Dutch Finance - what is it and why couldn't you read about it in Google (till now)?
A speedy synopsis; I'm trying to illustrate that till just recently we were, effectively, a battery farm run by the banks and this has been the case since money was introduced as a product by the BofE in 1694. It was doing that that was the point of the Dutch banks funding the Glorious Revolution. The banks sow credit in our endeavours and we run around building and working and turning it into spendable wonga for them. Hence forcing us off the Commons so we needed to use money, their product, both here and in other countries, which was what British Imperialism was for, to exacerbate or create the need for money round the world which our bankers supplied as credit. It's about injecting an artificial product into cultures, getting it to have and hold artificial value, and extracting it in cartloads once it's been turned from credit to spendable, hoardable cash. It's the artificiality of it that's so important, it's a totally fake thing and it's taken everything over. That's all really. What we've lived in is a scam scheme for self enrichment dreamed up by a bunch of Dutch bankers centuries ago. Now that the banks have been deregulated, however, they don't need us any more for that as they can make more money and faster too simply by overtly ripping us off. No more scam scheme then, so no need to be seeding communities any more, so the bank managers have gone, and bank branches are closing across the country. No more seeding communities with credit and letting them turn it into spendable money, which is unfortunate for us as it leaves us a) unable to live off the land as we once did and b) without the new stuff we now need, money, either. Death ahoy for many of us then, unless we go indie and start to supply ourselves with what we need independently of government or outside authority.
The significance of the Glorious Revolution was it precipitated, probably deliberately, the introduction of money as a product, specifically, the product of the banks. Money stopped being gold & silver, which the banks couldn't create from nowhere any more than you or I can, and started being stuff the banks (but no-one else, mind) could create in infinite number (though they pretended it was backed with gold and was therefore of limited availability).
So if you have a product, you want to create demand for it, right? So all those happy peeps living on the Commons, day in day out not needing money for anything, they had to go and be dumped into an environment where they needed money for absolutely every damn thing. Hence the industrial revolution. Not an advance at all, probably a wrong turning from a humanistic POV, but it increased demand for the bank's product, money.
Same deal with British Imperialim, which involved doing the same or similar to folks living in their versions of The Commons in lands far away. They started to need the banks' product too. See?
So the direction of human evolution for the last several centuries has been entirely for the benefit of the banksters.
... and let's not forget banks don't lend existing money anyway, instead they create new money as a deposit and pretend it's a loan. Since they can't do this without a signature from some passing mark, it's monstrously unfair that same mark then has to give the bank multiples of that money which couldn't have been created without their (the mark's) participation. If only people knew, eh? BOOM!
It gets a mention here in Google Books A Financial History of the Netherlands where they say this; "The next hundred years or so, up to the creation of the EEC in 1958, was dominated by the maturation of the bonds within the financial system. The nationwide interaction between government, the central bank, bankers, and entrepreneurs increasingly determined the ups and downs of Dutch finance." Oh dear, that's not what we're after though, that deals with fairly recent finances in the Netherlands. We're looking for something much older and darker than that.
Let's try here, again from Google Books (the only place to date where you'll find the info we want, oddly); Anglo-Dutch Commerce & Finance in the Eighteenth Century. This bit's interesting, not for our immediate query but but because it appears to offer evidence which could be used to support anti-semeticism; "... the circle of capitalists interested in Anglo-Dutch finance had now gone beyond the small clique of (mainly) Jewish capitalists who had financed William the Third." Well well... now I'd heard before from unrelated sources these guys were Jewish but wasn't sure if it was just part of some general anti-Jewish ranting. It appears to be historically accurate. Well! Still, it's not what we're after so we'll move on...
It's not till we get to Hugh Dunthorne's Britain and the Dutch Revolt 1560–1700 that we strike pay dirt. Here it is "... Britain's so-called financial revolution was distinctive too. It is true that the establishment of the Bank of England in 1694 and the introduction of a national debt funded by parliamentary taxation caused some observers to complain, rightly, that the country was being taken over by what they called 'Dutch finance'. There was indeed a broad similarity between the system of long-term public borrowing pioneered by the Dutch during their war against Spain in the sixteenth century and the one introduced into Britain by William the Third in order to fund the Nine Years War against France. Dutch investors were prominent among those subscribing loans to the British state at this time, as well as in the insurance market and on London's stock exchange."
Very interestingly for me, as I've long suspected Sir George Downing tried to get Dutch Finance introduced here with himself at the epicentre, the beneficiary of all the lovely interest that would accrue, Dunthorne goes on to say "Yet 'Dutch Finance' was not quite the novelty that it appeared to be in the 1690s. A generation earlier, between 1665 and 1667, Sir George Downing, formerly English envoy at The Hague and now Secretary to the Treasury, had introduced into the running of his department important reforms modelled on Dutch methods of record-keeping and public debt repayment." Well well! I wonder what his interest could have been, eh? We'll come back to that later but for now we'll note Dunthorne also says; "Moreover, while the influence of the Netherlands on Engalnd's financial development is undeniable, it also needs to be said that the Bank of England quickly grew to be quite a different institution from the Dutch banks which had inspired its founders. Unlike those of Amsterdam and Rotterdam, it was a national rather than a municipal bank; and it issued notes and lent directly to the government, as no Dutch bank did."
It's noteworthy too Dunthorne later writes "... despite the differences in political structure between the two states, despite their constitutional incompatibility, there is no doubt that Britain's rulers, in Parliament and in the country at large, did indeed follow the example of Dutch policies and institutions. We have seen already that they did so in the economic sphere, introducing 'Dutch taxes' and 'Dutch finance', and allowing merchants a greater voice in government."
Next, for a little background, we turn to The Political Economy of Nation Building: The World's Unfinished Business by Mack Ott. He digs deep into the detail we want so I'm going to quote extensively. After a brief explanation of the beginnings of fractional reserve banking, Ott goes on to say, "Finding themselves able to lend (at interest and at no real cost to themselves - there's the point! BB), goldsmiths began to seek out opportunities for placing loanable funds... from 1660 onward, the easiest and most prominent borrower with reasonable creditworthiness was the restored Stuart king, Charles 2nd.
Let's peer into some other books now, little windows of knowlege we can press our noses usefully up against...
GOING DUTCH, by LISA JARDINE
Phew... this is a hefty tome alright. It's a big solid hardback about the invasion of England by Holland in the 17th century. What's that? You never heard of any such invasion? The last invasion of England was in 1066 by the Normans, everyone knows that, you say? Well everyone doesn't, simply put, we're apparently taught a load of rubbish at school, with much that's important excluded.
I read this book because I read somewhere, in my travels, that aspects of the banking system which so oppresses us by throttling the money supply, the oxygen of society, whenever it so pleases, accompanied by complete and abject subservience and acquiescence by our elected representatives in government, this wunnerful banking system has its grubby origins somewhere in this period. On the basis that if you want to solve a problem you have to fully understand it, I was trying to track down its origins.
So, you never heard of the Dutch invasion of England, huh? You're not alone.
Here's author Lisa Jardine in the introduction, detailing how... "I found myself explaining the argument of Going Dutch to the charming young French waiter who presided there (the hotel Savoyarde, where she was putting the final touches, as she puts it, to the manuscript). I felt I owed him an explanation for all the mornings on which he had patiently cleaned and tidied around me. 'Surely you mean "When the English invaded the Dutch?" was his first response to my account of the huge military operation which had resulted in William III 'conquering' Britain and claiming the Crown on behalf of himself and his English wife. 'Holland is far too small and insignificant a country to have been capable of such a military manoeuvre. It surely never had the power'. And again: 'But I thought that the English mainland had not been invaded since the Normans in 1066'. I found his absolute disbelief faced with my account of events leading up to the Dutch invasion of November 1688 both challenging and inspiring - this must surely be a story worth telling, if it failed to agree in so many of its details with the version of northern European history my educated interlocutor had learned in a good French lycee."
Well. You weren't alone about that 1066 thing, then. For the conspiracy theorists this will be yet more evidence of how the reality of what we live in is kept carefully shrouded from our prying eyes. We're presented instead with an alternative, fictitious version of history which is afforded a veneer of respectability by being taught in our schools. Become fluent in this false history and you're rewarded by academic success, given letters after your name, status in society, authority in the culture, validated as an individual. You aren't likely to be keen on being told that the foundation of your success is a fiction designed to distract from the reality.
More on this subject from the book itself; in a chapter called "From Invasion to Glorious Revolution: Editing Out the Dutch" Lisa asks, "So why is there almost no trace of this vast, hostile armada (it was several times larger than the famed Spanish one was - BB), with its dramatic progress along the English Channel, its fanfares and gun-salutes and parading battalions, in conventional historical accounts of the so-called 'Glorious Revolution'? Why are many of us unaware of the fact that at the time of the English Parliament's 'welcoming' William and his wife Mary Stuart, and subsequently, in early 1689, inviting them jointly to ascend the English throne, the country was in the grip of full-scale military occupation, with Dutch troops posted in front of key buildings throughout London and growing unrest and resentment throughout the land?... how have we come to believe that William of Orange ascended the English throne in an entirely peaceful, not to say 'glorious' revolution?"
She goes on, "as historian Jonathan Isreal has observed; 'Since the early eighteenth century, a thick wall of silence has descended over the Dutch occupation of London 1688-9. The whole business came to seem so improbable to later generations that by common consent, scholarly and popular, it was simply erased from the record`"
Goodness me, dear reader; one wonders what, if anything, else that might conceal the origins of the current banking cartels has conveniently been dropped from history? This for me supports my growing contention that while everyone knows how in 1066 we were invaded successfully be the Normans, very few understand how in 1688 we were successfully and clandestinely invaded by the banks! More on this later... but back to Lisa Jardine; significantly in this regard, she informs us "The elaborate, clandestine preparations for the 1688 invasion would not have been possible without loans of almost unimaginable size from wealthy supporters of the Orangists in The Hague. Foremost amongst these was the Potugese Jewish banker Francisco Lopez Suasso (banker! Jewish! - BB, from behind the sofa), who provided the massive sum of two million guilders, lent without any collateral security. Effectively, William's entire expedition was underwritten by Suasso."
Well now, why would a banker underwrite the takeover of another country, one that was still using coins with intrinsic high value and tally sticks? To a discerning banker, perhaps England would have looked like a whole country full of gullible marks, ripe for the picking. Arguably, it wouldn't have cost him any money if he owned banks, he could have just made it up... I bring this in because I've heard elsewhere a rumour that William The Third, as he was to become, was advanced this money sans security or collateral on condition that upon becoming king of England he'd transfer the sovereign right to create money over to the parliament/government and then to privately-owned banks... specifically, I've come across a mention of this in Hansard, the record of English Parliament, in the records from 1940 http://hansard.millbanksystems.com/commons/1940/jul/25/ways-and-means-1#S5CV0363P0_19400725_HOC_308 where the speaking member, Mr Pierse Loftus, says "I urge the Chancellor to do what ought to have been done long ago, and that is, that the Crown should resume the essential right of every State - the right given away by William III in return for the Throne - to control the issue and cancellation of every kind of money".
