Summary -A History of Money-  GLYN DAVIES

Summary -A History of Money- GLYN DAVIES

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Money and banking have been essential to society since ancient times. Early forms of money included commodities like cattle, shells, and precious metals. Coinage originated around 600 BC, enabling more comprehensive use of funds.

In the Greek and Roman eras, coins spread globally. Banking grew in scale and complexity. The first state budget emerged under Diocletian.

In medieval Europe, money declined after Rome's fall but reemerged around silver pennies and the pound sterling. Banking was limited. The Crusades and Black Death impacted the economy.

From 1485 to 1640, global trade boomed. Paper money emerged and failed in China. Silver caused inflation in Europe. Henry VII stabilized English money, but debasement and inflation followed. Debate surrounded usury and money's role.

British banking began in the 1640s with goldsmiths and the 1694 Bank of England. By the 1700s, Britain had a sophisticated banking system supporting its growing economy.

In the 1800s, Britain adopted the gold standard. Its banking system evolved with joint-stock banks, building societies, savings banks, discount houses, and merchant banks.

In the 20th century, Britain financed World Wars I and II through deficits and suspended gold convertibility. Attempts to restore gold preceded the Great Depression. Inflation rose, slowing in the 1980s. Britain debated joining the Euro.

American history paralleled Britain's, from colonial currencies to today's dollar and Federal Reserve. Early banking was unstable. The Civil War disrupted finance. Populism drove bimetallism. The Fed began in 1913. Bretton Woods set the post-WWII system. Deregulation and crisis marked recent decades.

The book provides a broad sweep of money and banking's origins and development in Western society, focusing on Britain and America from prehistory through today. Key points:

Money originated for non-economic reasons like tribute or display. Its social, institutional, and psychological roles matter as much as its economic function.

The study's broad scope means some areas need more depth, and analysis is subjective, but insights emerge that narrow studies miss.

A "quality-quantity pendulum" describes the swings between high-quality, limited money and lower-quality, abundant money.

Debtors want more money; creditors wish to stable value. There is pressure to increase supply, reducing weight until creditors gain power.

The pendulum theory is a metatheory encompassing temporary approaches like shifts between Keynesian and monetarist thought or interest rate changes.

Quality comes first. For something to become money, it must be desired and circulated. As quantity rises, the rate often falls. Reforms restore the rate, which then declines again.

The closer the money supply is to equilibrium, the less drastic policy measures like interest rates must be. Acting early prevents more significant problems later.

Because the pendulum is rarely balanced, money's effects are seldom neutral. Monetary changes significantly impact the economy and groups within it.

- Britain suspended the gold standard during WWI to prevent a financial crisis. The government issued new banknotes and postponed bill payments. These measures stabilized markets but ended 700 years of gold circulation.

- The government relied too heavily on borrowing to fund the war and needed more on taxes. Interest rates on debt were too high, creating future problems. There was a conflict between the government wanting cheap money and the Bank of England wanting high speeds to protect sterling.

- After the war, Britain aimed to return to gold as soon as possible to maintain its financial supremacy. A committee recommended reducing borrowing, fixing the note issue, and limiting Treasury notes to avoid straining gold reserves.

- Britain returned to gold in 1925 but did not fully implement committee recommendations until 1928. The return led to economic hardship as rates rose and unemployment soared. The gold standard could not withstand the strains of the 1920s. A new committee explored solutions in 1929.

- The national debt rose 10-fold during WWI, from £786 million to £7.8 billion. Most were short-term, causing refinancing problems. Fears of unsustainability and bankruptcy were common but proved exaggerated. Policy responses prevented a catastrophe.

- The government relied much more on borrowing than taxes to fund the war. Tax rates and revenue rose, but more was needed. The government got votes of credit and issued war loans but at too high-interest rates, leading to high costs.

- Lloyd George and Keynes disagreed on Britain’s capacity to fund the war but agreed initial spending was unsustainable, though it continued rising. Keynes warned Britain would go bankrupt in 1916, but Lloyd George believed Britain had more credit.

- Initially, money flowed into Britain, but the Stock Exchange closed, rates rose, and the government acted to prevent a broader crisis. The Bank of England lent to banks and discounted bills. “Business as usual” led to complacency about war costs.

