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Those dishonest goldsmiths1

  • George Selgin (a1)

London's seventeenth-century goldsmiths are routinely said to have pioneered fractional-reserve banking in England by clandestinely lending coin they were supposed to store – that is, by embezzling their clients. I draw upon both contemporary testimony and contemporary English law to show that the goldsmiths were almost certainly innocent of the crime for which they are so often accused. I then go on to speculate that the myth of the embezzling goldsmith may have its roots in confusion of that crime with (1) crimes other than embezzlement of which goldsmiths were accused by their contemporaries and (2) embezzlement of stored coin not by goldsmiths but by the British crown and by some merchants' servants.

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The author is grateful to Meir Kohn, Hugh Rockoff, Mike Rozeff and Stephen Quinn, as well as two anonymous referees, for their helpful suggestions.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

L. Chandler and S. Goldfeld (1977). The Economics of Money and Banking, 7th edn.New York: Harper & Row.

J. K. Horsefield (1949). The cash ratio in English banks before 1800. Journal of Political Economy, 57, pp. 70–4.

J. K. Horsefield (1982). The ‘Stop the Exchequer’ revisited. Economic History Review, 35, pp. 511–28.

A. V. Judges (1931). ‘Historical revision: LVIII – the origins of English banking. History, 16, pp. 138–45.

F. T. Melton (1978). Goldsmiths' notes, 1654-1655. Journal of the Society of Archivists, 6, pp. 30–1.

S. Quinn (1997). Goldsmith-banking: mutual acceptance and interbank clearing in Restoration London. Explorations in Economic History, 34, pp. 411–32.

J. S. Rogers (1995). The Early History of the Law of Bills and Notes: A Study of the Origins of Anglo-American Commercial Law. Cambridge: Cambridge University Press.

G. Selgin (2009). The institutional roots of Great Britain's ‘big problem of small change’. European Review of Economic History, 14, pp. 305–34.

P. Temin (2004). Financial intermediation in the early Roman Empire. Journal of Economic History, 64, pp. 705–33.

J. Williams (1984). Fractional reserve banking in grain. Journal of Money, Credit, and Banking, 16, pp. 488–96.

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Financial History Review
  • ISSN: 0968-5650
  • EISSN: 1474-0052
  • URL: /core/journals/financial-history-review
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