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Money in the Western Legal TraditionMiddle Ages to Bretton Woods$
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David Fox and Wolfgang Ernst

Print publication date: 2016

Print ISBN-13: 9780198704744

Published to Oxford Scholarship Online: April 2016

DOI: 10.1093/acprof:oso/9780198704744.001.0001

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Early Public Banks I

Early Public Banks I

Ledger-Money Banks

(p.321) 17 Early Public Banks I
Money in the Western Legal Tradition

William Roberds

François R. Velde

Oxford University Press

This chapter explores the origins and development of models for a central bank by examining the history of the pre-Napoleonic-era public banks. Unlike central banks, some of these public banks were not owned by governments, and many did not function as ‘central banks’ in the sense of having a monopoly of control over a nation’s monetary base. They did share a common characteristic: the ability to create a privileged set of claims (ledger money or circulating notes) that could not easily be replicated by purely private institutions. Against these liabilities, the public banks held a range of assets including coins, bullions, private, dedicated tax revenues, and to varying extents, obligations of the sponsoring government. The legal features of the claims provided inducements for the public to hold them, both ‘carrots’ (freedom from attachment by creditors, for example) and ‘sticks’ (requirements for use of the bank’s claims to settle certain obligations).

Keywords:   central bank, public banks, monetary base, set of claims, circulating notes, liabilities, carrots and sticks

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