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Free Coinage and Managing the Amsterdam Money Monster

Amsterdam has a problem with success. Years ago, King Charles the 5th of Spain manipulated the money supply to increase the value of his gold-based treasury by 50%... and totally hosed the Spanish Netherlands which used silver coins for its commerce. This may have sparked the Dutch Revolution because the first thing the rebels did was to institute free coinage laws. In essence, any person can show up with his bullion and the mint turns it into coins for a small percentage or even free. No questions asked. Naturally, that turned the Netherlands into a sinkhole for all the "don't ask me where I got it" precious metal in the world. Dutch law compels their banks to accept foreign coins as legal tender, and as Gresham's Law suggests, good money pushes out bad. Whenever new coins are minted, they disappear and every crap foreign coin is used in its place. Amsterdam needs to control its legal tender, so the Bank of Amsterdam is born. It's primary mission is to pull foreign coins out of circulation and to issue notes on deposits based on the actual metal content of coins and bullion. With the metal content certain and safe in the vault, suddenly bank notes are more valuable than coins. The Bank of Amsterdam is one of the first central banks ever established (if not the very first). [1] [2] [3]

My Take by Alex Shrugged
There are good reasons to establish a central bank such as maintaining the currency standards and easing government spending fluctuations that disrupt the market. If that was all a central bank did, I would have very few complaints, but there are ways for bankers and government officials to abuse such a system, just as King Charles did. Was the Bank of Amsterdam like the US Federal Reserve System? Well... it didn't start off that way. It was a deposit bank. You deposited your gold or silver for a fee and received a receipt. Bank money represented actual deposits: real bullion or coins IN THE VAULT, no fractional banking. That is a far cry from what the US Federal Reserve does today. For a good explanation on what the Federal Reserve is doing, read, "The Creature from Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin. While the creation of the Federal Reserve was a conspiracy in the real sense of the word, at one point the author takes a ride into "Federal Conspiracy Disneyland". Nevertheless, I can recommend this book because he labels clearly when he goes beyond analysis into hair-raising speculation. I appreciated that. [4] [5] [6]

Admit You Are a Witch and Get a Pardon for Free!

7,000 people are charged by the Spanish Inquisition with practicing witchcraft. This is the largest group of witch trials that have every happened before or ever will. The vast majority of those on trial are children who have willingly admitted to witchcraft... often under torture... but willing. Most will be pardoned. A few will die under torture and a few will actually get burned at the stake. These are the Basque Witch Trials. The Basque area had a reputation for the occult long before this time but even the Christian priests are getting a little nervous. They weren't expecting this many accused. The Inquisition will give up on this witch hunt after a few years. The Protestants are having their own witch hunt in the north and they will stay with it a little longer. No one is covered in glory here but a few good Christians will risk their lives to put a stop to it. [7] [8] [9]

My Take by Alex Shrugged
The system went like this. (Try not to shiver.) If you were willing to admit you were a witch, you were pardoned, but you had to point out other people who were practicing witchcraft. (This sounds a lot like hunting for Communists in the 1950s.) Surprisingly, to the Inquisition, mostly children came forth to admit their witchery. I don't know why, but the children had a strong fear of being possessed and misled by Satan. There is one story about 40 children who were so fearful of Satan that they would sleep at the Rectory and be blessed by the priest for protection. One night, the priest forgot to bless them and they were taken by Satan to endure a terrible ritual. Is it true? The hysteria is certainly true. Children can really work themselves up into a frenzy so that things seem real, but no. I don't think Satan grabbed the children or anyone else. I have a difficult enough time figuring out what happened in the Book of Job.

The Law of 'the Freedom of the Seas'

The law book "Freedom of the Seas" is published by the Dutch jurist, Hugo de Groot. He makes a natural law argument that travel through the seas is free to all without interference. It begins with the idea that a nation with no ill-intent is free to travel to another nation to engage in trade. Since that occurs over land, how much more natural would it be to travel over the sea to engage in trade? And since the sea is like the air in that it is common to all, therefore, travel through the sea without ill-intent should be free to all. [10] [11] [12] [13] [14]

My Take by Alex Shrugged
Freedom of the Seas is one of the fundamental principles that we defend today as if it has been obvious and true since the beginning of time. In fact, it was not always obvious which is why so many countries engaged in privateering at the time (which was government-sanctioned piracy). This book spelled the beginning of the end of privateering. It is also the reason why ships are 'flagged' by a specific nation. The Freedom of the Seas applies primarily to merchant craft but during a war, even merchant craft of warring nations can be targeted. Thus, there is an advantage to be flagged from a nation that is NOT at war. It is no guarantee but it can be helpful to merchants. A flag provides less protection to warships. Warships in a war zone might find themselves targets even if they are flagged from a neutral nation. Warships make other nations nervous even when they are not at war with each other and mistakes can happen. A good example is when Israeli planes hit the USS Liberty in international waters in 1967 during the Six-Day War. Israel said it mistook the ship for Egyptian. People are still arguing about that one. Let the meltdown begin. [15]

This Year on Wikipedia

Year 1609, Wikipedia.