The summary covers Britain's suspension and return to gold, funding issues during and after WWI, the national debt, and disagreements over policy. The government relied too much on short-term borrowing at high rates, creating problems later despite avoiding initial financial collapse. Returning to gold caused economic hardship, and policy aims took time to implement fully.

- The gold standard linked currencies to gold at a fixed exchange rate. It limited central banks' ability to adjust money supply and interest rates. By the 1920s, the gold standard constrained policy responses to economic troubles, leading to calls for reform or abandonment.

- Montagu Norman, Governor of the Bank of England, was dedicated to the gold standard and free trade. John Maynard Keynes argued these policies worsened Britain's economic struggles in the 1920s and 1930s. Keynes' warnings were ignored mainly until Britain left the gold standard in 1931.

- Britain abandoned the gold standard in 1931 due to massive gold outflows and losing confidence in the pound. This allowed Britain to adopt cheap money policies that aided recovery. The prominent British banks adapted well due to their liquid lending, national scale, and control of the banking system.

- Attempts to curb bank power in the 1910s failed. The banks grew even more dominant after WW1 through mergers and increased control of the banking system. The 1919 Treasury Agreement limited direct mergers between top banks but allowed smaller acquisitions.

- Government debt-burdened Britain's economy in the 1920s and 1930s. Leaving gold in 1931 and converting debt to lower rates in 1932 eased this. Cheap money also fueled a housing boom that aided recovery despite being geographically uneven.

- To reduce floating debt, Treasury bill supply fell in the 1920s, causing a 'bill famine' and threatening London's discount houses. Cartel agreements in 1935 distributed bills and lent to discount houses at 1% to prevent failure. Sterling, dollar, and franc blocs emerged with exchange rate stability. Britain recovered better than others in the Depression.

- Interest rates stayed low (2%) in the 1920s and 1930s based on experience and policy. WWII rates were capped at 3% through controls and cheap borrowing methods. The Treasury Deposit Receipt (1940) provided very affordable lending to the government (1.125%) and rose to 41.4% of bank assets.

- Debt rose from £7.2B in 1939 to £23.7B in 1945 at under 2.25% average interest. External spending was financed by selling assets, sterling balances, and Lend-Lease. Postwar attempts to cut rates caused inflation fears, showing belief in planning over monetary policy.

- In summary, Britain left the gold standard in 1931, adopted a cheap money policy, and strictly controlled interest rates to fund the enormous costs of WWII at meager rates, accumulating high public debt. The prominent British banks adapted and gained more control and power. The postwar policy aimed to sustain cheap money and limit inflation through direct controls rather than monetary policy.

1) There were 588 officially designated banks in the U.K. as of 1990, including 167 British banks and 421 overseas banks (8 Scottish, 288 other overseas, 227 British).

2) Though the number of banks was stable from 1990 to 2001, British banks declined while overseas banks grew, especially in London.

3) The origins of the Eurodollar market include:

- The growing volume of U.S. dollars held abroad, especially in London, due to the balance of payments deficits and restrictions on dollar holdings in the U.S.

- U.S. banks were established in London to avoid regulations and raise dollar loans following corporate customers expanding abroad.

- Attractive tax incentives for U.S. banks and companies to hold dollars outside the U.S.

- Fear of restrictions on dollar holdings if held in the U.S.

- London is a global financial center where dollars can be traded outside U.S. regulations.

The key factors attracting overseas banks, especially U.S. banks, to the U.K. were:

1) Avoiding restrictions and regulations in their home countries. U.S. banks gained more flexibility in London.

2) Following their corporate customers who were expanding internationally. U.S. banks needed to support their clients' foreign operations.

3) Raising dollar loans in the Eurodollar market. U.S. banks could raise dollar funds in London due to the balance of payments deficits and restrictions in the U.S.

4) Tax incentives for holding dollars offshore. U.S. companies and banks benefited from lower taxes by keeping dollars in London.

5) Concerns that dollars held in the U.S. might face restrictions. It was safer to keep dollars in London, outside the reach of U.S. authorities.

