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Blupete's Weekly Commentary

February 21st, 1998.

"The Birth of The Banks"

Before the coming of William to the throne, in 1688, if anyone needed a loan, including the king (the government), it would be necessary to visit the London goldsmiths (there were very few of them). The fight for the English throne between James and William, in 1688-9, had the effect of bankrupting the goldsmiths (presumably they had put their money on the wrong man) and the process wreaked financial havoc. Rather than see the exchange business fall into the hands of a privileged few and run the risk again, William decided to incorporate a company (a legal artifice) and arrange for it to loan him (the crown) 1,200,000£ and to it he would simply owe the money (a solid repayment plan was likely not struck). Thus, in 1694, The Bank of England came into being.

This new company, The Bank of England, upon arrangements having been made with the king, would be able, to, in turn, raise the funds by public subscription. In ten days time the subscription sold out and the bank was to beholden to the "fundholders." Its promotion and its success (the gathering in of the people's money for government purposes), was due; first, because of the Royal guarantee to cover, should the Bank of England default; and, second, the need for a man, even the common man, to store wealth.

This scheme of William's, as it was to turn out, was to bring into being an institution in which could be found the very substance of England's personal wealth right down to the thrifty farmer's hay thrasher. The set up of The Bank of England was a brilliant move, mostly unconsciously made: it not only put a lot of money in the royal treasury, some of which would be used to run the country, it bound over all of the moneyed people (a great number of all sorts, sizes and amounts) to be loyal to him in the continuing fight with the Jacobeans in respect to the restoration of a Stuart; who would, it was believed, cancel these loan arrangements of the Bank of England. The effect of all of this was that every person possessing property rights in England (and a number of foreigners who had determined to buy these rights) put their money on William the Third against the risk that a Stuart would take the throne.

The fight of William the Third against the Stuarts was to became a classic, possibly first defined by the formation of the Bank of England: it became -- the moneyed people, against the non-moneyed; the industrialists, against the workers; the protestants, against the catholics; the Tories against the Whigs; the crown, against the parliament.

It remains, however, in the telling of the birth of the The Bank of England, to tell of the birth of its twin, -- the public debt; and, the resulting and the continuing need to shift "interest" from those that do not have (for whatever reason) to those that do have (for whatever reason).

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Peter Landry

February, 1998 (2019)