The ship A4

During the second half of the 1930s a growing threat of war was clearly felt. Hitler had come to power in 1933 and on the international level tension was building up. Belgium felt compelled to transfer most of its stocks of gold and other valuables abroad for safe keeping. The scale-model in room 3 of the Museum refers to the ship A4 which was used to transport the valuables of several agencies of the National Bank of Belgium to England. The evacuation of the stocks of gold went less smoothly than hoped for and part of the stocks was condemned to an odyssey.

Before the outbreak of the Second World War Belgium’s gold reserves amounted to some 600 tonnes. One third of it was transferred to the UK, another third found its way to the US and Canada. The balance was kept in Belgium to fulfil the statutory cover requirements in respect of the banknotes. As the international tension increased in late 1939-early 1940, those assets were removed on the orders of the Finance Minister Camille Gutt and entrusted to the Banque de France. 198 tonnes of fine gold, packed into 4,944 chests were brought via Ostend to the South of France. There it was stored in the cellars of the Bordeaux and Libourne branches of the Banque de France. At the time of the German invasion on 10 May 1940, only a very small amount of gold still remained in the Bank’s vaults.

Odyssey of the belgian gold

In view of the rapid advance of the German troops in France, the Banque de France informed the French admiralty at the beginning of June 1940 of the presence of Belgian gold which urgently needed to be shipped overseas. The navy took the gold to Lorient, the nearest naval port, where the chests were loaded on to the auxiliary cruiser Victor-Schoelcher. Initially, the gold had to be brought ashore in the US but the ship never crossed the Atlantic Ocean. On 18 June 1940 the ship weighed anchor, and ten days later, after a hazardous voyage, it entered the port of Dakar in French West Africa. From Dakar it was transported to the military base of Thiès, 65 km inland. It did not stay there because the French colonial authorities considered Thiès too close to the sea and they feared a possible invasion by the enemy. Therefore they decided to move the Belgian gold further inland, to Kayès, in the middle of the Sahara, some 500 km from Dakar.

The National Bank of Belgium did not really appreciate what was happening to part of its stocks of gold. Hubert Ansiaux, who was looking after the Bank’s interests in London, sent the French central bank a notice of default, on account of the fact that - contrary to the express wishes of the Bank - it had not taken the gold to the US.

At the end of 1940, in the course of the Franco-German armistice talks, the Germans and the French reached an agreement whereby the Belgian gold was made available to the Reichsbank by way of atonement. Under pressure from the French Prime Minister P. Laval, who expected something in return from the Germans, e.g. the release of French prisoners of war, the Banque de France reluctantly agreed to the transfer of the gold, against its better judgment.

The ship A4

Transporting the gold from Central Africa to Algiers and from there to Marseille was no easy task. The transfer was not completed until May 1942, which indicated that the French were not genuinely cooperative. The gold which was stacked up in the Reichsbank’s vaults was then seized by the commissioner for the German Four-Year-Plan, Reich Marshall Hermann Göring. Following the seizure, all the gold bars were melted down in the Prussian Staatsmünze. It was hallmarked with the dates 1936 and 1937. By doing so the Nazis hoped to give the impression that this was bona fide gold from before the war.

Meanwhile, on 5 February 1941 Regent G. Theunis had brought proceedings in New York against the Banque de France, demanding part of the French gold being held in the US. A lengthy legal battle followed and it was not until April 1943 that the main hearing took place. However, the court suspended the decision because the war prevented the French from calling any witnesses or submitting any evidence. After the war France and Belgium concluded an agreement whereby the Banque de France paid the National Bank full compensation, at which point the legal proceedings were, of course, terminated.

In April 1945, in a salt mine near the Thüringian town of Merkers, the American troops discovered a massive store of treasures: works of art, valuable objects looted by the SS, plus a stock of Reichsbank gold, including part of the gold belonging to the National Bank. The Americans also found the Reichsbank’s records relating to the gold. This made it possible to check precisely what route had been followed by the largest part of the stolen gold. The Germans had used it to obtain hard currency which they then used to purchase commodities and parts for the weapons industry in Spain, Portugal and Sweden. All the gold that the allies found in Germany was collected into a pool which was used by the Tripartite Commission for the Restitution of Monetary Gold to meet the claims of the countries whose assets had been plundered. Under pressure from the allies, neutral countries such as Switzerland also paid precious metal into the gold pool. The National Bank submitted a claim for compensation on behalf of the French central bank. In the end the Banque de France received around 130 tonnes, and thus recovered two-thirds of the gold which it had lost.