We continue... there are some fine reproductions of paintings in Going Dutch. It seems the courts of both countries were largely interchangeable for many years, making life easier for William III (as he became) because there wasn't a lot to choose between the two cultures when he invaded. No culture shock then, no need for the erection of giant stone Norman cathedrals to overshadow Saxon churches and make the point that a new order was now in charge (for example). In this instance, the new order was in many ways very similar to the old order. Witness; "When William III interrupted his military campaign, breaking off from the march to conquer London and walk in the garden at Wilton (as indeed he did, they were very big on self-expression through gardens in those days here and in Holland - BB), he must have felt in familiar surroundings, and an accompanying sense of comfort and relief. In terms of ambiance and lifestyle, he was coming home. The outstretched hands of the welcoming orange-sellers among the crowds thronging the streets of London, as he made his way along Knightsbridge towards Whitehall, will have reassured him further; the studied, self-conscious symbolism of the House of Orange was already recognisable and in place in England. Mutual recognition cushioned the impact of the Dutch invasion of England. Retrospectively, it blurred and diffused the national memory - here was no conquest, here was an affinity - a meeting of minds and sensibilities."
There follow many pages detailing the cultural and personal interchanges between the two courts. It's near the end of the book, however, we read of a man it appears we might be very interested in, very interested indeed. His name is George Downing. Contemporaries said of him he was 'a sider (turncoat) with all times and changes, well skilled in the common cant', 'a crafty, fawning man... ready to turn to every side that is uppermost, and to betray those who... thought they might depend on him'.
Admittedly there's nothing there about him being the type to offer you an umbrella in sunny weather then immediately demand it back at the first hint of rain, but he still sounds like banker material to me!
He spent some time as Ambassador to The Hague, so he was well-versed in Anglo-Dutch affairs. He is most of interest to us, however, as, Jardine tells us, "Downing's most important contribution to English fiscal policy, however, was the importation of the underlying principles of state banking that led ultimately to the formation of the Bank of England." Further, "Downing's scheme used parliamentary legislation to underwrite loan repayments with the authority of the state (rather than simply of the monarch personally)" Further still, "Downing worked tirelessly to reform English financial institutions so as to bring them inline with those he regarded as so supremely successful in the United Provinces. He did so in spite of the fact that England was a monarchy, while the United Provinces was a long established republic. In so doing, he put in place the machinery for the 'constitutional monarchy' which would follow the arrival of William III in England in 1688."
Oh dear - can this be the Downing that London's Downing Street is named after? Er... yes it can, sadly. Is this where beats the heart of the darkness that has enveloped us all for the past three hundred years? The information on Downing comes from the second to last chapter before the book's conclusion. It was a long haul, but I think we've found what we were after, a clear historical indicator of just when and how the banking system we all labour under and for came into being. This is a large book and personally I found much of the talk of time-pieces, paintings, inventions, cross-pollination between the English and Dutch courts tedious. I skimmed after the first few chapters, I confess. I knew what I was looking for, and eventually I found it, clear evidence of how we come to be under the yoke we currently are. "Going Dutch" by Lisa Jardine, available from all the usual outlets.
Very sadly, Lisa Jardine left us not too long ago. She died in the period of my writing this piece, which I've been working at on and off for a year or three now. I always thought that one day we'd sit down together and I'd ask her about what more she knew of the economics of both then and now as it seemed to me she must know more than she was telling. Sadly, that will never be. It was one of those things that you always imagine yourself doing in the future in some better time, a time when both money and opportunity are making themselves more available. Greatly to my chagrin, I learned after her death that she had a Twitter account. Damn! I'm on Twitter myself, @billkruse, so I could have asked her anytime. I'm remain very annoyed that it never occurred to me to check for that...
THE GODFATHER OF DOWNING STREET - SIR GEORGE DOWNING by JOHN BERESFORD
Some scene-setting from the preface;
"The Dutch between 1660 and 1672 were the most powerful nation in Europe — for three simple reasons: they had sea-Power, they had boundless wealth, and they had a far higher level of intelligence and civilization than any other people in the world."
Says he. We move on to the book proper:
"When George Downing, many years after the events to be recorded in this chapter, was engaged in that clandestine intrigue through which he secured the favour of Charles 11 on the eve of the Restoration, he excused his previous allegiance to Cromwell on the ground that he had been brought up in New England, 'and had sucked in principles that, since, his reason had made him see were erroneous.' It is hardly possible to take the last part of this apologia seriously, but it is true in one statement of fact, that he was brought up in New England: at least he was brought up there between his fifteenth and twenty-second year."
His formative years, then, were spent in the fledgeling America.
"Of all the streets of all the cities in the world, none is better known by name than Downing Street. Nevertheless, among the millions who have heard or if, among the thousand persons who daily glance up at its superscription as they pass to and fro down Whitehall, very few have the least idea why the street in called so. And even the few who have heard of Sir George Downing would remember little more than that his character was reputed to be unpleasant, or more plainly, that he was, as his sometime cleric and acquaintance Samuel Pepys described him, 'a perfidious rogue.'"
So then. Not the nicest of men. This is a theme returned to.
Here's Cromwell probably meeting the young Downing for the first time;
"In the early autumn, Haselrig accompanied Cromwell to Edinburgh, and it was probably on this occasion that Cromwell first came into close contact with George Downing. For the next definitive news we get of Downing, a year later, in November, is sufficiently startling. Cromwell, who like all great leaders of men had a hawk-like eye for ability, had made George Downing his Scoutmaster-General. Originally a sort of skirmisher in chief, the Scoutmaster- General in the reorganized army of the New Model and the Commonwealth was, in effect, the chief of the Intelligence Staff: it was his business to survey and control 'les service des espions et des correspondences secretes.' His rank seems to have been equivalent to that of a Major-GeneraI, and in several of the documents in the Calendars of State Papers Domestic Downing is so described. The salary attached to the post was very considerable - 4 a day — but this Included also the salary of the espionage staff under the Scoutmaster-General. Thus at the age of twenty-six the son of Emmanuel and Lucy Downing had become one of the most important and influential persons in the England of the revolution."
Well... head of espionage then, at a young age too. We will learn later that he worked in this field very well, not just for Cromwell but for Charles the 2nd too. It's significant because you don't put Mother Theresa in charge of spying.
He was a preacher in his earlier years, over which we can skate because what we're looking for is what he might have had in mind when he set up what was to become the Bank of England. We'll dip in here and there...
"Early in December, 1657, Cromwell decided to send George Downing to the Hague, as his Ambassador to The United Provinces. In order to make clear the importance of the appointment, and to follow Downing's career as Ambassador, it will be necessary to take a brief review of the situation in Europe at this time, as it specially affected England. For George Downing at the Hague was at the hub of the diplomatic universe."
He was where it was at, then, and we might reasonably assume he knew what was what.
Here's his mother, Lucy, writing to a family member (her family) about how her boy's doing;
"In February 13, 1663-4, she writes to John Winthrop saying thar her son George desires that she shall still stay at East Hatley; it is rather solitary there, 'but I hope tyme will discover some other meanes more for his ad- vantage, or more sutable to myself.' She supposes her nephew has heard how the King has made George 'Knight Baronet, and gift him a thousand pounds, as a token of his favour.' He has had another son, William, and the Prince of Orange was his godfather. The winter has been most temperate 'soe yt wee have been planting trees at Hatley allmost all this winter'•"
My OCR software goes to its happy place when it comes across this kind of spelling so I'm going to limit how much of this material I include as I have to copy much of it out by hand. I do though prefer to keep the original spelling, as it helps give the flavour of the times. Anyhoo... we learn from this that George was apparently cosy with the family Orange, no doubt significant as it was William of Orange who was later funded by the Dutch banks to take over England (we know this because we read about it in an earlier Economania when we reported on the book 'Going Dutch' by Lisa Jardine). We learn from Lucy's correspondence that Downing apparently didn't look after his dear old mum anything like as well as he might, in fact, the book suggests throughout that he had an exceptional reputation for meanness. Author John Beresford defends him where he can but does accept he had this reputation. We'll bear this in mind as we continue...
Lord Clarendon didn't like him;
"... in fairness to Downing it must be explained that Lord Clarendon intensely disliked him : 'a Man of an obscure Birth,' he says, and more obscure Education which He had received in Part in New England ... a Man of a proud and insolent Spirit, and who would add to any imperious Command of his somewhat of the Bitterness of his own Spirit.'"
We're using the word Ambassador with regard to Downing but at this time it wasn't actually true, here's more on that from biographer John Beresford;
"Very frequently in this book I have referred to Downing as an Ambassador, simply because that is the most expressive general description of one who represents his Nation at a foreign Court. But Downing was not technically an Ambassador: under Cromwell he was Resident at the Hague, under Charles II he was — during 1661-5 — Envoy Extraordinary."
Staying on that same subject, here's how pushy Downing could be;
"In the seventeenth century questions of diplomatic pro- cedure and precedence were of immense importance, so important that Wicquefort, the brilliant contemporary historian of the United Provinces, has also come down to fame as the author of a massive treatise on the Ambassador and his Functions. Wicquefort intensely disliked Down- ing, whom he regarded as the man who contributed more than any other to the fatal Dutch war of 1665-7.1 Both in his book on Ambassadors and in his History, Wicquefort describes Downing as trying to presume, to push himself into the privileges proper to Ambassadors, whereas, technically, he was only a Minister of the second rank. Thus he represents Downing as taking advantage of the fact that the Dutch were not too well acquainted with the technique of forms and ceremonies, to try and get himself received at his coach door and escorted upstairs when he came to confer officially. This was the privilege of Ambassadors; Ministers of the second rank stepped out of their coaches by themselves, and were only met at the top of the stairs, being conducted from that point into audience of the States General. But Downing, whether by design or accident, on one occasion arrived at a conference at the precise moment when two Deputies were also waiting to enter. All three there-fore went upstairs together. From this casual incident Downing tried to establish a formal precedent, but Wicquefort is glad to be able to say that in this attempt he failed."
There's another one didn't like him.
Now we come to chapter 12, which I would have liked to reproduce almost entirely. Copyright dictates I give you salient highlights, however. Here we go. The background is that Downing's been complaining about his expense account as Ambassador.
"It is not, therefore, surprising to find that no sooner had Sir George Downing returned from Holland at the end of August, 1665, than hew became immersed in what can only be described as, at that time, the veritable maze of National Finance. But for the recent and continuing labour of Dr. W. A. Shaw, in editing the 'Calendar of Treasury Books and Papers' preserved at the Public Records Office, Downing's remarkable achievements in this field would never have been realized. As it is, it is safe to sav that not one person in a thousand, including students and historians, has the Slightest conception of what Downing accomplished, or of what he attempted to accomplish. What he actually accomplished was, in effect, the virtual creation of the Treasury as the first Department of State, as that term is understood today. Further, the great Constitutional reform — Appropriation of Supply — is due mainly to him. What he attempted to accomplish was the creation of a National Exchequer Bank, which, had his scheme been permanently successful, would have rendered the creation of the Bank of England, twenty-seven years later, unnecessary."
