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In Dan Jones' 'The Templars', a paragraph details in broad terms how the Templar Order assisted the reigning Pope, Gregorius IX, with his debt collection over numerous Catholic realms.

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In 1240, Pope Gregory IX employed a particularly complex version of this, enjoining the French Temple to help him settle his debts: papal revenue collected in Scotland, Ireland and England was routed through the Templar house in Paris; the pope's creditors could then present themselves before the Parisian brothers bearing letters of credit and redeem these for outstanding payments owed to them from Rome.

However, this does not explain the mechanism. From what I understand, the Templars could provide a letter if someone brought money to one of their chapter houses and this letter could be exchanged at a different chapter house for the same value of money. This, on it's own raises some questions where if the money was changed from one form into another, a potential thief could still misappropriate the letter of credit and present it at yet another chapter house for the sum.

But, this papal plan seems to have been out of proportion to everything else -- hence I am wondering if someone can break the mechanism down a bit more to explain how the debt repayment plan worked in itsspecifics?

Did the Scottish, Irish and English Templar houses get the money directly (as in, did they own that year's tithe) or was it given to them by the local churchmen? Was one coin collected in Scotland the same value as one coin in the French realm? After that, how did the Parisian Temple know how much it could redeem the Papal debts for -- and did they do this in coin or similar letters of credit, to be exchanged somewhere else? It sounds dangerous for the Templars to commit to paying out a large number of coin from their Parisian branch while amassing stockpiles of the same in the countries further away, and transporting the coin would indicate that there was no specific benefit to having the Templars be involved with this (as the Pope could have sent his own ships to France with the money just as easily).

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    Regine Pernaud tells about the French King hiring the Templars to transport his own gold coin chest to the border to pay his troops in a war. Apparently the King trusted them more than his own troops. It makes sense the Templars could do that - they had to continually transfer wealth to the Holy Land and to suppliers and logistics. I don't know details on 'virtual' transactions, cheques, etc, but they had the means to physically move/escort gold around (inclusive, maybe, to support more complex 'banking' transactions by settling accounts between their priories).
    – Luiz
    Mar 12, 2020 at 13:25
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    I would guess that the Templars charged the Pope a fee for their services. Templars had land and got feudal tax from their peasants like every lord, but it was their money, not the Pope's. And trusting the military/financial Templar network, and Knights bound by religious vows, looks better than trusting sailors and hoping that your own ship carrying a lot of gold arrives safely from the long journey. I wonder how common it was to a ship to go from Italy to England - probably it would require various port calls.
    – Luiz
    Mar 12, 2020 at 13:42

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This mechanism is describing the cheque. It was not sufficient to present the "cheque", one also had to establish one's identity as the "payee" - just as in a modern chequing transaction.

That this service was being provided suggests that there was already such a mechanism in place for internal use of the Templars, such that only the net transfers would have to be remitted in specie at some interval. Also, you are talking here about a well structured military organization. Generally such do not have the same difficulties in transporting large sums of money and valuables around that you or I might.

Questions of course arise, concerning just how the Templars managed the internal transactions and transfers that supported their system., nobody knows. Not only that, nobody even knows how Barings Bank and the Rothschild's managed to transfer assets across the Atlantic a mere 200 years ago:

[After reading] a couple of chapters of an old treatise on the early merchant bankers ... it basically confessed that no-one knows how either Barings or Rothschilds transported much of their assets across the Atlantic. Either trade secret, or still classified in the Admiralty office. Recall though that by late 1814 the New England states were on the verge of secession over the war. Smuggling British ships in and out of Boston would likely not have been difficult.

The facts we do know are:

  • Letters of credit were issued, honoured, and redeemed across distances that could be multiple months travel - certainly over distances as great as London to Jerusalem.

  • Basic double-entry bookkeeping had already been invented, in Italy - though being originally a trade secret it is uncertain, for some centuries, just when, by whom, and available to whom. It is certainly difficult to imagine any arrangements as complex and reliable as that of the Templars without it.

  • They operated successfully for about 200 years, roughly 1119 to 1312.

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    Open field agricultural economics are relatively non-volatile. With hundreds of years of predictive information a cultural recognition of what normal tithes percolated upwards to the papacy existed.
    – Samuel Russell
    Nov 10, 2018 at 22:20
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    @gktscrk precisely why I described it as a “cultural recognition of normal” rather than a statistical prediction
    – Samuel Russell
    Nov 12, 2018 at 1:42

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