Leen Bultinck
Museum guide

Bibliography

• E. Buyst, I. Maes, e.a., The Bank, the franc and the euro. A history of the National Bank of Belgium, Lannoo, Tielt, 2005, pp. 146-147

Although many of us may dream of such notes in our wallet - or even better on our bank account - these notes hardly have any value at all. In November 1923 e.g. a loaf of bread changed hands for 140 billion marks. In January 2009 Zimbabwe issued a note of 100,000 billion Zimbabwean dollar, the counter value of barely 230 euro on the black market. Despite being millionaire or billionaire almost the whole population faced unemployment and poverty. In June 2009 e.g. 95 % of the Zimbabweans had no official job.

10,000 billion Zimbabwean dollar

To have a better understanding of these phenomena, we ought to have a closer look at the terms “inflation” and “hyperinflation”. Inflation refers to an increase in the general level of prices in an economy. A low inflation means that prices increase slowly in contrast to high inflation when prices increase rapidly. If prices increase stronger than salaries the purchasing power of money decreases. In other words, inflation is also a synonym for currency erosion. Price rises may have different causes, such as more expensive raw materials (cost inflation), a demand which is larger than the offer (demand inflation) or too much money in circulation. Limited price rises are no problem in themselves: in the euro area e.g. one aims at an annual rise of the harmonised consumer price index of less but close to 2 %. Slight price rises are considered to be favourable for the economy, as consumers are spurred on to buy goods. If consumers postpone buying, they know they will have to pay more for the same products. Price rises become problematic when price rates are rocketing as they do with hyperinflation. Then prices rise from month to month or even from day to day. At the worst moments of the German hyperinflation in 1923 prices rose by the hour. Workers were paid twice a day, enabling them to spend their morning salary as quickly as possible on goods which would cost twice as much by the end of the day. The value of money was such that it was cheaper to burn the notes than to buy fuel.

In 1923 children used to play with the practically worthless notes

High inflation and definitely hyperinflation go hand in hand with instability. As future price rises can not be foreseen, enterprises have difficulty in planning long term investments and refrain from further investing. In case of hyperinflation savings may become completely worthless from one day to the next and this of course will lead to a large amount of unrest and discontent. Hyperinflation is often linked with a run on the bank, meaning that people retrieve their money from their accounts in order to invest it abroad or in real estate. The longer an economy is confronted with price rises, the more banknotes are needed or the higher the denominations and the more cumbersome daily payments. Even for small purchases one already needs large amounts of money. In Zimbabwe e.g. wallets were replaced by rucksacks and in Germany they even used wheelbarrows!

A street sweeper sweeps together the former Hungarian pengö notes that became completely worthless after the monetary reform of 1946

The exact causes of hyperinflation may differ from case to case but a disrupted economy and too much money in circulation are two of the principal causes. The combination of both elements inevitably leads to staggering price rises. There is more money to spend on fewer goods and services resulting in price rises. As long as the government does not implement a monetary reform and continues to issue money, prices will keep roaring up. And this is exactly what happened during the French Revolution, the German hyperinflation of 1923 or the more recent examples of Yugoslavia and Zimbabwe. Only at the beginning of 2009 the Zimbabwean galloping hyperinflation was called to a halt by the introduction of the US dollar as official currency. The Zimbabwean dollar was no longer used and within a few months the staggering inflation rate of several millions per cent a year was curbed into a negative inflation rate! In September 2008 the official inflation rate in Zimbabwe amounted to 11.3 million per cent a year. Unofficially however one agreed upon a rate of 15 billion per cent, which means that within a period of one year prices of goods were multiplied by 150 million. In March 2009 - shortly after the introduction of the US dollar as official currency - Zimbabwe faced a deflation of 3 per cent.