We need to get some background here, which Beresford obliges us with. The King was very short of money,
"Now funding a National Debt, though well understood in Holland — De Witt had carried out an excellent funding scheme based on a period of forty-one years in 1655 — was utterly unknown in England. Indeed, it is no exaggeration to say that the whole idea of National Credit upon which Funding depends was practically unknown in Restoration England. It was here that Sir George Downing came in with all his experience of Dutch Finance."
Hmmm... it started here then.
"His purpose was to break down the conservative barriers which surrounded the Treasury. One of the chief of these barriers has not yet been described: it was this. Owing to the fact that the revenue came in with snail-like slowness, while the expenditure, as it always is, is immediate and rapid, the Government had to rely for ready money partly on letting the taxes out to farm — the farmers paying an advance on the farm, say, of the Customs — and partly on exceedingly short-term loans at high interest made by the Bankers - chiefly Goldsmiths, on the security of the immediately accruing revenue (there's that word again! BB) Sir George Downing did not propose to modify the tax farming system, but he did propose to break through the Bankers' ring, and to appeal direct to the monied citizen to lend his money to the King on the security of particular taxes. Despite the bitter opposition of Lord Clarendon, Down- lng's scheme, which was thoroughly approved by the wise Charles, was carried through."
This was October, 1665. OK, a complicated bit coming up now, but the kicker - well, you'll see for yourselves;
"Despite the bitter opposition of Lord Clarendon, Down- ing's scheme, which was thoroughly approved by the wise Charles, was carried through, and was embodied in an Act of Parliament at the end of October, 1665. Very briefly the scheme was this. The additional aid of 1,250,000 then voted hy the Commons in aid of the Dutch War was to be solely appropriated to the purpose of the
War, so that not a penny should be available out of the aid for any other part of the King's service. This is the modern beginning — for there had been spasmodic Parlia- mentary precedents for appropriation in the Middle Ages, and even later — of the constitutional doctrine of Appro- priation of Supply. Secondly, persons making loans, whether in money or kind, to the Exchequer were to have their loans at 6 per cent, interest registered in turn, repay- able in the order of precedence in which the loan had been made. The Auditor of the Receipt was to keep a Register in which each man could see where he stood on the list for repayment. His warrant for repayment would be transferable on endorsement. This last-named provi- sion alone — in effect introducing paper money - was revolutionary: hitherto wooden tallies had acknowledged payments and loans into the Exchequer, and one could not endorse a tally. Lastly, Sir George Downing, Teller of the Exchequer — a post he had held since Cromwell's day, though in that day it was virtually a sinecure - was to receive the loans as they came in."
We should pause to remind ourselves that he planned on getting a fee per loan too, as a Teller of the Exchequer. In the event, though, and against his arguments, this was decided against;
"... the declared debt due to the Bankers including arrears of interest. On February 9 the King by Order in Council accepted the recommendation, and approved the charging of the Debt on the hereditary excise as from January I, 1677.' Thus began the preliminary funding of the National Debt. One further point in this connection is amusing. Lord Treasurer Danby asked advice of the Attorney-General, Sir George Downing and one or two others as to the precise method of payment: should the payment be made from the Exchequer, or direct on Tallies from the Excise. Sir George Downing recommended payment from the Exchequer. The Attorney-General bluntly suggested that that was because Sir George had his eye on the fees due to his office as Teller. Sir George denied it, and said it was the regularity of the system that he stood for. How- ever, Lord Treasurer Danby evidently regarded Sir George's arguments as unsubstantial, for he concurred with the Attorney General in adopting the method of direct pay- ment from the Excise."
There's a lot more about the ins and outs of it here, which I'd love to share but those interested would do best to buy the book. Later we read that;
"Twenty years later, when the public had become more familiar with the principles of credit and investment, and the Treasury itself wiser as to the basis of these principles, the idea suffered a sea-change and re-emerged in a two- fold form: on the one hand in the funding of the National Debt, on the other in the creation of the Bank of England."
Poking up at us out of history, here at last we see the snout of the Beast.
Here's the beginnings of the National Debt, right here;
"... what did it matter if Appropriation became the rule provided that 'the Establishment of his Bank' which was part and parcel of the proposal, really filled his empty Treasury? It was argued by the opposers that the Bank idea was a 'Chimera,' and presupposed a perpetual debt (in fact a National Debt) which would be 'very ill Husbandry.' Then Lord Clarendon pro- ceeds: "Yet all Discourse against a Bank was thought to pro- ceed from pure Ignorance. And Sir George was let loose to instruct them how easy it was to be established, who talked imperiously of the Method by which it came to be settled in Holland by the Industry of very few Persons, when the greatest Men despaired of it as impracticable; yet the Obstinacy of the other prevailed, and it was now become the Strength, Wealth and Security of the State: That the same would be brought to pass much more easily here, and would be no sooner done, than England would be the Seat of all the Trade of Christendom.' And then assuming all He said to be Demonstration, He wrapped himself up according to his Custom, in a Mist of Words that Nobody could see Light in, but They who by often hearing the same Chat thought They understood it."
Early obfuscation - how typical of banking! The cabinet meeting spoken of above took place in Lord Clarendon's bedroom, him suffering greatly from gout. He himself was Lord High Chancellor, a position akin to being Prime Minister in today's standing. Also present were King Charles the 2nd and assorted other nobles. The King had the problem that he was always short of money as Parliament's voted revenue for him was inevitably somewhat late in arriving, assuming it arrived as intended at all. Establishing the National Debt, as Downing's scheme effectively did, filled the King's coffers. The King was hugely in debt by the standards of the day and raising more by taxation was considered impractical as the country had recently been through such turbulent times. We should remember here that taxation then wasn't what it is now, Downing would realistically have been handing over less than 2% of his annual income in taxes, for example.
"It must be remembered that there was no annual Budget: the King's annual revenue — the theoretic 1,200,000 but the actual 800,000 or 900,000 — was for his reign. It was one of the ghastly puzzles of seventeenth-century finance, that, owing to the immense variety, dispersedness, tortuous collection, and administration of the King's Revenue with roots buried in the centuries, it was impos- sible to find out what the situation precisely was."
This whole chapter goes into the whys and wherefores of why that should be and why so so little of history is concerned with it, suggesting it's far more pleasant for historians to dwell upon the merits of Nell Gwyn and Barbara Villiers than it is to pore over Treasury minutiae.
"At this meeting the Lords Commissioners dealt — amongst numerous other matters — with the disquieting situation of the arrears in respect of the produce of the property taxes — the Royal Aids granted by various Acts of Parliament. My Lords decide that letters in strong language (how Sir George Downing must have revelled in writing them) be sent to various Commissioners and Receivers-General in the several Coun- ties; for example, the Bedford Receiver, Mr. Lewis Harding, is to present an account forthwith or he will be arrested; Mr. Snow, of London, to attend personally the day after to-morrow; 'a sharp letter' for Mr. Cooper, of Nottingham, 'a quickening letter' to Mr. Hosier, of Salop, and the same for Mr. Treday, of Somerset. Then Mr. Vaughan, Receiver of Cardigan and Carnarvon, was called in. Mr. Vaughn said he would 'answer all' only he prayed for an allowance 'for bringing the money to the waggons.' The reader is to realize that if he had been alive in 1660 it would have caused him no surprise whatever if a waggon had lumbered past his house guarded by soldiers, and filled with boxes of money for My Lords of the Treasury."
Such was tax collection in those days. They farmed it out, which meant often it came in late, if at all.
Here's an example of early banker behaviour, and how he was allowed to get away with it even back then;
"At this meeting Sir Thomas Littleton and Sir Thomas Osborne, Joint Treasurers of the Navy, waited on My Lords, accompanied by the great Banker, Alderman Blackwell; Alderman Blackwell, indeed, was a very frequent attendant at the Treasury in these years. The Alderman promised to lend 15,000 required for the fleet in the Straits, on the security of the new farm of the Customs. For this loan the Banker would get 6 per cent interest, plus 4 per cent gratuity plus chargess. Two days later the Treasury made a manful effort to reduce the actual rate of interest to the legal rate of 6 per cent, for all future loans. But this attempt broke down."
They operated illegally with the cooperation of King and Government even then. This has been going on for centuries, so it's arguably no wonder the bankers of today behave as they do and feel themselves immune from prosecution.
"Though Sir George Downing made speeches in the House of Commons on Finance, as has been seen, he did not make them as a Member of a Ministry responsible to Parliament, for such a Ministry did not then exist. Moreover, his Parliamentary duties appear to have been occasional, whereas his administrative duties were unquestionably constant. In truth, from Downing and from Pepys descends that unique element in the English Constitution, the power and importance of which Walter Bagehot was the first to recognize, the permanent Civil Service. Sir George Downing probably received only a small fixed salary as Secretary to the Treasury, but it cannot be doubted that fees more than made up for any deficit on this head. Moreover, not only did he continue to enjoy his emoluments as a Teller of the Exchequer, but he received further renumeration for his special labours as an Administrator of the Estate of the late Queen Mother, and also in connection with the sale of Crown Property — those fee farms which Charles II was compelled to sell in order to carry on the service of the Government. Modern Civil Servants may well regret that the seven- teenth-century fee system is no longer in fashion—and not merely fees, but gifts as well."
Did alright for himself then.
We could probably immerse ourselves in chapter 13 too, here's a sample in defence of Charles 2nd.
"The patient, brilliant and profoundly important research which has been accomplished by Dr. Shaw in his many-volumed Calendar of Treasury Books, alone compels very different conclusions as to the relations, for instance, between Charles II and his Parliament, from those which will be found in the most reputable histories. Those researches prove beyond dispute that the financial difficulties of the reign — and it is not necessary to observe that money is the mainspring of almost all political and material activity — were due not to Charles's extravagance, but to the reluctance of the Parliament to impose adequate taxation; that Charles ran desperately into debt to main- tain the British Navy and the honour of England; that the charges of incompetent and maladministration are, for the most part, without foundation."
It was decided that a war with the Dutch would be incited with a view to taking over their sea trade. This was not to be rushed into headlong, but carefully set up over a period of time. Downing was to assist, indeed be instrumental, in bringing this about on the instruction and according to the timetable of the King himself personally (he wrote to Downing on this exact matter). Apparently uncharacteristically, Downing disobeyed;
"That Downing received the King's letter is clear from Lord Arlington's later letter of January 27. How he came to disregard instructions so categorical both from the King and Lord Arlington must remain a mystery. Suffice it to say that he suffered for his insubordination by a six-weeks sojourn in the Tower on his return."
Well well. Here we have information of significance. Sir George Downing, a lifelong toady who habitually strove to make himself useful to the powers that be, whether Cromwellian or Regal, disobeyed direct orders from the King himself, sent in the King's own hand. The King wanted a war with the Dutch, but in his own time and in a manner of his own choosing. Downing, against clear instruction, was rushing things along. What could his motivation have been? What was it he saw of such worth he'd go against the habits of a lifetime to gain? Or did he in some way we peering through the dim glass of time cannot, see a new master on the horizon, one he expected to supercede his Majesty Charles 2nd, indeed, any or all English King and so made preparation? Did he see that with the invasion of England and triumph of the Prince of Orange would come the coming era of the bankers - was he already working for them? He was expert at hiding things, was Downing - maybe he hid his manoeuvrings so successfully that history itself has not yet perceived them?
