 So, without further ado, I'd like to introduce Patrick O'Connor, soon-to-be-doctor. The title of his talk is Numbers vs. Resources, the History of Banking. Thank you. Hello. Hey, thanks for coming out. Soon-to-be-doctors may be a slight exaggeration, but this is nothing to do with my thesis. You'll be happy to know. This is based on some earlier work I did, which was much less rigorous, but much more interesting. That's the way academia tends to go. Maybe I should explain the title then, Numbers vs. Resources, or I wish there were a conspiracy, it were a conspiracy, but I'm afraid it's much worse than that. You may have the impression, I think a lot of people do these days, that we're on a kind of train to oblivion in terms of the global economy. It just keeps on growing and growing in all conceivable directions, and nobody seems to have any power to actually affect its progress or stop it. That leads, I think, to a lot of people resorting to the idea that the economy is under the control of a secret cabal of, and in fact the world's history is under the control of a secret cabal of people who are somehow pulling the strings from the shadows. That's a very comforting theory, because if that were true, then we could go and kill the queen or whoever other lizards were available, and then everything would be fixed. We could all go back to having a sustainable environment and living in a world where everything wasn't co-opted and taken over by commercial interests, and the surveillance state wasn't creeping up on us, and all these other processes weren't happening, that don't really seem to be subject to any kind of democratic or other forms of power. They're all just happening. I became interested in this from a certain perspective when I started reading a book, which I don't have with me, called Golda Leschebach by Hofstadter. Don't know if anyone's heard of it. It's a really interesting book. I think everybody here should definitely read it. Some of the concepts in it that he uses are listed here. Recursive equations, which he shows how interesting they can be. Isomorphisms being ways to create an alternative way of describing something, or differing ways to look at things that can be analogised to each other, can be said to be isomorphic. For instance, if you were to say that a virus has an isomorphism to a self-assembling machine, that would be an example. Sort of like an analogy or something like that. And chunking, this is the most important thing, I think. This is what gave me renewed faith in the powers of the historian. When he talked about chunking, which is it depends what scale you're looking on something, how you analyse it and how much you can get out of the thing that you're looking at. So if you're looking at the life cycle of an animal, you might not look at the minutiae of its individual cells, or even its day-to-day activities if it was a long-lived animal. You would look at certain things that are recurring trends that happened again and again, and you would get more information out of looking at something on a large scale than you would at looking at its tiny component parts. Now the same thing is true of human society. In some ways, we become more predictable as you scale up. One human can do all sorts of crazy things in a given day, but a whole bunch of humans together, if you have enough of them, tend to follow more certain and more... Not predictable is the wrong word, but sort of more open to analysis under paths. So one big chunk which I've taken an interest in is this process which has happened to the economy, the global economy. As you see, it's from a linear to an exponential tendency. What we have early on in our history is a linear growth in the economy. At some point between roughly the 13th century and the 16th, 17th century, we go into a completely different mode where the economy is suddenly running away from us and dragging everything along with it. Of course, this is a dialectical process. New technologies are discovered, new resources are discovered, the economy grows yet further and so on and so forth, but suddenly it's happening in a way which it never did in the whole of human history before. Remember, human history here is going back much further than this graph illustrates. It's going back thousands and thousands of thousands of years and in all that time, there was a linear tendency to the economy. So what's happened recently in history is actually a really amazing event which is a little underappreciated. Amazing but also terrifying. This is the population of the earth. And as you can see, again, the linear tendency, actually in fairness, this is a log scale. So it's not precisely linear before we get to this late period. It is slightly an exponential curve and that's the discovery of agriculture, what you're seeing there. I'm pointing at my thing but you're looking at the bits between 4000 and zero. This is the period where agriculture has been discovered. But it's still a relatively linear tendency and what we move into after, let's say, what, 1200, 1300, 1400, depending on where you put it, is an exponential tendency which means that we have a population of the world of maybe less than 200 million in zero AD. In 1400 or 1300 AD, it's still less than 500 million. Now it's 7 billion. So you can see that this