Maarten De Grauw
Museum guide

Bibliography

• BLACK, J; HASHIMZADE N. and MYLES, G. A dictionary of Economics. Oxford, 2009.
• ‘Loads of money’, in: The Economist, 23/12/1999.
• ‘The struggle goes on’, in: The Economist, 4/07/2009.
• ‘Zimbabwe schrapt twaalf nullen van zijn dollar’, in: De Morgen, 02/02/2009
• ‘Zimbabwe aanvaardt buitenlandse valuta als betaalmiddel’, in: De Standaard, 10/09/2008.
• ‘Zimbabwe kampt na hyperinflatie nu met deflatie’, in: De Standaard, 24/03/2009.

Bruges stock exchange

Last year the economic crisis hit us all. Stock markets, too, had a tough time. Both the American and the European markets felt the pain, and the Bel 20 index plummeted. The Fortis share, initially thought to be stable, went into free-fall. Nowadays, the stock market is a familiar concept, but where, when and how did share trading actually begin?  You will find the answer to that question in room 9 of the museum.

Coat of arms of the Van der Buerse family

The foundations of the stock exchange that we know today were laid in the late Middle Ages in the cities of northern Italy. That is where the main basic concepts of modern banking and stock markets (e.g. bills of exchange, businesses in the form of a company, and banking with book-entry money) were first developed. The Italians introduced them into north-western Europe via Bruges.  Right from the start, Bruges played a crucial role in the development of share trading. Owing to the demise of the Champagne annual fairs and rising transport costs, the Italians sought a different route to northern Europe via Bruges.  In the 14th century, Bruges lay at the junction of two major trading empires, namely the Mediterranean area with the Italians and the Baltic Sea area with the German Hanseatic merchants. Although trade was flourishing in Bruges, the people of Bruges were not directly involved. They tended to act as agents or intermediaries between the various foreign merchants. The brokerage function was often taken on by innkeepers. Not only did they provide accommodation for foreign merchants, they also represented them. In view of that central role in trade, inn keeping was one of the most highly respected occupations in the town.

Beurs van Antwerpen

One of the most important families of innkeepers was the Van der Buerse family. For five generations they ran the ‘Ter Buerse’ inn.  The oldest records relating to the family date from the 13th century, and it is an established fact that the Ter Buerse inn itself was already operating in 1285. It was run by Robert Van der Buerse, who was also the owner. During the 14th century the square in front of the Ter Buerse inn developed into the leading commercial and financial centre of the city. By 1340, Pegolotti’s guide to commerce  was already comparing the Bruges brokerage rates and exchange rates with trade in England and Italy.  Brokers also met in the square at set times, and because there were not yet any official stock market journals, they gathered a whole range of information from their guests, who travelled and corresponded with them about the local economic situation and the state of the foreign markets.  In 1370, exchange rates for various cities were announced at regular times in Bruges. By around 1400 a continuous, organised money market had developed, with set times for announcing the exchange rates of the leading commercial and banking centres of  Europe, such as Barcelona, Venice, London and Paris.

The principal money changers operated from their ‘nation houses’ on Ter Buerse square. A nation was an association of foreign merchants. These nations usually built, bought or rented their own buildings, known as the ‘nation houses’, which were also used as consulates, meeting rooms or storage facilities. By 1322 the Venetian nation had already been established; the Genoans arrived in 1397, and in the 15th century the Florentines also set up their nation. The merchants met daily in the square to conduct their business. If it rained, they took shelter under the eaves of the buildings around the square, or in the ‘Ter Buerse’ inn itself.  And although the Beursplein [stock exchange square] was a public place, beggars and vagrants were not allowed access during trading hours because they might annoy the merchants.  There was also a steward on guard. It is not known exactly what the trading hours were, whether there were any regulations, or what sort of official supervision existed. The operation of the first stock exchange was based on customary practice and there was never any written record. It was not until the 16th century that the Antwerp stock exchange became the first to keep written records.

