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					Classical Finance
   (Organic Finance)
 “He who can look furthest into the past,
    can see furthest into the future.”
           Winston Churchill


                By
           Gaylen Bunker
    Code of Hammurabi


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Code of Hammurabi (1800 BCE)

“If a merchant has given an agent silver
   to carry on business and sent him on
     a journey, the agent shall keep an
    account and if he has seen a profit,
   shall return to the merchant as much
        silver as he has received plus
                   interest.”
    The Old Babylonian Merchant, W.F.Leemans, E.J.Brill, Holland, 1950
        The
Code of Hammurabi
   in the Louve
      in Paris
    The Phoenicians


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             The Phoenicians
“Mightier than the sword the cargoes of
Phoenician’s traveling salesmen
revolutionized the lives of foreigners they
met, perhaps more than any invading
army. Their deep-laden “round ships”
brought fresh ideas, ingenious wares, and
a new alphabet that has served the world
ever since.”

   National Geographic, Samuel W. Matthews, August 1974, page 160
Thale‟s Scheme


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     Aristotle (325 BCE)
    The most hated sort [of wealth
getting], and with the greatest reason,
 is usury, which makes a gain out of
money itself, and not from the natural
 object of it. For money was intended
  to be used in exchange, but not to
          increase at interest.
          Politics, Aristotle, section 1258-1259
The Parthenon on top of the Acropolis
   overlooking the Agora in Athens
        Aristotle (con’t)
 It would be well also to collect the
scattered stories of the ways in which
    individuals have succeeded in
  amassing a fortune; for all this is
useful to persons who value the art of
            getting wealth.
        Aristotle (con’t)
There is the anecdote of Thales. He
was reproached for his poverty, which
      was supposed to show that
 philosophy was of no use. According
to the story, he knew by his skill in the
stars while it was yet winter that there
 would be a great harvest of olives in
  the coming year; so, having a little
                 money
         Aristotle (con’t)
he gave deposits for the use of all the
  olive-presses in Chios and Miletus,
 which he hired at a low price because
   no one bid against him. When the
  harvest-time came, and many were
  wanted all at once and of a sudden,
  he let them out at any rate which he
    pleased, and made a quantity of
                 money
         Aristotle (con’t)
    Thus he showed the world that
 philosophers can easily be rich if they
                  like…
But, his scheme for getting wealth is of
  universal application, and is nothing
     but the creation of a monopoly.
   Thales scheme (600 BCE)
1. Motivation (reproached for his poverty)
2. Talent & Advanced Knowledge (knew by his
   skill…while winter…coming great harvest)
3. Leverage and Options (having little money,
   gave DEPOSITS for the use of)
4. Monopoly (ALL the)
5. Critical industry (OLIVE PRESSES)
6. Opportunity (at a low price…no one else bid)
7. Discipline (charged any rate he pleased)
The amphitheater in Ephesus, Turkey
           near Miletus
Buddha‟s Response


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         Buddha (550 BCE)
“He that cleaves to wealth had better cast it
   away than allow his heart to be poisoned
   by it; but he who does not cleave to wealth,
   and possessing riches, uses them rightly,
   will be a blessing unto his fellows.”
“It is not life and wealth and power that
   enslave men, but the cleaving to life and
   wealth and power.”
Roman Economic System
One of the main streets in
     Pompei, Italy
Abu al-fadl ja‟far ibn „ali al-dimishqi‟s Advice


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      Advice to the Merchant of
      Damascus (9th century AD)
• Know your goods and craftsman who made them.
• Know how to care for and display your wares.
• Gain early information through
           precise inquiry and questions.
• Don’t buy all at once…spread-out your purchases.
• Carry a price list and compare.
• Seek trustworthy, reliable and well-to-do agents.
• Buy from those compelled to sell and
           sell from those compelled to buy.
       Advice to the Merchant of
           Damascus (con’t)
• Maintain judgement and reason, for greed
            brings the slavery of passion.
• Throw yourself into that business
            which brings good fortune.
• Allow for gifts to middlemen and rebates to buyers.
• Conserve your wealth…
            spend less than you make.
• Reach not for things beyond your capacity.
• Deal not in goods that are slow to sell.
The golden horn of Istanbul, Turkey
where the trade of the world came
The Knights Templar (1118 AD to 1305 AD)


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          Knights Templar
• “They should keep the roads and
  highways safe from the menace of robbers
  and highwaymen, with especial regard to
  the protection of pilgrims”
• Gained extensive holdings through
  donation, conquest, or purchase.
• The London temple was the mediaeval
  precursor of the Bank of England.
Leonardo Pisano Fibonacci‟s system


