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From John Adams to Boston Patriot, 26 September 1810

Quincy, September 26, 1810.

July, 1792. It appeared to me of some importance that my countrymen should be informed of the constitution of the bank of Amsterdam, and to this end I made all the enquiries in my power, in times that could be spared from other more important occupations, and prepared for congress the following sketch, which with the notes upon it, contained, as I was informed, a correct account of it.

A Memorial concerning the Bank of Amsterdam.

The bank of Amsterdam is much more simple than the denomination implies, in general, in the ideas of foreigners. It differs widely from those of Venice, of London and others, which have a capital formed by proprietors, (actionaries) to whose profit, those banks operate.

That of Amsterdam makes neither commerce nor loan, but upon real specie; upon their intrinsic value; and upon matters in lingots, bars, or masses of gold and silver.

This bank was erected in 1609. The magistrates of the city, opened the project of the bank, for the convenience of the merchants; but it is probable, that it was invented by the merchants themselves, as a remedy for the difficulty of payments, which became more and more considerable and embarrassing.

1. Because there was a good deal of foreign money in the city, with which they made payments reciprocally, amidst eternal disputes, concerning the value to be given or received.

2. Because, in the great number of coins struck by the states, diversely ordered, and singularly divided, they had not all, a constant circulation; notwithstanding the orders of the sovereign; some were declined, even below the fixed value, and others were worth more.

3. The external cashiers, whom the merchants employed in those times, as they do at present, to receive the money which is due to them in the city, and to pay in their turn what they owe, profited of the two inconveniences before mentioned, to make themselves gain, which augmented the disorder and the vexation of payments, as well as in writings.

The merchants contrived then to make reciprocal payments by a simple transposition of debit, from one to the credit of the other; but to this end it was necessary to assure the validity of payments made in this manner by a known and real value and solidly placed under the authority and warranty of the city. The magistracy lent themselves to arrangements, which answered to all these conditions; so that a number of merchants and cashiers, deposited, at first, at their pleasure, a sum in specie more or less considerable; which were then designed by the commissaries of the bank as ducats or rix dollars and others; which money was placed in one of the vaults of the state-house, under the department assigned for the carrying on this bank. Those who carried there their money, were credited for it upon a leaf of the great book, which was shewn to them; and from that time they might make reciprocal payments, as is practised at this day, without handling any cash; with this simple formula, viz. “Gentlemen, the commissioners of the bank—please to pay N. N. five thousand florins. Amsterdam, this—. Signed P. G.”

By means of which, the book-keepers had not, and have not still any thing to do but to debit P. G. with 5000 florins, and credit N. N. for the same sum. So that, if they had deposited, each one, ten thousand florins in cash, there would remain of it to the credit of P. G. only five thousands, and N. N. would have fifteen thousands to his; whereof he might dispose in his turn the next day in favour of one, or more others, having accounts open in bank. This manner of making payments, was found so convenient, and they took such a confidence in it, that all the bankers and merchants, even down to the petty traders, made haste to open an account and to carry there money, more or less, relatively to approaching payments, which they had to make in bank. So that there was soon a sufficiency of specie deposited, for a foundation of all the payments, which they had to make in bank, viz.—All the bills of exchange of above three hundred florins, drawn by foreigners upon Amsterdam, and in Amsterdam upon foreigners; all the merchandizes of the East Indies, the wools of Spain and some other articles.

It happened then, that they ceased to carry thither, the monies of Holland, because the merchants having occasion, alternately, some, of money in bank for current money, and some of current money for money in bank, they found a great facility in selling one for the other. From thence arose a commerce of Agiotage (pour L’Agio), which had been already prepared; because it had been resolved, for good reasons, without doubt, as in case of a flood of specie, &c. that the bank would not receive the monies they would deposit, but at five per cent below the current value.—So that to have a thousand florins in bank to one’s credit, it was necessary to deposit one thousand and fifty florins in current cash. Behold thus, this agio established, and the money in bank worth five per cent more than the current money. This value of five per cent soon varied, because some one, who found that he had too much money in bank, and was in want of current cash sought to sell the first for the second, found a purchaser, who would not give him more than four and seven eighths per cent, that is to say one thousand and forty–eight florins and fifteen stivers, for a thousand in bank. Thus of the rest; in such sort, that at all times, when one would buy or sell the money in bank, there is no question but to agree upon the price of the agio, which is subject to a perpetual variation, and which is more or less high according to the wants of epochas. As for example, when the company makes its sales, the merchants have greater want of money in bank, to pay their purchases, which raises the agio; which falls again when the company would sell that which is come in to them, for current money, in which all payments are made, for fitting out of vessels.

