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Amsterdam, the official capital of the Netherlands, lies on the banks of two bodies of water, the IJ bay and the Amstel river. Founded in the late 12th century as a small fishing village on the banks of the Amstel, it is now the largest city in the country and is a financial and cultural centre.

As of August 1, 2006, the population of the city proper is 741,329; the population of the official Greater Amsterdam area is approximately 1.5 million, but the real agglomeration is estimated at 2 to 2,5 million. Amsterdam is also one of the core urban centres of the greater metropolitan area called "Randstad" (Ring City) which encompasses other Dutch cities such as Haarlem, Utrecht, Leiden, The Hague and Rotterdam and has a population of over 7.5 million. Amsterdam has one of the largest historic city centres in Europe, dating largely from the 17th century. At this time, a series of concentric, semi-circular canals ("grachten") were dug around the old city centre. Along the canals houses and warehouses were built. The canals still define Amsterdam's layout and appearance today. Many fine houses and mansions are situated along the canals. Some of the narrow brick houses are gradually sinking because they are built on wooden piles to cope with the marshy subsoil.

Although Amsterdam is officially designated as the capital of the Netherlands, it has never been (save a brief period between 1808 and 1810), the seat of the court, government, or parliament of the Netherlands, which are all located at The Hague. Amsterdam is also not the capital of the province in which it is located, North Holland, whose capital is located at Haarlem.

Amsterdam is famous for its free-spirited liberalism, diversity and tolerance.