Bonds Part VI: An Overview of Medieval Venetian Finance

Every historical era has economic narratives, and sometimes it’s necessary to dig below the surface to find the economic side of the story. I always liked the way that Karl Marx expressed this idea in his writing. For instance at the beginning of his A Contribution to the Critique of Political Economy, he writes,

In the social production of their life, men enter into definite relations that are indispensable and independent of their will…The sum total of these relations of production constitutes the economic structure of society, the real foundation, on which rises a legal and political superstructure…

The important thing to take from this fragment is that beneath the social, political, and legal sides of history, with which most people are familiar, lies an economic layer. Most people I’ve encountered don’t give this underlying layer much thought. Think about historical documentaries and popular history writing that give little attention to the economic conditions of their subject matter.

What’s educational about Venetian history is that the economy was an obvious and unavoidable factor in the city’s rise and fall. The Venetians became a great medieval power with the help of the trading empire they built, and describing that empire requires recounting its underlying economic causes. I’ll incorporate the economy into my narrative of Venice by moving from a general story of the city, to give readers a sense of what Venice was, to the economic forces and financial innovations that propelled it to become a powerful medieval state.

I’ll end my narrative with an overview of the history of the prestiti, the bonds that I’ll analyze in my next post with the help of financial models. The Venetian state eventually came to rely on revenue from these bonds to pay for wars and other services. Wealthy Venetians used the bonds for investments on one of the earliest bond markets in European history. Clearly, the prestiti was an important innovation in early European finance.

Before I begin my Venetian narrative, I want to summarize my sources so readers have a sense of the limitations of my source material and my own interpretations. At the end of this post, I’ll criticize the author of one my sources for not being clear enough about how he uses his sources, so it’s fitting that I subject myself to the same scrutiny.

My Sources

I use three sources in this post. The main one for my overview of Venetian history is an article that includes a clear, concise history of Venice from the 9th to the end of the 13th centuries, which gives a good sense of the ascendency of Venice through to the heyday of the prestiti. The name of the article is International Trade and Institutional Change: Medieval Venice’s Response to Gobalization. Its authors, Diego Puga and Daniel Trefler, wrote it in 2012 as part of a series on economic history and trade for the Centre for Economic Policy Research.

Everything I take from the article comes from its second section, Brief History, 800-1297, which basically I paraphrase for my narrative. As much as I would like to spend a few weeks reading various books on Venetian history to construct this overview, as any self-respecting historian would do, I’m going to place my trust in Puga and Trefler and devote most of my energy to interpreting and constructing models for prestiti data.

My second source is Wikipedia, which I use to fill missing details in my Venetian overview, especially for the early history of Venice before the year 800. Puga and Trefler don’t cover that period, so I relied on Wikipedia as a default. For those who object to Wikipedia as a source, keep in mind that I use it secondarily and tentatively. Again, I could have gone to several secondary sources on that early period, but it’s more important for me to finish this post and push ahead to my prestiti models. If I would be preparing this blog for serious publication, then I would do more research and back up what I take from Wikipedia with the proper kinds of sources.

A History of Interest Rates CoverMy third source is a wonderful book written by Sidney Homer, The History of Interest Rates. My narrative of the prestiti brings together and paraphrases short, disparate sections that Homer devotes to the financial instrument. The data I’ll use for my next blog post will come predominantly from charts taken from Homer’s book. As much as I would love to consult other sources for alternative data, my options are limited, at least from my sense of what’s available online and through library catalogues. My first choices for alternatives would be in two articles Homer references in his notes, one of which is in Italian and the other is unpublished. Obviously, the best place to find the original financial is in Venice itself, a trip for which I don’t have enough time or money at this point. For now, I happily limit myself to Homer’s book

I should stop here to give a quick introduction to Homer’s book to justify why I call it wonderful and to encourage my readers to read it. Most basically, A History of Interest Rates is a review of the history of financial markets from ancient to modern times. Its focus is on Europe and North America, but the author also devotes space to other parts of the world, including Japan, Latin America, and China.

