the appropriator of surplus labour from the small producers, leading to the general impoverishment of the mode of produciton.

"Usurer's capital has capital's mode of exploitation without capital's mode of production", I think he says. But in any case, usury helped bring about the capitlaist mode of production.

[scarletghoul]

They were rejected in many other areas of christian society so had to find some way to make money. Another big factor is that the ruling elite would encourage and patronise a section of the jewish community to become bankers, merchants, moneylenders, etc but would not let them get into government, so they functioned as a kinda social buffer to keep the rest of the people down without encroaching on political power, and could of course be used as scapegoats. (Interestingly this is also the case in some Southeast Asian countries like Indonesia with their overseas Chinese populations, who also ended up disproportionately involved in finance and who also face(d) a lot of discrimination. And like Jews they were allegedly the masterminds of the great communist conspiracy.)
But I dont know much about this and I'm sure theres some other important stuff too

[ComradeOm]

Apparently there was some law that forced them into that limited sphere of the economy, at least thats what my Dad told me.There were a whole range of oppressive laws that ensured that Jews were treated as second class citizens. Most pertinent to this thread are those that limited the rights of Jews to own land/enterprises and corralled them them into urban ghettos; thus severely limiting their employment opportunities

Personally I would pay more weight to the above than the idea that Christians were forbidden to charge interest. The Church definitely didn't like the practice (and made this clear long before it formally condemned (http://en.wikipedia.org/wiki/Vix_Pervenit) it) but I'm far from convinced that this amounted to an effective ban. The Jews were certainly not the only bankers during the medieval period and were probably not as prominent as the Italian dynasties or the Fuggers

[BAM]

There were a whole range of oppressive laws that ensured that Jews were treated as second class citizens. Most pertinent to this thread are those that limited the rights of Jews to own land/enterprises and corralled them them into urban ghettos; thus severely limiting their employment opportunities

Personally I would pay more weight to the above than the idea that Christians were forbidden to charge interest. The Church definitely didn't like the practice (and made this clear long before it formally condemned (http://en.wikipedia.org/wiki/Vix_Pervenit) it) but I'm far from convinced that this amounted to an effective ban. The Jews were certainly not the only bankers during the medieval period and were probably not as prominent as the Italian dynasties or the Fuggers

yeah there was total hypocrisy in all this. The authorities would collect "fines" from petty money lenders each year, which would be tantamount to a licence in all but name. Also, institutions such as Medici Bank pioneered financial instruments such as bills of exchange, which were a "legal way" of extending credit.

(Some of this is reminiscent of modern day Islamic banking, which prohibits "riba" or interest, but allows a "profit-sharing" partnership between financier and "debtor" which magically mirrors commercial rates of interest!)

[thälmann]

it was forbidden for jews in europe to own land or to work in handcraft, the same to work for the state and so on. so they have to do money lending or small trade things if it was possible. but with the development of capitalism lots of them started working as workers in industry, for example at harbours in england. the nazi propaganda here in germany spread the fantasy of jewish banks, who exploit and control the german people, workers and capitalists.

[AK]

Goddam Jewish banks, exploiting the German capitalists :crying:

[Spear Of Sankara]

when they said immigrants i started to listen

cause i know niggers and jews is next

Jewish people are the scapegoat of the millenium, i mean, the whole jewish conspiracy thing, the equating judaism with zionism etc, jewish people have been the whipping boys since ancient egypt.

(Two jews being whipped building the pyramids, one says to the other)

"Us jews are getting our suffering out of the way early, from here on out its smooth sailing for us"

[Die Neue Zeit]

yeah there was total hypocrisy in all this. The authorities would collect "fines" from petty money lenders each year, which would be tantamount to a licence in all but name. Also, institutions such as Medici Bank pioneered financial instruments such as bills of exchange, which were a "legal way" of extending credit.