See Also


* The asterisk in the section header indicates that it was read on the podcast.
  1. French, Doug (2006). "The Dutch Monetary Environment During Tulipmania". Quarterly Journal of Austrian Economics 9 (1). Archived from the original on May 31, 2006. http://web.archive.org/web/20070927010650/http://www.mises.org/journals/qjae/pdf/qjae9_1_1.pdf. Retrieved 14 August 2012. "Many of these foreign coins were worn and damaged, thus reducing the value of Amsterdam's currency about 9 percent below that of 'the standard' or the legal tender. Thus, it was impossible to infuse any new coins into circulation. Upon the circulation of newly minted coins, these new coins were collected, melted down, and exported as bullion. Their place in circulation was quickly taken by newly imported 'clipped' or 'sweated' coins.". 
  2. Gresham's law - Wikipedia (2015). Retrieved on 21 July 2015. “Gresham's law is an economic principle that states: 'When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.'”
  3. Charles V, Holy Roman Emperor - Wikipedia (2015). Retrieved on 21 July 2015.
  4. First Bank of the United States - Wikipedia (2015). Retrieved on 21 July 2015. “The President, Directors and Company, of the Bank of the United States, commonly known as the First Bank of the United States, was a national bank, chartered for a term of twenty years, by the United States Congress on February 25, 1791. It followed the Bank of North America, the nation's first de facto central bank.”
  5. (September 11, 2010) The Creature from Jekyll Island: A Second Look at the Federal Reserve: G. Edward Griffin: Griffin: Amazon.com: Books. ISBN 9780912986456. Retrieved on 21 July 2015. 
  6. Federal Reserve Act - Wikipedia (2015). Retrieved on 21 July 2015. “The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch. 3) is an Act of Congress that created and established the Federal Reserve System, the central banking system of the United States, and granted it the legal authority to issue Federal Reserve Notes (now commonly known as the U.S. Dollar) and Federal Reserve Bank Notes as legal tender. The Act was signed into law by President Woodrow Wilson.”
  7. Basque witch trials - Wikipedia (2015). Retrieved on 21 July 2015. “The Basque witch trials of the 17th century represent the most ambitious attempt at rooting out witchcraft ever undertaken by the Spanish Inquisition. The trial of the Basque witches at Logroño, near Navarre, in northern Spain, which began in January 1609, against the background of similar persecutions conducted in Labourd by Pierre de Lancre, was almost certainly the biggest single event of its kind in history. By the end some 7,000 cases had been examined by the Inquisition.”
  8. Basque Witch Trials (Spain/Basque Country, 1609 - 1611) - Witchcraft. witchcraftandwitches.com (2009). Retrieved on 21 July 2015. “The accused were mainly women, but also included children and men, including priests guilty of healing with 'nóminas' (amulets with names of saints). The first phase ended in 1610, with a declaration of auto de fé (a ritual of public penance for condemned heretics and apostates) against thirty-one of the accused, eleven or twelve of whom were burned to death (although five had already died under torture).”
  9. Gifford, Douglas (1979). Witchcraft and the Problem of Evil in a Basque Village. Folklore. 90. Folklore Enterprises, Ltd.. pp. 11-17. http://www.jstor.org/stable/1259849. Retrieved July 21, 2015. "Zugarramurdi is in northern Spanish Basque Navarra and has been studied by many investigators, attracted by the events that apparently took place there in 1609. ... They were said to hold covens outside the caves near Zugarramurdi. The Basque country in general seems to have had a reputation for witchcraft in the sixteenth and seventeenth centuries, a fact mentioned by Villaon.". 
  10. Mare Liberum - Wikipedia (2015). Retrieved on 22 July 2015. “Mare Liberum (English: The Free Sea or The Freedom of the Seas) is a book in Latin on international law written by the Dutch jurist and philosopher Hugo Grotius, first published in 1609. In The Free Sea, Grotius formulated the new principle that the sea was international territory and all nations were free to use it for seafaring trade.”
  11. Dutch East India Company - Wikipedia (2015). Retrieved on 22 July 2015. “The Dutch East India Company was a chartered company established in 1602, when the States General of the Netherlands granted it a 21-year monopoly to carry out trade activities in Asia. It is often considered to have been the first multinational corporation in the world and it was the first company to issue stock. It was a powerful company, possessing quasi-governmental powers, including the ability to wage war, imprison and execute convicts, negotiate treaties, strike its own coins, and establish colonies.”
  12. Hugo Grotius (Hugo de Groot) - Wikipedia (2015). Retrieved on 22 July 2015. “Hugo Grotius (10 April 1583 - 28 August 1645), also known as Huig de Groot or Hugo de Groot, was a Dutch jurist. Along with Alberico Gentili and Francisco de Vitoria, he laid the foundations for international law, based on natural law. A teenage intellectual prodigy, for his involvement in the intra-Calvinist disputes of the Dutch Republic, he was imprisoned and then escaped hidden appropriately in a chest of books. He wrote most of his major works in exile in France.”
  13. Santa Catarina (ship) - Wikipedia (2015). Retrieved on 22 July 2015. “Santa Catarina was a Portuguese merchant ship, a 1500 ton carrack, that was seized by the Dutch East India Company (also known as V.O.C) during February 1603 off Singapore. She was such a rich prize that her sale proceeds increased the capital of the V.O.C by more than 50%. From the large amounts of Ming Chinese porcelain captured in this ship, Chinese pottery became known in Holland as Kraakporselein, or 'carrack-porcelain' for many years.”
  14. Freedom of the seas - definition of freedom of the seas (2015). Retrieved on 22 July 2015. “the exclusive jurisdiction possessed by a state over its own ships sailing the high seas in peacetime”
  15. USS Liberty incident - Wikipedia (2015). Retrieved on 22 July 2015. “At the time, the ship was in international waters north of the Sinai Peninsula, about 25.5 nmi (29.3 mi; 47.2 km) northwest from the Egyptian city of Arish.”

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