Do you consider yourself a victim of banksters? Have you been surprised by the loan installments? What does the APR abbreviation mean, did you find out only AFTER taking a payday loan? Spend your sleep over the course of a franc? Bankers have been doing this with us for centuries. It was no different with the expedition of one of the most famous sailors of all time.
The whole story wouldn't have happened had it not been for the words "Do what you like." They were said, however, not by Jurek Owsiak, but by the Portuguese King Manuel I the Happy. Historians refer to the power of Portugal, which reached its peak during the reign of this ruler (1495-1521). Those were happy times for a small country sandwiched between the Atlantic and Spain.
Portugal ruled the seas and oceans, enormous riches flowed into the country, and by the Treaty of Tordesillas (1494) the Pope granted the Iberian kingdom the right to rule over half the world. However, Manuel should be really happy for the fact that he died before September 6, 1522, through the meandering current of the Guadalquivir, a lonely, water-drenched and damaged ship - Victoria - reached the port of Seville. Death saved the ruler from knowing the consequences of his words.
He addressed them to his faithful but insubordinate nobleman named Ferñao de Magalhães - now better known as Ferdinand Magellan - thereby enabling him to switch to the Spanish side.
Manuel I Happy. Here with Vasco da Gama - another great traveler of this era.
In the service of the young King Charles I of Habsburg, Magellan organized an expedition to the root islands along the way west. So:an expedition that gives a chance to create a new trade route, allowing you to import spices to Europe, bypassing a Portuguese competitor. And with a crazy profit. Arriving in Seville Victoria it sealed the victory of the greater Iberian rival in the Renaissance counterpart of the space race between the USSR and the US.
Before that happened, however, only three things were needed:money, money, and more money. This is where the Fugger family comes in. More specifically their agent - Cristóbal de Haro.
Borrowing need
It has to be honestly admitted that banksters can play a role in our lives because we need them. No one who does not need to borrow money uses their services. And since needs are usually a reflection of ambitions, at the beginning of the 16th century, few rulers had them greater than the young Charles of Habsburg. The king could actually go to one place to get funding to finance his projects - the Fuggers.
Jakub Fugger. He is called Rich for a reason.
This German family had been developing their financial power for 200 years and was not going to take a step back. The Fugger representative in Spain dealt with what we would today call venture capital. He searched for potentially profitable ventures and invested in them. The start-ups of the era that promised the greatest potential returns were geographic discoveries. The Portuguese were developing their trading posts in Africa and India, the Spanish colonization of Central America was in full swing, and Cortes was preparing his trip to Mexico. The first Europeans have already seen the ocean on the western side of the new world.
Initially, de Haro was betting on the Portuguese - they were leading the race. He probably quietly financed one of his covert expeditions to Brazil. Its purpose, presumably, was to find the strait leading to the West. The expedition ended in a flop, and the banker fell into conflict with the wayward king, who probably did not want to return the money invested (and wasted).
In the ambitions of young Karol, he saw, like Magellan, his chance for exorbitant profits. Their relationship is a classic example of unclear arrangements at the interface between politics and business. Habsburg needed the Fuggers' money, and they needed his care and favor to earn even more. Of course, both of them needed someone to do the dirty work. Someone who will take all the risk.
Client, or rather debtor
How to describe Magellan? A leading historian of the age of geographical discoveries, a veteran of the Second World War and US Navy Rear Admiral Samuel Elliot Morrison wonders:"Dark skin, short, but broad in shoulders, but most of all tough, tough, HARD". Those who did not recognize him in time for their height paid a high price.
Soldier's toughness and personal courage made him a man eager for great deeds and prone to excessive risk. He put his family reputation and fortune at stake by abandoning Manuel I and offering his commanding and navigating talents to his greatest enemy - the King of Spain. Magellan was even willing to sacrifice his own life to gain immortal fame. He believed he was the master of his own destiny. In reality, however, he became a puppet, at the mercy and disgrace of the king and his clever banker.
His negotiating position was no better than that of a modern entrepreneur negotiating a loan agreement with a bank. He also couldn't go to another bank or Kickstarter.
In the 17th century, the Fuggers will even mint their own gold coins.
Once Magellan had obtained royal approval for his insane venture and its implementation was about to begin, it became clear that it would not be a cheap trip. It was established that the Molkanian Armada (the official name of the expedition - from the Moluccas archipelago, the destination of the expedition, i.e. the root islands) will include five ships and nearly 250 crew members.
The ships were not of the highest quality, they had to be properly built from scratch and supplied for a long voyage. Sailors (not all were hungry for fame) were paid in advance - this is the only way they could insure their families in the event of death. Because not everyone would come back alive was more than certain.
