The Principles of Banking

Preface

Aficionados of science fiction will be familiar with Dune, a seminal work in that genre written by the late Frank Herbert. A complex, interwoven tale of imperial rivalry, medieval mysticism, clan fighting and religious hero worship, as well as an old-fashioned story of good guys versus bad guys, it is set on the desert planet Arrakis. Among a range of peculiar geophysical features, this planet suffers from an almost complete lack of water. The native inhabitants of Arrakis, the Fremen, appreciated this lack so much that they took great pains to preserve and recycle every drop of moisture, even to the extent of recycling water from the bodies of their dead. Water was life. Anything that was vital to the maintenance of life itself was known by the Fremen as “the water of life”.¹

And so to banking. Banks have always been a part of recorded history. Latin texts describe a form of borrowing and lending activity in Roman times, and before that the ancient Babylonians practised an elementary form of banking. In his excellent and thought-provoking book Zero (London: Souvenir Press, 2000), Charles Seife tells us “before Arabic numerals came around, money [lenders] had to make do with an abacus or counting board. The Germans called the counting board a Rechenbank, which is why we call moneylenders banks”. So now we know. Banks are the lifeblood of society, because without them nothing would get done. By that I mean nothing productive. Nothing would be built, nothing would be traded, ...