It is very probable due to his long stay in the Hague he understood finance in some ways better than any other Englishman of the period. That he was well aware of the House of Orange and their activities there is no doubt as he specifically mentions details in letters... plus of course the Prince of Orange was Godfather to one of his sons, as we read above. Would a man who could change from Cromwellian to Royalist be bound by anything so confining as loyalty to a nation? Let's not forget, he was born in New England and perhaps felt a loyalty there, superceded when for a time as chaplain he was in the service of The Lord, later perhaps he felt his true loyalties lay with himself and all other masters were simply flags, as it were, of convenience under which the good ship Downing sailed. He tried to get the Bank of England established, in concept if not name, and he did succeed in getting the National Debt established, if not in quite the manner he'd envisaged. In our praise, regarding these as accomplishments, might we and history be blind to his failures, that centuries ago he in fact bought about the current implementation of the vampire banking system which went on to see its tentacles expand to embrace the world in its slimy grip?
“The introduction of bank notes was useful in weaning the public from the use of gold and silver coins, and prepared the way for the introduction of Bank Credit as the means of payment for commodities. As a result of this evolutionary process, the checks drawn and paid in the United States amount to between two hundred billion and two hundred and fifty billion dollars a year. It is clear that it would be a physical impossibility to do this amount of business by the use of gold coin. There is only about eight billions of gold money in the world, of which amount less than two billions of dollars are in the United States.
The banks have created fifteen billions of dollars of credit by discounting the notes of merchants and manufacturers, and crediting the proceeds to the borrower's account under the head of Deposits. As a result, the borrower is enabled to draw checks and pay his debts with them.(Howe, 1915, p. 25).R.H. Howe
The Evolution of Banking; A study of the development of the credit system
C. H. Kerr & Company, Chicago (1915)
The Last Revolution 1688 and the Creation of the Modern World, Patrick Dillon
"The last successful invasion of England; mobs burning Catholic chapels; one king, James, driven from his palace by night while another, William, rode in at the head of a foreign army - the events of winter 1688 were among the most dramatic in our history.
The settlement which followed would place England decisively on the path to freedom, toleration, parliamentary democracy - and empire. Few moments have done so much to shape this country as the Glorious Revolution.
But 1688 would change England in other ways as well. This was the time of Isaac Newton's scientific breakthroughs and John Locke's philosophy; the emergence of free market ideas and the end of press censorship."
With the cross-pollination of ideas stressed by Lisa Jardine ("Going Dutch") in mind, it's worth noting the following early passage; "Many Engish and Scottish radicals were now in Holland, among them London dignitaries like Patience Ward and Thomas Papillon, Lord Mayor and Sheriff just a few years before; and with them was the dead King's bastard son, James, Duke of Monmouth." There were plenty of people in Holland, or the Low Countries, in those days entirely familiar with England and what was going on there.
The Dutch weren't thinking like the rest of Europe. This was their strength, in some regards they had ideas which were alien and far in advance of anything Englanders were capable of dreaming up. This, I believe, made it possible for them to conceive of and execute the insertion of their invention, later understood as a form of money, into the fledgeling, naieve and innocent English culture. The Dutch were in a league of their own;
"Trade and commerce were becoming ever more important in England. That could be read in the development of Soho, and Dudley North found many signs of such a change on his return to London. 'No country can be rich or flourish without trade' , wrote Slingsby Bethel, the London Merchant and radical politician now in exile in Holland, 'nor be more or less considerable, but according to the proportion it hath of commerce'. From the opposite end of the political spectrum, Sir Josiah Child, flamboyant Monarch of the East India Company, agreed, and every economic writer in England knew which country to hold up as a model. On the other side of the North Sea an economic miracle had taken place which, in less than a century, had turned a flooded marshland into the richest corner of Europe. No-one was quite sure how or why this transformation had taken place, but no-one, equally, could ignore it. 'The United Provinces,' wrote Nicholas Barbon, who went to university there, 'within one hundred years last past... have changed their style from poor distressed into that of High and Mighty States of the United Provinces, and Amsterdam that was not long since a poor fisher-town, is now one of the chief cities of Europe.'"
Sir William Temple, diplomat and writer, first went as Ambassador to the Hague in 1668, when the Dutch miracle was at its height. He wrote a book, 'Observations on the United Provinces', to describe his experiences, and in it he described a prodigy, a country which seemed to be founded on principles quite unlike any other in Europe.'"
Get that? They weren't like us. They were far in advance of us. OK, art and some science, we know from Lisa Jardine's research they were cross-pollinating. But money? Trade? Credit? The Dutch were in a different league, not just from us but from everybody else in Europe - and why? Because they thought differently, appears to be why. Here's more from English writer Josiah Child; "Child envied above all Dutch Banks, 'which are of so immense advantage to them, that some... have estimated the profit of them to the public, to amount to at least one million of pounds sterling per ann.' William Temple visited the great bank in Amsterdam 'which is the greatest treasure... that is known anywhere in the world... bars of gold and silver, plate and infinite bags of metal, which are supposed to be of gold and silver'. He also learned, though, that in Amsterdam, those vaults of treasure were no longer counted the full measure of wealth, useful though they were to impress visitors. The real power of Amsterdam lay not in 'bags of metal' but in 'the credit of the whole town or state of Amsterdam, whose stock and revenue is equal to that of some kingdoms'. Credit allowed trade to move more freely and payments to be made more easily; it allowed interest rates to be quoted in Amsterdam at 3-3.5%, a third of what Nicholas Barbon paid for his money. Dutch fortunes were more likely to be invested in trade than in ancestral acres. Security in Holland was less onerous. The financial infrastructure, indeed, was high on the list of reasons William Temple gave for the Dutch economic miracle..."
There's a great deal in the book about the nature and temperament of William of Orange. Unlike with, say, Downing, his character traits aren't critical to so I'm going to skip over almost all of them. He was a prince who wanted to be a king. I don't believe the history books will disagree on that so there's no point going again over areas already well established. We'll note, though, that England was the place he had his eye on, accordingly Dillon advises us "By then England was already sliding towards the exclusion crisis, and William (of Orange! - BB) had already been approached by several 'considerable' persons there to lead the opposition to the King. On the other hand, he was thinking of a political marriage, and was considering his English cousin, the Duke of York's daughter, Mary. The English opposition was against it because it would bind the Prince too close to the court; for his part, he wanted to know what William Temple thought. Temple was unable to give the Prince much information about Mary, but his rely said much for the implications of the whole conversation, 'It was a great step,' he told him, 'to be one degree nearer the crown'."
Meanwhile, back in Blighty, a lot of people keen to make money were decidedly of the opinion that they weren't going to make much while they were lumbered with a monarch. The James mentioned here is, of course, the 2nd;
"James enthusiasm for the Companies (East India & similar - BB), however, did not reflect good relations between the Stuart courts and the City (of London - BB). There were many in the City - particularly Whig Dissenters like Thomas Papillon - who held to the Dutch assumption that Monartchy and trade were incompatible. For evidence they pointed to the events of 1672, when Charles 2nd's 'Stop of the Exchequer', reneging on interest payments, had ruined the City's biggest financier, Edward Blackwell, alienated all financial interests, and sown a lasting legacy of distrust between Whitehall and Guildall. The 'Stop of the Exchequer' provided inexhaustible ammunition for those who thought Kings could not nourish trade.
Two years later, Papillon had put his name to a scheme of Trade promoting a switch in government alignment from France towards Holland. That petition was the first sign of a strong and coherent grouping of new financiers in the City." Author Dillon then names a sample but for our purposes we only need note they included "Jean Dubois, the Sheriff later deposed along with Papillon, John Houblon, later the first governor of the Bank of England, his brother James, and Patience Ward, Lord Mayor of London, who would later go into exile (in Holland - BB) with Thomas Papillon."
So, in Holland you'd got a prince who wished to be KIng and had his eye on England for needing a new one and who had in fact been asked to consider this by 'considerable' people', and in England you had financiers who had their eye on Holland. Their aims could not be said to be entirely coincident but it was at least clear there was a two-way interest, both parties were aware of the other.
Ah yes, author Patrick Dillon creates an aside, of which we should be aware, to remind us of one interesting distinction between The Low Countries and the England of the day, "In entering Dutch politics we also take on the Gregorian calendar, 15th August in Britain was 25th August in the rest of Europe."
It's commonly held that William was asked to come over by people here and he was, but prior to that he had asked to be asked, which some might feel places a different complexion on the matter.
"In April 1688, at the Hague, William had told Edward Russell, brother of the Whig martyr, and Admiral Arthur Herbert that 'if he was invited by some men of the best interest and the most value in the nation, who should both in their own name and in the name of others who trusted them, invite him to come and rescue the nation, and the religion, he believed he could be ready by the end of September to come over'."
Here Gregotio Leti (who he?) pays tribute to William and his sailors
"No great power on Earth - including the Romans - has ever put so powerful a fleet, of more then four hundred sail, to sea so quickly, and so well provisioned... This Republic (is) openly entrusting its liberty, its blood, its military power, and prosperity to the pitiless sea in the harshest season of the year - and exposing itself still further to the caprices of the English, whose moods are as inconstant as the waves - against a king who lacks neither force nor support both at home and abroad. Why are they doing all this? Why are they exhausting wealth and land to prepare this fleet? Why... fearlessly exposing themselves to such perils and risks just to save others?"
Why indeed? The Spanish Armada, by comparison, was in the region of only 130 ships, yet that's the only one we hear about. Mention the Dutch Armada to most people and they won't have a clue what you're talking about, in fact, I didn't myself until I started researching all this. Some parts of history seem to be hidden by omission. Why would that be?
How many did those sails carry? "The schedule of forces published by William in Holland 14,352 men, 3,660 of them cavalry. Most leaders, now and then, exaggerate their forces. William may have done the opposite; his cover was that these troops of infantry, the heavy guns, the sweating horses, were not an invading army, but a kind of glorified bodyguard, 'utterly disproportioned to that wicked design of conquering the nation'."
William was welcomed with open arms by the City. Not everyone was so keen and some made that plain, but "There was no such reticence in the simultaneous declarations issued from Guildhall by the various governing bodies of the City of London. With Sir John Chapman disabled by his stroke, Whigs of the Exclusion Crisis emerged to claim London as their own. Among them were some of the financiers who had long ago signalled their opposition to James; both Houblon brothers were on the committee which drafted the declaration from Common Council, while legal advice was obtained from Sir George Treby, the Whig lawyer who had been suspended when London lost its charter. 'Finding ourselves finally disappointed by His Majesty's withdrawing himself, we presume to make your Highness our refuge, and so, in the name of this Capital City, implore your Highness's protection, and most humbly beseech your higness to vouchsafe to repair to this City, where your Highness will be received with universal joy and satisfaction'."
The Dutch banks, one imagines, got paid back pretty quick once William was established, although Dillon doesn't tell us that directly, saying the new Monarch promptly requested and was granted repayment of the £600,000 the invasion had cost.