The payment of bills of exchange, being to be made, as it has been said in bank money, the price of all exchanges of current money, which were heretofore fixed in bank money; for example, a crown tournois, of sixty sols, the intrinsic value of which founded upon the price of the money mark amounted to fifty–seven sols and three fourths current money of Holland, was placed at fifty–five sols of bank money. And thus of all other exchanges with all foreign countries. From whence it results, that having sold merchandizes of a man of Bordeaux the account of which produces net f. 1050 current; or the credit of f. 1000 bank, (the agio at 105;) when they make him a remittance, or when he draws, they purchase so many crowns as are necessary for the 1000 f. It at fifty–five sols fifteen deniers, which comes to the same thing as if they bought crowns for 1050 f. current, at fifty–seven sols and three fourths current.

When any one would open himself an account in bank, he goes there himself, and puts his signature upon a book, to make it known; and they give him the page upon which his account shall be opened, which he ought always to place at the head of the billet, by which he pays.

They begin with debiting him with ten florins, once for all; after which he pays no more to the bank, but two sols for each bill that he writes, with which they debit him, twice a year, when they make the balance of the books, namely, in January and July; at which epochas, each one is obliged, to settle equally, his account with the bank; and to go and demand his pay, to see if they proceed in accord with the bank, under penalty, after six weeks, if they fail or neglect, of paying a fine of twenty–five florins. The bank is shut at these epochas, and continues shut during fourteen or fifteen days, during which time, the bills of exchange sleep; and although they fall due, the first day of the shutting, or any day following, they cannot be protested, until the second or third day after the opening. There are other little shuttings of the bank at the feasts of Christmas, Lent, Pentecost, and at the Fair, which continue but a few days. One cannot dispose, till the next day of the money which enters by the bank, except the second day after the two great openings, and that of Pentecost. They call these days the “returns of bills” (revirement des parties) or “the recounting,” because they pay with that which they receive. One ought to take care, not to dispose beyond one’s credit, for not only all the draughts whereof one has disposed, are that day stopped, that is to say they are invalid; but one is condemned, and obliged to pay a fine of triple of the whole which one has disposed of, more than that which one has in bank.

The person who writes ought himself to carry his draught to the bank, or at least his attorney, between eight and eleven o’clock in the morning. Those who come after until three o’clock, pay six sols fine, for each draught. The merchants ordinarily pass a procuration which it is necessary to renew once a year, to one of their clerks to carry their draughts and demand their payments, which no other person can do.

They transfer every day in the week, except Sunday, and during the shuttings, which are announced some weeks before hand.

For accommodating the merchants, and also for favoring and maintaining the price of matters and specie, of gold and silver, both foreign and that of the country, which in strictness are not but of mere commerce as our ducats and rix dollars, the bank receives them at a value determined and relative to the weight and the title known by the paymaster of the bank; but the sum which they there receive ought not to be below 2500 florins. The bank gives receipts for the specie, &c. which they deposit there for six months, which are to the bearer; so that within the time, if the specie or matters exceed, the proprietor may sell his receipt to another, who pays him the surplus of what they are worth of the price at which the bank has received them; and this receipt may thus pass through several hands, as often happens, by the idea which they form of the excess or of the deficiency. He who is the bearer of this receipt, may go and take away these matters or specie when he will, in paying at the bank the value which it has advanced to him who has deposited them, and moreover one half of a florin for keeping them the six months, both upon gold and upon bars of silver; and one quarter of a florin upon Mexican dollars, rix dollars and some other species of money. When this term is expired, one may cause to be renewed the receipts in paying at the bank the one half or one quarter of a florin due. Thus from six months to six: but if one lets pass that time without taking away his deposit or without renewing it, it is devolved to the bank which keeps it to its profit.

The bank is governed under the inspection of the burgomasters, by six commissaries chosen & named by the burgomasters from among the magistrates and principal merchants, under the care of whom is the deposited treasure. They furnish every year, in the month of February, a balance of the bank to the burgomasters, the youngest of whom goes down with them into the vaults, to verify and take account of the number of sacks and of the specie contained in the said ballance, and forming the real and effective fund that each one has in the bank. And whatever may have been said or suspected upon this subject, it is very certain that the fund, rolling through the bank, is really there deposited in specie, lingots, and bars of gold and silver. This treasure is not, however, so immense as many people imagine.

