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The Church before the Reformation
For the Catholic Church sin is evil. If a sinner is forgiven his sins and is absolved (saved) from eternal punishment, he still has to be punished for a certain time, either in this life or in purgatory. An indulgence was granted to a sinner for the remission of part of his sin, but he still had to undertake penance for a certain period of time. This period varied from a few days to a lifetime. In addition, the indulgence would only be granted if the sinner was in "a state of grace" - which means that his sins had to be forgiven after a true and sincere confession, and if he had promised to fulfil the penance. Much more rarely, a "plenary indulgence" could be granted for the total remission of sins. The first plenary indulgences were granted by Pope Urban II in 1095 to those who participated in the First Crusade.
Indulgences were not "a short-cut to heaven" as they imposed severe penitence. This explains the furious reaction of Luther (and many other devout Catholics) to Johannes Tetzel selling pieces of parchment in the market places of Germany, like a shopkeeper selling vegetables, claiming that they were plenary indulgences.
Relics, such as a piece of Christ's cross, Christ's blood in a bottle, some nails from the cross and saints’ bones, were in widespread use by the Church in the Middle Ages. People called pardoners would travel around the countryside, from village to village and from town to town, selling these relics. The pardoners had to buy a license from the Church in order to be allowed to sell relics. This was, therefore, a way for the Church and the pardoner to make money.
It is a difficult for us to understand why people would buy these "fakes", but we must remember that their attitude to religion was very different from ours.
Perhaps the main reason people bought relics was because they were superstitious. The people, in general, believed in goblins and ghosts as well as heaven and hell. If they died and went to hell they would burn for ever or be speared by fierce demons. The buying of a relic would reduce time spent in purgatory after death. The second main reason they bought relics was that it showed how devoted they were to God.
Pilgrimages were journeys undertaken by all sorts of people to confirm their faith in God. Sometimes priests would recommend that a sinner should go on a pilgrimage to be forgiven. Often people would go of their own accord.
Pilgrims destinations were Holy Places. The best place to go was Jerusalem - the centre of Christianity, but other places included Canterbury (England), Lourdes (France), Campostella (Spain) and Rome (Italy). In these places Saints were buried. People believed that if you touched the grave of a Saint you would be cured of disease or be guaranteed less time in purgatory. Such sites had pardoners and relic sellers, and each would have its own badge.
Pilgrimages could be seen as a remnant of the Crusades of the 11th, 12th and 13th centuries. They were a way for people to show their faith or repent of their sins.