Saturday, August 18, 2007

Isaac Newton was a great enthusiast for alchemy- a hobby that helped create the British Empire.

Montagu devised the proto-modern English banking system in the 1690's, basing it upon the Venetian reserve (fractional?) method- notes could be redeemed at any time for Gold or silver, but the banks only held a percentage of the funds/coins needed to operate, and functioned as long as there was never a run on the banks-which would quickly deplete the nations reserves of precious metals. Good faith and confidence was needed for the system to work.
Montagu installed Newton as head of the treasury, knowing that he was widely rumored by the populace to hold the secret of how to transmute base metals into silver and gold. This had the effect of calming people during troubled financial times- they would never run on the banks, because they believed that Newton could always produce enough silver or gold to cover their individual holdings of paper currency- they had no fear that the bank would simply run out of precious coin.

This allowed the realm to finance and 'purchase' their empire. Or so the story goes...

1 Comments:

Blogger slskenyon said...

Interesting. Alchemy is particularly unique as a "science." Today, banks take similar risks without the assurance of a "Newton" in this same sense, and I haven't heard any complaint--although maybe there should be one.

8:19 PM  

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