Be that as it may, the old Bruges family of innkeepers lives on in the word ‘beurs’ [stock exchange].  There is no doubt that the name and coat of arms of the Van der Buerse family were central to the development of the association between the Bruges stock exchange square and the concept of a stock market.  Yet the original meaning of the word ‘beurs’ seems to refer more to the square than to the building. The very first author to mention the Bruges stock exchange was Hieronymus Muenze, a German physician from Nurenberg who embarked on a long journey around Europe in 1495. His travel diaries reveal that in 1495 he stayed in Bruges at a guesthouse on the square, near the Ter Buerse inn.  He said: “In Bruges there is a square where merchants meet. It is called De Beurs.  Spaniards, Italians, English, Germans, Orientals, in short all nations, meet there.”  In the next century, following the decline of Bruges, the financial centre moved to Antwerp. Very soon people were talking about ‘the new stock market’, the square where merchants met. From Antwerp the term ‘beurs’ spread to France, Italy, Spain and Germany where it was corrupted into bourse, borsa, bolsa and Börse.  In England, too, the term ‘Burse’ was used between 1550 and 1775, eventually giving way to the term ‘Royal Exchange’.

The city of Bruges undoubtedly played a crucial role in the development of the stock market. The role of Bruges as a financial centre was over by the end of the 15th century. There followed a long history of trading in stocks and shares, culminating in the hectic, speculative stock market that we know today. 

Leen Bultinck
museum guide

Bibliography

• DE CLERCQ, G., et al., Ter Beurze. Geschiedenis van de aandelenhandel in België, 1300-1990, 1993, 15-32.

On Wednesday 23th December the visitors counter stopped at 29,365. The larger part, 15,539 persons to be precise, took a guided tour, the others explored the fifteen rooms on their own. The combination of the permanent exhibition with one of the temporary thematic exhibitions on the 10th anniversary of the Euro and the Millennium Development Goals went down well.

You were also very eager participants of the 2nd edition of the Brussels’ Museum Night Fever, the Erfgoeddag, the Printemps des Musées, the Open Monument Days and the two autumnal late evening openings. For the very first time the Museum also hosted two Chinese Puppet Theatre Troupes who toured in Belgium for the Europalia Festival.

Another important novelty is the completely restructured and updated website of the Museum,  http://www.nbbmuseum.be. The site contains quite a lot of news items and interesting topics, such as “Object of the month”. The whole series can be consulted at and downloaded from http://www.nbbmuseum.be/en/category/object.

The museum team wishes you a merry Christmas and the very best for 2010

The revision took, amongst others, the evolution within the Eurosystem, the 2008-2009 financial crisis and the developments within the National Bank of Belgium into account. Figures and numerical data have been adapted as well and, where necessary, some extra explanation has been added. The chapter containing most of the former information sheets has been enlarged with a few concepts, such as SEPA, MRO’s, goldreserve. Graphs, tables and schemes illustrate or summarize the contents. A bibliography provides extra material for those who want to read more on the different subjects.

Sterling of Robrecht van Bethune (1305-1322) On the face, the crowned head of the count is displayed looking to the left; the wording on the back (MONETA ALOSTEN) tells us that the coin was minted in Aalst.

By late Roman times, domestic wool was already being used to produce textiles (“cloth”) in the Low Countries. The marshes along the coast, which had not yet been enclosed by dikes, provided grazing for large flocks of sheep which yielded sufficient wool to satisfy domestic demand. In the 12th century a fundamental change occurred. Production was transferred from the countryside to the fast-growing cities (Ypres, Ghent, Bruges, and later also Brussels and Antwerp), and weavers began using English wool as their raw material instead of home-produced wool. The result was a high quality, luxury product intended for export. Sheep reared on the type of grass produced by the very damp English pastureland with its poor soil yielded a particularly fine and springy woollen fleece. For that reason, demand for English wool was virtually inelastic: neither home-produced wool nor the wool occasionally imported from Spain offered a real alternative.

English wool was now being imported into the Low Countries in unprecedented quantities, in sacks or as fleeces still attached to the skin. Flemish and Brabant merchants and weavers were very active in this trade. They went to England in person, to the grounds of the sometimes remote Cistercian abbeys where the sheep were predominantly reared. On the local wool markets they often paid in advance for future deliveries, so that they also already had a stake in the actual production of the wool. Flemish vessels shipped the wool from London and other ports such as Great Yarmouth, King’s Lynn, Dover, Sandwich and Boston.

