Far from being a 20th-century innovation, our taste for leverage could date back to the Middle Ages. In fact, two UK-based academics are looking into whether 14th-century English monarchs were the original sub-prime borrowers.
While the Queen Mother’s fabled overdraft at Coutts was fodder for the tabloid press, professors Chris Brooks and Adrian Bell of the University of Reading’s International Capital Market Association centre are embarking on what promises to be an exciting investigation of royal finances.
In a study entitled Credit Finance in the Middle Ages: Loans to the English Crown c. 1272-1340, Brooks and Bell will examine credit finance arrangements used by Edward I, II and III.
"Evidence suggests that English monarchs were sub-prime borrowers, allegedly causing the Frescobaldi of Florence to suffer a ‘run on the bank’ at the turn of the 14th century," says Bell. "This arose precisely as a consequence of a lack of investor confidence due to the bank’s loans to the unreliable Edward I, the then King of England".
Brooks and Bell profoundly suggest that studying the history of finance might help us better understand the financial markets of today.