Currently, the world is obsessed with the international credit crisis and the role that banks have played in this debacle. We take it for granted that trade flows quickly and accurately across borders and borders. A Maine resident can buy a tank of gas at her house or in Italy with the same credit card. The purchase will be accurately charged to his account, his credit limit will be adjusted, and the merchant will receive an electronic transfer of the charge to his account almost simultaneously. This type of trading happens many millions of times each day and we take its simplicity for granted.
The story of the rise of organized banking is a bit more laborious, and evolves from a highly unlikely source. Today, our knowledge of the Knights Templar comes mostly from popular culture, such as the Indiana Jones movies. The story of this iconic fighting force and its evolution to become the first international trading group of the Middle Ages is as amazing a story as can be told in any fictional novel or film.
The Knights Templar were formed after the initial Christian victory in the First Crusade to take Jerusalem from the Muslims in 1099. Pilgrims from all over the Christian world wanted to make the pilgrimage to Jerusalem and the Holy Land. However, traveling at that time was extremely dangerous. The Knights Templar were first organized as a monastic order to protect pilgrims as they traveled. They took a strict vow of poverty.
Over the next 200 years, the order flourished and became a renowned fighting force. With their stout mounts, white hooded robes displaying the Red Cross, and gleaming armor, they lead the way in numerous battles against the enemies of Christendom. The vow of poverty was strictly enforced, but many royal and noble families gave their children to the Knights Templar to curry favor with the Papacy of the Catholic Church.
The Knights Templar enjoyed a privileged status with popes and archbishops throughout Europe and North Africa, for their reverence, gallantry, and honesty. They were often rewarded with handouts, farms, land, and cattle. Their power grew as the public recognized the special relationship they enjoyed with the clerical hierarchy of the Church.
Many pilgrims came to depend on the Knights Templar to keep their valuables safe while they made the difficult journey. The order created secure storage facilities at strategic locations along the most heavily used routes. They developed a type of written file that verified that they had certain money and valuables owned by the bearer. Upon arrival in the Holy Land, the bearer could visit a Knights Templar outpost, present his receipt, and receive money, bullion, or goods in kind, the equivalent of what was left in the care of the order.
This was the first form of bank check and probably the oldest form of organized international banking. The system evolved as the Knights Templar acquired vast new wealth, despite still promising to live a life of poverty. Prior to their development of rudimentary banking products, most trade was done via crude barter. They became the richest entity in the world at the time and began to come under increasing scrutiny from their historical patrons in the Catholic Church.
In the 14th century, the church moved to disband the Knights Templar and martyred many of those who were captured. The order became a secret underground society and rumors of its activities and continued existence are legend to this day. The location of the lost gold, silver, jewelry, art, and religious artifacts that the Knights Templar acquired and hoarded on their many adventures is also the stuff of fables and lore. The lost Holy Grail, and all the fabulous stories attached to this famous relic of the Last Supper, are often linked to the Knights Templar.
The commercial activity that the simple and innovative creation of a system to verify bank guarantees is actually the greatest contribution of the Knights Templar to humanity. This simple transactional device has historically proven to be far more valuable than their military conquests and reputation for living pious lives. It’s certainly not what they’re best known for. But it is an invention that has positively affected trade and productivity to this day.