Did You Know?: Bank of England Founded by Pirate Gold
Did You Know?: Bank of England Founded by Pirate Gold
How stolen Spanish treasure from a legendary shipwreck became the foundation for one of the world's most prestigious central banks
Introduction
The Bank of England (sometimes abbreviated simply as BOE) could probably claim the title of most prestigious central bank in the world with little argument. It has been in operation for over 300 years, founded in 1694. Few outsiders may realize that the bank began, and spent most of its history, as a private corporation.
This begs some interesting questions. How was it founded? By whom? The answers are quite surprising. What isn't surprising is the fact that gold is at the center of this story—much like how gold continues to serve as a cornerstone of monetary systems and investment portfolios today.
Central Banking History
The Bank of England's founding story reveals how precious metals have shaped financial institutions for centuries. Understanding this historical connection helps modern investors appreciate why gold prices remain closely watched by central banks worldwide.
Table of Contents
Humble Beginnings Lead to Big Payoffs
The intriguing story of the Bank of England starts with a certain Sir William Phips, who was actually born in the colonies, in Maine. Phips, like his father, was a shipwright—a ship builder. Phips followed his entrepreneurial spirit to England to secure funding for treasure-hunting voyages.
The Pirate-Entrepreneur
In reality, Phips was little more than a pirate. (The same is true of the famous English "hero," Sir Francis Drake.) Even though most of his ventures were disappointing failures, Phips was not discouraged.
The Gambling Duke
He garnered the financial backing of the Duke of Albermarle. This duke was known to be of ill repute with his fellow aristocrats due to his preference for gambling. This actually made him the perfect candidate to support Phip's far-fetched ideas.
The Search for Spanish Treasure
Using primitive submarines, Phips and his crew went in search of the famous Nuestra Señora de la Concepción (Our Lady of the Conception). This Spanish ship, loaded with gold and silver bullion, had sunk in waters near the Bahamas some 50 years prior.
Initial Disappointment
According to reports, "the galleon was elusive—[Phips and] his crew searched in vain and finally in January 1687, Phips gave the order that they were to head for home, empty-handed."
The treasure they sought contained both gold and silver bullion—precious metals that represented enormous wealth in the 17th century, just as they do for modern investors today.
Discovery of the Nuestra Señora
However, by a stroke of luck, divers happened upon a cannonball in a dense coral reef. Nearby, the Nuestra Señora was found!
The Legendary Haul
The ship's booty clocked in at 34 metric tonnes of gold and silver, an impressive haul. Investors in the long-shot venture received 10,000 percent dividends. One of those investors was William Paterson, another self-made buccaneer.
To put this treasure into modern perspective, 34 metric tonnes of precious metals would represent hundreds of millions of dollars in today's market values. The discovery demonstrated the enduring value of physical precious metals—a principle that continues to drive investors to acquire silver and gold for their portfolios.
Stolen Treasure Gives Birth to the Bank of England
Paterson used his portion of the loot as a seed for plans of a new private bank to fund King William III's navy to protect British trade routes on the high seas, especially against the despised French.
Capital Formation
The booty from the Nuestra Señora not only flooded England with bullion, making a bank more of a necessity, but also was held up as an example to entice others to invest in the new bank.
Historic Fundraising
A staggering £1.2 million (equivalent to about £1 billion in terms of today's money) was raised for the project through this treasure-backed venture.
Historic Returns
This project for a new bank, built on the back of looted Spanish treasure, became the Bank of England in 1694. It did not become a part of the national government until 1946. This is when the progeny of the original private investors were finally paid interest on their initial investments, an unbelievable 420,000 percent gain!
A Legacy Built on Pirate Gold
Martin Parker, a Professor at the University of Leicester and author for The Conversation, sums it up like this:
"But it is worth remembering that the vaunted institution that is the Bank of England, which now seems timeless and above reproach, began as a projection—a speculative attempt to make a quick buck. This is how the very idea of a 'national debt' began—a speculation and promise that has now grown to £2 trillion for the UK."
Historical Irony
So next time you hear the Bank of England's governor speak, remember that his position was born from a storm that caused a Spanish shipwreck on a coral reef in 1641, carrying treasure stolen from South America.
Modern Parallels
This remarkable origin story demonstrates how precious metals have always been fundamental to monetary systems. Today's investors who purchase gold participate in the same tradition of wealth preservation that built one of the world's most important financial institutions.
Conclusion
The Bank of England's extraordinary origin story reveals how precious metals have shaped financial history for centuries. From Spanish treasure ships to modern central banks, gold and silver have consistently served as the foundation of monetary systems and stores of value.
This tale of pirate gold transforming into one of the world's most prestigious financial institutions demonstrates the enduring appeal and utility of precious metals. While modern investors may not need to salvage shipwrecks, they can still participate in this legacy by adding gold and silver to their portfolios—continuing the tradition of precious metals as reliable stores of wealth.
Investment Insight
The 420,000% return earned by Bank of England's original investors over 250 years illustrates the power of patient capital backed by real assets. While such extraordinary returns are rare, precious metals continue to offer portfolio diversification and wealth preservation benefits for modern investors.