"Tenacious though he was, brave though he was in action, Willliam of Orange was not the greatest general of his day, nor the most inspiring leader. One reality of modern warfare, however, he grasped better than any other general in Europe: that war was no infinitely more expensive than war had ever been before. His schooling in that lesson had come from Amsterdam, and as if to confirm that he had learnt it, almost his first act as King had been to request repayment of the £600,000 the English project had cost the Dutch. 'I am confident your generosity will have as little bounds towards them, as theirs had towards you,' he told his first parliament, 'of which our account shall be given to you.'... Whether they agreed or not, Parliament could hardly refuse to pay; without Dutch intervention they would not have existed."
War was and is expensive. This is good news for some though; Dillon goes on to tell us "All nations were struggling with the costs of war. The French King's credit was so poor in December 1869 that Paris bankers were said to have 'buried their money' rather than lend it to him. By contrast, the Whig government in 1694 had two advantages. The City's leading financiers were on their side, and the loans they had made immediately after the Revolution had revealed to them a fundamental truth; that war at 8% was extremely good business".
This will come as a shock to those who, along with Edwin Star, mistakenly thought war was good for, uh, 'absolutely nuthin'. The City has known war=profit for centuries. I've even heard it suggested the 1st World War was started with that - profit - in mind. I'll try to find the story and relay it to you all some day... but to continue, war was good business but only if you actually got paid. Under individual monarchs, payment had not always been forthcoming. "In the past this had been the check to substantial investment in government. Charles 2nd's 'Stop of the Exchequer' was a notorious case study in royal untrustworthiness. It had ruined the City's leading banker, Edward Backwell, and underlined the Dutch maxim (DUTCH MAXIM!! - BB) that finance could never prosper under an arbitrary monarch. There was no longer such a monarch in England, however. It was Parliament who voted through loans and guaranteed to pay the interest upon them. And that shift was the first breakthrough in Goverment finance, for from now on a loan to the Government was no longer a loan to an individual - the King - on whose doubtful character the creditor must then depend. It was founded on the credit of Parliament. "Public Credit", as Daniel Defoe later put it, "is national, not personal, so it depends on no thing or person, no man or body of men, but upon the Government.". The result was to vastly increase the credit-worthiness of the state. Not only did Parliament and the nation answer for it, but loans raised on this basis could be managed as a long-term part of the finances, rather than as a series of expensive and ad-hoc short-term loans. The House of Commons could envisage 'a fund of perpetual interest'. The National Debt had come into being"
Anyhoo, back to our theme... Taking advice from the Earl of Sunderland, William dumped Tories and surrounded himself with Whigs, who he placed in position s of power, with a view to encouraging loans from them. These became known as the Whig Junta. "The greatest task facing them was to resolve this crisis in war finance. Their solution would change forever the way government worked. It would be less a matter of strategy, however, than a series of desperate improvisations carried out on the brink of financial ruin. These improvisations did save the nation - but only at a cost. For the revolution in finance would drag the state itself into the new world of risk."
There are whole chapters of interest in this book, but we must limit ourselves... "And it was Michael Godfrey, in partnership with the Scottish entrepreneur William Paterson, who presented the 1694 scheme for a new Bank of England. They proposed a fund of 1.2m, to be made available to the Government at 8%, the loan to be secured on the new institution of Parliamentary credit. That was the immediate solution for the war finance crisis. In the longer term, though, Godfrey and Paterson foresaw all the advantages which a national bank would bring: Goverment debt could be managed; payment by bill of exchange could reduce bullion outflow and facilitate trade, while interest rates might at last start to fall, perhaps even to the Dutch figure of 3% (a rate eventually reached in 1749)."
Later we're reminded "The Bank of England did not emerge as a fully-formed modern state Bank. It's foundation, however, was the key step in London's development as a financial centre. Increasingly the Bank would be used to manage the Government's long-term debt. As the country's financial position worsened in the next two years, with exchequer tallies discounted 30%, and the Bank's own notes down 16%, it was the Bank of England which stepped in to rescue deficient tax funds with new loans, eventually to be converted into long-term debt. It would be the Bank of England which made Government debt liquid, and therefore desirable. Its foundation was a fundamental change in the way governments paid for their operations."
That same MIchael Godfrey was later killed abroad, shot by a cannonball while inspecting trenches in Flanders a loan from his bank had made possible. "There was mourning for Godfrey in the City. In the wider country, though, grief may have been muted. For to most people in England, the Bank and its related financial innovations were not an economic triumph, but a dangerous adventure which had dragged the whole nation into the world of risk, threatening to pull it into the same vortex into which the projectors had disappeared. 'Dutch Finance' was not a breakthrough in the managemment of human affairs but 'a canker which will eat up the gentlemen's estates in land, and beggar the trading part of the nation, and bring all the subjects in England to be the monied men's vassels'." That last was fron one John Briscoe, bruised from a partnership with the City's Nicholas Barbon.
"You had a new and different kind of wealthy individual springing up as a result of the Dutch approach to finance and the introduction of credit, hitherto apparently undreamt of. "'Tis the principle of us Modern Whigs to get what we can, no matter how' bragged Tom Double, the satirical monster Charles Devenant dreamed up to keap scormn on the new breed of moneyed men, the carpet-baggers of the Revolution." I mention this because the self-description could be so easily applied to the Whigs' modern counterparts in politics and business.
Their behaviour led then as now to a financial crisis, solved eventually by Isaac Newton's recoining of the supply, withdrawing existing coinage much reduced by reduced in value by clipping and replacign it with new coins having milled edges, an idea we still have today. Paper money was introduced too, baffling the public with the idea, voiced by Nocholas Barbon, that "Money is a value made by a law" and not necessarily an item having intrinsic value. He also suggested, equally perturbingly, "Credit is a value raised by an opinion". Dillon tells us "on such flimsy wings did Modern economics take flight. To most people in England the crisis over the value of money was of a piece with stockjobbing, gambling and national lotteries. Dutch finance was the disparaging name given to all the novelties of the new economic world which emerged after the Revolution: to banks and lotteries, futures markets and public credit, speculation and paper money. In the economy, as in the political world, as in religion and knowledge, old certainties were disappearing."
Where did this go? Eventually, the desire to increase the demand for the banks' product, money, led to the Industrial Revolution. Here's one of the closing paragraphs of 'The Last Revolution' (Patrick Dillon);
"Thomas Savery waxed lyrical about what his steam-pwered engine could do; pump water from mines to allow minerals to be extracted far deeper, , drive other machines, power ships against wind and tide so that they would not need sails. One day it would do all of these things, but it would take a hundred uncertain years to combine the various necessary breakthroughs in metallurgy, casting, in the design of furnaces and the calculation of pressures, which would together make this wheezing, shimmering contraption an object of practical use. It would be a hundred years before the sound of steam engines filled English valleys. They would only do so because finance was available to fund development - finance in search of profits, based on risk."
Money, the Unauthorised Biography, by Felix Martin
What happened to tally sticks? There must have been millions of them, where did they all go? They got burnt. ALmost ALL of them that were still around. A tragedy, right? There's so much we'll never know now... how did this dreadful event happen? Felix Martin quotes Charles Dickens on the subject "It came to pass that they were burnt in a stove in the House of Lords. The stove, overgorged with these preposterous sticks, set fire to the panelling; the panelling set fire to the House of Lords; the House of Lords set fire to the House of Commons: the two houses were reduced to ashes..."
They didn't need them any more after they were outdated - from 1834 they used paper - so they got rid of the last lot by burning them. It sounds like they were overeager to get rid of them, from Dickens' description of how they overstuffed the stove with them. Sounds a bit desperate, doesn't it? Quite apart from no-one apparently grasping there was a danger of setting fire to Parliament, did no-one have any sense of history back then, I wonder? Did it not occur to anybody that these would be invaluable to future generations? I mean, wouldn't you think that someone, anyone, would think of that? Or was their complete destruction carried out on purpose, with a view to making using the new paper money, the bank's covert product, the natural order of things, with nothing left to remind people that there'd ever been any other way?
How did banker money come to displace sovereign money in this period? This was the conundrum of the day for the then banksters, though I'm sure in myself from Downing's attempts to set one up decades previously that this had all been planned in Holland/The Low Countries during his time in the Hague. Martin tells us "The result was... a long-running guerilla war between sovereigns and the private money interest which neither side could win. All this was to change with a final historic invention at the end of the seventeenth century. As had been the case with money itself, this was an innovation that was the result of transplanting advanced ideas from the most sophisticated commercial culture of the age into a financial backwater - but one which enjoyed a unique political inheritance. In this reprise of the old drama the part of the sophisticate was to be played by the Low Countries, and that of the bumpkin by England. Holland's cutting-edge technology was 'Dutch finance': the most system for managing the national debt that then existed. England's contribution was its recent, painful adoption of constitutional monarchy. The resulting invention was the Bank of England - and with it, the basis of all modern banking systems, and all modern money."
What made this new bank different from others? Well, "Investors would subscribe capital to the bank, and the bank would lend money to the government... What was new about Projector William Paterson's proposal was that this Bank of England would in effect be a publi-private partnership... Its design, governance and management were to be delegated to the mercantile classes precisely in order to ensure confidence in its operations and credit control". The merchants had, over the years, proven their creditworthyness whereas the monarchy, well... the Stop of The Exchequer was not soon to be forgotten... "... But in return the sovereign was to grant important privileges. Above all, the Bank was to enjoy the right to issue banknotes - a license to put into circulation paper currency representing its own liabilities, which could circulate as money."
Now Patersons idea, Martin explains, might easily have been overlooked but the idea was favoured by the Whigs, attracted to it by the idea if they backed this then "the king would in turn allow them a statutory share in his ancient and most jealously guarded prerogative: the creation of money and the management of its standard. To be granted the privilege of note issue by the crown... this, they realised, was the Philosopher's Stone of money... what they would sow by agreeing to lend, they would reap a hundredfold in being allowed to create private money...". Philosopher's Stone indeed, the ability to turn base paper, in this case, into notes having the value of gold. Here, in real life not legend, was alchemy.
Martin mentions to us "It was not the first time that the mysterious magic of banking had been put forward as a solution to the problem of the crown's fiscal incontinence. In 1665, Sir Charles Downing had proposed that the Treasury become a virtual state bank. The Earl of Clarendon, the ing's chief advisor, had dismissed the plan on explicitly political grounds as 'introductive to a commonwealth, andf not fit for a monarchy'." I believe he means Sir George Downing there, Charles being his as yet unborn grandson.
I should point out there were other banknotes in circulation but the BofE's had the advantage of being sovereign-backed. These were the notes which won out over the others. They had more credibility in the marketplace.
The Invention of Capitalism, Michael Perelman
We can learn much from this book, not least from the blurb on the back cover, itself in some ways more directly informative than some books and documentaries on economics I've read (Niall Ferguson, Robert Peston, I'm looking at you here). The writers we assocaiate with the creation of classical political economy (the usual suspects, Smith, Ricardo, Steuart etc.) mostly neglected to explain one very ugly aspect of the beginnings of capitalism, "peasants would have to abandon their self-sufficient lifestyle and go to work for wages in a factory. Why would they willingly do that? Clearly, they did not go willingly."
