Monday, April 4, 2016

Medieval mortgages

A lot of institutions we assume are modern were well established in the twelfth century.  As I noted in a previous post, pawning was one.  Here I want to discuss a related topic just touched on there:  mortgaging one's land.

The rich-and-powerful of medieval society were not rich by having money in the bank or in the stock market.  They were rich in the number of people they could command and in their land holdings, which would produce rents and food--both food for themselves and food to sell.  This meant that if they needed a lot of money all at once, they couldn't just sell their mutual funds.

Most commonly, medieval aristocrats needed money when going on Crusade.  They could have sold land, but they preferred not to, because if they returned alive they'd want it again.  Therefore they would mortgage it.  (The distinction between pawning and mortgaging was insignificant; the only real difference was the size of what was being offered for money.)

Cistercian monks became major money-lenders in the twelfth century, acquiring land in return for lump-sum advances of money.  Crusaders promised to pay the money back, usually within six years.  In practice, many Crusaders never made it home.  Many more were wounded or sick.  Even those who came home as healthy as when they left had no more money than when they left.  Occasionally Crusaders would get a lot of loot and actually manage to get home with it, but that was rare.  (The idea that one might get rich from Crusading was very quickly dispelled by the experiences of the First Crusade.)

It may seem surprising that the monks, withdrawn from society to a life of simplicity, would be involved in mortgages, but medieval people did not have the same automatic assumption many people today do that "business" was necessarily opposed to religiosity.  (Click here for more of the interactions between monks and secular society.)  The monks were always being given money as pious gifts, more than their simple needs required, and granting it in return for mortgaged land was a way to help the Crusading movement and to acquire land, which they wanted for their sheep.

Because the monks did not charge interest, the Crusader would announce that the "fruits" (income and produce) the land produced while they were gone, the usufruct, would be a gift for their souls, not an interest payment.  An economic and a spiritual transaction here were joined in a way that made perfect sense in the twelfth century.

In practice, the monks most often ended up keeping the land, because the Crusaders were never able to redeem it within the specified time.  In essence, although that was not their intent, they acquired a lot of land very cheaply.

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