The continental merchants went to England in person to buy wool. Notice the sheep in the background and the gestures of the merchants; once the deal has been concluded with a handshake or slap, the buyer opens his purse to pay either the full amount or an advance.

The Southern Netherlands merchants needed English coins to buy their wool; they became good customers of the English coin workshops, where they exchanged the lightweight pennies from the Netherlands or bars of silver for English sterling. Thus, the accounting records of the London Mint list the names of merchants from Ypres and Brussels, side by side with the names of English customers. On their return from England, they did not always take their surplus English money for melting down into local pennies again, but sometimes preferred to set the foreign currency aside ready for their next trip. It is therefore not surprising that the 13th century coin treasure discovered in 1908 during the demolition of a cellar wall in the house at no. 32 Rue d’assaut in Brussels contained no less than 80,927 English sterling coins.

Gradually, the rulers and merchants on the Continent came to realise that they could make considerable savings by minting sterling coins themselves in their own country, rather than buying them from English coin workshops. From around 1270, coins worth one or two sterling pennies were therefore minted in the Low Countries, alongside the ordinary lightweight pennies. The sterling copies had the same weight and alloy as the foreign originals. The images on the face of the coins varied greatly: some depicted a crowned head, just like the English coins, while others displayed a totally distinctive image. In contrast, the reverse of virtually all the coins depicted the cross with three bullets between the arms, copied from the English model. From about the mid 14th century, owing to the rising demand for high value currency, the sterling penny became less important, giving way to the silver groat – worth three sterlings – and gold coins.

Marianne Danneel
Museum coordinator

Bibliography:

• T.H. LLOYD, The English wool trade in the Middle Ages, Cambridge, 1977
• J.H. MUNRO, Wool, cloth and gold. The struggle for bullion in Anglo-Burgundian trade (1340-1478), Brussels, 1973
• N.J. MAYHEW, Sterling imitations of Edwardian type, London, 1983
• IDEM, L’esterling, in: Une monnaie pour l’Europe, Brussels, 1991, p. 91-96.

Although frequent subject in the news, the notions of purchasing power and inflation are not any easier to understand. Room 14 of the Museum of the National Bank of Belgium is therefore dedicated to a didactic explanation of these themes. There you can see how prices have changed for a selection of items (bread, meat, milk, beer and coal/oil) and, in parallel, the development of the average hourly wages of a worker, from 1860 until the present day. The table showing the evolution of prices is based on a principle similar to that used for the consumer price index (CPI).

shop

The consumer price index is an economic tool compiled to observe changes in the prices of a fixed range of goods and services. It is metaphorically called the “housewife’s shopping basket” since the goods and services are selected for their significance in the household budget. This index enables us to measure inflation, a generalised increase in prices over a long period of time.It would not be possible to observe the price changes for all goods and services, without any exceptions. That is why it is first necessary to make a selection. The goods and services that are the most important for households have to be determined by using surveys about the consumption habits of households. Some of the selected items will be given a higher weighting because they are more frequently used. Once this classification has been completed, the observation of prices may begin.In Belgium, the first consumer price index dates from 1919. We owe it to Joseph Wauters, Minister for Labour, Industry and Supplies. Published in 1920, it only consisted of a limited range of goods: 56 products, most of them edible. Unlike our current index, all the goods had the same weighting. Despite this lack of differentiation, the index had a practical objective, which was to maintain the purchasing power. Since the purchasing power is the ability to buy a given number of goods with a fixed amount of money, it decreases if prices increase, unless wages and benefits increase too.

Table showing the evolution of prices

The CPI was thus created, among other aims, so that wages and benefits could be adjusted to changes in the cost of living. Since its 1919-1920 version, this particular objective has not changed, but the index itself has greatly evolved. The selection of goods and services has been considerably widened, from 56 products in 1919 to 507 products and services in 2004. Moreover, the items in the basket have been given a different weighting depending on their importance in household expenditures. In 1994, a new index came into effect, called the “health index”. It is a “light version” of the housewife’s shopping basket, for it does not include either fuel oils, tobacco or alcohol.