Sydney Homer Picture

Sydney Homer

Contrary to what some readers might expect, Homer’s book isn’t a dry collection of financial charts and statistics. He relates financial developments to their broader historical context. This is what makes his book useful for students of history and economics. I consider myself lucky to have stumbled on it. Anyone like me, who is interested in how finance and banking have developed over the centuries, needs to give the book a try.

With these sources in mind, I feel ready to begin my narrative. A word of warning about it: I’m going to incorporate a detailed historical introduction that may seem, at first, not to have to do with economic history, let alone medieval bonds. The next three sections give the necessary historical background for a discussion of the medieval Venetian economy. The sections that follow those will move the discussion into finance.

Beautiful Venice

Early Venice

Venice MapThe city of Venice needs no introduction. Famous for being one of the most beautiful European cities, its romantic ambiance and beautiful ancient architecture have made it a perfect backdrop for films and novels. Its architecture points to its ancient origins. According to one tradition referenced in Wikipedia, Venice dates back to 421 AD, with the founding of the first church in the area, the church of San Giacomo. The actual historical record is less definite, of course, which hints at the uncertain nature of the origins of Venice. According to the Wikipedia entry on the church, the earliest known reference to San Giacomo appears in a document from 1152, over five hundred years after the church was supposedly first built. 

San Giacomo

The Church of San Giacomo di Rialto

I found better documentary evidence in a letter, quoted here, written by an ancient Roman in 525 AD, which hints at the earliest industries of the inhabitants of Venice:

Your inhabitants [of Venice] have fish in abundance . . . All your activity is devoted to the salt works, whence comes your wealth . . . For your gains you repair your boats, which like horses you keep tied at your doors. Fishing is the means of livelihood, salt the industry, democratic equality the social note.

If this letter is correct, it seems that by the early 500s the Venetians had already started to trade salt and had developed a successful ship-building industry. Fittingly, the Wikipedia entry I referenced earlier mentions that by this period residents were also building ports. This was an important early step the Venetians took towards becoming masters of trade in the Mediterranean.

Continuing with that same Wikipedia entry, another theme of early Venetian development was the struggle with outsiders. Historians have come to the conclusion, according to the Wikipedia author, that the first Venetians were refugees fleeing Hun and Germanic invasions of the Italian peninsula. Given the dates of these invasions, the refugees must have arrived between 200 and 400 AD.

Roman Invasions

Another invading group, named the Lombards, had a longer lasting influence on Venice than did the Huns and Germans. According to traditional accounts, the Lombards originally came from Scandinavia, settled in central Europe, and finally established, by 568, a kingdom in Italy to the west of Veneto, the region in which the Venetians lived. The Lombard presence both threatened and helped increase the Venetian population. As the Lombards began to expand and take more territory, more setters arrived in Venetian territory.

Fortunately, the Venetians had a powerful patron to the east. They were a western outpost of the Byzantine Empire, which was, by the 500s, all that was left of the once mighty Roman Empire.

Byzantium at 600 AD

The western half of the Empire, centered in Rome, had collapsed, so the eastern half, centered in modern day Turkey, continued to survive as a powerful empire for the next thousand years. While under the auspices of this powerful eastern empire, the Venetians managed establish a secure local government, the first governing council of which was named the Tribuni Maiores.

Two centuries later in 726, the Venetians managed to gain a level of political independence. They rose up in rebellion, expelled foreign government officials, and killed the Byzantine representative who governed Venice. This was, of course, only a partial step towards complete independence and international power. In the next few paragraphs, I’ll explain how the Venetians used their connections with the Byzantines to build a maritime and trading empire.

