6 - Metal in Motion: The Mechanics of Receipts

Summary

This chapter further analyzes the workings of the receipt system, using data from the Bank’s cash books, which survive from 1711. These data show that heavy usage of the receipt system began from about 1714, following the end of the War of Spanish Succession. From about 1720, most coins entering the Bank under receipt were foreign coins. Inflows of coins into the Bank’s receipt facility are shown to be appreciable percentages of New World gold and silver production. Coins under receipt were usually withdrawn from the Bank less than a year after they were deposited, with the exception of gold coins, which were sometimes surrendered to the Bank upon expiration of their receipts (such coins were said to be “fallen to the Bank”). Waves of fallen gold coins sometimes coincided with surges of gold into Amsterdam, as occurred after the 1720 collapse of John Law’s system in France. Because the receipt system functioned much as a repo facility, the chapter concludes with a derivation of implicit discounts (“haircuts”) on coins under receipt. Haircuts on silver coins are shown to be consistently positive, while haircuts on gold coins are variable and sometimes negative. These haircuts, combined with higher redemption fees for gold, created incentives for more consistent use of the receipt facility for silver coins, while usage of the receipt facility for gold was intermittent.