Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-28T01:15:26.584Z Has data issue: false hasContentIssue false
  • English
  • Français

Those dishonest goldsmiths1

Published online by Cambridge University Press:  11 September 2012

George Selgin
George Selgin*
Affiliation:
University of [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

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.

Keywords

bailmentsembezzlementfractional-reserve bankingfraudgoldsmithsG21K12N23
Type
Articles
Information
Financial History Review , Volume 19 , Issue 3 , December 2012 , pp. 269 - 288
Copyright
Copyright © European Association for Banking and Financial History e.V. 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

1

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

References

REFERENCES

Anderson, A. (1762). Historical and Chronological Deduction of the Origin of Commerce. London.Google Scholar
Andreau, J. (1999). Banking and Business in the Roman World. Cambridge: Cambridge University Press.Google Scholar
Anonymous (1884). Times past and present. The Bankers' Magazine, 44, pp.728–32.Google Scholar
Baumol, W. J. and Blinder, A. S. (2009). Economics: Principles & Policy, 11th edn.South-Western.Google Scholar
Benston, G. J. (1999). Regulating Financial Markets: A Critique and Some Proposals. Washington, DC: American Enterprise Institute.Google Scholar
Campbell, C. D., Campbell, R. G. and Dolan, E. G. (1988). Money, Banking, and Monetary Policy. Chicago: Dryden Press.Google Scholar
Chandler, L. and Goldfeld, S. (1977). The Economics of Money and Banking, 7th edn.New York: Harper & Row.Google Scholar
Coquillette, D. R. (1993). The mystery of the new-fashioned goldsmiths: from usury to the Bank of England (1622-1694). In Piergiovanni, V. (ed.), The Growth of the Bank as Institution and the Development of Money-Business Law. Berlin: Duncker & Humblot, pp. 91–117.Google Scholar
Defoe, D. (2008 [1697]). An Essay upon Projects. Rockville, MD: Arc Manor.Google Scholar
Fox, D. (1996). Bona fide purchase and the currency of money. Cambridge Law Journal, 55, pp. 547–65.Google Scholar
Goldin, H. E. (1913). Mishnah: A Digest of the Basic Principles of the Early Jewish Jurisprudence. New York: G. P. Putnam's Sons.Google Scholar
Greenbaum, S. I. and Thakor, A. V. (2007). Contemporary Financial Intermediation, 2nd edn.Burlington, MA: Elsevier.Google Scholar
Herbert, W. (1836). The History of the Twelve Great Livery Companies of London, vol. 2. London: The author.Google Scholar
Horsefield, J. K. (1949). The cash ratio in English banks before 1800. Journal of Political Economy, 57, pp. 70–4.CrossRefGoogle Scholar
Horsefield, J. K. (1982). The ‘Stop the Exchequer’ revisited. Economic History Review, 35, pp. 511–28.Google Scholar
‘J. R.’ (1676). The Mystery of the New-Fashioned Goldsmiths. London: s.n.Google Scholar
Judges, A. V. (1931). ‘Historical revision: LVIII – the origins of English banking. History, 16, pp. 138–45.Google Scholar
Kohn, M. (1999). Early deposit banking. Dartmouth College Department of Economics Working Paper 99-03, February.CrossRefGoogle Scholar
Laurent, R. D. (1994). Is there a role for gold in monetary policy? Federal Reserve Bank of Chicago Economic Perspectives, pp. 2–14.Google Scholar
Macaulay, T. B. (1855). The History of England, from the Accession of James the Second, vol. 4. London: Longman, Brown, Green, and Longmans.Google Scholar
Mankiw, G. (2008). Principles of Economics, 5th edn.Mason, OH: Cengage Learning.Google Scholar
Martin, J. B. (1892). ‘The Grasshopper’ in Lombard Street. London: Leadenhall Press.Google Scholar
Melton, F. T. (1978). Goldsmiths' notes, 1654-1655. Journal of the Society of Archivists, 6, pp. 30–1.Google Scholar
Melton, F. T. (1986). Sir Robert Clayton and the Origins of English Banking, 1658-1685. Cambridge: Cambridge University Press.Google Scholar
Mitchell, D. M. (1994). ‘Mr Fowle pray pay the washwoman’: the trade of a London goldsmith-banker, 1660-1692. Business and Economic History, 23, pp. 27–38.Google Scholar
Nichols, G. O. (1971). English government borrowing, 1660-1688. Journal of British Studies, 10, pp. 83–104.Google Scholar
North, D. (1691). Discourses upon Trade; Principally Directed to the Cases of the Interest, Coyning, Clipping, Increase of Money. London: Thomas Basset.Google Scholar
Pepys, S. (1904). The Diary of Samuel Pepys, ed. Wheatley, Henry B.. London: George Bell and Sons.Google Scholar
Powell, E. T. (1915). The Evolution of the Money Market, 1385-1915. London: Frank Cass & Co.Google Scholar
Price, F. G. H. (1881). Some notes on the early goldsmiths and bankers, to the close of the seventeenth century. Transactions of the London and Middlesex Archeological Society, 5.Google Scholar
Price, F. G. H. (1890). A Handbook of London Bankers, with Some Account of their Predecessors, the Early Goldsmiths. London: Leadenhall Press.Google Scholar
Quinn, S. (1996). Gold, silver, and the Glorious Revolution: arbitrage between the bills of exchange and bullion. Economic History Review, 59, pp. 473–90.Google Scholar
Quinn, S. (1997). Goldsmith-banking: mutual acceptance and interbank clearing in Restoration London. Explorations in Economic History, 34, pp. 411–32.Google Scholar
Quinn, S. (2001). The Glorious Revolution's effect on English private finances: a microhistory, 1680-1705. Journal of Economic History, 61, pp. 593–615.Google Scholar
Richards, R. D. (1958 [1929]). The Early History of Banking in England. London: Frank Cass.Google Scholar
Rogers, J. S. (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.Google Scholar
Rothbard, M. (1962). The case for a 100 per cent gold dollar. In Yeager, Leland B. (ed.), In Search of a Monetary Constitution. Cambridge, MA: Harvard University Press, pp. 94–136.Google Scholar
Rothbard, M. (2008). The Mystery of Banking, 2nd edn.Auburn, AL: Ludwig von Mises Institute.Google Scholar
Ruding, R. (1857). Annals of the Coinage of Great Britain and its Dependencies. London: Nichols, Son, and Bentley.Google Scholar
Sause, G. G. (1966). Money, Banking, and Economic Activity. Boston: D. C. Heath.Google Scholar
Selgin, G. (2009). The institutional roots of Great Britain's ‘big problem of small change’. European Review of Economic History, 14, pp. 305–34.Google Scholar
Shapiro, J. A. (1983). The Shetar's effect on English law – a law of the Jews becomes the law of the land. Georgetown Law Journal, 71, pp. 1179–1200.Google Scholar
Spalding, W. F. (1922). The London Money Market. London: Sir Isaac Pitman & Sons.Google Scholar
Story, J. (1832). Commentaries on the Law of Bailments etc. Cambridge: Hilliard and Brown.Google Scholar
Story, J. (1878). Commentaries on the Law of Bailments, 9th edn.Boston: Little, Brown, and Company.Google Scholar
Temin, P. (2004). Financial intermediation in the early Roman Empire. Journal of Economic History, 64, pp. 705–33.Google Scholar
Temin, P. and Voth, H.-J. (2006). Banking as an emerging technology: Hoare's Bank, 1702-1742. Financial History Review, 13, pp. 149–78.Google Scholar
Vickers, D. (1985). Money, Banking, and the Macroeconomy. Saddle River, NJ: Prentice Hall.Google Scholar
Violet, T. (1660). An Appeal to Caesar. London: s.n.Google Scholar
White, L. H. 2003. Accounting for fractional-reserve banknotes and deposits – or, what's twenty quid to the bloody Midland Bank? Independent Review, 7, pp. 423–31.Google Scholar
Williams, J. (1984). Fractional reserve banking in grain. Journal of Money, Credit, and Banking, 16, pp. 488–96.Google Scholar