foreign bills of exchange of a certain value
should be paid, not in common currency, but
by an order upon, or by a transfer in the books
of a certain bank, established upon the credit,
and under the protection of the state, this bank
being always obliged to pay, in good and true
money, exactly according to the standard of
the state. The banks of Venice, Genoa, Amsterdam,
Hamburg, and Nuremberg, seem to
have been all originally established with this
view, though some of them may have afterwards
been made subservient to other purposes.
The money of such banks, being better
than the common currency of the country,
necessarily bore an agio, which was greater or
smaller, according as the currency was supposed
to be more or less degraded below the
standard of the state. The agio of the bank
of Hamburg, for example, which is said to
be commonly about fourteen per cent. is the
supposed difference between the good standard
money of the state, and the clipt, worn, and
diminished currency, poured into it from all
the neighbouring states.
Before 1609, the great quantity of clipt and
worn foreign coin which the extensive trade
of Amsterdam brought from all parts of Europe,
reduced the value of its currency about
nine per cent. below that of good money fresh
from the mint. Such money no sooner appeared,
than it was melted down or carried
away, as it always is in such circumstances.
The merchants, with plenty of currency, could
not always find a sufficient quantity of good
money to pay their bills of exchange; and the
value of those bills, in spite of several regulations
which were made to prevent it, became
in a great measure uncertain.
In order to remedy these inconveniences, a
bank was established in 1609, under the guarantee
of the city. This bank received both
foreign coin, and the light and worn coin of
the country, at its real intrinsic value in the
good standard money of the country, deducting
only so much as was necessary for defraying
the expense of coinage and the other necessary
expense of management. For the
value which remained after this small deduction
was made, it gave a credit in its books.
This credit was called bank money, which, as
it represented money exactly according to the
standard of the mint, was always of the same
real value, and intrinsically worth more than
current money. It was at the same time enacted,
that all bills drawn upon or negociated
at Amsterdam, of the value of 600 guilders
and upwards, should be paid in bank money,
which at once took away all uncertainty in
the value of those bills. Every merchant, in
consequence of this regulation, was obliged to
keep an account with the bank, in order to
pay his foreign bills of exchange, which necessarily
occasioned a certain demand for bank
money.
Bank money, over and above both its intrinsic
superiority to currency, and the additional
value which this demand necessarily
gives it, has likewise some other advantages.
It is secure from fire, robbery, and other accidents;
the city of Amsterdam is bound for
it; it can be paid away by a simple transfer,
without the trouble of counting, or the risk
of transporting it from one place to another.
In consequence of those different advantages,
it seems from the beginning to have borne an
agio; and it is generally believed that all the
money originally deposited in the bank, was
allowed to remain there, nobody caring to demand
payment of a debt which he could sell
for a premium in the market. By demanding
payment of the bank, the owner of a bank
credit would lose this premium. As a shilling
fresh from the mint will buy no more
goods in the market than one of our common
worn shillings, so the good and true money
which might be brought from the coffers of
the bank into those of a private person, being
mixed and confounded with the common currency
of the country, would be of no more
value than that currency, from which it could
no longer be readily distinguished. While it
remained in the coffers of the bank, its superiority
was known and ascertained. When it
had come into those of a private person, its
superiority could not well be ascertained
without more trouble than perhaps the difference
was worth. By being brought from the
coffers of the bank, besides, it lost all the other
advantages of bank money; its security,
its easy and safe transferability, its use in paying
foreign bills of exchange. Over and above
all this, it could not be brought from
those coffers, as will appear by and by, without
previously paying for the keeping.
Those deposits of coin, or those deposits
which the bank was bound to restore in coin,
constituted the original capital of the bank, or
the whole value of what was represented by
what is called bank money. At present they
are supposed to constitute but a very small
part of it. In order to facilitate the trade in
bullion, the bank has been for these many
years in the practice of giving credit in its
books, upon deposits of gold and silver bullion.
This credit is generally about five per cent.
below the mint price of such bullion. The
bank grants at the same time what is called a
recipice or receipt, entitling the person who
makes the deposit, or the bearer, to take out
the bullion again at any time within six months,
upon transferring to the bank a quantity of
bank money equal to that for which credit had
been given in its books when the deposit was
made, and upon paying one-fourth per cent.
for the keeping, if the deposit was in silver;
and one-half per cent. if it was in gold; but
at the same time declaring, that in default of
such payment, and upon the expiration of this
term, the deposit should belong to the bank,
at the price at which it had been received, or