Reviled to Revered
In his book, The Ascent of Money , Niall Ferguson uses Shylock (from The Merchant of Venice ) as a representative of how money lending worked in the pre-banking era in the West. Say, a merchant in Venice expected to make money by some activity in the future, but he needed money today to get started. He’d need to borrow it. But the lender ran the risk that this merchant might fail, or run away, or refuse to repay. To compensate for these risks, the lender wanted a premium to be paid, what we could call “interest”. But Christianity forbade usury – the charging of interest. That, and the fact that Jews were not allowed to hold property in Europe, meant Jews became the only group who could lend money. With high interest since each money lender was small and couldn’t spread his risk across too many loans, the way modern banks can. Also, without a strong legal system, some form of force (or the threat of it) was needed to get back the money. Add to this the Jews were a minority, an...