silver).34 The bank used its holdings of other countries’ debt (i.e., its currency reserves) to buy its currency on the
open market to support the value of deposits, but it lacked adequate foreign currency reserves to support the
guilder.35 Accounts backed by coin held at the bank plummeted from 17 million guilder in March 1780 to only
300,000 in January 1783 as owners of these gold and silver coins wanted to get them rather than continue to hold
the promises of the Bank of Amsterdam to deliver them.36
The running out of money by the Bank of Amsterdam marked the end of the Dutch empire and the guilder as a
reserve currency. In 1791 the bank was taken over by the City of Amsterdam,37 and in 1795 the French
revolutionary government overthrew the Dutch Republic, establishing a client state in its place.38 After being
nationalized in 1796, rendering its stock worthless, the Dutch East India Company’s charter expired in 1799.39
The following charts show the exchange rates between the guilder and the pound/gold; as it became clear that the
bank no longer had any credibility and that the currency was no longer a good storehold of wealth, investors fled to
other assets and currency.40
41
The chart below shows the returns of holding the Dutch East India Company for investors starting in various years.
As with most bubble companies, it originally did great, with great fundamentals, which attracted more investors
even as its fundamentals started to weaken, but it increasingly got into debt, until the failed fundamentals and
excessive debt burdens broke the company.
As is typical, with the decline in power of the leading empire and the rise in power of the new empire, the returns
of investment assets in the declining empire fell relative to the returns of investing in the rising empire. For

example, as shown below, the returns on investments in the British East India Company far exceeded those in the
Dutch East India Company, and the returns of investing in Dutch government bonds were terrible relative to the
returns of investing in English government bonds. This was reflective of virtually all investments in these two
countries.
42
The British Empire and the British Pound
Before we get to the collapse of the British empire and the British pound, let’s take a quick look at the whole arc of
its rise and decline. While I previously showed you the aggregated power index for the British empire, the chart
below shows the eight powers that make it up. It shows these from the ascent around 1700 to the decline in the
early 1900s. In it, you can see the story behind the rise and decline.
The British empire’s rise began before 1600, with steadily strengthening competitiveness, education, and
innovation/technology—the classic leading factors for a power’s rise. As shown and previously described, in
the late 1700s the British military power became pre-eminent and it beat its leading economic competitor and the
leading reserve currency empire of its day in the Fourth Anglo-Dutch War. It also successfully fought other
European rivals like France in a number of conflicts that culminated in the Napoleonic Wars in the early 1800s.
Then it became extremely rich by being the dominant economic power. At its peak in the 19th century, the UK’s
2.5% of the world’s population produced 20% of the world’s income, and the UK controlled over 40% of global
exports. This economic strength grew in tandem with a strong military, which, along with the privately driven
conquests of the British East India Company, drove the creation of a global empire upon which “the sun never set,”