Venetian Expansion after 800

Charlemagne's Holy Roman Empire

Charlemagne’s Holy Roman Empire

For the rest of my general Venetian narrative, I’m going to rely on Puga’s and Trefler’s article that starts its narrative in the year 800. The first major event the authors mention is an invasion from northern Europe. Charlemagne, the emperor of the Holy Roman Empire, decided to confront the Byzantines by attempting to take Venice. When he sent is son, Pepin, to lead armies to capture the city, the Venetians sided with Byzantine troops and repelled Charlemagne’s invasion. Interestingly according to one the Wikipedia articles I consulted, Pepin contracted a disease in the swamps of Venice during his campaign and died months later. As a result of this stunning loss, Charlemagne renounced his claim on Venice, and the Byzantine emperor rewarded the Venetians with de facto independence. Full independence came later in 992 after Venice assisted the Byzantines against armies from the Middle East.

Another windfall for Venice came from the growth of trade between Europe and Asia. Puga and Trefler describe the initial situation. Western Europe was still undeveloped in terms of trade and industry, but it was growing. By the 11th century, the four largest cities in Europe sat along the Danube and Rhine rivers, and Venice occupied a strategic location to take advantage of the resulting increase in river trade. In addition, trade increased with Lombardy, the territory to the west of Venice in which the Lombards had settled, which gave Venice control of local trade in timber, wheat, and salt.

With respect to the Mediterranean, Venice sat in a good location to take advantage of routes heading to Constantinople, the rich and industrialized capital of Byzantium. On the other side of the capital, routes began to open up for the Venetians as the Byzantines, starting in 969, began to eliminate pirates in the eastern Mediterranean.

More than a century later, things changed for Byzantium, which was then under threat of Ottoman forces to the east and Normans to the west. In return for major trade concessions, the Venetians helped the ailing empire by providing urgent naval assistance, which saved the capital. In return, the Byzantines granted Venice duty-free access to 23 Byzantine ports, protection of Venetian merchant property, and the ability to trade within Constantinople itself. Puga and Trefler mention that by the end of the next century, 20,000 Venetian merchants had taken advantage of this situation and had settled in the capital.

Venice as Colonial Power

The growth of Venice and the ambitions of its residents eventually led to conflict with Byzantium. Though they don’t explain the immediate cause of the incident, Puga and Trefler mention the Byzantine Emperor in 1171 ordering 10,000 Venetians to be rounded up and held as hostages. I suspect that part of what was behind this order was the insecure position of Byzantium at that time. The aging empire was struggling with invasions, so 20,000 Venetians inside of Constantinople must have fueled paranoia. Whatever the cause, the Venetians became enemies of the Byzantines.

I turn to Wikipedia for Venice’s reaction. In 1204, crusader armies from northern Europe asked Venice for help to travel to the Holy Land for the fourth crusade. The Venetians agreed, but, when the northerners could not raise funds to pay for the trip, the Venetians took advantage of the situation and changed the terms of the agreement. They wanted the northern armies to attack a rebellious Venetian outpost in the Adriatic Sea, which would help Venetian trade, and then attack Constantinople.

ConquestOfConstantinopleByTheCrusadersIn1204.jpg

The Venetians and northerners were victorious in both tasks, and northern armies never reached their original goal, the Holy Land. Instead, turning back to Puga and Trefler again, the allies split the proceeds. Venice took Byzantine territory in the Aegean, the Black Sea, and the Eastern Mediterranean; the northerners took other Byzantine territory to the west of Constantinople. More than just revenge for hostages, for the Venetians this was an important step towards building an empire.

Incidentally, I may be misrepresenting the situation by writing that the Venetians took advantage of the crusaders. I imagine that, beyond simple greed, the northerners were happy to go on a detour and leave the attack on the Holy Land for another time. Strategically, it makes sense. Gaining Byzantine territory, including ports, might be a good staging point for a future invasion of the Middle East. Of course, I’d have to check the sources to get a sense of northerner motives. Nevertheless, I don’t want to give readers the idea that I’m being naive about them. I don’t like portraying such a large group of people with a mix of motives in a simplistic way.