is not a tendency that can be in any way sustained in terms of the earth's carrying capacity. We're hurtling towards something and it's like being out of control economic freight train. But of course there are good results as well as bad ones. The part of the reason the world of population has gone up so much is because the extraordinary advances in medicine and technology and other things that have been discovered in this process of economic growth. Now the question is what's driving this? And obviously if you're Karl Marx, you look at this period after 1500 and you say, well, obviously maybe not everyone's read Karl Marx, and you say, well, here we have industrialisation. And so industrialisation is the key to this change from a linear to an exponential tendency in the economy, in population and in all these other ways. But if you look earlier on this graph, you can see that actually there's a little mini version. Maybe I need to come around and sort of point this out. There's a little mini version here of what happens here. You see a little spike, a little attack sustained decay which happens between let's say 1250 and let's say sort of 1350. And I became very interested in this because that happened to be a period in which the economy was financialising in a very revolutionary way, but not the economy of the whole world, just the economy of a very, very small fraction of the world. And that fraction was Italy and then secondarily Western Europe, which at this time were very small backwards places compared to a lot of other places in the world. And they had this extraordinary take-off which is reflected in what happened later on after the Industrial Revolution. And this take-off was led by banks and lending and profitable lending. Now, something else big changed in that time. This is olden times, not to be too technical with you. Olden times, money was gold or other precious metals and the amount of money was obviously less than the total amount of wealth which represented all sorts of things that could have a value. Money, in other words, was just one little piece of the economy. And what's happened between olden times and nowadays, not to get too technical with you, is that money, as you can see, has grown and assets and liabilities, which now money is, outstrip wealth. There's more assets and liabilities in the world than there is wealth. So in other words, the creation of money has led this process of exponential growth. First comes the money, then comes the... I won't bother with the rest of the quote because it's got a bit rude. So the financial process is a recursive exponential process. And so you can see here, you're adding to... If you start lending out money to make a return on a compound interest rate, what you get is an exponential process of accumulation, which is obviously not linear. And so what I wondered is, is this a coincidence? And I came to the conclusion that it's very much not a coincidence that in these periods, first this one in the 13th century and then the later one, that financialization of the economy was a very big part of what was happening on a local scale in the 13th century and on a global scale later on. Behold our demonic lord. This is the... I can analogize this to the story of Faust. I don't know if anyone is familiar or how much you're familiar with Faust and Mephistopheles. So Faust is this old, fusty old guy who was visited by a demon. And the demon offers him incredible power, incredible wealth, incredible pleasures, but at the same time he leads them on this dance towards the loss of his soul. And lending, profitable lending, has a kind of similar effect. When somebody comes to you and suddenly offers you the opportunity to have a massive amount more money than you did before, all sorts of possibilities open up. So you might be the King of England and you might decide to get a much, much bigger army and invade France, but you never would have thought of doing before because France is huge and England is small. But now suddenly you can. So you might have Leonardo da Vinci inventing catapults for you or get some really incredible hats. And all these things suddenly become possible, but at the end of the process you have to find a way to return more money than the money you borrowed in the first place. And that's why I say this is more like the second line, Y plus N, Y N plus question mark, which is human ingenuity, the ability to leverage whatever powers you have to get more money than you had next year than you had last year, not just the same amount as you would do if you were just doing common agriculture. And this human ingenuity is teased out by the process of offering loans to powerful people. And so this is what the... a geometric representation of this sequence looks like. That's Fibonacci-ish, right? There's something profound and powerful about it. And in each one there's a sort of isomorphism. In each stage it's a bigger, more elaborate version of the previous stage. Right, now I'm going to blow your mind. Here's a world map. And here's the Fibonacci sequence on a world map. And I mean, all right, some of you historically educated among you may say, well, this is completely inaccurate. True. But it is roughly illustrative of a process that happened whereby financial power spread out from Europe into