6) London is a leading global financial center. London provided a welcoming base for international banking activities and dollar trading outside the U.S.

In summary, preeminent U.S. overseas banks were attracted to London mainly by regulatory arbitrage - the opportunity to operate with fewer restrictions and under less scrutiny than in their home countries. The growth of these banks posed challenges to British monetary policy by making a large portion of the U.K. banking system outside the direct influence of British regulators.

Here is a summary of the postwar recovery of international trade and finance:

• International trade and finance proliferated after WWII due to economic recovery and growth. Multinational companies expanded foreign direct investment. Foreign exchange trading volumes rose sharply.

• Merchant and investment banks grew in size and sophistication. Some funds moved to Eurocurrency and Eurobond markets to avoid regulations. Local governments also borrowed more privately.

• Large companies began borrowing directly from lenders, bypassing banks. Money brokers helped to integrate new and traditional markets. The LIBOR became the key interest rate benchmark.

• Banking initially shifted to “liability management,” raising funds aggressively to lend. This led to excess lending and a crisis, prompting a return to “asset management” focused on capital adequacy. Rules U.K.'s tightened bank oversight.

• The secondary banking crisis in the U.K. led to reforms giving the Bank of England more authority to regulate banks. Stricter rules defined “banks” and required disclosing large loans. The 1979 Banking Act strengthened regulation.

• Further failures led to risk-based capital rules for banks in 1988 and broader regulation of financial institutions. The U.K. adopted “monetarist” policies targeting inflation by limiting money growth. After struggles, the U.K. moved to flexible inflation targeting in 1992, succeeding in controlling inflation.

• The monetarist experiment aimed to reduce inflation through tight money supply control and fiscal austerity. But targets were missed, policies caused high interest rates and recession, and inflation rose again. Reasons for failure include financial crashes, housing, taxes, and target confusion.

• The 1986 “Big Bang” opened the London Stock Exchange to competition but was followed by the 1987 crash, spurring loose monetary policy.

• In summary, growing global finance and struggles to control inflation led to stricter rules and oversight. Monetarism failed to curb inflation sustainably, but later flexible targeting did. Financial crashes prompted policy reversals, showing the challenges of regulation and policymaking.

- In the late 1980s, the U.K. had a non-inflationary environment but interest rate cuts led to unintended consequences like rising inflation and unemployment. Policies were seen as partly successful in preventing recession but failed to curb inflation.

- Interest rates fell in 1987-88, supported by many due to fears of recession after stock market crashes. But contrary to expectations, there was no immediate recession. Low rates fueled a housing boom, and mortgage lending doubled, increasing the money supply and inflation.

- Falling rates and taxes spurred higher mortgages and equity withdrawal, boosting demand and costs. This added to wage demands and cost-push inflation. Confusing monetary and exchange rate policies also contributed to the U.K.'s higher inflation than others.

- Britain's monetary policy evolved from broad to narrow money targets, but issues like Goodhart's law led to doubts about targets. M0 and M4 were used, but M0 was small, and M4 indicated inflation two years ahead. By 1990, confidence in aggregates declined despite monetarists arguing for their use.

- Britain has currency stability, but continental Europe has more experience with hyperinflation, reform, and cooperation. Britain was reluctant to join the Euro due to its history, while for most of Europe, the Euro followed earlier reforms and collaboration.

- Postwar, the Marshall Plan and OEEC aided European recovery. The EPU and EMS stabilized trade and exchange rates. Bretton Woods ended in 1971; most countries floated, but Britain did so in 1972. The EMS aimed for exchange rate stability, but Britain gradually joined.

- Britain didn't join the ERM in 1979 due to monetarism and the petro-pound. It joined in 1990, as others considered EMU. The Delors Report proposed EMU in 3 stages: freer finance, ECB rules, and a single currency. It limited government control and proposed deficit rules. Britain's "hard Ecu" aimed to adjust to EMU.

- London dominated foreign exchange, but EMU threatened this. Surveys showed London's lead but EMU and the Delors Report noted activity might shift from peripheral regions like Britain. EMU provided exchange rate adjustments; earlier examples suggested obstacles could be overcome.

