It all started in the year 1690 with a decisive defeat of the English navy at the hands of a French fleet
The King of England at the time, King William III, was humiliated. He sought to rebuild the navy as quickly as possible. This was to protect England and stave of possible invasion by the French. However, the problem was the amount of money required and the royal purse wasn’t exactly abundant.
The King of England was not in a place to borrow the money. This was because his predecessor Charles II had flat out repudiated (refused to repay) a vast debt he owed to London’s gold merchants a few decades before. Borrowing is normally based on a promise that any money that is lent will be repaid. And the royal family at the time were not seen as reputable when it came to making repayments
King William III was limited in his options
An entrepreneurial banker called William Paterson caught wind of this… and he had a bright idea. His idea was to create a private bank, this bank would bear the crest of the nation of England (and therefore inspire trust to the uninformed eye). Any creditors who made deposits into the bank would be given an enticing rate of annual return on their money of 8%…
…the part they they didn’t disclose was that these same funds would then subsequently be borrowed by the King.
The Bank Of England was subsequently created. And William III then in turn borrowed the necessary funds to rebuild the English navy. It was an indirect method for King William III to acquire capital. Capital that others would not provide for him given that he was deemed to be at too much of a risk of defaulting
And that’s how the UK’s central bank was born. Through a backroom deal between an entrepreneur called William Paterson and a king who was at the time broke.
Of course its not all bad – this monetary system has given us immense progress in certain period of history. It’s just interesting to know how it all began.
I’d really recommend the book “The Creature From Jekyll Island” as a good read on financial history if anyone is interested
*Not Financial Advice
Disclaimer: All content on this channel is for education purposes only and does not constitute an investment recommendation or individual financial advice. For that, you should speak to a regulated, independent professional. The value of investments and the income from them can go down as well as up, so you may get back less than you invest. The views expressed on this channel may no longer be current. The information provided is not a personal recommendation for any particular investment. Tax treatment depends on individual circumstances and all tax rules may change in the future. If you are unsure about the suitability of an investment, you should speak to a regulated, independent professional.
Introducing Warren Buffett Introducing Warren Buffett Sir Isaac Newton, the famous English scientist, once said, “If I have seen further, it is by standing on the shoulders of giants.”With that
What’s Holding Us Back From Earning More? What’s Holding Us Back From Earning More? Think about wealth like this – how can we know what our options are until they
So How Does One Get Exposure To Gold? So How Does One Get Exposure To Gold? I see this question pop up from time to time so thought Id write
The 4 Types of Money The 4 Types of Money We all take money for granted but did you know there are actually 4 different types of money?How these evolved
The Role Of Luck In Investing The Role Of Luck In Investing Here’s a really insightful piece on “Luck” and how you can create your own day to day. Particular
What Is The Best Long Term Investment? What Is The Best Long Term Investment? Great question – and really “the best” can only be defined relative to your overall objective.For
The Story Of How The Bank Of England Was Created Is An Interesting One The Story Of How The Bank Of England Was Created Is An Interesting One It all