The total costs are estimated in the literature at a staggering amount of 8 million 751 thousand and 125 marawedi, the King's share at six and a half million marawedi, and Cristóbal de Haro at almost two million. But where did Charles I - who was in debt to his ears, as we have already said - had such an enormous amount? You are not mistaken. He borrowed it ... from the same Cristóbal de Haro.
For this, de Haro was of course to receive a high percentage. Maybe even 14% per year. Agent Fugger's total contribution to expedition costs is estimated at up to three-quarters. Is it big money? Yes, very big. Laurence Bergreen in her book on Magellan converts the value of one Marawedi into 12 cents. However, this is definitely an incorrect valuation, resulting from a simple conversion of the value of the metal to today's prices. A slightly better idea is to convert these amounts into labor prices.
King of Spain, Charles of Habsburg.
With this amount and assuming that we would like to hire someone for 250 days of work a year, we could afford 730 years of work of a skilled carpenter or 1000 years of work of an unskilled worker. And these are very conservative estimates. Simple seamen were cruising to Magellanic ships in exchange for 1,000 Marawedis.
Cristóbal de Haro, of course, did not intend to risk such money without - even the sight of - huge profits. They could be as high as 400 percent. The banker himself, however, was more cautious in his estimates:he was counting on at least 250 percent of the profit. He promised (through the king) "generous" conditions to the man who risked his life to earn this money - 5% of the profit from the venture.
Cross-selling, or squeezing a lemon
Have you ever wondered why the banks press you another credit card or a seventh savings account? It's simple - they want to earn more from you. Even if you don't have a single zloty more, the fees, insurance and commissions alone will bring the bankers extra cash. Modern plays would be very close to the Fuggers. Haro became the champion.
Every merchant fleet - and that was Magellan's business goal - had to take trade goods with it. And those goods had to be delivered. Guess Who? No, he was no longer known to us banker, but… his brother. Diego de Haro living in Antwerp. And the amount? 1 616 781 marawedi. We don't know what margin the Fuggers took from it, but it's as clear as sunshine that they didn't provide them selflessly. So they benefited from the expedition even before it even hit the road.
Ferdinand Magellan with a fleet funded by the Fuggers in the background.
If you think de Haro left it there, then have a look at your loan agreement. Are you surprised? Surprised? Amazed? The first time Magellan read the royal instructions for travel into the unknown, he too had to tear his hair out of his head. Neither he nor you can do anything about this millstone. Magellan, because the instructions were given by the king. You, because you have already signed the contract. On the other hand, you can easily imagine the discoverer's reaction - terror mixed with surprise and the thought:Does his Majesty think I have never been to the sea?
It must be fair to say that many of the points in the instruction were prepared by the ruler's officials who wanted to prevent violations of the Treaty of Tordesillas. Many of them, however, secured the interests of de Haro. And the fact that it was a first-class detailer is proved by the accounting documentation of the expedition (unfortunately not published so far), numbering almost 50 volumes.
The result was the deadly enemy of any business - micromenagement. For Magellen and his enterprise, the most far-reaching effects were brought by continuous interventions in the personnel policy. The crew was reduced to 236 and the admiral was forced to fire the people he intended to hire "to the left." A deeper problem was the influence of the king and banker over the officers. Magellan intended to take as many trusted people as possible on board. In those days, it mainly meant relatives. And in this particular case it meant the Portuguese at the same time. The proud Spaniards could not stand it.
Magellanic ships passing through the strait south of Patagonia.
Magellan did not manage to hire everyone he wanted. However, Cristóbal de Haro succeeded. The banker knew that detailed instructions were not enough. He knew he needed people on the spot to look after his interests.
Security, or when it all blows up in your face
Today's bankers must be more subtle than de Haro because they are less allowed. At least officially. Theoretically, they are not able to stick their people to the company they lend money to. In practice, there will almost always be someone "his" - be it on the supervisory board or on the management board. De Haro's man was Geronimo Guerra. He was officially a ship writer. However, he was related to the banker and only received less than the captain's salary. Simply put:he was a spy. By placing him in the crew, de Haro was going to protect his interests.
Not only did he not achieve his goal, but in a way - it was thanks to this decision that he brought death to the vast majority of the participants of the expedition. And at the same time:he diminished several times both his own and the king's profits. However, this is a topic for a separate article.
Bibliography:
- Samuel Eliot Morrison, The European Discovery of America. Southern Voyages , Oxford University Press, New York 1993.
- Laurence Bergreen, Beyond the World's Edge , trans. Jan Pyka, Rebis, Poznań 2014.
- Paul Hermann, Show me Adam's will , PIW, Warsaw 1968.