Because the florin was worth a great deal and could not be broken down into smaller coins (otherwise the poor would have begun to use it), bankers found it necessary to invent an accounting currency, so that wholesale prices and discretionary gifts could be calculated in fractions of florins. So the lira a fiorino must rapidly be mentioned. This was worth twenty twenty-ninths of a florin (yes, 
) and each lira a fiorino could be divided into 20 soldi a fiorino, which in turn could be divided into 12 denari a fiorino. Hence there were 348 denari or 29 soldi in a gold florin, though of course there were no such coins as the soldo and the denaro. Who says money and imagination don’t go together? To help them do their sums, each banker was equipped with an abacus. Perhaps not surprisingly, they couldn’t always get their books to balance, despite a thorough knowledge of the rules of double entry. “May God save us in future from greater mistakes,” writes one Medici branch director to the head office, unable to find out where he has gone wrong.
How mysterious these imaginary currencies must have seemed to the uninitiated in a world where everything but the Holy Ghost was visible. Technology had not yet removed the ordinary things of life from view. Piss did not stream into clear water to be sucked away beneath gleaming porcelain. Shit steamed in the pan. If you were a florin kind of person, you could pay a picciolo person to take it away for you and empty it elsewhere. In a back alley, perhaps. The plague victim did not die in starched sheets, nor was his agony alleviated by analgesics. Where there was a perfume, that was because an unpleasant smell was lurking beneath. Your mortality was ever present. People died young.
But there were good smells, too. Packaging hadn’t stretched its shiny film over meats and vegetables, wools and silks. Since windows of oiled cotton didn’t let in much light, the weavers took their looms to the door. The cobblers and saddlers worked their goods in the street. By the Gora Canal, men are washing the raw wool that will soon be on someone’s back. The fishermen come in from the country with carp in their buckets. They pass the barber shaving customers at a corner. The apothecary is grinding nutmeg for cough relief. There are onions for your piles. Everything is present. Every task is clear. That is the natural order: people getting by with the sweat of their brows, as God commanded. Even the feudal lord in the country keeps an army and hires it out, governs his lands. That is understandable. Even the priest helps your soul to paradise when the solid flesh finally melts and the breath rattles its last. Who would deny the need for a church? But what on earth are these bankers doing counting in coins that don’t exist?
RETURNING TO FLORENCE in 1397, Giovanni di Bicci put 5,500 florins into his new bank. Already he had at least doubled the 1,500 his wife brought him eight years earlier. The other partners were Benedetto di Lippaccio of the famous Bardi family, who was already working with Giovanni in Rome — he brought 2,000 florins — and Gentile di Baldassarre Boni, who added 2,500 to make 10,000 in all. Things got off to a bad start. Gentile Boni pulled out after a few months, taking his capital with him. Mistake. While his ex-partners grew rich, he would end his life in a debtors’ prison. Giovanni increased his capital contribution to 6,000 florins to bring the total to 8,000, and after paying rent and salaries and setting aside a reserve for bad debts, the company got through its first eighteen months with a modest profit of 1,200 florins, 10 percent annually, on the nail.
Over the next twenty-three years, up to Giovanni’s retirement in 1420, the bank as a whole would make total profits of 152,820 florins (6,644 p.a.). Giovanni took three-quarters. From 1420 to the next reorganization in 1435, during which time the partners were Cosimo de’ Medici, his brother Lorenzo, and Benedetto de’ Bardi’s brother Ilarione, profits were 186,382 florins (11,648 p.a.). The Medici took two-thirds. From 1435 to 1450, when the bank was in its heyday, profits were 290,791 florins (19,386 p.a.). The Medici, with new partners now, took 70 percent. Keep firmly in mind that a respectable palazzo would cost only a thousand to build and that the vast majority of the populace were too poor to pay so much as a single florin in tax.
How was this done, given that it was forbidden to lend money at an interest? Like all major banks at the time, the Medici were merchants as well as bankers. They would procure goods abroad for rich clients: tapestries, wall hangings, painted panels, chandeliers, manuscript books, silverware, jewels, slaves. They would speculate, buying shiploads of alum (for the textile business) or wool or spices or almonds or silks, moving them from southern to northern Europe, or vice versa, and selling at a higher price.
There was a risk involved. A buyer wouldn’t give you a florin until he’d seen the goods. Demand and prices swung alarmingly, depending on how many merchants had sensed a particular gap in the market. A lot could happen in the months it took a Florentine galley to sail and row west from Pisa across the Mediterranean, through the Strait of Gibraltar into the Atlantic, then north up the Portuguese, Spanish, and French coasts, east to Bruges, and finally across the English Channel to London. Perhaps there were no customers by the time you arrived. Ships could sink, especially the newer, so-called round ships, which were all sail. The bellying sail became an image of chance. The goddess of fortune stood blindfolded at the mast. In short, the cargoes had to be insured. Groups of banks would get together to underwrite eventual losses. “May God and fortune be our aid,” implored the shipping documents.
The merchants reacted to risk by spreading investments over a wide variety of goods and customers. Every bank had its warehouse. Along with the raw silks and wool and linen, an inventory in the Medici’s Florence warehouse in 1427 lists “un corno di liochorno”—the horn of a narwhal or rhinoceros. In 1489 a giraffe died on its way to the duchess of Bourbon. Who would deny such enterprising men their profits? Yet the accounts show that trade accounted for only a modest percentage of the bank’s profits. By trade alone, the Medici would not have become fabulously wealthy. How did they do it?
By the art of exchange.
A man comes to our green-covered table in Florence, in Rome, or after 1400 it might be Naples, after 1402 Venice. He wants money. He is a merchant most probably, in any event credit-worthy, otherwise we won’t deal with him. He wants, say, 1,000 florins. Why should we give it to him, if we can’t ask for interest? He isn’t a friend or relative. He offers us an exchange deal. He will take the florins and repay us in pounds sterling, in London. No harm in that. The cashier consults with the branch director. Depending on the conditions of his contract, the director may have to write to the head office. But eventually the money is brought from the strongbox. In return, the merchant — or he might be a magistrate — writes us a cambiale, or bill of exchange: