Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

100 Money, Bank Credit, and Economic Cyclesover both halves of the globe, and her wealth is so great thatduring the war she supplied as much as fifty millions a yearif not more. 104In 1802, when, as we will now see, the Bank of Amsterdamstarted to become corrupt and violate the principles on whichit was founded, the bank still enjoyed enormous prestige, tothe point that the French consul in Amsterdam noted:At the end of a maritime war which has kept the treasuresof the mines pent up in the Spanish and Portuguesecolonies, Europe is suddenly inundated with gold and silverin quantities far above what is needed, so that they woulddecline in value if they were put into circulation all at once.In such an eventuality, the people of Amsterdam depositedthe metal in ingots in the Bank, where it was kept for themat a very low cost, and they took it out a little at a time tosend to different countries as the increase in the rate warrantsit. This money, then, which if allowed to flood in toorapidly would have driven up the prices of everythingexceedingly, to the great loss of all who live on fixed andlimited incomes, was gradually distributed through manychannels, giving life to industry and encouraging trade. TheBank of Amsterdam, then, did not act only according to thespecial interests of the traders of this city; but the whole ofEurope is in its debt for the greater stability of prices, equilibriumof exchange and a more constant ratio between thetwo metals of which coin is made; and if the bank is not reestablished,it could be said that the great system of thetrade and political economy of the civilised world will bewithout an essential part of its machinery. 105104 Pierre Vilar, A History of Gold and Money, 1450–1920, Judith White,trans. (London: NLB, 1976), p. 207. The deposit and reserve figures wehave cited in the text are also found here on pp. 208–09. Two other Europeanbanks modeled after the Bank of Amsterdam were the Bank ofVenice and the Bank of Hamburg. They were both founded in 1619.Although the first eventually violated the strict safekeeping obligationand disappeared in 1797, the Bank of Hamburg operated in a more consistentmanner and survived until merging with the Reichsbank in 1873.J.K. Ingram, “Banks, Early European,” in Palgrave’s Dictionary of PoliticalEconomy, Henry Higgs, ed. (London: Macmillan, 1926), vol. 1, pp. 103–06.105 Vilar, A History of Gold and Money, 1450–1920, p. 209.