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Über dieses Buch

The book analyses the establishment of De Nederlandsche Bank and its early development as a case study to test competing theories on the historical development of central banking. It is shown that the establishment of DNB can be explained by both the fiscal theory and the financial stability theory. Later development makes clear that the financial stability role of DNB prevailed. DNB´s bank notes were not forced onto the public and competition was fierce. A prudent and independent stance was necessary to be able to play its intended role. This meant that DNB played a modest role in the Amsterdam money market until 1852. By 1852 it had established itself to become the central bank. By then its bank notes had become generally accepted and it could start to operate as a reserve bank. Also the market context had changed dramatically, its competitors had been driven out of the market and several credit institutions had become customers of DNB.

"On the occasion of the Nederlandsche Bank's 200th Anniversary, it is good to have a new, and an extremely good, history of its founding and first fifty years of operation. The only previous account of this period of the DNB's history was legalistic and did not sufficiently place the Bank´s development in its wider context. Uittenbogaard's book provides a much broader, and better, story of the personnel, economics, and finance of the DNB at this juncture." - Charles Goodhart, LSE.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
On March 25 2014 it will be 200 years ago that King Willem I established De Nederlandsche Bank. DNB is one of the five oldest central banks still existing in the world: only the Swedish Riksbank, the Bank of England, Banque de France and Suomen Pankki are older. As a central bank, nowadays, DNB is no longer extraordinary; quite the contrary, central banks are a ubiquitous phenomenon. There is hardly a country in the world that does not have its own central bank, which could easily give rise to the idea that central banks are inevitable. Economic discourse has come to focus on what a central bank should do, rather than asking a priori the question of why there is central bank at all. This is just the question that was posed by the ‘free banking school’. Proponents of free banking argue that the existence of central banks is at the very core of the problem of monetary and financial instability, instead of helping to solve these problems. The argument made by the free banking school is outlined in more detail in Chap. 2. Here my main point is that the question of why central banks exist has relevance.
Roland Uittenbogaard

Chapter 2. Theories on the Emergence and Development of Central Banking

Abstract
This chapter provides an overview of different theories on the question of why central banks developed, in order to create a set of hypotheses about the principal issues to be analysed for the Dutch case. The development of central banking took place in the context of monetary history under changing economic and political conditions. This explains why this topic has been analysed by economists, historians as well as political scientists and this chapter eclectically combines insights from all these disciplines.
Roland Uittenbogaard

Chapter 3. Dutch Economy and State 1800–1860

Abstract
To set the stage for understanding the evolution of Dutch central banking, this chapter outlines the main economic and political institutions and developments in the Netherlands from 1800 to 1860. Political and economic developments interact continuously and need to be understood in their mutual coherence. It is therefore somewhat arbitrary to treat the political and the economic dimension separately. Still, since both dimensions had their own dynamics, the periodisation of political developments does not logically match that of economic developments.
Roland Uittenbogaard

Chapter 4. Establishment of De Nederlandsche Bank in 1814

Abstract
On 25 March 1814 De Nederlandsche Bank was established by Royal Decree. This chapter answers the question of why De Nederlandsche Bank (DNB) was established and why in 1814. Dutch historiography on the emergence of DNB in 1814 generally regards this as a more or less inevitable and logical event, given the ‘obvious’ shortcomings of the financial system in the late eighteenth century. The fiscal theory points at the utter financial distress of government after the Napoleonic era. DNB is implicitly assumed to provide the logical solution for both. However, institutions do not simply emerge when needed. In order to understand the establishment of DNB, we also need to understand why it was established in 1814 and not earlier or later. This can only be explained by looking at the political context and the interplay of the different interest groups involved. By looking at that context this chapter answers the question of whether DNB was established in order to address market failure, i.e. with an economic rationale, or for political or fiscal purposes.
Roland Uittenbogaard

Chapter 5. Corporate Governance of DNB

Abstract
In the previous chapter it was shown that Gogel proposed a private note-issuing bank with a large capital base, which King Willem I established in 1814. From the perspective of the evolution of central banking, it is now relevant to consider how this private institution could pursue a public good objective and assume responsibilities that could go beyond what would be in the best interest of its owners, the shareholders. This chapter’s main questions are therefore: who controlled the Bank and how did that affect the development of its central banking functions.
Roland Uittenbogaard

Chapter 6. Relationship to the Government

Abstract
As we have seen, DNB was established for payment system reasons but the fiscal option was clearly left open. From the analysis of the governance of DNB we concluded that while legally a private company, DNB was not structured to maximise profit for its shareholders. This leaves unanswered the question of what objectives DNB did have. This chapter centres on the question of how independent DNB was from the Government. This is relevant for at least two reasons. Firstly, from a fiscal theory point of view, we would expect the Government to have strong influence over DNB in order to make it serve its purposes. From the perspective of the payment system, the role of the Government would be to support confidence in the new payment technology, i.e. banknotes. Historiography on DNB is not very explicit about the relationship between DNB and the Government. De Jong points at the wisdom of securing DNB’s independence through the structure of its Charter, but he did not elaborate on the underlying incentives. Nor does De Jong devote much room to lending to the Government, which began in 1834. This ‘incident’ does not fit well in his linear history towards modern central banking.
Roland Uittenbogaard

Chapter 7. DNB’s Role in the Payment System (1814–1852)

Abstract
In the previous chapters we found only limited support for the fiscal theory of central banking explaining the emergence and development of De Nederlandsche Bank (DNB). In this chapter we will analyse the alternative theory that looks at a central bank’s role in the payment system. A brief recapitulation of the theoretical perspectives makes clear which questions will be addressed in this chapter. After that the structure of this chapter is briefly explained.
Roland Uittenbogaard

Chapter 8. DNB’s Credit Policy (1814–1870)

Abstract
To finish the analysis of the development of business of DNB in the first decades of its existence, this chapter looks at the asset side of the balance sheet of DNB. In the previous chapter I argued that DNB after 1840 became de facto a monopolist in issuing banknotes and became the reserve bank of the Amsterdam money market. This chapter analyses what guided DNB’s credit policy in the first decades. What agenda can be inferred from its lending business?
Roland Uittenbogaard

Chapter 9. Summary and Conclusion

Abstract
This thesis presents an analysis of the extent to which De Nederlandsche Bank (DNB) developed into a central bank during the first four decades of its existence and explains the reasons for that development. In order to address the question of how DNB developed into a central bank, first a definition of a central bank is necessary. Normally central banks are defined by what they do. The defining functions of a central bank in the early nineteenth century were that of being: (1) the monopolist issuer of banknotes, (2) the government’s bank and (3) the lender of last resort. The general theoretical picture (outlined in Chap. 2) is that over time, either by political decision or through market forces, the phenomenon and role of a bankers’ bank emerged, which towards the end of the nineteenth century became a reserve bank, thus enabling it to play a role in the management of exchange rates under the gold standard. The monopoly of central banks as issuers of banknotes is generally emphasised by proponents of the free banking school. For Goodhart last resort lending is the defining function of a central bank. Lending of last resort required the central bank to give up profit maximisation because it had to hold excess reserves and it had to be non-competitive in order to solve potential conflicts of interest. That is why government should play a role in establishing this central bank function.
Roland Uittenbogaard

Backmatter

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