European on a "grand tour": how did they store their money?

September 13, 2009 5:51 AM

How did rich European gentlemen on a "grand tour" of Europe in the 18th Century manage their finances? I can't imagine they carried enough money (or gold) to support months or years of travel--was there a system of banks they could use? Or credit notes? Also, how did they arrange to get their packages shipped home?
posted by mstillwell to Work & Money (9 answers total)

They used Letters of Credit. Their banker would write a letter essentially guaranteeing that the carrier of the letter had the money to cover their expenses. I've seen early 20th century versions of this letter, which was written on bank letterhead and flowery language saying the dude's letter extended to $500.

Here's some history going back to ancient times.
posted by julen at 6:12 AM on September 13, 2009 [1 favorite]

Response by poster: Was forgery an issue? Did you have to wait for a few days/weeks for your letter of credit to be authenticated or was it instant? If someone came into your bank, and presented a letter saying:

Please pay Bob £50.

Thanks,
Alice

How would you know that the letter really did come from Alice? Would you be able to cash your Letter of Credit pretty much anywhere, or only in select banks in large towns that had an existing arrangement with Alice?
posted by mstillwell at 6:24 AM on September 13, 2009

Best answer: Ooh. Found a better link - including pictures - on the history. It talks about supporting documents (a signature card issued by the bank and signed by you) and a letter of indication to be carried separate from the Letter of Credit (often several pages long, including an accounting). Bigger banks would issue letters of credit for smaller banks, because they had forged a business relationship with more banks around the world. So if you lived in western MA, let's say, your local bank would get a Boston bank to issue the letters of credit because that Boston bank usually had better reciprocity deals with International banks. Letters of Credit had a limited time frame - they would expire.

Your bank would give you a list of the banks for each city with whom it had a relationship. Those were the only banks who would front you the money. That bank would know what your documents are supposed to look like (letterhead, style, signatures). The letter of credit would often include a sheet that would detail what monies had been taken from your available reserve so far as well as the expiration date. That new link includes a discussion of someone who basically replaced that particular page every new city he went to; he got caught when one bank asked his originating bank to reimburse them.
posted by julen at 7:16 AM on September 13, 2009 [4 favorites]

This is essentially the same system we have today. A "bank note" (get it?) basically guarantees the seller that the United States (or France, or Russia) guarantees value for that piece of paper, should the holder ever demand it.
posted by nax at 7:55 AM on September 13, 2009 [1 favorite]

Nax's point, while at one point valid, is now a much less clearly so: very few nations' banknotes are actually redeemable for anything physical (viz. gold) anymore.
posted by cmyr at 8:01 AM on September 13, 2009

Taking it back another five hundred years - how did the pilgrim or crusader pull this stunt off? The Quality could mortgage the castle back in Europe (and many went broke so doing - crusading was not the paying proposition many imagine), but what of the Little Guy? Was it all living on the Kindness of Strangers and odd theft? Or the Neapolitan student who wanted to hear Peter Abelard, say. What of them?
posted by IndigoJones at 10:48 AM on September 13, 2009 [1 favorite]

True. And the whole credit economy weakens the link further. I actually lose sleep over this (but then I'm pretty neurotic).
posted by nax at 2:12 PM on September 13, 2009

For crusades, that was motivation. If you didn't win the next battle and take the city, you probably starved to death.

Banknotes- doesn't matter. Anything can be currency. Gold happens to be historically convenient because there was just enough of it getting mined that it had a nice scarcity to demand ratio, as well as having very little actual utility. You can't eat it, you can't make a tool with it. All you can do is trade it for something else. Just like a US dollar. There is nothing intrinsically better about gold except that it happens to have a long history. Currency, no matter what it is, is all about trust. I take the currency, trusting that I will be able to use it at some point later. And credit=trust. So it doesn't matter.
posted by gjc at 9:47 PM on September 13, 2009

If you didn't win the next battle and take the city, you probably starved to death.

But you still had to get there, and it;'s a long way from Tipperary. You don't read about strings of crusader (or pilgrim) corpses lining the road to Jerusalem like so many bread crumbs. Did they all go on the game? Surely not. All become thieves? Likewise.

Probably in a book somewhere. I was just hoping to short circuit the particular question.
posted by IndigoJones at 6:12 PM on September 18, 2009