The Age of Central Banks
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The Age of Central Banks

Curzio Giannini

Curzio Giannini’s history of the evolution of central banks illustrates how the most relevant institutional developments have taken place at times of widespread confidence crises and in response to deflationary pressures. The eminent and highly-renowned author provides an analytical perspective to study the evolution of central banking as an endogenous response to crisis and to the ever increasing needs of economic growth. The key argument of the analysis is that crucial innovations in the payment technology (from the invention of coinage to the development of electronic money) could not have taken place without an institution – i.e. the central bank - that could preserve confidence in the instruments used as money. According to Curzio Giannini’s ‘neo-institutionalist’ methodological approach, social institutions are, in fact, essential in the coordination of individual decisions as they minimize transaction costs, overcome information asymmetries and deal with incomplete contracts.
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Chapter 2: Fluctuations of Trust: Pre-industrial Credit Payment Technologies

Curzio Giannini


2.1 INTRODUCTION The institutionalist approach described in the previous chapter puts trust at the centre of monetary analysis. But, as shown, not all payment technologies are fiduciary, in the sense of requiring external institutions to support the trust of those who use them. We have seen, for example, that commodity money is a payment technology that can be self-supporting because the guarantee against monetary abuse is provided by the value of the commodity it contains. But as soon as an element of credit is introduced into the payment technology, the fiduciary aspect comes immediately to the fore because a credit instrument is no more than a right to a future benefit and as such is uncertain. Credit payment technologies were not born with central banks. Their history goes back over many centuries and have their roots in the Roman age, if not even earlier. It is with the revolution in trade of the late Middle Ages that the technologies began to become more refined and to spread. Until the beginning of the age of central banks, they nonetheless remained circumscribed to large-scale trade transactions owing to the difficulty of sustaining trust in credit payments in a context in which the legal order had not yet developed institutes capable of protecting the rights of holders of credit instruments. Commercial law gained ground starting from the commercial revolution of the thirteenth century as a law reserved to the community of merchants, as distinct from civil law, to which all citizens are subject....

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