Episode Overview

Podcast: New Books Network
Host: Alfred Marcus
Guest: Paolo Zannoni, author of Money and Promises: Seven Deals That Changed the World (Columbia Business School, 2024)
Date: February 24, 2026

This episode explores Paolo Zannoni’s new book, which traces the foundational relationship between money, banks, and the state across seven transformative historical episodes, from medieval Italy to the modern era. The discussion centers on the argument that what we call "money" is actually a complex, evolving web of promises and debts, mutually reinforced by governments and banks. Particular focus is given to the crucial but misunderstood mechanics of money creation, historical bailouts, and the enduring reasons behind banking crises.

Paolo Zannoni’s Motivation and Approach

[00:24-03:13]

• Zannoni describes himself as both a career banker (Goldman Sachs, Prada, FIAT in various global locations) and a student of monetary history.

• His difficulty in grasping "what money is" led him to comb through centuries-old bank ledgers in Venice, Pisa, and elsewhere, seeking clarity in transactions:

  “When you look at an old ledger…there are no frills, no bullshit. Everything is starkly clear on a single page.” — Paolo Zannoni (01:56)

• He recognized that to understand modern money, he needed to examine the fundamental trades between banks, their clients, and the state.

What Historical Ledgers Reveal about Money

[03:16-06:32]

• Ledgers make explicit the promises and debts that underpin the monetary system—between state, bank, and private individuals.
• Example:
  • The Banco Giro of Venice required a coin for every debt, but later shifted to using public debt as a bank asset.
  • This allowed the creation of money backed by state promises, not just precious metals.
  • The state, bank, and their clients became enmeshed in a shared web of promises.

State, Bank, and Money: Then and Now

[06:32-11:26]

• Core mechanisms persist:

  • Banks issue promises (deposits), often backed by a mix of public (state) and private debts.
  • The circulation of money relies on trust in these layered promises.
  • Cash represents a promise to pay by the central bank (e.g., Federal Reserve).

• Contemporary parallels:

  “When you use Apple Pay, you are spending the promises to pay of Apple. When you use cash, you are spending the promises to pay of the Federal Reserve.” — Paolo Zannoni (11:07–11:26)

Bailouts: A Structural Feature, Not a Flaw

[11:26-14:46]

• Both historical and modern episodes show states stepping in to rescue banks:

  • Venice, 1513: The government openly backs a failing banker to prevent panic.
  • US, 2008: The Treasury injects capital to stabilize banks.

• This is not accidental, but intrinsic to the system, as the state is ultimately upholding its own currency:

  “I argue that the money of modern nation is bank debt. It’s in the interest of the state to save the banks that look into trouble.” — Paolo Zannoni (12:46)

• Crises are inevitable unless banks are required to maintain full reserve (which is impractical at scale).

The Early History of Bank Money

Pisa, 14th Century

[17:02-21:39]

• Banks’ ledgers substituted coin in a world with scarce silver.

• Diverse clients signaled broad adoption: “Fishmongers being paid with promises on the ledger…and paying their supplier with the same kind of bank promise. Amazing. 1376.” —PZ (21:04)

• Banks were integral to industrial growth (e.g., Pisa's cloth industry).

Venice, 17th Century

[21:48-23:52]

• Public banks serviced both state and commercial needs.
• “The Senate set up a public bank…as the paying agent for big state agencies.” —PZ (22:09)
• Public debt became money’s foundation; the intertwined nature of finance and government is highlighted.

English Tallies and the Origins of Central Banks

[24:45-34:47]

• The Exchequer’s use of tallies (notched wooden sticks) to account for tax and debts represented an ingenious decentralized record-keeping system.

• The later development:

  • Tallies could be directly issued as state debt instruments, passed to suppliers, and returned to settle with the government.
  • Remarkable continuity: Tallies “from the 11th century to the 18th century” (28:13), with some surviving today, including a 7.3-foot tally at the Bank of England.