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Leonardo Pisano Fibonacci (1175)

    "Hindu-Arabic" system.
   Introduced the decimal
     numbering system to
           Europe.
         Golden Mean
“When my father, who had been appointed by
his country as public notary in the customs at
Bugia [North Africa] acting for the Pisan
merchants going there, was in charge, he
summoned me to him while I was still a child,
and having an eye to usefulness and future
convenience, desired me to stay there and
receive instruction in the school of accounting.
There, when I had been introduced to the art of
the Indians' nine symbols through remarkable
teaching, knowledge of the art very soon
pleased me above all else and I came to
understand it…”
The Golden Mean
      Phi
     1.618
       Usury versus Interest
• The Latin noun usura means the “use” of
  anything, hence usury was the price paid
  for the use of money.
• The Latin verb intereo means “to be lost”;
  which developed into the term “interest.”
  Interest was not profit but loss.
• The modern definition of interest became
  standard in 1220. Profit the lender might
  have made with the money loaned.
The Hanseatic League


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       Hanseatic League (1300)
•   At the demise of the Templars
•   Need for a new organization
•   Baltic confederation for protection/trade
•   Trade with the mediterranian ships
•   Coming to Brugge (first stock exchange)
•   Rise of the term (purse) or Burse
         De Gamble Be   De Gamble Be
             Denmark        Denmark




Brugge, Belgium
Tallinn, Estonia




   Visby, Gotland Island
Giovanni di Bicci de‟ Medici‟s Council


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 Giovanni de Bicci de‟ Medici (1400 AD)
“Be inoffensive to the rich and strong…while
   being consistently charitable to the poor
   and weak. Do not appear to give advice,
    but put your views forward discreetly in
    conversation. Wait to be summoned to
         political office and when you are
  summoned, do what you are asked to do
       and never display any pride. Avoid
    litigation and political controversy, and
       always keep out of the public eye.”
The Arno river at the Ponte Vecchio in
             Florence, Italy
Medici and Fugger system
Jacob Fugger‟s Method


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 Jacob Fugger (1515 AD)

The successful capitalist will:
1. Keep accurate records
2. See things in whole and in detail
3. Weigh the possibilities and risks
4. Secure information and “News”
The Fugger Bank
  in Augsburg,
     Germany
      Dutch East India company
•   Hanseatic League
•   Brugge to Amsterdam
•   Dutch Center of trade
•   British East India Company
•   Sassoon (Bombay, Hong Kong, Shanghai)
•   Domination of Asian Trade
•   Gold flowing to Asia for superior goods
•   Opium Wars
    Francis Bacon‟s Essay


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     Francis Bacon (1625 AD)
• Wealth is the baggage of virtue.
• Therefore to speak of the abolishing of
  usury is idle. All states have ever had it, in
  one kind or rate or other. The tooth of
  usury be grinded, that it bite not too much;
  [so] there be left open a means to invite
  monied men to lend to the merchants, for
  the continuing and quickening of trade.
Lichester Square in
   London (talk of
    baggage and
       virtue)
                           Dynasty
 An able ambitious man moved into the city from
the countryside; he made money by trade and
moneylending; he founded a merchant-banking
company of international reach and made a great
deal more money; he matriculated in a major
guild, acquired citizenship, and bolstered a shaky
social position by advantageous marriages; by
spinning the necessary web of influential
friendships and dependent clients he got himself
elected or appointed to public office; if he
remained fertile and lucky, he founded a dynasty.
  The Columbia History of the world, Harper and Row, New York, 1972 page 502
   Will and Ariel Durrant

 “The men who can manage
  men, manage the men who
      manage only things,
and the men who can manage
      money, manage all.”
       Organic Finance
    Maximize shareholder wealth
   Maximize return on investment
  Present value of future cash flows

Wealth is the baggage of valued service
    Value = integrity and security
          THE FUTURE
Montesquieu: “commerce is a cure for
 the most destructive prejudices”
Tocquerville: “Trade is the natural
 enemy of all violent passions”
 [because it] “loves moderation,
 delights in compromise, and is most
 careful to avoid anger.”
         Solon (594 BCE)
The poor, finding their status worsened with
each year---the government in the hands of
their masters, and the corrupt courts
deciding every issue against them---began
to talk of violent revolt. Good sense
prevailed; moderate elements secured the
election of Solon, a businessman. Within a
generation almost all agreed that his
reforms had saved Athens from revolution.

				
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posted:10/22/2011
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