Rise of the Merchant Oligarchy

Returning to the Venetians, as their empire grew, their city experienced important political changes. A merchant class began to gain power, which coincided with an increase in trade and merchant wealth. Most important for this blog series, as the merchants began to do more long-distance trading, they developed new financial innovations. Before I discuss those developments, I need to summarize the underlying political changes, which takes me back to the early period before Venetian independence from Byzantium.

Going back to the sixth century, when the Venetians were still an outpost, the Byzantines controlled who would become the leader of Venice. In effect, this meant that they would install their own representatives as Doges. By the late 900s, after the rebellion in 726, the Venetians gained control over their high office, which transformed into, as Puga and Trefler describe it, a hereditary office with unlimited monarchic power. This accumulation of power is no surprise without an outside power to check the Doge. That doesn’t mean that, in the long run, he wouldn’t find opposition from within Venice itself.

Things changed with the assassination of Doge Candiano in 976. Candiano’s mistake was to try to build a relationship with the Holy Roman Emperor (the ruler of the empire Charlemagne originally established) and, at the same time, create conflict with the Byzantine emperor. This angered the merchants, who relied heavily on Byzantine trade. After the assassination, powerful merchants made it difficult for Doges to follow their own interests at the expense of, again as Puga and Trefler describe it, communal interests. I assume the authors are referring to the interests of the merchant or bourgeois community, not a wider democratic concept of the public good that includes the lower classes.

In 1032, the merchants took advantage of the political vacuum that formed after the death of Candiano and appointed a wealthy silk merchant as Doge. This marked the end of the hereditary system and the beginning of the electoral appointment of Doges. In addition, Doges were forced to adhere to judgments from the judiciary. Though Puga and Trefler don’t offer details about the new scope of judicial power, their comments suggest to me that the judiciary had gained much more influence in Venetian politics and society.

A final step in the victory of the merchants followed another assassination. In 1171, Doge Vital II Michele tried to force the Byzantines to release the Venetian hostages they had taken earlier that year. I mentioned this hostage crisis as one of the causes of conflict between Venice and Byzantium. The Doges failed and, to make matters worse, brought a deadly plague back to Venice. When he returned, a lone Venetian followed him down a side street of Venice and murdered him.

Once again, the merchants stepped in and took advantage of the resulting political vacuum. Though the old hereditary system had ended over a century earlier, the electoral system had eroded. In the previous seventy years, the family of the assassinated doge had held the office for fifty years. What kept this from being hereditary was the fact that political office had not been transferred directly from father to son and there were breaks when other families took temporary control of the office.

To reinforce the electoral system, the merchants installed a new constitution in the months after Doge Michele’s death. They installed a new parliament, called the Great Council, which, sometime before 1192, managed to gain power to elect the Doges. Ultimately, this council increased its control so much that, as an author Puga and Trefler quote puts it, by 1192 the doge could do almost nothing without approval of the council (found on page 10).

Financial Innovation

The victory of the merchant class and the corresponding growth in trade spurred financial innovation. Puga and Trelder give a long list of innovations that appeared by the 13th century: limited liability stock companies; debt markets (to sell bonds I assume); markets for equity, debit, and mortgage instruments; bankruptcy law; new accounting methods; banking deposits; and the ducat as a stable exchange currency. Their argument, which makes sense to me, is that these innovations appeared in order to help Venetian traders and bankers deal with the difficulties of long-distance trade.

Ship in rough seasThe authors mention the typical challenges merchants faced. Travel time was a major issue. It took ships a month to travel from Venice to the eastern side of the Mediterranean, and two months to return. This is assuming that weather conditions were favorable. As the authors put it,

Death abroad from illness, shipwrecks, and piracy were common. There was also substantial business risk associated with the thinness of markets. A merchant who arrived in Acre a month late might find that the market was over for the year and be forced to dump his goods at firesale prices. [on page 10]

There were benefits from the new financial developments. They reduced corruption and made it difficult for merchants to take advantage of the system. Puga and Trefler note that there was a reduction of embezzlement and other forms of corruption (page 33). It was easier at that time to bar dishonest and corrupt merchants from taking part in long-distance trade, which was so crucial for anyone who wanted to become successful in Venice at that time.