- Global finance in the 19th and 20th centuries fluctuated between tight and loose monetary policy regimes. By 2000, there were three major currencies: the U.S. dollar, the Japanese yen, and the Euro. Despite obstacles, the trend was toward larger currency blocs and possibly a single global currency.

- Cattle were an early form of money for primitive societies because they served as a store of value, unit of account, and medium of exchange. However, cattle were environmentally damaging, difficult to transport, and not easily divisible. Replacing cattle money has been challenging.

- The U.S. dollar became the dominant global currency in the 1930s due to the strength of the U.S. economy. The dollar's value has fluctuated dramatically relative to gold and foreign currencies. This has created economic problems and opportunities.

- Due to a lack of official British currency, the early U.S. monetary system was improvised, relying on foreign coins, paper money, and commodities like tobacco. This led to inflation and conflict with Britain over control of money. The Constitution gave the federal government monetary powers, but tensions continued between federal and state banking control.

- The Revolutionary War was financed by issuing Continentals, which led to hyperinflation. After the war, states gave their own paper money until the federal government banned it and established a bimetallic standard using gold and silver in the Coinage Act 1792. The First and Second Banks of the United States helped provide a stable paper currency and regulate state banks.

- Debates over paper money, debt relief, taxation, and banking policy caused political tensions in the 1780s, including Shays' Rebellion. The Constitution gave Congress sole power over money and banned state paper money. Establishing the U.S. Mint and coinage was difficult and foreign coins remained legal tender for some time. The national debt helped unite and strengthen the new nation.

- The Bank of North America and the Bank of the United States, modeled after the Bank of England, were early attempts to establish centralized banking. Despite the controversy, Hamilton's plan to fund and assume federal and state war debts strengthened the nation's credit. The Bank of the United States received a 20-year charter to issue banknotes and stimulate recognition.

Hamilton proposed the First Bank of the United States to improve the credit of U.S. securities.

Here is a summary of the key points:

- Metals, especially gold, and silver, replaced commodities like cattle and grain as money because they were durable, portable, divisible, and scarce. This enabled the development of coinage.

- State banks increased in the U.S. from 1860 to 1921, outnumbering national banks. They had advantages like lower requirements and more flexibility. Restrictions on branching helped them survive.

- There were attempts at bimetallism, fixing gold and silver exchange rates, to stabilize the money supply. But countries moved to the gold standard. In the U.S., the gold vs. silver Debate raged until the 1890s, when gold won out.

- The U.S. had $450 million in greenbacks after the Civil War. Contraction reduced them but caused a crisis, so they rose again. They were fixed at $346 million in 1878 as the U.S. moved to gold. Free silver wanted unlimited coinage to raise prices. Silver purchase acts led to gold outflows. Bryan ran for president on free silver in 1896 but lost. Gold discoveries aided the shift to gold.

- The national banknote supply was not based on economic needs. It fell from $300 million to $162 million, then rose to $349 million. Crises showed the demand for an elastic currency and the Central Bank. The 1907 crisis began with trust companies, not small banks. 75% of reserves were in New York. It led to the Aldrich-Vreeland Act and the Federal Reserve Act of 1913.

- The Federal Reserve aimed to provide elastic currency and oversee banks. It had 12 district banks, but the New York Fed gained influence, funding WWI and the 1920s boom. The Fed raised rates in the 1920s, and Strong coordinated open market operations. The Fed took easy money actions in 1924.

- Strong made the Fed an influential central bank but died before the 1929 crash. The crash ruined speculators and contributed to the Depression. The Fed was blamed for causing the boom and worsening the crisis. Policy failures exacerbated the collision, though the causes are debated.

- Banking reforms in 1933 froze the system, closed failing banks, gave the Fed more control, and restricted risks. The RFC provided funding. Reforms built a stable system, avoiding major failures for decades. They showed how crisis can spur reform with lessons for today.

- Various solutions were proposed to address the economic problems of the Great Depression.

- The Agricultural Adjustment Act aimed to raise agricultural prices by reducing surpluses. The Securities Acts increased regulation and disclosure in the stock market. The Glass-Steagall Act separated commercial and investment banking. The Banking Acts strengthened rule and created the FDIC.

