A vigorous capital market without banks – Hennaarderadeel, Friesland, 1537-1556
At this moment I’m working on an article on the capital market in Hennaarderadeel, a rural part of Friesland, between 1537 and 1556. Look here for the unbearable flatness of this area, the landscape as shown has not changed too much since 1537. The data are obtained from the excellent transcriptions of hundreds upon hundreds of sixteenth century deeds available on the website of Paul Borghaerts (and there is much more where that came from… ). Interesting questions are: who were the lenders, who were the borrowers, how much did they lend and borrow, why did they lend and borrow and how did lenders and borrowers meet – without banks. And a genuine capital market of course has an interest rate (graph, every dot is a transaction), note the increase after 1550 (interestingly, after 1543 a 20 year pause in the sixteenth century price revolution came to an end).
One interesting part of the answers to the questions above is that, in 1537, no banks existed in Friesland and we have to wait until the nineteenth century before any serious banks came into existence in this area. Somehow, lenders and borrowers were able to find each other without banks… Between 1537 and 1556 almost all lending and borrowing was a kind of ‘peer to peer’ lending, often but surely not always between family members but importantly also more often than not also between people living in different villages and hamlets. Each village and hamlet was a kind of node in a rural capital market network which as early as the first half of the sixteenth century covered the entirety of at least Friesland and probably the entire commercialized and monetized coastal zone of Friesland, Groningen northern Germany and Denmark (this is not too hypothetical!). While no banks existed… Considering the amount of deeds lots of people took part in this market, when it comes to borrowers according to Paul mainly to be able to buy land and houses. Also according to Paul, after about 1600 (The Dutch ‘Golden Age…) rich traders and institutions entered this capital market but even this did not change the ‘peer to peer’ character of this capital market and did not lead to the rise of a banking system. Which leads to the question: what did?