When central banks were created in the 17th century, they didn’t everywhere change the nature of money. Indeed, the Bank of England was founded not with any particular monetary objective in mind, but rather with a fiscal one. In Holland by contrast, the Bank of Amsterdam was established with a monetary raison d’etre. Almost immediately…
Finance is usually distinguished from the ‘real economy’ to isolate those parts of an economic system that are most directly engaged in production or consumption. However, this shouldn’t suggest that a financial system cannot reveal anything new about the ‘real economy’ not already measured. The condition of a monetary system can be indicative of an…
Technical advances brought about changes in military planning during the Second World War, but measuring the impact of new technologies and tactics was not the only preoccupation of the planners. Even monetary questions had to be confronted. During the war, armies had to be supplied with locally sourced materials wherever they were. This need, along…
The 18th century was a formative one in finance, especially in Britain. The innovations of the ‘Financial Revolution’ and the accompanying respect for the importance of sound credit had resulted in an increasing ‘financialization’ of the economy. Though still scarce, credit was becoming more accessible, most of all for the increasingly indebted British state. When…
In its first century in operation, the Bank of England carried out a wide array of functions, many of which it had a legal or practical monopoly over. One of these was ensuring its banknotes, the most common in the country, were adequately backed by reserves, the most important of which was gold. However, in…
Fiat currencies supposedly receive their value from the dictates of the issuing government. Citizens must pay their taxes in official currency and even the acceptance of a certain money in private transactions may be mandated by the state. Accordingly, the exact value of fiat currencies is usually linked to the health of the issuer. If…
After the start of the First World War, numerous countries’ monetary authorities suspended their gold standards. Many reverted back to gold after the war only to abandon it once more during the Great Depression. During this era, the question of what money was, and what it should or shouldn’t be, were debated more than ever…
In the last decade of the 19th century, a hitherto unheard-of German immigrant in Argentina published a book proposing a radical new monetary system. The author, Silvio Gesell, had no training in economics and so his ideas could very easily have been dismissed, but they were not. They caught the attention of economists, governments, and…
Though invented in China a millennia ago, paper money was viewed with suspicion for centuries thereafter. With its issuance potentially unlimited, how could its value be maintained? The question was grappled with in colonial Quebec, which resorted to using paper money made from ordinary playing cards in order to make up for a chronic shortage…
Back when the value of currencies was still linked to the precious metals, and their issuance therefore curtailed, many resented the scarcity of money as the cause of their economic ills. Of course, a deficiency of money makes credit similarly scarce and can slow economic growth even when any stimulus at all would be welcomed.…
Through much of the history of paper money, banknotes were issued by private entities operating in a decentralized system of money and finance. In whatever country and whatever their denomination, banknotes even traded at discounts to their face value that varied according to their liquidity and the health of the issuing bank. In the 19th…
Hyperinflation crippled numerous economies in the 20th century and continues to do so to this day. One of the most severe, and the one that is perhaps the most recounted to this day occurred in Germany following its defeat in the First World War. That episode of hyperinflation, like all the others, was most directly…