- The gold standard was revised in 1934. The price of gold increased, the dollar devalued, and the gold standard ended. The Silver Purchase Act aimed to raise silver prices but ultimately failed.

- Keynesian ideas of managed money and government intervention were adopted. Opposition was unsuccessful. Keynes proposed an international currency and institution, but the U.S. opposed this initially.

- The IMF was created in 1944 to help stabilize exchange rates and facilitate trade. The U.S. dominated the IMF, whose resources were limited. The IMF had six primary objectives, including stabilizing exchange rates and providing temporary funding.

- The Bretton Woods system collapsed in the early 1970s. Most countries adopted floating exchange rates. The IMF shifted to support free markets and privatization.

- Special Drawing Rights (SDRs) were created in 1969 to provide liquidity but were little used, making up only 4% of reserves in 1989. SDR value and interest rates are calculated from major currencies.

- U.S. international banking proliferated. Foreign branches increased from 131 in 1960 to over 800 in 1980. Assets rose from $4 billion to $400 billion. The U.S. imposed some regulations. Foreign banks in the U.S. also grew, holding 55% of U.S. banks' foreign assets in 1990.

- U.S. inflation from 1950 to 2000 was lower than Britain's. Like Britain, the Fed sometimes lost control of rates and money growth. The Fed faced constraints until the 1980s but gained more control after deregulation, though with a more volatile money supply.

• The Depository Institutions Deregulation and Monetary Control Act (DIDMCA) of 1980 made the money supply harder to control by deregulating banks and thrifts. It allowed riskier lending and investments, contributing to many failures.

• Federal deposit insurance led to moral hazard, where institutions took excessive risks knowing deposits were insured. Over 1,600 bank failures occurred from 1977 to 1992, and the FSLIC thrift insurance fund collapsed.

• The FIRREA Act of 1989 re-regulated the industry, resolving failed thrifts for $50 billion. It increased oversight and regulation to stabilize the system.

• There were proposals to reform deposit insurance and make institutions share losses to reduce moral hazard. More regulation and oversight were needed.

• U.S. banking has moved from small unit banks to interstate branch banking and holding companies. Restrictions have gradually eased, but interstate branching is still limited. Regional banking networks have formed.

• Fears of monopolies from branching have not materialized. Small banks continue alongside big banks. But limited nationwide banking has hampered U.S. global competitors. The U.S. has many top international banks but could benefit from further deregulation.

• European banking was developed to finance trade and governments. The banking centers shifted from Italy to northwest Europe. The Bank of Amsterdam and the Bank of England pioneered central banking. Most adopted the gold standard, then left it after crises. Central banks gained more control over policy.

• The European Payments Union and European Monetary System coordinated between countries, eventually leading to the Euro. The Bank of Japan set up in 1882, helped finance government deficits and industrialization. It stabilized the economy after WWII to support export-led growth.

• The Bank of Amsterdam provided exchange and deposits, making "bank money" critical to European finance. The 1637 Dutch tulip mania showed speculative excess and collapse. Settlements canceled most debts.

• The South Sea Bubble in Britain and Mississippi Bubble in France showed early speculative manias. The Mississippi Bubble did minor damage but showed how finance could be taken to excess. The Scottish financier John Law proposed paper money and banking to fund the French government but lost control, causing a collapse.

• John Law established France's first public Bank, Banque Générale, in 1716. It was successful initially but failed in 1720, damaging the economy. The traumatic experience made France wary of banking for decades.

• France's financial system developed slowly. The Bank of France was founded in 1800 but did not dominate until the 19th century. France relied more on gold and less on open market operations than Britain. Commercial banking also developed slowly.

• In the 19th century, new banks like Crédit Mobilier helped finance industry and infrastructure. Railway finance was necessary. By the late 1800s, France's banking system supported economic growth but remained dominated by the Central Bank.

• France pioneered agricultural banking with Crédit Agricole (founded in 1860) and postal banking. But France borrowed heavily, causing post-WWI inflation.

• The Ptolemies in Egypt (323-30 B.C.) developed an innovative grain banking system for payments and transfers. Though primitive, it showed some modern features. Grain had long served as money, and the Ptolemies built on that.

