The Face of Money

Never mind arguing about whose face should be on the back of banknotes, whose face should be on the front of them?

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The newspapers here have been full of discussion about who should be on the back of banknotes, but rather less discussion about who should be on the front of them. I’m all in favour of having one of the greatest ever Englishmen, Alan Turing, depicted on the back of the new £50 note, for example. To be honest it wouldn’t really matter to me who is on the back of £50 notes because I never see one. They are for corrupt politicians and tax-evading tradesmen, not hard working social media influencers. You could show me any old piece of plastic around the right size and tell me it’s a £50 note and I wouldn’t know any difference. All banknotes look fake to me anyway since they started making them out of plastic. No, I don’t mind Alan Turing on the back, but why is the Queen on the front? She has nothing to do with money or the global position of the City of London.


The face on our banknotes should be Sir Thomas Gresham, banker to Queen Elizabeth I and the father of the modern City of London.


Sir Thomas is best known to scholars of financial markets for the eponymous maxim, "bad money drives out good" (although it should be noted that he was far from the first person to understand the principle). In other words, rational actors will attempt to trade away debased and worthless coinage in return for goods and services but will keep the good stuff under the mattress. Thus, over time, the money in the marketplace goes bad.

Thomas used financial services to save the nation from invasion and subjugation and carried out great acts of economic subversion on behalf of the Crown. As the Wall Street Journal review of a recent book about the great man (John Guy's "Gresham's Law") puts it, his astonishing career made him, "a harbinger of a world to come: one in which national sovereignty is answerable to the machinations of the market to whose imperatives crowned and elected heads alike would eventually have to bow". And this is not hyperbole, it's realistic appraisal of a man who changed the course of our history.

Guy relates how, in the year 1540, Gresham set out to evade capital controls in place on the continents and smuggled the equivalent of some $40 million in today's money from Antwerp to Calais on behalf of King Henry VIII. Nowadays he would have used cryptocurrencies and run them through a few mixers, but due to the technological limitation of Tudor money transfer, he was forced to use 25 bags of gold and silver coins.

(In fact, you'd think most people would use bitcoins instead of gold for money transfer today but apparently not: see the haul of 3Kg of gold that someone forgot on a train in Switzerland recently.)

Anyway for this highly risky cross-border transfer he was paid around $40,000 which means that the cost to the King was one basis point. That's less than Wise charged me last week for sending money to the UK, although to be fair it did take Thomas a month to get Henry's loot to him and he did run the risk of being executed.

In his wonderful and indispensable "A History of Money: From Ancient Times to the Present Day", the late professor Glyn Davies tells how Thomas’ time in Antwerp taught him all about borrowing, lending and foreign exchange as well as cross-border money movements. He mastered the black arts of finance and set the City of London on a path to global domination so successful that in 1587 it was City financiers who “cornered" bills of exchange drawn on Genoan banks so effectively that they were able to disrupt the build-up of resources for Phillip II's Great Armada, demonstrating how sophisticated economic warfare had become by the 1580s.

Adam Anderson, writing in 1787, says that the defeating of the Armada "does equal honour to commerce" which one of my favourite phrases of all time, saying of our man in Antwerp that "he managed the matter with such secrecy and success, that the fleet could not be set out that year. At so small a price," says [Bishop Burnet], "with so skilful management, was the nation saved at that time!". Wow.

(Anderson is actually wrong about this, since Sir Thomas had been dead for some years at this point, but he is right to praise Gresham’s heirs and successors in the London markets for their role in fending off Spanish invasion. You can read it about this in more detail in Neil Hanson's superb "The Confident Hope of A Miracle: The True History of the Spanish Armada", a book I cannot recommend highly enough.)

Gresham was a man who truly understood money. He encouraged Elizabeth I to rebase the coinage (that had been debased by her father) by melting it down and reissuing it with a higher base metal content and to pay down her debts and to balance her books. While Royal Agent in the Low Countries he came up with some financial engineering that would still put Wall Street to shame. He managed to up the value of the pound sterling from 16 to 22 Flemish shillings to assist with the repayment of the Crown's debts. Later, when Carols V placed a ban on the export of bullion from the Netherlands, Gresham adroitly managed the necessary bullion smuggling operations (he’d be all about using Bitcoin to evade exchange controls today).

For these actions I long ago suggested that he be revered more widely as the Patron Saint of Fintech and I am renewing my calls today. Never mind changing the world by making it easier for you to find better credit card rewards using an app, he invented a kind of guerrilla financial warfare and shaped a merchant company that helped to defeat what was then Europe's greatest empire with some financial jiggery-pokery 400 years before credit default swaps and mortgage-backed securities.

While I worship Sir Thomas for those acts of economic terrorism in the service of Merry England, his contribution to the City of London should also be celebrated: he founded the Royal Exchange. The story is nicely told by Lambert in his 1806 "History of London and its Environs from the Earliest Period to the Present Time" and rather than paraphrase the eloquent narrative I will quote directly:

Sir Thomas Gresham, an opulent merchant of London, actuated by a laudable desire to facilitate commercial transactions, made a noble offer to the corporation, of erecting, at his own expence, a convenient bourse or exchange, for the accommodation of merchants, to meet and negociate their business in; if a proper situation was provided for him. The city accordingly purchased fourscore houses, which composed two alleys leading out of Cornhill into Threadneedle-street, called new St. Christopher's, and Swan alleys, for 3532 pounds. They sold the materials of these houses for 478 pounds and Sir Thomas Gresham, with some of the aldermen, laid the first bricks of the new building, June 7, 1566, each alderman laying one, with a piece of gold for the workmen: and the work was pursued with such alacrity, as to be roofed in by the month of November, in the following year. The queen would not have it called, as in other countries, the Bourse; but, when it was finished, came and dined with the founder, and with the heralds at arms, by found of trumpets, proclaimed it by the name, of the Royal Exchange.

In building the Royal Exchange, Sir Thomas created England's first specialist commercial building. For the first hundred years or so, the space was used for the exchange of goods only. Stockbrokers were not allowed in, not because of some principled stand against the trading of assets but because their manners were considered too poor (seriously). However, the barrow boys were eventually admitted and in the eighteenth century it also housed the Lloyds' insurance market.

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Many years ago while visiting the executive floor in Barclays Bank's Canary Wharf headquarters, I came across a glass display case containing a ring given by Sir Thomas Gresham, and found myself gazing at it for some time. He is one the most important people in the history of money and yet there is no statue to him in Trafalgar Square or outside the Royal Exchange. The least we can do is put his face on our soon-to-be extinct banknotes.

Sir Thomas is reputed to have died of apoplexy. I am genuinely concerned that this might become my fate if I read one more article about the how the blockchain is the biggest innovation in the history of finance.

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