the rest of the world. First from the 11th century to the 13th century into northern Europe, from southern Europe and the Mediterranean, as you can see there. And then later into all these... roughly into all these other periods. All right, yeah, it's not exactly right, but it's more or less on it. But the bit that I'm interested in is this 1050 to 1250 change, which is the microcosm, you see, or the isomorphism of what's happening now in the modern world economy or what has happened since, let's say, the 17th century. So the church had an idea that there was something wrong with this concept. They called it usury. This is the idea of lending money for compound interest. They said, if you lend money for compound interest, you describe it, and they did in Italy already by the 11th century, as putting your money to work. And what the church said, quite fairly, was you're not putting your money to work. You're putting someone else to work because your money is not going to make more money all on its own. It requires a degree of exploitation, a degree of going beyond and compromising with what you were doing before and changing how you did things in a way which the church wasn't comfortable with and the church is all about tradition. It ain't natural, they said. This red line is what a farmer does. This red line is what we were doing collectively for thousands and thousands of years. But the blue line and the green line are the lines that pop up when you start to bring usury into the equation. So what we say, well, surely we can't be controlled by an equation, right? This is ridiculous. The unlimited variability and unpredictability of human behavior, and particularly the behavior of powerful people. Because the world, historically, has always been ruled over by death bots actually up until very recently. And those death bots can be a bit flighty, right? We've all seen Trump in action. Sometimes they take it upon themselves that they don't want to, let's say, pay their creditors. And in fact, they want to arrest their creditors instead and kill them all. And that happened repeatedly throughout history again and again and again. And that was a process which set back and reset this system and prevented it from ever reaching its exponential potential, let's say, or its logical conclusion. So the answer is no, except under very, very specific historical circumstances. And so the example that we're going to give is the circumstances of medieval Italy in the West and Europe, which is a much simpler, in a way, example than what we're experiencing now, which is happening on a global scale and is incredibly, incredibly complicated, not least because now money has stopped being a real thing. We're no longer taking money and putting it into the economy. We're creating money and we're dragging the economy along with it. But what they were doing in medieval Italy was they were unlocking stored wealth. All these people who had a bit of money hidden under the bed or had it in a chest or in the ground somewhere in a field could pull it out and put it into this system, which was to lend it out and get back more. Or they were induced to pull it out and put it into the system by the fact that they'd taken out loans and they couldn't afford to pay them back. Now, this is the geography that gives us the specific historical circumstances. So we can see Italy here is isolated from the rest of Europe by the Alps in the north and then, obviously, the sea all around it. And this gave the Italian city-states the opportunity to develop their banking system, which was in contact with the rest of Europe, relatively free from reprisals from the kings and so forth that they were getting involved in. And so in Italy, what happened was that it was a very... let's say, active urban class and they were merchants, yes, pirates, certainly, and also, you know, very, very astute people. And they took over the civic governments of the Italian city-states, these merchants, and basically sat at the apex of society. And so they ensured that the process by which this equation took hold would remain in force because the rulers had no interest in interrupting the process. They were the biggest debt holders. So the rulers of the Italian economies like Florence and Venice and other places had massive investments in the state debt of their own societies. And so in Venice, they called it the Old Mountain, the Montevideo, which was a gigantic state debt which everybody in Venice was invested in but the richest people were the most invested in it. And so there was no prospect as in other countries where money lenders were isolated from the true powerful people, the kings and so forth, that this process would be interrupted and they were able to gestate it and bring it to a point of real sophistication within Italy by the 12th century or even maybe the 13th century, depending on how you look at it. This guy was involved. He's the Pope. And there he is, Pope Gregory IX with a fantastic hat, you may notice, and an even nicer cloak surrounded by people in a very, very nice building. Well, where did he get the money for all of this stuff? In the long term, he got the money for this stuff from his churches. That is to say the popes had a network of churches all around Europe and over the course of the 12th and 13th