Last night there was a lot of noise on Twitter about the national debt, and how one politician in particular appeared to regard it as a flexible credit system. Yet, the national debt is just that, and has been since 1694. This is a brief history of the foundation of the Bank of England and the subsequent creation of our national debt, and the symbolism of British money.
During the late seventeenth century banks were private and it was up to the customer to choose which man was trusted enough to deposit money with. Child’s Bank, Hoare’s and Coutts & Co., are three of the earliest, and most famous. Their promissory notes were known as Running Cashes and functioned like a banknote. These men were prominent and trusted, but it was thought London needed an official bank, such as those in Amsterdam or Germany. A group of City merchants, many of the Huguenots, stepped up who believed they could raise a million pounds to start a new Bank. The million pounds would go to the perpetually skint state, and the newly created Bank of England was to reap £65,000 interest for its investors annually, and in perpetuity. Thus, in one swift Act of 1694, the National Debt was created and has swelled over time as successive governments robbed from Peter to pay Paul.
The Great Seal of the new Bank bore the image of Britannia, with her spear and her leg boldly on show, which had appeared on the coins of Hadrian and Antonius Pius in the second century AD. No more was heard of her until after the Restoration, when in 1667 Charles ordered a Britannia medallion to be struck to commemorate the Peace of Breda, which ended the Second Anglo-Dutch War. His own likeness, on the front was captured from a drawing by done by candlelight, by ‘Mr Cooper, the rare limner‘, whilst John Evelyn held the candle. On the reverse, Charles decided that Britannia should feature, and that the Duchess of Richmond should sit as the model. The reaction to the Duchess of Richmond was so positive that she began to appear on the half-pennies and farthings issued soon after. As Samuel Pepys recorded, her face is ‘as well done as ever I saw anything in my whole life, I think; and a pretty thing it is, that he should choose her face to represent Britannia by’.
Two years later during the Great Recoinage of 1696, Britannia came to symbolise the new standard of English money. Old fake or clipped coins had become a huge problem. England had minted most of its coins in the Royal Mint near the Tower since around 1279, the high value denominations in gold and sterling standard silver. These coins had a set value, but they stayed in circulation for a long time, and over the decades, the bullion prices changed, so the real value of the metal was either lower, or higher than the face value of the coin. If the value was lower, it was cheaper to ‘buy’ coins and make them into silver dishes, spoons and forks than it was to buy the bullion to make them. So coins were removed from circulation. At the same time the price of bullion on the Continent rose, and clever merchants shipped English coin to Europe where it was purchased and melted down. By the 1670s, John Evelyn recorded that there were not enough coins around to pay for simple household items and food. This provided the perfect opportunity for fakers. As long as no one looked too closely, and simply continued to pass the money around the system, it was worth the face value. Daniel Defoe always attempted to hand over any fake money first, but made sure he had the right amount of genuine money in his pocket in case he was caught. The teenage Isaac Newton made lists of his ‘sins’, and at Whitsuntide, aged 19, number forty-six on his list was ‘Striving to cheat with a brass halfe crowne’. A less than promising start for the man who would become Warden of the Royal Mint.
With so many fakes and devalued coins around, it was no wonder William III in 1696 decided to give English money a makeover through recoinage, effectively revaluing the pound. Anticipating the demands of recoinage upon available bullion reserves, the Bank of England decided it needed to appoint ‘a fit person who understands gold and silver’. That man was Moses Mocatta, a partner in the firm Mocatta and Goldsmid. Moses Mocatta and his family worshipped at the Bevis Marks synagogue and had strong ties with the Amsterdam bullion community. He established a repository near the Bank, known only as ‘The Warehouse’, where vast quantities of gold and silver bullion were kept. The early bullion trade was supplemented by the issuing of promissory notes, which were an instant and somewhat alarming success. Because Bank of England notes were payable instantly upon presentation and because the Bank’s credit was so good, Bank of England notes became an easy target for forgers. In 1724, the Bank thought it had found a solution. The Huguenot Henry Portal made high grade paper at Bere Mill in Hampshire. This paper, when watermarked, was very hard to fake. The Bank began printing large numbers of notes for fixed sums, whereas previously they had been filled out for the sum specified by the customer. In 1725 the first modern banknotes appeared. The Portals still make the paper for all English banknotes.