Banks & paper money

Paper money begins as a metal warehouse receipt — a claim check. Someone deposits coin or bullion; a goldsmith, a mint, or a public bank writes a paper that says the metal is there. The holder can return and collect the same weight. This chapter follows that receipt until it is no longer a warehouse claim: until notes circulate because a bank or a state says they will, and the window that once paid metal is optional, delayed, or gone.

The long articles are From warehouses to public banks, the Bank of Amsterdam, and John Law and the Mississippi Bubble. Walk warehouses → Amsterdam → Bank of England → Law → assignats. Law’s 1720, the assignats of the 1790s, and Germany’s 1923 mark all show paper losing trust — under different regimes and dates.

The claim: a receipt, then a note

A warehouse receipt is not yet a currency. It is a named claim on a named pile of metal. Banking, in the sense these pages use the word, starts when the receipt itself is used to pay. The metal stays in the vault; the paper moves. Counterparties accept the check because they trust the warehouse, not because a statute has declared the paper to be money.

Convertibility is the test. If the holder can still get coin at the window, the note is a convenient claim. If the window closes, limits payout, or pays in more paper, the note has become a bank or state liability whose value depends on policy and confidence. This hub is that sequence — not a morality play about “printing,” and not a pitch to buy metal.

Warehouses to assignats

Late-medieval and early-modern Europe stored metal with people whose business was to keep it. Italian deposit banks already knew the warehouse model. London goldsmiths, in the seventeenth century, issued running-cash notes that merchants endorsed onward. As long as redemption was ordinary, the paper was a ticket, not a rival unit. The turning point is circulation without movement of the metal: once the ticket pays a debt, the issuer has a float. From warehouses to public banks names that handoff.

In 1609 Amsterdam created the Wisselbank (exchange bank) to take in mixed coin, credit a standard bank guilder, and let merchants settle by book entry (giro). For a long time its reputation was that it did not lend: a florin banco was a claim on metal in the vault. Bank money usually traded at a premium — the agio — over worn street coin. Later the bank made concealed advances to the city and the Dutch East India Company. When that lending became public in the 1780s–1790s, the agio collapsed. That is a Dutch public-bank story. It is not 1720, and it is not the assignats. The Bank of Amsterdam page is that article.

The Bank of England was not a copy of Amsterdam. In 1694, during the Nine Years’ War, a private corporation was chartered to lend to the Crown and to issue notes. Subscribers put up about £1.2 million as a war loan. Over the eighteenth century those notes became the ordinary paper of London: national money grown from war finance, not from a city warehouse ticket alone. In 1797 the Bank stopped paying gold for its notes (Restriction); gold payout returned in the 1820s (resumption). That English suspend–resume cycle is not the Mississippi Bubble, and it is not Weimar.

France after Louis XIV faced heavy public debts. John Law fused a note-issuing bank with a colonial trading company. In 1716 he founded the Banque Générale, later the Banque Royale, alongside the company that became the Compagnie des Indes. Notes supported share demand; shares supported confidence in notes. Through 1719 privileges widened and prices soared. Coin drained. In 1720 the System broke. Open John Law and the Mississippi Bubble for the instruments and the dates.

Decades later, revolutionary France issued assignats: paper supposedly tied to confiscated church and émigré lands, the biens nationaux. The land was real. Quantity rose faster than retirement. By 1795–96 the paper was not a unit anyone would hold. Law is 1720 and a royal bank-plus-company. Assignats are a revolutionary fiscal instrument with a land story. Keep them apart so 1720 does not swallow 1790.

Three paper collapses — keep the dates

Three paper disasters share a mechanism. They are not one event. Law’s Mississippi System is a 1720 fusion of bank notes and company shares in Regency France. Assignats are 1789–1796 revolutionary paper on confiscated land. Germany’s mark in 1923 is a twentieth-century collapse after war, reparations, and extreme monetization. Weimar lives on the 20th-century chapter, not here.

Paper can cease to be a trusted claim on metal. Merging the cases erases dates, regimes, and which window actually failed. Weimar is not “France printed again.” The Nixon gold-window close of 1971 is not the invention of paper money. Those turning points have their own articles.

Articles in this chapter

Warehouses, Amsterdam, and Law are the long narratives. The Bank of England and assignats are shorter stops.

1. From warehouses to public banks — A receipt for metal starts to circulate; banking begins when the ticket pays a debt.
2. Bank of Amsterdam — The 1609 Wisselbank as public deposit money, then concealed lending and a lost reputation.
3. Bank of England — The 1694 war-finance charter, notes that became English money, then restriction and resumption.
4. John Law and the Mississippi Bubble — The 1720 note-and-share System under the Regency; the full article in this chapter.
5. Assignats — Revolutionary paper supposedly tied to land, 1789–1796; not a second Law, and not Weimar.

Return to Sound Money History for the other chapters. Use the twentieth-century chapter for 1907, Weimar, and 1971; keep those dates off this chapter except as a labeled later case. Linear order is the on-ramp: warehouses, Amsterdam, Bank of England, Law, assignats — or open Law first if 1720 is the hinge you need.