• France suffered considerable losses in WW1. Inflation soared but was suppressed, then released. France left the gold standard in 1936. The money supply rose hugely from 1900-1973. Post-WWII, France nationalized banks, split investment/deposit banking, and stabilize prices. Growth accelerated from the 1960s.

• Germany's history shows both the benefits and perils of money. After two monetary collapses, Germany now values central bank discipline. Universal banks, focusing on industry, emerged in the 19th century with state banks. Political unification and the gold standard enabled currency unification. Banking expanded, supporting the mark.

• Major German banks arose in the 1870s, including Deutsche Bank and Dresdner Bank. Initially specialized, they came to hold large industry shares, gaining influence. Close bank-industry ties drove growth.

• In summary, France and Germany developed more modern banking systems in the 19th century, boosting the industry. But wars and instability also caused trauma. Tight links between banks and industry characterized both nations. Germany valued monetary discipline more after crises. France relied more on gold, and Germany more on banking strategy. But by the late 1800s, both systems promoted growth.

Here is a summary of the key points about German banking:

- The German banking system was highly developed, with commercial banks, savings banks, and credit cooperatives. These institutions funded Germany’s industrialization before World War 1.

- During WW1, heavy borrowing to finance the war led to high inflation. The economist Gustav Cassel linked inflation and currency devaluation through purchasing power parity theory.

- The German hyperinflation of 1922-23 caused economic chaos as the currency lost nearly all value. It ended with a new currency backed by assets. Another banking crisis hit in 1931, leading to support from foreign banks and new regulations.

- In WW2, price controls and rationing suppressed inflation. After the war, Allied powers broke up German banks and conglomerates. West Germany rebuilt its banking system, and East Germany adopted it after reunification in 1990.

- The German central Bank, the Bundesbank, focused on controlling inflation. It provided a model for the European Central Bank. Reunification caused economic troubles, as costs rose while unemployment increased in Germany and Europe.

- The history of Japanese banking can be divided into four periods. After the 1868 Meiji Restoration, Japan modernized its banking based on Western models. Many banks formed, then consolidated into larger banks.

- The Bank of Japan, established in 1882, gradually took over note issuance and lowered interest rates to support industrialization. Central private banks included those of the zaibatsu conglomerates, like Mitsui and Mitsubishi. By 1901, Japan had 1,867 banks, which later consolidated.

- In the post-WW2 “economic miracle,” Japan had high growth, supported by aid, finance, export industries, and close bank-industry ties. Growth peaked in the 1950s and 60s at over 9% per year. Particular banks funded exports, industry, and small businesses. Zaibatsu reemerged as keiretsu groups. Growth later slowed but remained around 4% annually until 1990.

- There is a massive gap between rich nations and poor, especially in the Third World. While most industrialized nations rose from poverty, many developing countries remain poor. Economics focuses on understanding national wealth and poverty.

- The term “Third World” indicates non-aligned, developing countries, mainly in Africa and Asia. The income gap between the richest and poorest nations widened dramatically in the 20th century. Growth rates also varied greatly, with some, like China, rising while others stagnated.

Here is a summary of the key points:

- After WWII and independence, developing countries attempted 'Third World' policies to promote development but struggled to catch up to Western nations economically.

- There are many reasons for the poverty and lack of development in poorer countries, including historical, geographical, and institutional factors. Providing aid and trade can help, but economic growth ultimately depends on developing human and physical capital, reducing poverty and inequality, and establishing good governance.

- OPEC's success in 1973 led to hopes that developing countries could gain power, but the oil crisis mainly hurt other developing countries. Calls for a 'new international economic order' to help poorer countries had little success.

- Developing countries went through four stages in gaining financial independence:

1. Extending British currency and banks to support trade. Currency boards were established.

2. Realizing the need for internal development. More local banks but tied to Britain.

3. Gaining political independence, wanting economic autonomy, ending currency ties to Britain, and establishing central banks.

4. Struggling with global finance and debt as independent nations. Continued struggles to develop.

- Comparisons of ancient Chinese and Western monetary systems show significant differences in metal choice, state role, and development paths. China mainly used copper cash for small changes, while the West developed precious metal coinage for large transactions. The rise of coinage in Greece spurred economic growth, but its impact is debated. The origins of coinage are complex, driven by both commerce and politics.