Some authors have written (without doubt by estimation) that it went as far as three hundred millions of florins, which is not credible, when we consider the returns of the bills (revirement des parties) which are continually made, between those who have reciprocal payments to make among themselves. We know very nearly, that there are scarcely more than two thousand accounts open upon the books of this bank, so that in order to make three hundred millions of florins, it is necessary that these two thousand persons should have one with another, one hundred and fifty thousand florins each, in bank, which is beyond all probability, especially, if we consider that A and B having there each, ten thousand florins, might reciprocally pay themselves sixty thousand florins per week, and thus make a circulation of transposition of one hundred and twenty thousand per week, with twenty thousands of sign effective, so that reducing the year to forty weeks of payment on account of the intervals which take place in the times of the shuttings, which is too large an allowance, it would result that with fifty millions, there might be made twelve thousand millions of florins of payment per annum. According to this, and considering that the money in bank brings no profit, it is easy to imagine that there is not much more than is necessary for the circulation of payments in bank, and that its treasure cannot be so considerable as many people imagine.

The bank never lends upon any species of merchandize nor discounts any paper nor makes any other profit than the one half or one fourth of a florin, upon the gold and silver there deposited, and which added to the ten florins for the opening of accounts and two stivers for each draught of which I have spoken, serves to pay all the expense of clerks and others, which is occasioned by the bank. The overplus, which is not very considerable, goes to the profit of the city.

No arrest or attachment can be made of any monies which are in the bank, under any pretext. The commissaries, book–keepers and others, who are in the service of the bank are bound by oath to say nothing of what passes there.

No man has a right to require of the bank the reimbursement in specie of the sum with which he is credited.* Each one having his account only, in the receipts of the commissaries, which are in the term of six months. It is certain, that the primitive fund, the receipts for which they have suffered to be extinguished, is no longer demandable; and that one cannot force the commissioners to give species. But it is not therefore the less true that this fund exists really, and one ought not and cannot doubt that if the city was threatened with an inevitable invasion and if the merchants should require their money to place it elsewhere in safety, that the burgomasters would cause it to be paid by giving so many florins in current money or value in bars or lingots with which one should be credited.

[* Note—The author is here mistaken, (or rather has not explained himself with sufficient precision.) All those who have an account in Bank, may demand to be paid in ready money, but they cannot require the agio. By consequence, while the bank shall have credit, and there shall be commerce at Amsterdam, which cannot be carried on without the money of the bank, and while there shall be consequently an agio, no man will go and demand in ready money a sum which is worth five per cent more.

The author has not well distinguished between the sum of money, or rather the specie which one may redeem and in the term of six months, by means of a receipt and the money for which one is credited in bank. Behold the difference.]

When they have received at the bank a certain quantity of gold or silver, whether in money or in bars, for the value of which the bank has credited upon its books the proprietor, not according to the value which this money has in commerce, but according to its weight and denomination; in this case, the depositary, or he who holds the receipt, has the right, by means of this receipt and in restoring to the bank the sum for which the first depositary had been credited, to withdraw this gold or silver, paying one half per—for the keeping. But the six months elapsed, the receipt becomes useless, the gold and silver remains in propriety to the bank, and the depositary must content himself to have received in its place, the sum which this gold or silver has been valued at, by which sum he has been credited upon the books, and whereof he might have disposed as he saw good. It is this sum that he has the faculty of redemanding in ready money when & as often as he judges appropos, and as he is acknowledged upon the books to be a creditor for that sum, but they are not bound to restore him more than the nett sum without agio. No man will be by consequence, mad enough to cause himself to be paid four or five per cent less than the money of the bank is worth in commerce. But if the money of the bank should be so discredited, that there should be no longer an agio, in that case, all the world would have a right to come and demand at the bank, the amount of the sum for which he is credited; and the bank, whose credit would be ruined, would be obliged, without controversy, to make this payment or to commit bankruptcy. It can never acquire a right of propriety in the capitals, for which it has given credit upon its books. But in case of restitution it is not obliged to restore the same matters or the same money for which it originally gave these credits. Over these the right is lost, with the expiration of the time established for the duration of the receipts; but it is held to the restitution of the amount of the credits, such as they appear upon the books.

John Adams

Printed Source--Boston Patriot.

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