The end result of the new financial development was that many more Venetians could take part in their city’s commercial revolution. Before that period, only the wealthiest merchants could take part in international trade.

Forced Loans and the Origins of the Prestiti

As interesting as the financial system of Venice is, I don’t want to stray too far from my main topic, the prestiti. In other words, my narrative of the prestiti begins here, for which I need to switch to Sydney Homer’s book, A History of Interest Rates. I introduced this book at the beginning of this post. Homer’s references to the prestiti appear in his chapters on medieval finance, each devoted to a different century. He also includes a short discussion, beginning on page 72 of the book, on Venetian forced loans, which seem to have been an important precursor to the prestiti.

Homer doesn’t include much information about forced loans. I can summarize his comments in a few sentences. Basically, the forced loan program involved the wealthy residents of Venice lending money to the government at a rate based on each individual’s level of wealth. Then, that money would go to communal needs, notably for defense. The fund that housed this money was called the mons.

Unsurprisingly, with such a brief description, I’m left with questions. The fist that kept coming to mind is why Homer doesn’t describe the forced loans as taxes. Like a tax, the Venetian government used loans to make its residents give money to the state. However, when I remember that the mons is an investment fund, which the government pledges to repay in the future, I realize that Homer might have made the right choice to use the term forced loan. In addition, I wonder if my modern sense of the difference between taxes and investments is getting in the way of my understanding of medieval finance. For growing medieval states, which were clamoring for funds, the distinction between tax and loan might not have been as precise as I expect it to be.
The other thing that bothered me about Homer’s description of forced loans is that he doesn’t mention when they first began.  I can estimate that they must have appeared between the 11th and mid-13th centuries. The 11th century is the beginning of the medieval era for Homer, so the loans couldn’t have appeared before that point. The first date he gives for the prestiti is 1261, so they must have appeared before that date, which is to say before the middle of the 13th century.

The Prestiti

After his brief comments on forced loans, Homer makes is first reference to the prestiti on page 93, where he describes the government of Venice creating a new fund called the monte vecchio in order to reorganize the existing prestiti. This was in 1261, as I mentioned in my last paragraph. Homer doesn’t give a reason for the reorganization, but he does mention that it took place after the victory over Constantinople, which makes me wonder if there was a connection. Perhaps the new fund was developed to cover military expenses or to organize new revenue coming from the territories the Venetians took from the Byzantines.

Whatever the reason for the new fund, it was at this point in the book where Homer starts to gives prestiti statistics. The first figure he gives is the nominal interest rate or the coupon of bonds, which was 5% interest per year. It was separated into semi-annual payments of 2.5% and didn’t change for roughly the next 100 years.

An interesting thing Homer reveals about the bonds at this point in the book (page 94) is that bondholders never received certificates of ownership. The government kept a list of their names on public record in a centralized loan office. One might assume that this would have made it difficult for a bond market to form, but trading the prestiti became popular by the 13th century. Venetian nobles traded them for charity and to add to their daughters’ dowries. Market rates were publicly available, and purchasers would have the same rights as the original bondholders. Thus by the late 1200s, as the list of financial innovations I quoted earlier from Trefler and Puga confirms, Venice had its own secondary market for bonds.

The 13th Century

In the next chapter of Homer’s book, he covers the 13th century, during which the price of the prestiti fell. By 1285, the market value had fallen to 75% of their face value. At the same time, while the coupon rate remained at 5%, the perpetual annuity rate was at 6.625%.

