Britain and banking: Back to the 1830s
2012 07 12

By Lee Williams | Independent.co.uk

Unparalleled levels of imprudent lending; corrupt banking practices; soaring inflation and rising unemployment; government bank bailouts and an economy dependent on increasing levels of debt to sustain growth. Sound familiar? It would have done to Britons in the 1830s. The fact is that we have been in a remarkably similar economic crisis before and the reasons for it could be almost identical.

In Britain during the early 19th century, paper money was not as we know it today – all reassuringly bearing the head of the Queen and the stamp of the Bank of England. Back then, the Bank of England had the monopoly on the creation of metal coins but private banks – literally – had a license to print money of the paper variety and stick whatever images they liked on it. The result of the bank’s power to print money had disastrous consequences: inflation, as too much money flooded the economy and unsustainable lending, as banks lent out more in paper money than they could possibly back up with real reserves.


George Cruikshank’s famous bank note of 1819, a comment on stringent measures to protect the paper currency by hanging forgers. (Getty Images)


When the bubble finally burst in the late 1830s, catalysed by a similar crisis in America (sounding familiar again?) the ensuing lack of confidence in the system led to a run on the banks which had to be hastily curtailed by the Bank of England bailing out a prominent northern bank (how about that one?). In 1839 a similar predicament forced the Bank of England into the ignominious position of having to borrow £2 million from France.

The problem was ultimately resolved by an act of parliament. In 1844 the Bank Charter Act curbed the private banks’ ability to create paper money and ultimately phased it out altogether. The power to create money was now solely in the hands of the Bank of England, a situation which today we think of as the norm, so much so, in fact, that money being created willy-nilly by any private organisation with sufficient (or even insufficient) funds is pretty much unthinkable.

But wait a minute, because, unthinkable as it may be, that’s exactly what is going on today. The causes of our modern banking crisis may be uncomfortably similar to what happened in the 1830s. Today it’s not paper money that the banks have a license to print, but electronic money.

[...]


Read the full article at: independent.co.uk





Related Articles
Barclays rate rigging crisis shows ’corruption at heart of banking’
Barclays chairman quits bank after interest rate-rigging scandal
Government by the Banks, for the Banks: The ESM Coup D’Etat in Europe
CNBC Admits We’re All Slaves To Rothschild Central Bankers Global Government
Bank downgrade "shocker" aims to plant fear & panic
More Icelandic bankers arrested
The Biggest Financial Scam In World History
Financial Collapse At Hand: When is "Sooner or Later"?


Latest News from our Front Page

US Silent on Psychologists Role in CIA’s Tortures: Doctors
2014-12-20 21:53
Physicians for Human Rights had not received any response from the US Federal Commission to their call to investigate the role of health professionals in CIA’s torture program, Deputy Director of the organization told Sputnik. December 19 (Sputnik) — US government has not responded to calls to prosecute doctors, who participated in CIA torture program, the Deputy Director of Communications for ...
Ziolebrities: Simon Cowell donates £100,000 to Israeli soldiers to please pregnant jewish girlfriend Lauren Silverman
2014-12-20 21:00
Cowell, 54, is also planning a secret trip to Israel soon as he embraces the Jewish faith of Silverman, 36 Gala: Billionaire Haim Saban with Cowell Simon Cowell has publicly donated nearly £100,000 in support of the Israeli army. The X Factor boss pledged the cash to the Friends of the Israel Defense Forces at a US fund-raiser in Beverly Hills. The lavish gala ...
Former Chief Security Officer for NewsCorp: N. Koreans Not Behind Sony Hack, Interview Leak
2014-12-20 2:17
Hemanshu Nigam, a former federal prosecutor and former chief security officer for NewsCorp/Fox studios, says North Korea isn’t behind the Sony Hack. Nigam gave several bullet points for why the hack was likely an inside job. Attack code borrowed from a previous attack on Seoul, that’s why it’s in Korean. Private hackers typically borrow malicious code from other hackers.Nations state attacks follow ...
Sony Fires Back at Obama: Actually We Did Call the White House – Several Times
2014-12-20 2:13
Sony fired back at Obama after the press conference saying they had several conversations with the Obama White House before and after the movie was canceled. Via The Hollywood Reporter: After President Obama criticized Sony for its decision to cancel The Interview's release after theater chains decided not to show the film, the studio has issued a statement elaborating on the move. “The ...
The Bankster International
2014-12-20 1:55
Geopolitical analysis, the art of explaining power relationships through the prism of impersonal geography, can be a helpful tool for observers of the Great Game – but it also has its limitations. A case in point is the renewed US-Russia confrontation. Think tanks and policy insiders easily sell the narrative that from the dark days of the Cold War to ...
More News »