How were they made to accept it then? How is it the highly artificial way of life we have today come to supplant the more natural life on the land of centuries ago? It certainly wasn't by accident and it most certainly wasn't for our benefit; Perelman tells us "While economic historians may debate the depth of involvement in market activities at the time, the incontestable fact remains that most people in Britain did not enthusiastically engage in wage labour - at least so long as they had an alternative. To make sute that people accepted wage labour, the classical political economists actively advocated measures to deprive people of their traditional means of support. The brutal acts associated with the process of stripping the majority of the people of the means of producing for themselves might seem far removed from the laissez-faire reputation of classical political economy. In reality, the dispossession of the majority of small-scale producers and the construction of laissez-faire are closely connected, so much so that Marx, or at least his translators, labeled this expropriation of the masses as 'primitive accumulation'."
Perelman later notes "... classical political economy advocated restricting the viability of traditional occupations in the countryside to coerce people to work for wages." which, he says, "demonstrates the classical political economists'keen interest in driving rural workers from the countryside and into factories, compelling workers to do the bidding of those who would like to employ them..." and significantly, though Perelman never touches on this, appearing not to notice it, the policies promoted by classical political economists compelled workers to have to use money to live, increasing demand for what was now the bankers' product.
Mention should be made here of the Game Laws, intended originally to stop people from poaching too much, one gathers, they became a lot stiffer as capitalism took hold. Why? " The answer lies in the fact that the Game Laws reflected a situation where the interests of capital and the gentry coincided. The gentry could enjoy the prestige of hunting, while the capitalists could enjoy the labor of many of the people who were forbidden to hunt as a means of sustenance."
Cottage industry was the one-time norm. But then "... capitalism... created a spatial separation between the workplace and the household. At the same time, capitalism joined together independent workplaces into an ever expanding set of market relationships. In the words of Nassau Senior, 'Nature seems to have intended that mutual dependence should unite all the inhabitants of the earth into one great commercial family.' The establishment of this 'great commercial family' required that the relatively autarkic economic structure of the independent household be broken down in order that it would be doubly dependent. First, it was to become dependent on commodities that were, in general, produced with wage labour. Second, to acquire these commodities, members of the household would have to supply the market with wage labor."
Perelman dispenses this interesting information about Henry Ford, lionised by many as an example of benficient capitalism for his policy of paying high wages to attract the best staff, "As late as the 1930s in the United States, Henry Ford required that his employees tend gardens; furthermore, a staff of inspectoirs kept his company informed about those who were remiss in their horticultuiral responsibilities. Those whose gardens were deemd to be inadequate were dismissed. While Ford might want a full-time effort from his workers on the job, he knew that they would experienc e irregular employment. Gardens would help tie workers to Ford. They would also blunt the criticism of those who would point to the plight of the workers during their periodic bouts of unemployment."
He says of Steuart, he ".. was not one to base his work on the airy fiction of a social contract. Instead, he wrote with a blunt honesty about the harsh nature of capitalist development, seeking out the real forces that impeled people to provide surplus value for others, especially the desctruction of the self-sufficient household."
While we're on the loose subject of gardening and self-provision, let's take this lengthy quote Perelman makes from Aurthur Young. It's a long one, and we might be accused of over-egging our pudding in our eagerness to make our point here, but I feel it's worth that risk as with one senstence Young underlines and illustrates the independence of the country cottage home of the era; "... A modern society flourishes by the mutual exchange of the products of land for the manufactures of towns, a natural connection of one with another, and it may be remarked, that in proportion as the exchange is rapid from a great consumption, in such proportion will a peaople generally flourish. If every family in the country have a patch of flax or hemp for its own supply of all the manufactures found from these materials, this beneficial intercourse of the country with the town, is so far cut off, and no circulation takes place. If the practice be good in flax, it is good in wool; and every family should have a sufficient number of sheep, to cloth themselves in woolens; and if every little village have its little tanner, the same supposition may be extended to leather. A patch of vines furnishes the beverage of the family, and thus, by simple domestic industry, all wants are supplied; and a poor family, as it would be improperly called, would have no occasion to resort to the market for any thing to buy.... A countryman living on his own little property with his family industriously employed in manufacturing for all their own wants, without exchange, connection, or dependence on any one, offers, indeed, a spectacle of of rural comfort, but a species absolutely inconsistent with the prosperity of a modern society."
Modern society my arse - the real complaint was that people living self-sufficiently couldn't (and can't) be exploited.
Paper Against Gold; or, The History and Mystery of the Bank of England, of the Debt, of the Stocks, of the Sinking Fund, and of all the Other Tricks and Contrivances, Carried On by the Means of Paper Money. William Cobbett.
It's important to place this in context - he started writing it in 1810 from Newgate prison.
Who was Cobbett? IMHO, a guy with a very clear head indeed. Here's some of what the Wiki says "William Cobbett (9 March 1763 – 18 June 1835) was an English pamphleteer, farmer and journalist, who was born in Farnham, Surrey. He believed that reforming Parliament and abolishing the rotten boroughs would help to end the poverty of farm labourers, and he attacked the borough-mongers, sinecurists and "tax-eaters" relentlessly. He was also against the Corn Laws, a tax on imported grain. Early in his career, he was a loyalist supporter of King and Country: but later he joined and successfully publicised the radical movement, which led to the Reform Bill of 1832, and to his being elected in 1832 as one of the two MPs for the newly enfranchised borough of Oldham. Although he was not a Catholic, he became a fiery advocate of Catholic Emancipation in Britain. Through the seeming contradictions in Cobbett's life, his opposition to authority stayed constant. He wrote many polemics, on subjects from political reform to religion, but is best known for his book from 1830, Rural Rides, which is still in print today."
Where do I begin? The whole book could be classed as essential reading. It's dedicated to the Duke of Wellington by Cobbett, who seems to have written most of it from jail (he says in the preface "The first part of it was written, and published, while the Author was confined in prison for two years, with a thousand pounds fine to the King hanging over his head, for having written and published some observations on the flogging of certain English Local Militia-men, at the town of Ely in England, while Hanoverian Soldiers, who had been called in to reduce the former to submission, were present.") - the self-styled Online Library of Liberty http://oll.libertyfund.org/titles/cobbett-paper-against-gold-and-glory-against-prosperity-vol-1-1815 says of him "Cobbett wrote the first volume of 28 Letters while in prison for two years (1810-11) for opposing the flogging of some militia men. It is a history of how Britain funded the war effort against Napoleon by increasing the national debt, suspending the use of gold, and using paper money. Cobbett also chronicles the economic hardships imposed on ordinary working people by the disruption of trade, war taxes, and inflation of the currency."
You didn't used to see a lot of money in the form of notes, Cobbett tells us, in a bit of scene setting. I'm going to include far more than I need merely to make my point, because, centuries ago, this guy sat down to explain to his fellow men what was really going on, and we should listen, because a paradigm which was less than benign came into being centuries ago, and we're still under it's malevolent influence.
"There are few of you who cannot remember the time, when there was scarcely ever seen a bank note among Tradesmen and Farmers. I can remember, when this was the case; and, when the farmers in my country hardly ever saw a bank-note, except when they sold their hops at Weyhill fair. People, in those days, used to carry little bags to put their money in, instead of the paste-board or leather cases that they now carry. If you look back, and take a little time to think, you will trace the gradual increase of paper-money, and the like decrease of gold and silver money. At first there were no bank notes under 20 pounds; next they came to 15 pounds; next to 10 pounds: at the beginning of the last  war, they came to 5 pounds; and, before the end of it, they came down to 2 and to 1 pounds."
"You have, during the last seventeen years, seen the quantity of paper-money rapidly increase; or in other words, you have, day after day, seen less and less of gold and silver appear in payments, and, of course more and more of paper-money. But, it was not ’till the year 1797, that the paper-money began to increase so very fast. It was then that the two and one pound notes were first made by the Bank of England. It was then, in short, that paper-money became completely predominant. But, you will naturally ask me, “what was the cause of that?” The cause was, that the Bank of England stopped paying  its notes in gold and silver. What! stop paying its notes?Stoppage of Payment at the Bank of England. Refuse to pay its promissory notes? The Bank of England, when its notes were presented, refuse to pay them? Yes: and, what is more, an Act of parliament, brought in by Pitt, was passed, to protect the Bank of England against the legal consequences of such refusal. So that, the people, who held promissory notes of the Bank, and who had, perhaps, given gold or silver for them, when they went to the Bank for payment, were told, that they could have no gold or silver, but that they might have other notes, more paper, if they pleased, in exchange for the paper they held in their hands and tendered for payment. From that time to this, the Act of parliament, authorising the Bank of England to refuse to pay its notes in gold and silver, has been in force. At first it was passed for three months; next ’till the parliament should meet again; then it was to last to the end of the war; then, when peace came, it was continued just for a year, ’till things should be settled; then, as things were not quite settled, it was continued till parliament should meet again; and, as this present war had begun by that time, the act was made to continue ’till six months after the next peace."
Why would they do that? Well, the whole point of the notes was that they were backed by gold, hence the idea of the so-called gold standard. Were they, though? Was every note backed by a corresponding amount of gold?
Oh please... if you think there was ever a gold standard, I have a bridge or two for sale you'd probably quite like. Either would go well with your collection... don't ask how I know you have a collection :-)
"The chief object of our enquiries being this: Whether it be possible, without a total destruction of all the paper money, to restore gold and silver to circulation amongst us; this being the chief object of our inquiries, we should first ascertain how the gold and silver was driven out of circulation, and had its place supplied by a paper-money; for, unless we get at a clear view of this, it will be next to impossible for us to reason satisfactorily upon the means of bringing gold and silver back again into circulation.
Some people suppose, that paper always made a part of the currency, or common money, of England. The Origin of the Bank of England, and of the Funds, or Stocks, was in They seem to regard the Bank of England as being as old as the Church of England, at least, and some of them appear to have full as much veneration for it. The truth is, however, that the Bank of England is a mere human institution, arising out of causes having nothing miraculous, or supernatural, about them; and that both the institution and the agents who carry it on, are as mortal as any other thing and any other men, in this or in any other country. The Bank, as it is called, had its origin in the  year 1694, that is, a hundred and sixteen years ago; and it arose thus: the then King, William III, who had come from Holland, had begun a war against France, and, wanting money to carry it on, an act was passed (which act was the 20th of the 5th year of his reign) to invite people to make voluntary advances to the government of the sum of 1,500,000 pounds, and for securing the payment of the interest, and also for securing the re-payment of the principal, taxes were laid upon beer, ale, and other liquors. Upon condition of 1,200,000l. of this money being advanced, within a certain time, the subscribers to the loan were to be incorporated; and, as the money was advanced in due time, the incorporation took place, and the lenders of the money were formed into a trading Company, called “The Governor and Company of the Bank of England.” Out of this, and other sums borrowed by the government in the way of mortgage upon the taxes, there grew up a thing called the Stocks, or the Funds (of which we will speak hereafter); but the Bank Company remained under its primitive name, and as the debt of the nation increased, this Company increased in riches and in consequence.