One might assume, as I first did, that the perpetual rate refers to the yield to maturity of the prestiti, which would include the value of all of the cash flows of the bond, including coupons and the face value. However, as is clear later in the book, there was no stated maturity. There was no set date for the bonds to stop paying coupons. To calculate their value all one needs to do, according to one useful Wikipedia entry, is divide the bond value by the market value.Perpetual calculationA quick calculation for the prestiti shows how this works. I start with the coupon value in ducats, which for a 100 ducat prestiti with a  5% coupon is 5 ducats (5% of 100 is 5 ducats). Then, I divide the coupon value by the market rate, which Homer quoted as 75% of the face value of the bond or 75 ducats (75% of 100 is 75 ducats).Prestiti calculationAccording to this equation, the perpetual annuity rate of this prestiti is 6.666%, which is close to Homer’s original result of 6.625%.

Now just because the bonds were perpetual, that doesn’t mean that bondholders never received a full repayment that included face values. There were times that the Venetian government repaid them, which later in the chapter Homer confirms happened. This leaves me with a question about his original data. How can I be sure that the prestiti were actually perpetual annuities, as his charts and historical account present them? The author gives no hint about how he calculates the bond data. He simply lists his results as he does in the table below, taken from page 95 of the book.

Interest rate chartNote that the last three rows list perpetual market rates for Venice. This is the kind of source material that bothers me. To confirm it and answer my previous question, I would need to go back to the original source, written by the Venetians themselves centuries ago, and verify that the numbers in charts like Table #6 are accurate. While I trust Homer’s analysis, I still would feel better verifying it with the original data.

Back to the Numbers

Moving back to Homer’s narrative, the next two dates he mentions in the chapter on the 13th century show the price of prestiti falling and the annuity rate rising. By 1288, the price fell to 70% of the face value and the perpetual annuity rose to 7.14%. By 1299, the price decreased again to 60%, and the annuity rate rose to 8.375%. After that point, Homer mentions a longer trend in the opposite direction. The price rose to over 100% of the face value by the middle of the 1300s, as Venice went through a period of peace and repaid its bondholders.

That last point about Venice’s repayment shows that the state always had the option to repay its bonds, though there were periods when it didn’t. A comment from the end of the chapter is further evidence of this:

Confidence in the prestiti . . . was helped by the growth in the prosperity of Venice and, hence, her ability to service her debts. Later the appropriation of a fund to buy in the prestiti when they sank in value contributed to their popularity and price.

In other words, when Venice prospered, it could pay off its debts, including buying back its prestiti. With less outstanding bonds, the state reduced the amount it had to pay in interest.

The 14th Century Fall

The next place Homer mentions prestiti is in the chapter on the 14th century. He starts the chapter with many passing comments about the bonds before discussing interest rates. The most interesting of these comments has to do with the prestiti becoming a popular international investment. Investors included, as he puts them, capitalists, foreign princes, and Venetian nobles. Foreigners who wanted to buy prestiti needed to obtain permission through an act by the Venetian government. It would be interesting to find out how much revenue the state raised by approving such acts.

Another interesting point Homer brings up is that by the 14th century the prestiti had become the most important source of revenue for the Venetian state. Initially, the salt tax had been an important alternative form of revenue, which covered expenses during peace and went to redeem prestiti debt when there were surpluses. To cover new debt for wars, the government decided to issue more prestiti. Naturally, as the Venetian state issued more bonds during war years, it failed to pay its existing prestiti obligations.

The only interest rate Homer mentions in this chapter is for 1299, when the annuity rate hit 8.375% and the price of the prestiti fell to 60% of its face value. This fall followed an unsuccessful war with Genoa from 1294-1299, during which Venice issued a large number of new bonds. This is a good example of the connection between historical events, like the war with Genoa, and, on the other hand, the performance of bonds. I’m hoping that my financial models in the next blog post will address this connection in more detail.

The 15th Century

The last chapter in the book that gives information about the prestiti is the chapter on the 15th century, after which all references to Venetian bonds are only by comparison with other bonds. The discussion in that chapter begins with a war with Genoa from 1378 to 1381.

The war with Genoa shows that wars weren’t always good for the popularity of Venetian bonds. Though Venice was victorious, the results for the prestiti were negative. Venice stopped paying interest on them, so their price fell from an initial high of 92.5% in 1375 to a range of 19% to 43% by the end of the war. Thus more than just than the price falling, it became more volatile.