From then on, the health index has been the benchmark for index-linking rents, wages and benefits. The indexation of wages and benefits, is calculated in stages. There is a new round of indexation when what we call the “central index”, a threshold that corresponds to a fixed margin of increase, is reached by the moving average of the health index over the last four months.

In practice, the prices of goods and services in the housewife’s shopping basket are recorded each month, in 65 representative towns in Belgium. Various price averages are then worked out. Eventually, the index measures the level of price changes based on the reference year of 2004. The annual inflation rate is calculated by comparing the value of several “baskets”, one by one, over time. This rate is expressed as a percentage change worked out from a year-on-year price comparison.

In order to meet their goal, consumer price indices have to be the most precise representation of household consumption. This may seem like an elementary precaution, but it is not as easy as it looks. Until 2006, the index was fully updated only every five to eight years. The January 2006 index nevertheless introduced some methodological changes. Not only have measures been adopted to take better account of changes in quality of the goods and services in the basket, but a biennial reform has also been decided on so that new products would more easily become part of the basket and weightings could be slightly modified. Even though these reforms are not complete, they give a more representative model of household consumption and they manage to take new products into consideration. The full updates are still carried out every five to eight years. Yet there is still one other pitfall when it comes to representativeness, for the index cannot take into account the fact that people tend to replace goods whose prices are rising with cheaper ones.

Besides the national indices, there is a third tool for observing the purchasing power, namely the harmonised consumer price index (HCPI). Designed to be a collective economic instrument within the European Union, but also within the euro area,it measures price variations in a harmonised way. Until 1997, the national indices of the different countries of the European Union were the fruit of disparate methodologies. Each one had its peculiarities. The first national harmonised indices were published from 1997. Since then, and on the basis of the HCPI of the different countries, Eurostat (the Statistics Office of the European Commission) is able to work out the HCPI for the euro area or that for the wider European Union. This enables a better understanding of movements in inflation rates evolution within the euro area and the EU, information that is vital when it comes to setting monetary policy, the task of the Eurosystem.

Cyrielle Doutrewe
Museum guide

Sources

• BROQUET H., VAN ROY P., Vocabulaire de l’économie en Belgique, Couleur livres, Bruxelles, 2007.
• CORNILLE D., “A new national index of consumer prices and ten years of the HICP”, in Economic Review, Vol. 2006, Nr 1, June 2006, p. 29 - 43.
• EUROPEAN CENTRAL BANK, Price Stability: Why Is It Important For You?, ECB, Frankfurt, 2008.
• Index of consumer prices (Belgium.be)
• Consumer prices (FPS Economy, S.M.E.s, Self-employed and Energy)

museumtalks

You can find that out on www.museumtalks.be! The Chinese engineering student talks there nineteen to the dozen about the tea money he discovered in one of the displays of the NBB Museum. There is only one condition for listening, you have to understand Chinese. Because, like all the other ‘museumtalkers’ Chen uses for his commentaries only his mother tongue.

Museum Talks is a project of the Brussels Museum Council. The museums of Brussels receive visitors from countries all over the world, and about 140 of them made a comment about their favorite object in their favorite museum. You can share their enthusiastic view on these objects in 25 languages by listening to www.museumtalks.be. Comforting, isn’t it? To discover behind your computer through these commentaries what no less than 43 Museums of Brussels are about. You can also download the pieces and use them as an alternative mp3-audioguide.

This way, when you visit the NBB-museum, you can not only listen to the commentaries of Chen Zhaoxi on the tea money, but you can also hear why the Dutch computer specialist Bas Gijsen actually thinks that a change table is a topic of the day and you can understand why Gundera Vavere-Mikuta from Latvia is surprised about the value of the little kauri shells. The total number of commentaries on www.museumtalks.be is still expanding. Surely to be continued!

New 2-euro commemorative coin

The newest Belgian 2-euro commemorative coin is dedicated to Louis Braille (1809 - 1852) and the 200th anniversary of his birthday.

Louis Braille is the inventor of braille, the world-wide system used by blind and visually impaired people for reading and writing. The inner part of the coin features his portrait between his initials L and B, in the alphabet that he designed.

The coin is available to the public through the normal channels, including the counters of the National Bank of Belgium in Brussels or at one of its branches.