Cover of MoneyWeek magazine issue no 574

Rebuilding the West

3 February 2012 / Issue 574

A construction boom is coming


  • Compounding could crush Britain
  • How to check your dividends are safe
  • The man who bet $10m on the US election race


A lesson from Vivaldi

In 1371, something interesting happened in Genoa. A man called Francesco Vivaldi invented, or at least formalised, the concept of compound interest. It didn’t come in quite the form that it does today. Vivaldi held large amounts of the debt issued by the municipality of Genoa.

In an attempt to help the city out of fiscal difficulties, he placed the debt in a sinking fund and demanded that the interest received every year be used to buy further debt until the fund owned the entire tranche of debt. It would then be cancelled. By 1454, the fund had bought 99.8% of the ‘compera’ in question (debt tranches were referred to as comperas – this was the Compera Pacis), or around 12% of the public debt at the time.

The city showed its gratitude by erecting a statue of Vivaldi a few years later in the Palazzo San Giorgio. He looks pleased with himself, as well he might, given that he kicked off something of a trend (so many of Genoa’s rich followed his example that statues had to be rationed), and that today paying or getting interest on interest is one of the cornerstones of our financial system.

• Read the full editor’s letter here: A lesson from Vivaldi.