century they learned very well how to extort the maximum possible profit from their network of churches which they never thought of doing prior to that. But in the short term, he got the money from these guys in the corner. So you see we have like the priestly hats on the left hand side of the screen then we have a couple of monks either side of him. And then there's these guys in the corner who've got no priest hat and no monk baldy patch. These are the Italian bankers who were resident in the papal court by the 13th century. And so they were the ones providing the pope with all of the immediate income he needed to build his vast palaces to have his lovely cloaks. This is what they looked like before. They weren't much of anything, you know what I mean? They were just doing masses and stuff. And then of course, by the 13th century they're looking like this. And this is the exponential effects that you can see happening. They had to get the money from somewhere. So they found a way. They were going around Europe occasionally taking gifts from their local churches. And then what they did was they started to make annual demands for these gifts. And the annual demands of the gifts turned them into a kind of form of regular taxation. Now this is the papal tithe. And that taxation became the basis for the loans that they would receive from these Italian bankers, because of course what do creditors want? They want you to have regular income. They want you to have collateral. And so the papacy went from an occasional, you know, collector of money from churches to an incredibly regular, almost kind of tyrannical collector of money from all of the churches around Europe. In order to satisfy the demands that they had created themselves by asking for these loans, right? I mean they didn't have to get involved in this stuff, but you see you can't resist the temptation. Mephistopheles, right? So what happened next? The Pope's converted. They took a little while to come around to the idea that they should be involving themselves in this system. So if you take the early 12th century, excuse me, is there some more? Well, you can read it yourself. They did not like usury in the early 12th century. They thought it was awful in all forms without exception. By 1168 they were like, they weren't quite sure, you know. They thought usury is still bad, but what's worse, what's even worse is not paying off your debts, because that's really bad. And then by 1179 they changed the form, and this is where you can see this is two latter-run councils. They were basically rephrasing the same statement, but they rephrased it in a very legalistic way. They now condemned usury manifest users. That is to say, pawnbrokers, people who do it on the street, on a small scale, not the big-time merchant bankers from the Italian city-states who were lending them their money in a very subtle way. By the 1200s it had gone much further. Now they were borrowing so much money. What's the point in collecting all the tax, bringing it back to Italy and paying it to the bankers? Why not just send the bankers out and let them collect the tax themselves? So Italian bankers from Florence and Venice and Luca and all of these other cities were tasked with going around Europe and collecting the pope's taxes on the post-behalf. And this is a big step forward for them, because now, of course, they have a connection to everywhere in Europe. The pope has churches everywhere in Europe. They have to travel everywhere. And, of course, sometimes these churches can't afford to pay their taxes naturally. And who's there to help them out? It's the same people, the same bankers who have helped out the pope are now there to help out all of these local churches with paying the money that they owe him. And not only that, hey, maybe you want a bigger monastery, guys. Maybe you want a really vast monastery with palatial conditions and all of the sorts of things that are going to lead to the Reformation, but we won't talk about that. And by 1235, the Bishop of London, you see, the local churches were still against usury. The Bishop of London excommunicated all the Italian bankers. He threw them out. He declared their usurious debts to be illicit. And Pope Gregory IX stepped in and went, hold on a minute here, guys. These are my people. So now we have an international financial regulator. And we have the IMF in papal form. And his international financial regulations consist of excommunicating people who mess with bankers. This is the fact that this has happened. This is all real. So this is the vector by which this spread as well. The Crusades involved kings in this process. And so what you see in the red line that goes around Spain is the journey of the kings of England on the Third Crusade. And subsequent to the Third Crusade, they made the same journey again and again and again. And each time they passed Italy, they would meet the Pope and they would meet his people. And then, eventually, they established a relationship with the Pope's people and then they were being offered all kinds of extra money to, hey, how about having a bigger Crusade? Guys, did you ever think of having twice as big an army as that? Twice as many boats and so on and so forth. Actually, this resulted in one of the most incredible vault fasses of any