War and Taxation. Thus, you see, and it is well worthy of your attention, the Bank had its rise in war, and taxation. But, we must reserve reflections of this sort for other occasions, and go on with our inquiries how gold and silver have been driven out of circulation in this country, or, in other words, how it came to pass, that so much paper-money got afloat."
"The Act of Parliament, which I have just referred to, points out the manner in which the Bank Company shall carry on their trade, and the articles in which they shall trade, allowing them, amongst other things, to trade in gold, silver, bills of exchange, and other things, under certain restrictions; but, as to what are called bank-notes, the Company was not empowered to issue any such, in any other way, or upon any other footing, than merely as promissory notes, for the amount of which, in the coin of the country, they were liable to be sued and arrested. Having; however, a greater credit than any other individuals, or company of individuals, the Bank Company issued notes to a greater amount; and, which was something new in England, they were made payable, not to any particular person, or his order, and not at any particular time; but to the bearer, and on demand. These characteristics, which distinguished the promissory notes of the Bank from all other promissory notes, gave the people greater confidence in them; and as the Bank Company were always ready to pay the notes in Gold and Silver, when presented for payment, the notes became, in time, to be looked upon as being as good as gold and silver. Hence came our country sayings: “As good as the Bank;” “As solid as  the Bank;” and the like. Yet, the Bank was, as we have seen, merely a company of mortal men, formed into an association of traders; and their notes nothing more than written promises to pay the bearer so much money in gold or silver."
"We used to have other sayings about the Bank; such as, “As rich as the Bank;” “All the gold in the Bank;” and such like, always conveying a notion, that the Bank was a place, and a place, too, where there were great heaps of money. As long as the Company were ready and willing to pay, and did actually pay, their notes in gold and silver, to all those persons who wished to have gold and silver, it is clear that these opinions of the people, relative to the Bank, were not altogether unfounded; for, though no bit of paper, or of any thing which has no value in itself, can be, in fact, so good as a bit of gold; still, if it will, at any moment, whenever the holder pleases, bring him gold or silver to the amount written upon it, it is very nearly as good as gold and silver; and, at the time of which we are speaking, this was the case with the promissory notes of the Bank Company. But, it must be evident, that, though the Company were ready, at the time now referred to, to pay their notes in gold and silver, they had never in their money-chests a sufficiency of gold and silver to pay off all their notes, if they had been presented all at once.  This must be evident to every man; because, if the Bank Company kept locked up as much gold and silver as their notes amounted to, they could get nothing by issuing their notes, and might full as well have sent out their gold and silver. A farmer, for instance, who is generally using a hundred pounds of money to pay his workmen, might lend the hundred pounds and get interest for it, if he could persuade his workmen to take promissory notes of his own drawing, instead of money, and, if he were sure, that these promissory notes would not be brought in for payment; but, if this was not the case, he would be compelled to keep the hundred pounds in his drawer ready to give to those who did not like to keep his promissory notes; and, in such case, it is clear, that the money would be of no use to him, and that he might full as well have none of his notes out."
STILL think we were ever on a gold standard?
"Just so with the Bank Company, who, at no time, could have in hand gold and silver enough to pay off all their notes at once; nor was this necessary as long as the people regarded those notes as being equally good with gold and silver. But, it is clear, that this opinion of the goodness of the Company’s notes, or, rather, the feeling of confidence, or, still more properly, perhaps, the absence of all suspicion, with respect to them, must, in a great degree, depend upon the quantity of notes seen in circulation, compared with the quantity of gold and silver seen in circulation.  At first, the quantity of notes was very small indeed; the increase of this quantity was, for the first twenty years, very slow; and, though it became more rapid in the next twenty years, the quantity does not appear to have been large till the war which took place in 1755, before which time the Bank Company put out no notes under 20 pounds in amount. Then it was that they began to put out 15 pound notes, and afterwards, but during the same war, 10 pound notes. During all this time, loans, in every war, had been made by the government. That is to say, the government had borrowed money of individuals, in the same way as above-mentioned, in the year 1694. The money thus borrowed was never paid off, but was suffered to remain at interest, and was, as it is now, called the National Debt, the interest upon which is annually paid out of the taxes raised upon the people. As this debt went on increasing, the bank-notes went on increasing, as, indeed, it is evident they must, seeing that the interest of the Debt was, as it still is and must be, paid in bank-notes."
The banksters had done it. Paper they could run up in the basement for pennies would be treated is if it had the worth of gold. Here, I suggest, is your alchemy, base paper into gold!
"Without, however, stopping here to inquire into the cause of the coin’s not increasing with the increase of paper, suffice it to say, that such was the fact. Year after year we saw more of bank-notes and less of gold and silver; till, in time, such was the quantity of bank-notes required to meet the purposes of gold and silver in the payment of the interest of the still increasing Debt, and in the payment of the taxes, many other banks were opened, and they also issued their promissory notes. The Bank Company’s notes, which had never before been made for less sums than 10 pounds, were, soon after the beginning of Pitt’s war, in 1793, issued for five pounds, after which it was not to be supposed, that people could have the same opinion of bank-notes that they formerly had. Every part of the people, except the very poorest of them, now, occasionally, at least, possessed bank-notes. Rents, salaries, yearly wages, all  sums above five pounds, were now paid in bank-notes; and, the government itself was now paid its taxes in this same sort of currency."
As there were more and more notes in circulation, though, suspicion began to dawn on the general population that some day, some way, having a piece of paper in your hand might not be as good as having that same value in actual gold. They began asking for their gold back, in quantity. The response of the BofE was to promptly refuse to pay.
Bankers, eh? Plus ca change... but more on that later. Let's venture now with Cobbett into Letter Two, where he gives his opinion about how the national debt got started, and why.
"The Debt, in England, did, as we have seen, begin in the year 1692; and there appeared, at first, no intention to pay either the interest or the  principal in any thing but the usual gold and silver coin of the country. People lent their guineas and crown pieces, and there was not the smallest notion of their being repaid in any thing but guineas and crown pieces. But, it was soon found, that to pay the interest of its Debt, the government needed something other than gold and silver; which, indeed, any one might have foreseen, because the Debt itself necessarily arose from the want of gold and silver within the reach of the government. It was, therefore, supreme folly to suppose, that the government, who had borrowed people’s guineas from want, would long have guineas enough to carry on wars and to pay those people too. Accordingly, in only two years after the Debt began, the Bank was established; the Bank made notes; these notes, as far as they went, supplied the place of real money; and, very soon, by giving all possible countenance and support to the Bank, the government got great part of the interest of its Debt paid in bank notes. Thus were the bank notes, from the very outset, as, indeed, all promissory notes must be, the representatives of Debt, and not of wealth, of prosperity, or of trade; and, if this was the case, at a time when these notes were convertible into gold and silver, shall we now look upon them in a better light?"
A lot of what led to the run on the bank was hysteria fed by a hysterical press, venal ptints as Cobbett calls them.
"In the mean while, the negotiations for peace were broken off by the month of December, which gave rise to new alarm. This was soon followed by the appearance of a French naval force, with troops on board, off the coast of Ireland; and, though its return back to France, without attempting a descent, might, one would think, have tended to quiet people’s fears, it was, on the contrary, made the ground work of a still more general and more vociferous alarm. There was now no bounds to the exaggerations of the venal prints. From the first week in January, (1797) to the third week in February, the people were kept in a state of irritation hardly to be conceived. Addresses to them, in all shapes and sizes, were published, calling upon them to arm and come forth at once, not waiting for the slow process of the Militia and Cavalry Acts. “Already,” were they told, “the opposite coast was crowded with hostile arms; forests of bayonets glistened in the sun; despair and horror were coming in the rear.” It was next to impossible that this should not make people think of what was to become of them; make them reflect a little as to what they were to do in case of invasion; and it required but very little reflection to convince them, that  money, at all times useful, would, in such a case, be more useful than ever.Away the people run to the Bank! Whence by a very natural and easy transition, they would be led to contemplate the possibility of real money being rather better than paper. That’s enough! There needs no more! Away, in an instant, they go to the Bank, where the written promises tell them the bearer shall be paid on demand."
" The run upon the  Bank continued to increase, until the day last mentioned, Saturday, the 25th of February, 1797, a day which will long be remembered, and which will be amongst the most memorable in the annals of England, as being the last (hitherto at least) on which the Bank of England was compelled, at the will of the bearer, to pay its promissory notes in gold and silver, agreeably to the tenor of those notes; until the evening of that day the run continued, but, on the next, though it was Sunday, The immortal Order in Council. an Order was issued from the Privy Council requiring the Directors of the Bank to forbear issuing any cash in payment, until the sense of Parliament could be taken upon the subject, which memorable instrument was in the following words,* to which  I must beg of you, Gentlemen, to pay particular attention."
It's important to realise and always bear in mind when Cobbett or his contemporaries speak of cash, they mean gold and silver coins. We now today are more likely to mean notes or coins, as fivers, tenners, £20 and £50 notes are all referrd to in contamporary society as cash. Not so back then. Funny how things change, eh?
This was promptly followed by the passing of an "Act of Indemnification, that is to say, an act to shelter the parties concerned from the penalties of the law" ie which placed the then banksters usefully beyond the reach of law, much as it's suggested the Blair/Brown Finance Service & Marketing Act 2000 places our current banking fraternity beyond the law.
How did they get out of this fix? They made bank notes themselves legal tender.
What a happpy day for the banksters!
Springtime for banking!
And it had to be kept secret too, the real reason for the stoppage, so the committe formed to investigate it were, er... forbidden to comment on the real reason for it
"It was before observed, that the Committee; that even a Secret Committee, and that Committee, appointed, too, in the manner that we have seen (at page 253); that even a Committee like this were not permitted (to use the phrase of Pitt) to “push their inquiries into circumstances, the disclosure of which would be attended with injury to public credit.” Accordingly, not a word do this Committee say about the quantity of Gold and Silver in the Bank, though the great, and indeed, the only cause of the Stoppage, and of the whole of these  proceedings, was, the alarm felt by the Directors at the daily decrease in their Gold and Silver. The question, and the only question of any importance to the people, that is to say, to the holders of the Bank Notes, was: “Is there a quantity of real money in the Bank sufficient to pay us the amount of our notes, when we may choose to present them for payment.” This was the question, to which the people wanted an answer; but with nothing relating to this question, were the Committee to meddle. This question was, with assurance unparalleled, said to belong wholly to the “private economy of the Bank, with which the public had nothing at all to do.”"
And the reason they were refused permissio to discuss it was that if they'd been able to make public the fact that there's wasn't anythig like enough gold and silver (cash as they were known then) to cover the value of thenotes issued suposedly backed by gold, the notes would have been rendered worthless and the economy ended right there and then.