• The Bank of England’s founding (1694):

  “They authorized the corporation to sell shares for cash…The tally cutter…gave half to the Bank of England…receiving those tallies, the Bank of England issued banknotes to the Exchequer.” —PZ (31:07)

Neapolitan Charitable Banks and Proto-Microfinance

[35:19-38:53]

• Naples’ charitable banks lent to the poor without dividends and issued written debt certificates—early banknotes—long before similar innovations elsewhere.
• Rooms still filled with these historical ledgers demonstrate the scale and longevity.
• “He’s early microfinance.” —PZ (38:53)

American Experiment: The Continental Congress and Early US Banking

[38:53-45:42]

• Financing the Revolution:
  • The Continental Congress issued notes backed by the promise of taxes, but with minimal tax collection, notes lost value (“not worth a Continental”).
  • Franklin’s arrangements with French banks allowed international bills of exchange backed by the assets and debts of both Congress and the French state.
  • Creation of the first public bank in North America (Bank of North America, Philadelphia, 1782): public-private hybrid, leveraging promissory notes and shares for capital, echoing European models.
• “That was the first bank of North America…based in Philadelphia, 1782.” —PZ (44:40)
• The institution survives today, part of Wells Fargo.

The Soviet Experiment

[45:42-50:42]

• The Bolsheviks theorized an economy without money—just a universal state ledger.
• In practice, lack of money was unworkable; civil war needs forced them to issue currency (sovznaks), which quickly became worthless due to inflation.
• By 1923, a central bank modeled on the Bank of England was established, combining ruble notes for citizens with ledger-based accounting for state entities.

The Evolution of the System and Persistent Crises

[50:42-55:26]

• The US (and other states) sometimes operated without a central bank, with large private banks (like J.P. Morgan) stepping in during crises.

• The structure always includes banks backed, at least implicitly, by state support—demonstrating recurring patterns, regardless of the political or economic system.

• Zannoni’s thesis:

  “In all of them I have seen the debt of banks backed by large percentage of public debt. And when banks run into trouble, the state—different states, centuries, systems—always bailed them out. Do I think this will end? I don’t, honestly.” —PZ (52:05)

• Even modern reserve requirements don’t require that loans be fully backed by cash or gold (“assets, not coins, not gold,” (53:10)), so state intervention is structurally baked in.

Notable Quotes & Memorable Moments

• On the nature of spending:

  “You are spending the promises to pay of your bank.” — Paolo Zannoni (08:21)

• On the inevitability of crisis:

  “They are bound to recur, because…modern money is bank debt, it's in the interest of the state to save the banks that look into trouble.” — Paolo Zannoni (12:46)

• On historical continuity:

  “The state is backing you…The same thing that Hank [Paulson] was doing [in 2008], the state is backing you all, from Morgan Stanley to Goldman Sachs to Bank of America.” — Paolo Zannoni (15:32)

• Describing English tallies:

  “I have seen in the coffer of the Bank of England one tally that is 7.3ft.” — Paolo Zannoni (34:09)

• On confidence and commerce:

  “It gives people confidence…that they’ll receive their money.” — Alfred Marcus (20:52)

• On microfinance origins:

  “He's early microfinance. And we all cast him. He's early microfinance.” — Paolo Zannoni (38:53)

Closing Thoughts & Future Directions

[55:26-end]

• Zannoni is working on a new project about the use of money in facilitating transactions.
• The book encourages readers—and policymakers—to recognize that crises and bailouts are normal, not exceptional, within our system:

  “Crises, failures and bailouts are baked into the system where bank debts are national money…States will almost always rescue banks because they are rescuing their own currency.” — Alfred Marcus (51:40 paraphrased)

Key Timestamps

• [01:29] Zannoni’s motivation: ledgers and the “no frills” history of money
• [03:54] Example: Venice’s public bank and evolution of money supply
• [11:07] Modern payment systems as layered promises (Apple Pay, cash)
• [12:02] Bailouts as a structural necessity
• [17:02] Bank-ledgers as money in medieval Pisa
• [24:45] The English tally system and state finance
• [35:19] Neapolitan charity banks and proto-banknotes
• [38:53] US Revolution: bank promises and public debt as money
• [45:42] Bolshevik Russia: state-ledgers and the return to money
• [52:05] Zannoni’s view: systemically embedded crises and bailouts

Summary

Paolo Zannoni’s Money and Promises offers a sweeping, lucid narrative on how money arises from promises—anchored in the balance sheets of public and private banks, and ultimately, the state. This episode traces the technical and human tangle of ledgers, debts, and bailouts across centuries, urging listeners to recognize the unbroken line between medieval tallies and modern quantitative easing. Zannoni argues that banking crises and state rescues aren’t unfortunate exceptions; they're essential features of a system built on trust, institutional memory, and dynamic promises—ones that, for better or worse, bind all citizens, bankers, and states together.