(Some of this is reminiscent of modern day Islamic banking, which prohibits "riba" or interest, but allows a "profit-sharing" partnership between financier and "debtor" which magically mirrors commercial rates of interest!)

Despite what I wrote on the topic of this thread (http://www.revleft.com/vb/nationalising-banksi-t137695/index.html?p=1788576), the profit-sharing relationship forces the lender to absorb more risk. By the way, Islamic banking has a precedent in ancient Sumerian commercial laws.

Besides, effective interest rates, along with expected rates of return, are only part of the bigger picture in the form of Weighted-Average Opportunity Cost of Capital.

[BAM]

Despite what I wrote on the topic of this thread (http://www.revleft.com/vb/nationalising-banksi-t137695/index.html?p=1788576), the profit-sharing relationship forces the lender to absorb more risk. By the way, Islamic banking has a precedent in ancient Sumerian commercial laws.

thanks. I covered Islamic finance for a while and what I was thinking of were things like Libor benchmarking on sukuk issuances, etc. A lot of these products, eg sukuk or "Islamic bonds", are structured to emulate conventional products, even if traditional bonds are interest-bearing debt securities, whereas sukuk are claims to ownership of assets. In fact, the principle is largely the same: dispersed ownership of underlying assets via certificates representing claims on an income stream. In other words, fictitious capital.


Besides, effective interest rates, along with expected rates of return, are only part of the bigger picture in the form of Weighted-Average Opportunity Cost of Capital.

I'm not sure what you mean. The Islamic finance industry has had a terrible time trying to find an effective replacement for the interest rate benchmark. (I don't know if the "Tobin-q" proposal has got anywhere lately)

[Die Neue Zeit]

By the way, perhaps you can post in that thread of mine above. ;)

The OCC above is a weighted-average measurement of the after-tax cost of debt and the cost of equity (related to expected rates of return). The beta coefficient complicates things, but here goes:

http://en.wikipedia.org/wiki/Weighted_average_cost_of_capital

It is this OCC value that determines present-value calculations that big businesses make when buying new assets or discounting future cash flows.

[BAM]

By the way, perhaps you can post in that thread of mine above. ;)

The OCC above is a weighted-average measurement of the after-tax cost of debt and the cost of equity (related to expected rates of return). The beta coefficient complicates things, but here goes:

http://en.wikipedia.org/wiki/Weighted_average_cost_of_capital

It is this OCC value that determines present-value calculations that big businesses make when buying new assets or discounting future cash flows.

Thanks. I am familiar with WACC, which would be based on interest rates in conventional lending, but the problem comes from trying to establish a cost of capital without the interest rate. An alternative was James Tobin's "q" theory. That is, the ratio of cost of shares to replacement costs of capital. The problem with this is that Tobin's theory doesn't work (iirc).

In fact, the whole islamic financing concept from a Marxist perspective is based on an error. The only way for an Islamic rate of return to be established without an interest rate would be simply to use the rate of profit. But the rate of Islamic "interest" on financial investments would equal the rate of profit in industry - something that cannot happen, as industrial capitalists will simply become financial capitalists, thereby undermining surplus value production.

[Die Neue Zeit]

In fact, the whole islamic financing concept from a Marxist perspective is based on an error. The only way for an Islamic rate of return to be established without an interest rate would be simply to use the rate of profit. But the rate of Islamic "interest" on financial investments would equal the rate of profit in industry - something that cannot happen, as industrial capitalists will simply become financial capitalists, thereby undermining surplus value production.

Hmmm. Why would the risk premiums associated with "ideal" Sumerian/Islamic rates of return necessarily be the same as risk premiums associated with today's rates of profit?

I wrote in my commentary above that "equity not usury" can be lower especially if the financial system is entirely under public ownership, because the risks are ultimately underwritten by the public, and because related profits are properly tied to these risks (socialized financial profits and losses).

This is already demonstrated by the different rates of return between preferred shares and common shares.