Things improved by 1400, when prices rose to a range between 60% and 66% of the face value of the bonds. For the rest of that century, Homer mentions a price range between 13% and 67%, with the average at the upper end of the range. It seems at this point that the coupon rate changed, as well. Homer refers to the coupon in the 15th century falling from its original 5% to 4% and a variable rate.

In response to this changing face value, the government issued a new tax to pay for a new series of prestiti in a new fund called the Monte Nuovo in 1482 with the old coupon rate of 5%. The new fund’s performance suffered. The market rate started at 100% of the face value but by 1494 fell to 80% with an interest rate of 6.25%. By 1500, the price fell further to 52% of the face value and the yield rose to 96%. The last date Homer mentions is 1502, which was a little better with a market value of 75% and a 6.76% yield.

The last prestiti series Homer mentions in the book dates to 1509, during another war. The only information he gives about this series is that the Venetians paid it off by the end of the century. He doesn’t offer any interest rates or terms, because he feels he doesn’t have enough data to make good calculations. He ends his discussion of Venetian financial history at that point and explains that after the 1509 war, Venice lost a series of wars with the Turks and lost its empire. This would mark a good place, then, for my narrative of the prestiti to end.

Concluding the Prestiti

To end this post, I want to follow up on one of my complaints about Sydney Homer’s presentation of his source material. Before I do that, however, I need to recap my narratives of Venetian and prestiti history.

I began with a basic history of Venice, starting with its earliest inhabitants seeking refuge from invaders and establishing maritime industries. With the help of Byzantium, Venice slowly grew into a medieval power with trading links across the Mediterranean.

Within a few centuries, as conflict arose with the Byzantines, Venice gained independence and, with the help of northern Crusaders, took territory that was once Byzantine. As this was happening, Venetian merchants began to gain power and displace the influence of the nobility. In turn, long-distance trade spurred a commercial revolution that led to new financial innovations, including forced loans, which were an important precursor for the prestiti.

In my prestiti narrative, I explained the basics of Venetian bonds. They were perpetual annuities, meaning that they had no maturity date, so that bondholders could earn interest from them until the state decided to buy back the bonds. The prestiti were also a popular international investment instrument, which eventually became the most important source of revenue for the Venetian state.

As much as I’ve learned about the prestiti by writing this blog post, I still feel uncomfortable with Sydney Homer’s analysis and presentation of financial data, which, on reflection, might have more to do with my trepidations about dealing with such data than with problems I recognize in his writing. At this point, I don’t feel like I’ve seen his original sources, even though he includes charts and specific numbers throughout his book.

It’s revealing to contrast my reaction to A History of Interest Rates with a more positive reaction I had to another book I read years ago about a series of letters written by Joseph Stalin. I remember feeling impressed with the Stalin book because its author included the letters at the back of the book. That allowed me to confirm his analysis and gave me confidence in his interpretation.

What didn’t bother me was that the letters appeared in an English translation, not in the original Russian. They were, if remember correctly, translated into English with no photographs of the original letters. That means that I had a false sense of connection with the original source material. Naturally, I trust the author’s translation, but I still want to ask why I’m more critical of and uncomfortable with Sydney Homer’s presentation of his sources than I was with the author of the Stalin book. Homer presented a translation of the original Venetian documents in his book, along with the charts of financial data, and he didn’t include any photographic images of his original sources. Why am I more concerned with Homer, then?

My double-standard with respect the books I just mentioned, in other words, reveals a double-standard I have towards text-based sources vs. numerical or financial sources. I wonder how many historians have the similar double-standard and how their predilections towards text influences their scholarly work. It’s an interesting problem to consider.

In the end, this means for me spending more time with unfamiliar kinds of sources will only improve my ability to analyze sources, including those that are text-based.

This entry was posted in Bond Markets, Bond Pricing, Bonds, Marx, Prestiti, Price, Series Two, Venice. Bookmark the permalink.

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