This chapter again uses data from the Bank’s ledgers, cash books, and other records to examine its policy decisions over much of the eighteenth century (1711—1791). Examination of these data indicates that the Bank’s accounting was highly focused on accurate tabulation of the total stock of Bank money. It is argued that this money stock had two functional components, de facto splitting the bank into two institutions: a passive bank whose money originated from customers’ deposits of coins under receipt, and an active bank whose money originated from open market purchases of metallic assets and credit operations. The data show that from 1727 forward, the active portion of the Bank’s money was systematically adjusted to balance out (sterilize) fluctuations in the passive portion. The chapter also discusses two crisis episodes when this policy approach broke down: (1) a financial panic in the autumn of 1763 that required a liberalization of the receipt system, leading to unbalanced expansion of the passive bank; (2) excessive lending to the Dutch East India Company during the Fourth Anglo-Dutch War (1780—1784), leading to a contraction of the passive portion and overexpansion of the active. The effects of the latter crisis were sufficiently severe that the Bank never fully recovered.

Van Dillen, Johannes Gerard. Bronnen Tot de Geschiedenis der Wisselbanken: (Amsterdam, Middelburg, Delft, Rotterdam). The Hague: Martinus Nijhoff, 1925. (A two-volume edited transcription of many primary sources relevant to the Bank of Amsterdam and other early-modern Dutch municipal banks.).

This chapter surveys the first half-century of the Bank’s history, drawing largely on secondary sources because only limited archival material has survived for this period. The original purpose of the Bank, as stated in its 1609 charter, was to take in various types of coin as deposits, facilitate book-entry (giro) payments among Bank customers, and pay out high-quality coins for withdrawals. Ongoing deterioration in the quality of the circulating coin, largely due to debasement, made it impossible for the Bank to adhere to its original mission. Instead, the Bank developed its own unit of account, the bank florin, which was applied to Bank money and was distinct from the unit of account for local forms of money, the current guilder. Having a distinct unit of account made it easier for the Bank to deter money-losing inter-coin arbitrage. This period also witnessed the development of a secondary market in Bank money to facilitate domestic currency exchanges (bank florins for current guilders). This era closed with the passage of the Dutch Republic’s 1659 coinage ordinance, which granted official status to the bank florin.

This chapter lays out the monetary, financial, and political environment in Amsterdam in the mid-eighteenth century — the high tide of the Bank. The main types of monetary assets within Amsterdam are described, along with the channels by which one monetary asset could be exchanged for another. This chapter also discusses major players in the Amsterdam money markets and their connections to the Bank. The chapter concludes with a discussion of the Bank’s relationship to the City of Amsterdam and fiscal aspects of this relationship.

This chapter covers the Bank’s introduction of its receipt (quasi-repo) facility in 1683 and its simultaneous transition to a fiat-money standard. Data extracted from the Bank’s ledgers (which survive from 1666) show that before the introduction of receipts, the Bank routinely executed large purchases of silver in order to maintain the size of its balance sheet and to ensure an adequate stock of metallic assets. These data also show that the Bank’s open market purchases were curtailed after the introduction of the receipt system, which created greater incentives for Bank customers to deposit trade coins into the Bank. With the introduction of receipts, Bank ledger balances unaccompanied by a receipt lost their rights to redemption in coin—Bank money became fiat money. The archival data suggest that the transition to fiat money was chiefly motivated by a desire to improve Bank accounting, via a reduction in the set of feasible transactions involving precious metal. The chapter shows how the transition to fiat money also stabilized the market value of Bank money. An appendix to this chapter presents a methodology for classifying Bank transactions from entries in its ledgers.

This chapter discusses categories of precious metal assets (bullion, trade coins, and local coins) and their roles within eighteenth-century Amsterdam. Bullion was valued for its fine content, but failed to meet the modern definition of a “safe asset,” because its use as a means of payment was limited by the need for assay. Popular varieties of high-denomination trade coins, on the other hand, did function more as safe assets because they circulated freely, often cross-border, at premia above the value of their advertised fine content. The Bank’s archives show that these trade coins were seen as safe enough to value by “tale,” that is, by enumeration. Trade coins were the major form of collateral held at the Bank. However, the Bank also occasionally dealt in low-denomination local coins. Local coins were rarely employed in international trade but were commonly used within the domestic economy of the Dutch Republic and nearby areas. The chapter explains that players in the Amsterdam market, the Bank included, always viewed these categories of precious metal as distinct types of assets.

This chapter offers an example of the role of the Bank in European state finance. The kingdom of Prussia made heavy use of the Bank during the Seven Years War (1756—1763). Public finance in Prussia during this period was primitive, lacking basic features such as a bond market or central bank. Under heavy financial pressure, Prussian King Frederick II chose to finance much of the war through the production of debased coinage. The task of minting debased coins was outsourced to private contractors (“mint entrepreneurs”), who purchased much of the necessary silver in Amsterdam, making use of credit which was abundant in the Amsterdam market. Details of these transactions are revealed in the Bank’s ledgers. Frederick also relied on gold subsidies from Great Britain, which were paid via Amsterdam and can also be matched to Bank records. Finally, at the end of the war, Frederick called upon his entrepreneurs to engineer a reverse debasement (reinforcement). This activity once again relied heavily on Dutch resources, including remote smelting furnaces, Amsterdam credit, and Bank money. Traces of the entrepreneurs’ activity can again be seen in the Bank’s records.

This introductory chapter describes salient features of the Bank of Amsterdam and proposes that these were sufficiently advanced to qualify the Bank as a modern central bank. Sophisticated central banking, however, was not the Bank’s original mission, which instead was to apply contemporaneous information technology (double-entry accounting) within a limited-purpose institution to facilitate the movement of safe assets (trade coins) through Amsterdam. By the eighteenth century, the Bank had moved well beyond its original design and evolved into a de facto fusion of two banks, active and passive, linked by a common liability — fiat ledger money. This chapter outlines this evolution, which is explored in greater detail in subsequent chapters.