"Surely nothing ever was heard so impudent as this. The holders of the Bank Notes, the creditors of the Bank Company, the creditors of this Company of Merchants, carry their notes and demand payment; the Company of Merchants apply to the Minister, and he obtains from the Privy Council an Order to authorize the Company to refuse to pay the just and lawful demands of their creditors, and then the Minister, when he comes to the Parliament for an Act to sanction and to continue this refusal, tells the House of Commons, that even a Secret Committee of them, though chosen as we have seen, are not to push their inquiries into circumstances, the disclosure of which might injure the credit of the Bank; and yet he has the face to say, at the same time, that the report of this  Committee cannot fail to satisfy the country of the ability of the Bank to pay all its outstanding demands."
The public, not surprisingly, weren't impressed. Hence the declaration that paper was now legal tender. They HAD to like it then, they were stuck with it.
The committee appointed to look into the stoppage, after being told specifically not to look into how mach gold and silver the bank actually had, came up with nothing helpful, in fact, "no proof was produced, or attempted to be produced, that the Bank Company had gold or silver, or both together, sufficient to pay its promissory notes; and that no account was rendered to the Parliament of the amount of the cash and bullion in the Bank."
This came as no surprise to readers of American pamphleteer Thomas Paine;
"Mr. Paine had, only the year before, said, in the words of my motto, that the quantity of cash in the Bank could never, on the evidence of circumstances, be so much as two millions, and most probably, not more than one million; that, on this slender twig, always liable to be broken, hung the whole funding system of four hundred millions, besides many millions in bank notes; that the sum in the Bank was not sufficient to pay one fourth of only one year’s interest of the National Debt, were the creditors to demand payment in cash, or to demand cash for the bank notes in which the interest is paid: a circumstance always liable to happen. Mr. Paine founded this opinion upon a statement of Mr.  Eden (now Lord Auckland) and Mr. Chalmers, Clerk to the Board of Trade, who had given an account, or, rather an estimate, of the gold coin circulating in the kingdom; and, it is truly surprising to observe how near Mr. Paine was to the exact truth as to this point, though at the time when his pamphlet was published, its calculations and predictions were treated with scorn, and the work itself was ascribed to a malicious desire to cause the ruin of England; just as if it were in the power of Paine, or of any one else, to injure the credit of a nation; or, as if any thing but the want, the real want of the gold and bullion could shake the faith of the public in such an establishment as that of the Bank. Paine might have written ’till this time without persuading any one that a guinea was a thing not to be relied upon. He never would have written people out of their belief in the goodness of guineas. And, if the Bank had stood a run for only one week, he might have written his pen to the stump, but would not have shaken the people’s confidence. Credit that has a solid foundation need fear no assaults."
Note next how acceptance of bank notes was forced ypon people by the goverent maing them legal tender. Bear in mind what these paper notes actually are - they're the bank's product. I repeat; these are what the bank makes, and now that tally sticks are some time inthe past, now that gold and silver coins have been made scarce by the benk's having offered interest to those who surrendered them, in other words, the likely possible substitutes having been sidelined, now the main purpose could be enacted. Bits of paper which could only be produced by a bank would now form the basis of the economy.
"Until the time at which the Bank Stoppage took place; until the 26th day of February, 1797, the Notes of the Bank Company were considered as good as real money, because, if the holder chose it, he could, at any moment, demand and receive real money in exchange for them. But, when the Bank, in the manner that we have seen, refused payment upon demand, the nature of the Notes was wholly changed. They were no longer equal in value to real money; and nothing but a species of compulsion would, of course, induce the people to receive them in payment of any debt theretofore contracted."
"Now, then, came the pinch. Now came forth the fact, that it was beyond all the powers of hypocrisy, trick, and confusing verbosity any longer to disguise: forth came the fact, that Bank Notes were to be, in reality, forced upon the people; that the man, who had a debt due to him, must take them in payment, or if he refused them, be unable to arrest his creditor: forth came the fact, aye, forth it came, after all the railing against French assignats; forth came the fact, that no man who held a Bank note; that no man who held a note of that Company of Traders, payable on demand, could compel them to pay him, except in other such notes. Forth came this fact, and yet those who had brought the finances  of the country into such a state, were still kept in power; to their management were the nation’s affairs still left: to their promises did the credulous and affrighted people still listen; and of their measures has the nation ever since been feeling, and will, it is to be feared, long feel, the consequences.
As Cobbett says, what was the BofE, who were the people behind it? Just a group of traders, merchants, businessmen, and now they had their product being used nationally as the national currency, creating the most enormous demand for it.
"The Order of the Privy Council (See it in Letter XI, page 204) required the Bank Company to stop paying their notes in money. The words are “to forbear issuing any cash in payment.” I beseech you, Gentlemen, to consider well the nature of this transaction. Look back at the origin of the Bank. Consider it, as it really was, a mere Company of Traders. Then view the holders of the Notes, who were so many legal creditors, so many persons having a just and legal claim to be paid upon demand. See all these creditors at once deprived of their legal rights of payment by an Order of the Privy Council, of which the Minister himself was a member. See here a Company of Traders, having promissory notes out to the amount of many millions, required by the Privy Council “to forbear” to pay off the said notes; and above all, things, observe, and NEVER FORGET, that this order, or request, was made in consequence, as we have seen from the official documents, of representations made by this Company of Traders themselves, who, as is stated in those documents (Letter XIII, page 242), made such  representations in consequence of the drain upon their cash and of the alarm they therefore felt for the safety of their House."
It happened because they, those same traders and businessmen, asked for it to happen! Are you smelling a scam here?
The processes involved are meticulously recorded for us by Cobbett. There were more Acts involved, one to forbid the creation of paper notes to be used for sums less than £10, and later for sums less than £5, and one after the stoppage to suspend those Acts, after which such notes wer promptlty produced by the banks.
This suited the banks very well of coure because, where they had interest to pay in small sums, sums less than they could hand out banknotes (bits of paper they could produce themselves) for, they had to hand over actual gold or actual silver. Well, they didn't like a lot of that...
"But, this was nothing without giving a power of making small notes to the Bank of England. The Bank had dividends to pay; and, of course, all the sums, or parts of sums, under five pounds (there being, as yet, no notes under that sum) they were still compelled to pay in cash, which was what they did not like, and, in fact, what they were not, perhaps, able to do. It was, therefore, necessary, above all things, to give them a power of making small notes. There was a doubt, whether the two Acts of the 15th and 17th of George the Third, above-mentioned,  applied to bank notes; and, it was thought, by some persons, that they did not so apply; but, an Act of Parliament, the great cure for all doubts and difficulties, was passed to remove this doubt; and such was the haste in doing this, that the Act was passed on the 3rd of March, though the bill was brought in only on the 28th of February. This Act authorized the Bank to issue notes for sums under five pounds; and, accordingly, two and one pound notes were immediately issued.*
Which meant the Bank of England, that wonderful invention for extracting all the precious metals from the people of England, could move into a higher gear and separate the ordinary people of the land from their precious metals even more efficiently than previously.
I have said this before, and I'll say it again as it's worth repeating - to pull off a really big scam, you have to have government on-side.
The Decline and Fall of the English System of Finance, by Thomas Paine (5th edition).
Anyone serious about studying this period should read all of this. There's not much of it, no more than a few pages, but Paine provides us with corroboration of detail and adds his own insights. He tells us;
"Before the invention of the funding system, there was no other money than gold and silver; and as nature gives out those metals with a sparing hand, and in regular annual quantities from the mines, the several prices of things were proportioned to the quantity of money at that time, and so nearly stationary as to vary but little in any fifty or sixty years of that period." http://quod.lib.umich.edu/e/ecco/004828892.0001.000/16?page=root;size=100;view=text
Before the paper money we know came along, then, money was physical, gold and silver. It was bits of stuff, round, with pictures and words. It couldn't be made up. It could be mined, and molded once it'd been mined, but it couldn't be created from nothing the way paper money could. With paper money, you get your paper, your design, your ink, your printing press, and away you go, you've got money you could go out and spend. Bit great if you're the only ones can do that, eh? Worth funding the invasion of a backwards little island by a conquest hungry Prince to get that set up, eh?
"What a miserable prospect has England before its eyes! Before the war of 1755 there were no bank notes lower than twenty pounds. During that war bank notes of fifteen pounds and of ten pounds were coined; and now, since the commencement of the present war, they are coined as low as five pounds. These five pound notes will circulate chiefly among little shop-keepers, butchers, bakers, market people, renters of small houses, lodgers, &c. All the high departments of commerce, and the affluent stations of life were already over-stocked, as Smith expresses it, with the bank notes. No place remained open wherein to croud an additional quantity of bank notes but among the class of people I have just mentioned, and the means of doing this could be best affected by coining five pound notes. This conduct has the appearance of that of an unprincipled insolvent, who, when on the verge of bankruptcy to the amount of many thousands, will borrow as low as five pounds of the servants in his house, and break the next day. But whatever momentary relief or aid the minister and his bank might expect from this low contrivance of five pound notes, it will increase the inability of the bank to pay the higher notes, and hasten the destruction of all; for even the small taxes that used to be paid in money will now be paid in those notes, and the bank will soon find itself with scarcely any other money than what the hair powder guinea tax brings in." http://quod.lib.umich.edu/e/ecco/004828892.0001.000/51?page=root;size=100;view=text
Paine was singularly unimpressed with the entire idea of paper money. It's well worth reading his whole paper on the subject.
Imperialism; A Study, J.A. Hobson
Let us consider the nature of imperialism before we go further. Of the defintions Google gives us, perhaps this from the Brittannica is the most useful, observing as it does the connection between economics and power; "Imperialism, state policy, practice, or advocacy of extending power and dominion, especially by direct territorial acquisition or by gaining political and economic control of other areas. Because it always involves the use of power, whether military force or some subtler form..."
Why imperialism? Hobson has perhaps an unpopular view in that he suggests it's not for any good reason at all. He says, "The famous words of Sir Thomas More are as true now as when he wrote them: 'Everywhere do I perceive a certain conspiracy of rich men seeking their own advantage under the name and pretext of the Commonwealth.'"
Indeed. He himself notes that a "State in which certain well-organised business interests are able to outweight the weak, diffused interest of the community is bound to pursue a policy which accords with the pressure of the former interest."
He points out "... how small a proportion of our national income appeared to be derived as profits from external trade. It seemed unintelligible that the enormous costs and risks of the new Imperialism undertaken for such small results in the shape and increase to extrnal trade, especially when the size and character of the new markets acquired were taken into consideration. The statistics of foreign investments, however, shed clear light upon the economic policies which dominate our policy. While the manufacturing and trading classes make little out of their new markets, paying, if they knew it, much more in taxation than they get out of them in trade, it is quite otherwise with the investor."
British IMperialism 1688-1914, Cain/Hopkins
From the blurb; "While modern scholarship has tended tolocate the springs of imperial expansion outside Britain itself, Cain and Hopkins argue that it is impossible to understand the nature and evolution of British Imperialism without taking account of the peculiarities of her economic development. In partcular, the growth of he financial sector - and, above all, the City of London - played a crucial role in the shaping of the course of British history and Britain's overseas relations."
Bill Kruse - http://www.economania.co.uk/various-authors/various-authors.htm - Permission granted to freely distribute this article for non-commercial purposes if attributed to Bill Kruse, unedited and copied in full, including this notice.
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