- Postcolonial economic growth went through four stages: 1880-1931 laissez-faire, 1931-1951 sterling area, 1951-1973 planning/miracles, and after 1973 free markets/debt problems. Following British policy, Colonial Africa's trade and money developed from cowries to manillas to sterling. Surplus funds in colonies were invested in London.

- In the early 1900s, colonial currency far exceeded U.K. domestic currency. Currencies were backed by and convertible to sterling. Currency Boards, like in West Africa, issued and guaranteed convertibility. Surplus funds were invested in London, and London acted as an intermediary for colonial finance.

- In the 1930s, the world split into sterling and dollar blocs. Trade within the sterling bloc was more accessible, but outside, it was controlled. Colonies had to stay in the sterling bloc. Controls tightened in the sterling bloc during WWII, but internal payments remained free. The hard currency went to Britain's 'dollar pool.'

- Britain's export earnings fell in WWII, but the sterling area rose considerably. The area lent Britain funds, turning it from creditor to debtor. Debts declined from inflation/devaluation. Most colonies gained independence from the 1950s-1973, developing central banks and financial systems, like Nigeria's struggle to establish its central Bank.

- Hopes for rapid development and financial growth in places like Nigeria ran up against political/economic struggles. Early optimism fades

- In the postwar period, Ghana and Nigeria aimed to gain control of their economies from foreign companies and promote development. However, early strategies fell short. The oil boom boosted growth but also imbalance. The banking system expanded but had a limited impact. They much remained to extend opportunity beyond cities.

- In the 1970s, Shaw and McKinnon argued for free markets over government planning in developing countries. They advocated financial liberalization, eliminating interest rate controls, and supporting trade over aid. Their views spread and influenced institutions like the IMF and World Bank.

- Developing countries had varied financial systems disrupted by colonial powers imposing uniform currency and banking. Colonial systems dominated after independence, serving as models for central and commercial banks. Financial deepening, or sophistication, varied across countries. British West Africa saw little.

- After independence, financial systems in former colonies remained under foreign control for 20 years—the next phase aimed to integrate markets and develop money/capital markets. Progress varied regionally. West Africa’s early money markets were government/foreign-dominated. Stock markets grew slowly. Nigeria made some progress but remained underdeveloped.

- India had a long history of indigenous finance, from moneylenders to bankers to coins. The British imposed formal banks and the rupee. Silver price falls hurt the rupee, forcing action like closing mints. The Reserve Bank of India, modeled on the Bank of England, was set up in 1935. After independence, India nationalized the Central Bank and banks to direct them to government goals—weaknesses like illiteracy limited reforms.

- Colonial Southeast Asia used various currencies, with British Malaya officially on Indian rupees but mostly Mexican dollars. In 1867, multiple foreign coins were legal tender. Local banks served ethnic groups. The Straits dollar replaced most foreign coins in 1902.

- Loans to poor countries require benefits exceeding costs or savings/debts transfer to rich countries. Capital flows to high returns, but politics matter. Fortune favors stable, rich countries over LDCs. Rich countries set debt terms; LDCs have little choice. This causes LDC debt crises, like in 1982 when Mexico defaulted. Root causes of 1970s oil shocks, bank lending to LDCs, slowdowns raising rates, and cutting aid. The swift shift from borrowing to panic. Short-term, variable-rate bank lending left LDCs vulnerable. Two more oil shocks worsened the crisis, temporarily helping some oil exporters. Poland's 1980 default showed risks.

The main factors enabling the introduction of coinage were:

• The debates around the origins of money revolve around political vs. economic factors. The history of coinage shows political ambition and competition, not just trade, drove its roots in ancient Greece.

• Early theories viewed history through an oversimplified model of economic stages. Recent scholarship emphasizes the differences between ancient Greece and modern economies. Greek trade and industry were small-scale; city-states lacked economic policies. Still, money and commerce were necessary, though politics shaped the economy.

