Thursday, October 1, 2015

Pawning

Medieval cities, like modern cities, had pawn shops, places where people could deposit something of value and get ready cash for it, even if not what it was actually worth.  The pawnbroker would agree that the person depositing their "pledge" had a certain amount of time to come and buy it back.  The danger then, as now, was that if one was a little slow, someone else might come in and buy it before one could get back and redeem it.

Officially in the Middle Ages one could not loan at interest.  This was called usury and is formally forbidden in the Bible.  We now use the term "usury" to mean high interest rates, but it was assumed then that any interest was usurious.  The Bible provides a loophole--one is not supposed to charge interest to one's "brother," but Jews and Christians did not consider each other brothers, so Jews could be bankers and charge interest on loans.  (See more on medieval Jews here.)

In medieval pawning, officially there was no interest, and the pawnbroker made money from selling goods that were not redeemed in time--and getting more from the buyer than he had advanced to the person who had deposited the pledge.

The Italian banking houses also were involved in pawning; Lombard Street in London is named for the medieval pawnbrokers who operated there.  (See more on medieval banking here.)  The symbol of a pawn shop was three gold balls, which also became the coat of arms of the Medici family in Florence, a banking family that survived the Renaissance with their wealth intact, largely because (unlike other banking houses) they had the sense not to lend money to either the French or English kings during the Hundred Years War.


Saint Nicholas became the patron saint of pawnbrokers, and the story is that the gold balls represent the three bags of gold he gave to a poor man's three daughters as dowries.

But if one needed to raise a lot of money all at once, pawning some jewelry would not be enough.  During the twelfth century, the heyday of the Crusades, those preparing to go to the East would pawn their land.  Here the principal pawnbrokers were, interestingly enough, not bankers (either Jewish or Italian) but Cistercian monks.  They would receive the land in pawn (pignus in Latin), giving the Crusader a sum of money that was substantial but still less than he would have gotten for selling it outright.

No interest was charged.  The monks got the income and produce of the land as long as they held it.  The Crusader generally specified that this usufruct was to be considered a gift for his soul.  He usually was (understandably) worried about his soul, heading off to war, and might make a gift to the same monks who were advancing him money.

If the Crusader made it home alive, he could redeem his land; he generally had six years in which to do so.  But if he never made it home, or arrived home sick and broke (as commonly happened), then the monks kept the land.  They might offer the Crusader extra prayers.

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