The Bank of England in the 17th century

A look at its founding, purposes, development, politics, credibility, background, goldsmith banking, operations and the effect on economy as an institution geared to its time.

On May 4, 1696, the Bank of England was caught in the grip
of its first crisis. The Bank had based its operation on the standard confidence trick which powers modern financial institutions: lending out the money that had been deposited therein and keeping only a small cash reserve on hand to meet the needs of those wishing to make withdrawals. Such a system works perfectly well when public confidence in the state of the bank, the economy, and the nation as a whole is strong. But by 1696, the English public felt no such sense of security. England was irrevocably locked in a costly and seemingly unwinnable struggle against the France of Louis XIV, the most powerful country in Europe. The depletion of the currency, so long a nagging deflationary force on the economy, had reached crisis proportions in the first half of the decade; as a result, the government had…

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