First Banks Printing Operation: Fill & Download for Free

Here’s one very few people know about and yet it set the course of some of the United States.One of the first major scams in America took place in 1805 by a shady speculator named Andrew Dexter, Jr. Dexter was a “Harold Hill” on steroids. His intentions seemed to be pure but his methods were totally corrupt and his ultimate goal was to enrich himself.In the early 1800s, major stock and business transactions in Boston were held outside under a tree, often the Liberty tree. There weren’t even any real grocery stores - vendors pushed carts up and down the street hawking wares (one reason why there is STILL a law on Boston Books forbidding dogs bigger than 10 inches is because dogs always followed the meat carts and tried to snatch meat from the customers). The first major grocery store in America was Faneuil Hall and it was not completed until 1825 and nearly went bankrupt until people accepted that it was better to go to the store than let the store come to them.Dexter wanted to build a world-class stock exchange and businessman’s office in Boston and so he set out to build the biggest building Boston had ever seen - the Boston Coffee and Exchange Building right next to the State House (which is still there). Nothing like it had ever been seen before and it would have been impressive even in Europe. It was 9 stories tall, a veritable skyscraper at the time, with a stone base over 5 feet thick to support the weight of the upper floors - there was no re-inforced concrete in those days. It had a massive open floor plan where businessmen could meet and conduct business and a gigantic coffee room with newspapers of the day laid out for businessmen to read, then floors of offices and residences. It had four huge stack outhouses built into the walls, which was an amazing thing for the time.The problem was that Dexter paid for the building with money he created out of thin air. In those days there was no central bank - every bank printed its own money, redeemable for gold on demand because paper money was easier to carry. The money was discounted at vendors based on reputation and distance from the bank. Dexter went around New England and bought up many banks far from Boston, even one in Michigan, and then had them print up thousands of dollars of bank notes. In this way he raised over 800,000 dollars to build his building of which he was very proud.The problem was that no one wanted to use it. As the City would discover with Fanueil Hall later, people were used to doing business outside and liked having the pushcarts delivering their food. They were suspicious of doing business indoors. Fanueil Hall nearly went bankrupt in its first few years of operation, renting out only 2 stalls out of 44 for the first two years. And Dexter was attracting no business at all. No one wanted to live or rent any offices or residences above the fourth floor of his tower - every time someone wanted to go in or out they had to walk up 9 floors of stairs. There were no elevators. And the outhouses only went up to the fourth floor. So if you had to “do the necessary” or even dump the chamber pot, you had to climb down as many as 5 flights of stairs to the bathroom. The building was a failure and largely abandoned.And because Dexter was making no money, people would try to convert his worthless dollars into gold. The newspapers of the day got suspicious and sent riders to his far-flung banks to redeem their money with gold but the banks had none. The Rhode Island Merchant Bank had issued something like 250,000 dollars (which would be tens of millions of dollars today) and had a total of 88 dollars worth of gold on hand in its vaults. People holding Dexter’s notes were ruined overnight. Naturally, the Law wanted his head. He was able to escape to Nova Scotia with his family right ahead of the Law but soon he tried other nefarious business practices. Right before he was arrested he was notified that he had inherited a large amount of worthless property in the outback of Alabama, so he took his family and one step ahead of the Law he fled to Alabama.There, on the worthless land he inherited, he successfully founded the city of Montgomery. He tried his hand at banking, speculation and farming but finally died of Yellow Fever in 1837. And his glorious achievement, the biggest building in America? The Boston Exchange and Coffee House limped along but was never successful. It was accidentally set on fire by an oil lamp in 1819 and there was no fire equipment that could tackle the massive blaze. After the fire, people scoured the ruins to loot for valuables. The only death was a 12 year old boy who fell into a vat of boiling beer. The building was knocked down completely. Dozens of businessmen were ruined as a result of holding too much of Dexter’s worthless money.As a result of the scandal, many banking laws were changed that are still in place today to place limits and safeguards on speculation. The US would not get a real central bank until the Fed was developed after the First World War; it’s invention ended the frequent cycles of boom and bust that threatened the US every 10 years or so.

It was one of the first instances of optical recognition worked in computingFirst, you had your card, which had imprinted numbers on itNow, take a look at those numbers. They were especially designed to be read by the optical character readers of the day, but to be easy to imprint on a surface and easy to tell apart if you’re not a machine too.You would take that card, and put a paper slip on top of itYou would then run it through one of these machines - an imprinterThat imprinter has a metal plate on it with the merchant’s information on it.You then fill out the slip with the transaction information, and have the client sign it. If the transaction is for more than a certain amount, you call the credit card company, get an authorization, and enter that information on the slip too. You can see the authorization phone number attached to this imprinter.Then you take the slips down to the bank and deposit them as if they were a cheque or money order. The bank credits your account and passes them off to a clearing house where the computing is done.From there, the credit card company’s computers get to work. They recognize the number on the slip with optical readers. It’s then shown to a data entry operator who enters the amount on the slip. The computer then charges your account and, once a month, prints out a statement and mails it to you.

I’ve explained the difference in some depth elsewhere. In QE, there is no “money” created, only bank reserves, and bank reserves are not money. You can read the full explanation here:Why Quantitative Easing Isn't Printing MoneyFirst, in QE, the government isn’t necessarily increasing its spending. The central bank can buy bonds from the market without the Treasury issuing any more bonds. In the usual “money printing operation,” the Treasury issues a lot more bonds and uses the money to increase government spending. That’s why it’s usually inflationary.Secondly, even if the government does expand its spending and print more bonds, in QE, the government has to pay the market price for the money. That is, it issues the bonds to the market at the current market rate, and then the central bank buys them from the market.In the usual “printing money” operation, such as what Argentina or Zimbabwe carried out, the government sells the bonds directly to the central bank at a below-market price. Usually this is close to zero, so the money doesn’t cost the government anything. Thus there is no limit to how much they can do.This is why in some countries, the central bank is forbidden from buying recently issued bonds. In Japan for example I think the bonds have to be at least two months old. (I don’t think there’s any such requirement in the US however, and I seem to remember that the Fed was buying bonds that had been issued 45 minutes earlier — but I’d have to check on that.)I have to admit though, my article is somewhat disingenuous. I said that “The whole operation leaves the Treasury's balance sheet unchanged. No new bonds are issued, no revenues received.” Of course, if the QE operation is combined with an increase in government spending that’s financed by issuing bonds, this condition does not hold true. In that case, as I said the difference between QE and money printing is whether the government is paying the market rate for the money or not.