Meditating on Ancient Banking

I’ve been over in Italy the past couple of days, enjoying the geographical and time-difference arbitrage to the United States’ markets. It’s rather peculiar having the market closing at 10 o’clock at night instead of 4 o’clock in the afternoon, but it gives me much more freedom during my mornings, so I can’t complain.

Granted, as a futures trader, the market is open 23 hours a day, but the volume is nowhere near as high as it is during the main trading hours in the U.S.. Not to mention, it’s become much less expensive as an American in Europe since the dollar has been so strong, and the good news for us stateside is that I think it will become even more economical in the near future.

The “friendly” exchange rate, slower pace of life… and the omnipresence of 2,500-plus years of history… have put me in a contemplative mood. I’ve got money on my mind, and I’ve found something I think will make us better traders and stewards of our own legacy, our wealth.

Because if there was one thing the Romans accomplished, it was getting their legacy through to the other side. Let me show you what I mean…    

Why History Matters

My roots run deep here in central Italy. I’m the first one in my immediate family born in the United States, but whenever I’m back in the old country, it makes me so grateful to have the opportunity to earn and make a living in the U.S. Europe, and especially Italy, is a beautiful place. But let’s be real: the economic opportunities pale in comparison to what the United States has to offer.

As a student of the markets, I’ve found it equally as important to study economic history. We know that history doesn’t necessarily repeat, but it certainly rhymes. And the more I learn, the more I realize that human nature doesn’t really change.

Being in Italy really brings that into sharp focus. So many of the economic institutions we deal with have roots here, in whole or in part. There’s the Republic of Genoa and the Bank of St. George, which was, according to my research, the first real central bank. There’s Siena’s Banca Monte dei Paschi, an institution since 1472. It still functions as a bank today - a systemically important one, no less. 

They build things to last here…

This morning, I woke up and walked out onto the balcony in my backyard. There’s a big, beautiful mountain there, and as it turns out, it was once part of the personal estate of one of Rome’s top bankers - Titus Pomponius Atticus.

Atticus really knew how to “walk the line.” He lived in one of the most tumultuous periods in Roman history - during one of its many civil wars. More than that, Atticus made it through perhaps the most consequential of those wars - the one that led to the end of the Roman Republic, and the establishment of the Empire.

He had allies on both sides of the conflict. Not only did Julius Caesar like him, but Cicero did too. As it turns out, bankers (even 2000 years ago) knew how to play both sides. After all, it would be an important skill to have when a government is keen on confiscating and redistributing the assets of the wealthy.

Ah, right - the mountain in the backyard… 

There must be something special about this mountain, because on the other side of it is the famous Monte Cassino monastery, where the largest battle on Italian soil during World War II took place over five months. The Allies, pushing for Rome, were stopped by German forces the immense valleys nearby. The furious Allies incorrectly surmised the enemy was using the beautiful, ancient monastery as an observation post from which to call in deadly artillery strikes.The Allies ended up dropping nearly 1,500 tons of explosions on the massive building, but there was in fact little German presence inside. The Germans were, however, able to use the ruins to great effect as a trap. 

The Allies made a questionable call that cost them a lot, but won despite that. A horrifically expensive lesson in making sure you’re in full possession of the facts. The stakes may be lower, but market’s not terribly different; acting with emotion, or with incomplete information can incur expensive tuition costs.

Ah, right - the monastery…   

In (much) earlier times, Giovanni di Lorenzo de’ Medici of the Florentine de Medici banking dynasty was an abbot at Monte Cassino monastery before he went on to become Pope Leo X, who infamously began the practice of selling indulgences that fueled the Protestant Reformation. These days, with so many thumbs on so many different scales in the economy… with a million “Pope Leos” selling “one rule for me, another for thee” in boardrooms and government offices…  I wonder if we’re not due for a reformation of sorts, as well…

Admittedly, sometimes it seems like the past makes more sense, and the present the least amount of sense. But that disconcerting feeling isn’t necessarily bad. I think it actually arises from understanding the past, knowing where we’ve been.

The bottom line for us, I think, is this: Modern markets, whatever their faults, are the most honest institution there is. They’re still a place where good planning, a keen sense of timing, and full understanding are rewarded. The markets are a place where excellence pays off. I think the ancient Romans and medieval Florentines would appreciate that. I certainly do.