Abstract
We examine the experience of an innovative fiat money regime, introduced by the Bank of Amsterdam in the late seventeenth century and persisting until the downfall of the Dutch Republic in 1795. The pan-European competition among international monies occurred beyond the legal domain of any one political authority, or cluster of local authorities. Competition was not framed by legally derived spillovers, so bad money was shunned.
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- 1.
The 1930 Brecht/Weill opera takes place in a city where it is a crime to be caught without money.
- 2.
In J.M. Barrie’s work, fairies exist only if enough people believe in them.
- 3.
The rise of the Amsterdam bill market coincides with the general economic expansion of the Dutch Republic during the Golden Age, and it is difficult to sort out the marginal contribution provided by the Bank of Amsterdam. As has been emphasized by various authors (e.g., Spufford 2006), however, the strength of Amsterdam’s institutions allowed it to thrive as a financial center, even after economic growth had largely ceased.
- 4.
The guilder was a ‘ghost money’ (Sargent and Velde 2002: 126), a coin that no longer circulated but continued to serve as a unit of account.
- 5.
This was possible given contemporary technology for metal assay. Detection of silver fineness by touchstone was accurate to 3 % at best (Gandal and Sussman 1997: 444). Weight could be accurately assayed only with large amounts of coins.
- 6.
The early ledgers of the Bank have unfortunately been lost, so we have no direct proof that such ‘giro’ payments immediately became the norm in Amsterdam. However contemporaneous ledgers from a similar exchange bank in Middelburg were examined by Van Dillen (1964a: 350) who found extensive use of giro settlement.
- 7.
To give some perspective on these figures, consider that a contemporary daily wage for an unskilled laborer would have been approximately one guilder (de Vries and van de Woude 1997: Table 12.5). A typical bill of exchange would have been for one to two thousand guilders.
- 8.
Calculated by the authors using the Van Cauwenberghe and Verachten (2012) data set.
- 9.
Confusingly, the new dukaat became known as a rijksdaalder, the new rijder as a ducaton, and the old rijksdaalder as a bank rijksdaalder. See for example the Bank inventory of 1711 (AMA 5077/1355, folio 1–2).
- 10.
By structuring the receipt as an option rather than evidence of a debt, the Bank was able to guarantee its priority as a creditor. This meant that the Bank could offer what were essentially collateralized loans on advantageous terms, i.e., at lower interest rates and lower collateral haircuts than could a private lender (Mees 1838).
- 11.
Annual fee revenue calculated by subtracting interest revenue from total revenue for each year. All data from AMA 5077/1318–1322.
- 12.
A noteworthy contrast is provided by the more direct approach of another contemporary municipal bank, the Bank of Hamburg. Beginning in 1770, the Hamburg institution explicitly defined its accounts as a claim on silver bullion rather than coin, and always stood ready to buy and sell bullion at posted prices (Sieveking 1934: 150).
- 13.
These figures were collected by Simon Hart (AMA 883/405).
References
Archives
Amsterdam Municipal Archives (Stadsarchief Amsterdam): AMA.
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Quinn, S., Roberds, W. (2014). The Bank of Amsterdam Through the Lens of Monetary Competition. In: Bernholz, P., Vaubel, R. (eds) Explaining Monetary and Financial Innovation. Financial and Monetary Policy Studies, vol 39. Springer, Cham. https://doi.org/10.1007/978-3-319-06109-2_11
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