The Fidelity of the Bank of Amsterdam

²⁷ The bank of Amsterdam professes to lend out none of what is deposited with it.

For every guilder credited in its books, it keeps in its repositories the value of a guilder in money or bullion.

It cannot be doubted that it keeps in its repositories all the money or bullion equal to the receipts.

• But it is uncertain whether it still keeps money or bullion for long expired receipts.

At Amsterdam, the best faith is established in the promise that for every guilder of bank money, there is a guilder in metals in the bank.

The city guarantees this.

The bank is directed by four reigning burgomasters who are changed every year. Each new set of burgomasters:

• visits the treasure
• compares it with the books
• receives it on oath
• delivers it with the same solemnity to the set which succeeds

Oaths are not yet disregarded in that sober and religious country.

A rotation of this kind is alone sufficient security against any practices which cannot be avowed.

Faction has created many revolutions in the government of Amsterdam.

Despite this, the prevailing party has never accused their predecessors of infidelity in the bank’s administration.

• Such an accusation would have most deeply affected the reputation and fortune of the disgraced party.
• If such an accusation could have happened, then it would have happened.

In 1672, when the French king was at Utrecht, the bank of Amsterdam paid so readily.

• It left no doubt of its fidelity.

Some of the pieces brought from its repositories were scorched with the fire after the bank was established.

• It meant that those pieces must have lain there from that time.

²⁸ Many have speculated how much treasure is in the bank.

• We can only guess it.

Around 2,000 people keep accounts with the bank.

• If each one had £1,500 in their respective accounts (a very large allowance), the total amount of bank money and treasure in the bank will amount to about £3 million or 33 million guilders at 11 guilders the pound sterling.
  • This is a great sum, sufficient to carry on a very extensive circulation.
  • It is vastly below the extravagant estimates of some people.

²⁹ The city of Amsterdam gets a big revenue from the bank.

Besides the warehouse-rent, each person pays a fee of:

• 10 guilders when opening the first account,
• 3 guilders 3 stivers for every new account,
• 2 stivers for every transfer.

If the transfer is less than 300 guilders, the fee is 6 stivers. This is to discourage the multiplicity of small transactions.

25 guilders is forfeited by the person who neglects to balance his account twice in the year.

The person who transfers more than the amount in his account, must pay 3% for the sum overdrawn.

• His transfer is set aside into the bargain.

The bank also profits by selling the foreign coin or bullion that it gets.

• It keeps them until they can be sold with profit.
• It also profits by selling bank money at 5% agio and buying it at 4%.

These emoluments are more than necessary to pay salaries and defray management expences.

• The revenue for keeping the bullion on receipts is alone supposed to amount to a net annual revenue of 150,000-200,000 guilders.

This bank’s original object was public utility, not revenue.

• It aimed to relieve the merchants from the inconvenience of a disadvantageous exchange.
• The revenue which arose was unforeseen and accidental.

I made this long digression to explain why the exchange between the countries which pay bank money and those which pay in common currency appears in favour of country which pays in bank money.

• The country that pays in bank money has its intrinsic value always the same and exactly agreeable to their mint’s standard.
• The country that pays in currency has its intrinsic value continually varying and frequently below that standard.