Increases in Trade: A trade fair was a group of traveling merchants who would move from town to town selling their goods. These started small but quickly grew in size and importance. Many new things were being brought in from other places by ship and caravan. Sometimes it was the merchant himself who brought the goods from far away. Later the merchants would buy their goods in one place and sell to other merchants who would travel about. Along with their wares, these merchants brought their own money.
Creation of Banks: These merchants needed someone who could exchange their money for the local money. This lead to the creation of moneychangers. This was the start of the banking system since these moneychangers charged for the exchange of currency.
Creation of Money: Barter or the exchange of one thing for another, was becoming less popular. Traders wanted something small and light that they could carry easily. A trader didn't want to trade his silk for bushels of wheat. So the Nobles started trading silver and gold for what they wanted. Nobles had to find a way to get the gold and silver to trade.
To get the gold and silver they wanted, the nobles had to sell their crops or tax their peasants. Since peasants usually paid in crops, the nobles had an excess of food. So they sold the food to get gold and silver to by the traders merchandise. Many times the nobles didn't get enough for their crops to pay the merchants for goods. The nobles would then go to a moneylender to get money and would pledge their lands as repayment.
The nobles were not used to the idea that they had to pay back anything that they had borrowed. They were used to just taking what they wanted. The banks were owned and operated, for the most part, by merchants and traders and the new class of moneylenders and they wanted their money back. They went to the King. The king also needing loans to run the kingdom had to keep them in business so the King ordered the nobles to pay back their loans.
The Kings saw this as a great way to get money. They could tax the nobles, the merchants and even the moneylenders.