Crusade, which is the fourth one we can see here. The orange line, 1202 to 1204, ended up destroying Constantinople rather than attacking Muslims because they owed so much money, the Crusaders, to the Venetians who had provided their ships that they had to pay them back somehow. And Venice came up with the clever idea of going attacking a bunch of other Christians in order to get the money back because there was more money in Constantinople than there was in Jerusalem. So, this is like how they all fall into this same system. And then, of course, the King of England comes back to England with enormous debts. And how does he pay those debts? Well, now he has to find a way of creating new taxes, leveraging the power that he has. Now, these are feudal monarchs. They don't really tax. And suddenly, you know, they have to come up with ways of doing it. So, who's there to advise them on how to create taxes? Well, the very sophisticated merchants who are now hanging out in their courts help them out by giving them ideas like customs and excise. And the Italian merchants are actually running the customs and excise system of England in the late 13th century on behalf of the kings because they owed them the money already. They were just taking back money they'd already lent to the kings in order to go on Crusade. And then, of course, they do more tithes. You know, the kings collaborate with the churches, they push everybody and everybody further into poverty if they can. But then, people down the social scale who are being taxed also find it necessary to go and borrow money. And so, then you get these little village economies with lenders and debtors and people forfeiting their lands to other people on account of debts and a concentration of wealth. And this is very much that, you know, biblical phrase to he who has, you know, will be given a load more and to he who hasn't will be taken away even the little bit that he has. That's the process which this is creating is concentrating wealth. Now, concentration of wealth can be very useful. Very useful for creating technology, very useful for advancing society in all kinds of ways. You can't build a sewer system without a massive concentration of wealth. And so, this isn't something that we should necessarily see as like evil and, you know, always wrong in every conceivable way. But it is a specific process which should come about in this era. This is Florence. This is the growth of Florence between the 12th century and the early 14th century. You can see the walls, the 12th century Florence and the walls of early 14th century Florence. And this is the same exponential effect that we've seen in our opening graphs happening at a highly localized level within the Italian city-states in this period. And those were, you know, the profits they were making from throughout Europe. Okay, so, all right, I think I've run out of time, so I just have to, I'll take questions or if there's no time for questions, you can meet me in the bar and ask me stuff. Well, I believe I've illustrated the point generally, which is that usury has a kind of social effect, a socio-economic political effect. It drives people to leverage their power to find more sources of wealth, to innovate and also to exploit. And that's the downside. And the exploitation bit is the part that we're now running scared of. So, the question is what do we do about it? Here's the population graph again. This is what should happen. This is what was happening continuously over the period before this exponential effect took hold. What actually did it for the Italian early phase of this was the Black Death and a number of wars and other things which set this back an awfully long way. And in fact, the entire experiment was destroyed when Italy was invaded repeatedly by the King of France and the King of Spain, et cetera. Whose armies the Italians had done so much to help to develop? That's the irony of it. The process does dig its own grave. And so, this will happen by hook or by crook and the question is can we take hold of it and make it happen deliberately? Or will it happen all on its own? Because if it does, it won't be pleasant. So, political solution sees the banks. It's really simple. I mean, it's really obvious. If they return everything that they take out of the system straight back into it and if they only loan to people who have been democratically mandated to receive massive amounts of money rather than just to anyone who can make them a massive profit, then we can do a lot to turn this power into something which is good for everybody. It doesn't have to be dangerous. It doesn't have to be awful. But it does have to be controlled not to be dangerous and awful. And it's currently not. All right, there's a non-political solution. Some of you may like that better. I don't know. I'm not a computer guy. You know what I mean? You lot do what you feel. I'm not encouraging anything. I'm not encouraging anything. It's illegal. Don't do what you feel. But, yeah, anyway. So, yeah, that's the end of that and thank you very much. Thank you very much. Unfortunately, I have the men in to say they don't have any more time for questions in here. But you can definitely continue conversation in the bar. Particle B in the bar right after the stock. And the bar is behind us. Thank you.