Jump to content
House Price Crash Forum
Sign in to follow this  
lowrentyieldmakessense(honest!)

Central Bank War Finance

Recommended Posts

when are the real terrorists going to be locked away

link

Central banking in England rose out of the British government’s

demand for funds to continue King William’s War in the 1690s, on the heels

of the Glorious Revolution. Public confidence in the government reduced

dramatically as a result of ongoing war and rising military expenditures.

Private creditors became hesitant to loan money to the government in this

time when revenue ran desperately low. In 1694, the British government

accepted the proposal from William Paterson to establish the Bank of

England; the government received its badly needed loans in return for

granting special privileges to the Bank. Paterson further demanded that the

government deem the new Bank’s notes legal tender. The British government

refused, but Parliament did grant the Bank the power to issue new notes to

pay for government debt and the advantages of holding all government

deposits. The Bank of England was thus created as a way to serve the military

interests of the British Empire.

Two years after its founding, the Bank experienced its first experiment

with suspending payments, an act that foreshadowed the Bank’s enormous

influence in the future. To buy government debt, the Bank of England issued

£760,000 in bank notes, which immediately caused inflationary effects on the

British economy. A run on the Bank ensued, and the central bank became

insolvent. In May 1696, Parliament allowed the Bank to suspend payments of

specie. In other words, the Bank could refuse to pay its “contractual

obligations of redeeming its notes in gold…yet in operation, issuing notes

and enforcing payments upon its own debtors.” Accordingly, the Bank of

England suspended specie payments, effecting a severe depreciation of bank

notes in circulation because of the uncertainty of the Bank in the future to

resume payments in gold. Specie payments resumed two years later, but the

early history of the Bank continued to be plagued with a record of periodic

suspensions of payment, and Parliament continued to grant special privileges

to the Bank to serve the interests of government revenue. The Bank of

England, thus, wielded impressive power over the supply of money that

made it easier for Britain to engage in military conflict without having to

persuade private investors for loans.

Easy access to money is the best friend of governments in the state of

war. The Bank of England, created to aid in the funding of war, gradually

accumulated greater exclusive privileges from the British government to

continue the monopolization over the creation, circulation, and loaning of

currency to the government. The British government used the Bank of

England to its optimal ability to help finance its war with Napoleonic France.

The government, by itself, borrowed from and taxed the British people to

acquire revenue, and the Bank added another dimension to war financing.

Once the Bank suspended payments of gold, the obligation of the Bank to

hold reserves diminished, enabling it, essentially, to be able to issue notes at

the government’s discretion. By removing itself from the gold standard, the

Bank of England toiled with the dangers of fiat currency from 1797 to 1821.

The action that saved the Bank, and restored public confidence in the

currency, was the resuming of specie payments in 1821. By helping to finance

the war, the Bank of England served as an early example of central bank war

finance.

Share this post


Link to post
Share on other sites

Funded by a fiat monetary system our military took over 1/4th of the world's surface area. Compared to our opponents with their antiquated gold money system. Granted this wasn't our only advantage, but it sure helps when you have almost unlimited funding compared to your opponents.

People say a fiat money system cannot last.. but 300 years and still going isn't too bad.

Share this post


Link to post
Share on other sites

Funded by a fiat monetary system our military took over 1/4th of the world's surface area. Compared to our opponents with their antiquated gold money system. Granted this wasn't our only advantage, but it sure helps when you have almost unlimited funding compared to your opponents.

People say a fiat money system cannot last.. but 300 years and still going isn't too bad.

Did Britain really leave the gold standard 300 years ago?

Share this post


Link to post
Share on other sites

Exactly.

Our success of establishing the bond markets and FRB and central bank (copied from the Dutch who were punching well above their weight) guaranteed its use would be spread round the globe. If you didn't, you would be taken over.

It's like nuclear weapons. You've got to get them. Once the genie is out of the bottle, you can't put it back in.

And like all weapons, the only answer is once they are created to let anyone who wants one to have one in order to balance the power out.

Edited by Injin

Share this post


Link to post
Share on other sites

Exactly.

Our success of establishing the bond markets and FRB and central bank (copied from the Dutch who were punching well above their weight) guaranteed its use would be spread round the globe. If you didn't, you would be taken over.

It's like nuclear weapons. You've got to get them. Once the genie is out of the bottle, you can't put it back in.

So now we face Economic Mutually Assured Destruction?

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 259 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.