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4
ASSIGNMENT 1
Pre-reading task
I. Answer the questions.
1. What do you know about the history of banking?
2. How does a bank work? Describing its operations use the words “money” , “ to de-
posit” , “ to borrow” , “ to lend” , “ rate of interest” .
II. Read Text 1.
Banks and Money (Text 1)
For a full view of banks and money the city to visit is Amsterdam. It is associ-
ated with not one but two of the great developments in their history.
In 1609, money – hard, coined money – was, as money goes, abundant in Am-
sterdam. Everywhere in Europe men were taking the coins and sweating and clipping
them, thereby getting metal to make more of them. It was to the problem of quality
that the merchants of Amsterdam now addressed themselves. They created a bank
owned by the city; the bank solved the problem of the quality of the coins by going
back to the system that antedated the invention of coinage. That was weighing. A
merchant brought his good and wretched coins to the bank, the bank weighed them,
and the weight of the pure metal was then credited to his account. This deposit was a
highly reliable form of money. A merchant could transfer it to the account of another
merchant. The recipient knew that was getting honest weight, nothing funny. Pay-
ments through the bank commanded a premium.
Then came the second Amsterdam discovery. The deposits so created did not
need to be left idle in the bank. They could be lent. The bank then got interest. The
borrower then had a deposit that could spend. But the original deposit still stood to
the credit of the original depositor. That too could be spent. Money, spendable money
had been created.
The important thing, obviously, is that, the original depositor and the borrower must
never come at the same time for their deposits – their money. As will now be evident,
every monetary innovation or reform carries the seeds of some new abuse. So it was
here. One of the important borrowers from the Bank was the Dutch East India Com-
4
ASSIGNMENT 1
Pre-reading task
I. Answer the questions.
1. What do you know about the history of banking?
2. How does a bank work? Describing its operations use the words “money”, “to de-
posit”, “to borrow”, “to lend”, “rate of interest”.
II. Read Text 1.
Banks and Money (Text 1)
For a full view of banks and money the city to visit is Amsterdam. It is associ-
ated with not one but two of the great developments in their history.
In 1609, money – hard, coined money – was, as money goes, abundant in Am-
sterdam. Everywhere in Europe men were taking the coins and sweating and clipping
them, thereby getting metal to make more of them. It was to the problem of quality
that the merchants of Amsterdam now addressed themselves. They created a bank
owned by the city; the bank solved the problem of the quality of the coins by going
back to the system that antedated the invention of coinage. That was weighing. A
merchant brought his good and wretched coins to the bank, the bank weighed them,
and the weight of the pure metal was then credited to his account. This deposit was a
highly reliable form of money. A merchant could transfer it to the account of another
merchant. The recipient knew that was getting honest weight, nothing funny. Pay-
ments through the bank commanded a premium.
Then came the second Amsterdam discovery. The deposits so created did not
need to be left idle in the bank. They could be lent. The bank then got interest. The
borrower then had a deposit that could spend. But the original deposit still stood to
the credit of the original depositor. That too could be spent. Money, spendable money
had been created.
The important thing, obviously, is that, the original depositor and the borrower must
never come at the same time for their deposits – their money. As will now be evident,
every monetary innovation or reform carries the seeds of some new abuse. So it was
here. One of the important borrowers from the Bank was the Dutch East India Com-
