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Those dishonest goldsmiths1

Published online by Cambridge University Press:  11 September 2012

George Selgin
George Selgin*
Affiliation:
University of [email protected]
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Abstract

London's seventeenth-century goldsmiths are routinely said to have pioneered fractional-reserve banking in England by clandestinely lending coin they were supposed to store – that is, by embezzling their clients. I draw upon both contemporary testimony and contemporary English law to show that the goldsmiths were almost certainly innocent of the crime for which they are so often accused. I then go on to speculate that the myth of the embezzling goldsmith may have its roots in confusion of that crime with (1) crimes other than embezzlement of which goldsmiths were accused by their contemporaries and (2) embezzlement of stored coin not by goldsmiths but by the British crown and by some merchants' servants.

Keywords

bailmentsembezzlementfractional-reserve bankingfraudgoldsmithsG21K12N23
Type
Articles
Information
Financial History Review , Volume 19 , Issue 3 , December 2012 , pp. 269 - 288
Copyright
Copyright © European Association for Banking and Financial History e.V. 2012

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Footnotes

1

The author is grateful to Meir Kohn, Hugh Rockoff, Mike Rozeff and Stephen Quinn, as well as two anonymous referees, for their helpful suggestions.

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