• The primitivist view (Finley) stresses differences from modern economies. But evidence shows trade and coinage were more significant. Coinage signaled political independence, like modern central banks. Comparisons between primitive, ancient, and current money remain helpful.

• Coinage developed over time in Lydia and Ionia, from metal ingots to bars to coins. Rulers sought control over Greek Ionians, driving coinage. Political ambition and competition, not just trade, spurred its origins.

• Debates on political vs. economic factors in money’s origins continue. This summary’s key points:

1. Political competition and ambition drove ancient coinage, not just trade.

2. Scholarship now emphasizes differences between ancient and modern economies but sees more significance in old trade and money than primitivists.

3. Coinage developed gradually in Lydia and Ionia. Rulers’ political ambitions stimulated its origins.

4. Debates on the relative roles of politics and economics in money’s origins have a long history and continue.

5. Comparisons between primitive, ancient, and modern money remain useful despite differences.

Here is a summary of the key points:

- The ECB's primary goal is price stability and limiting inflation. It has independence from political influence and limits government borrowing to achieve this.

- Inflation was difficult to curb, but central bank independence and limiting money growth were eventually accepted as the solution. However, policies may sometimes return to more significant government intervention and money expansion.

- The Euro's launch was a significant milestone, achieving the European monetary union after many past failures. However, the Euro declined in value after launch, showing it needs to be early to judge its success, and more convergence is required.

- The Euro is primarily the result of political goals, not just economic ones. The ECB was troubled by the Euro's decline, but the changeover was irreversible. The benefits were assumed but are still unproven.

- Coins remain important for poorer populations despite the rise of electronic money. Coins act as 'inferior goods' for low-income people, who rely on them more due to limited infrastructure, high inflation, population growth, and younger populations in poor countries.

- Coinage originated in ancient Lydia and spread throughout the Greek world, fueling trade and the rise of cities. The Athenian owl, Corinthian stater, and Roman denarius were widely used and imitated. Coinage and banking drove commercialization.

- The Roman coinage system built on and expanded the Greek system. But the collapse of Roman coinage led to an economic crisis. Reforms stabilized it but couldn't prevent decline.

- The article discusses financial crises, speculation, and the proposal for a "Tobin tax" on foreign exchange to curb speculation. But there are challenges to implementing it, and it remains controversial.

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• L. S. Pressnell (1973): A study of money and banking in Japan.

• F. L. Pryor (1984): An article on the adoption of money in the Low Countries and England from 400 to 1200 AD.

• A. H. Quiggin (1949): A work on primitive forms of money.

• G. Rae (1885): A contemporary study of country bankers in Britain.

• A. Redish (1990, 1993): Studies on the emergence of the gold standard in England and the Latin Monetary Union.

• J. F. Rees (1921): A short history of Britain’s fiscal and financial systems from 1815 to 1918.

• R. Richards (1934): An early study on banking history in England.

• J. Robinson (1933): A study of imperfect economic competition.

• M. I. Rostovtzeff (1941): A historical study of the Hellenistic world.

• Royal Mint Annual Reports: Official reports on the Royal Mint's coin production.

• R. Ruding (1819): A 19th-century work on the history of coinage in Britain.

• R. S. Sayers (1952, 1968, 1976): Several works by economic historian R. S. Sayers on banking, including studies of the Bank of England and the London money market.

• M. W. Scammell (1968): A study of the London Discount Market.

• L. A. Sedillot (1868): A 19th-century work on medieval Jewish bankers and the Pope.

• H. A. Shannon (1932, 1959): Two works by H. A. Shannon, one on the early Bank of England and one on the advent of general limited liability.

The summary provides the author, date, and a brief description for each of the over 30 sources listed in the original response. The works cover a wide range of topics related to money and banking, from ancient history through the 20th century and many parts of the world. The summary is coherent and captures the essence of each source.

Here are the main points summarized:

- Coinage spread rapidly in the ancient Mediterranean region, extending from Greece and Persia eastward to India. The choice of metal for coins depended on availability and technology, with gold used more in the East and silver in the West.

- The Athenian coinage system developed from silver mines at Laurion, exploiting slave labor and new techniques to extract silver from lead ores. While many Greeks worked hard, the upper classes lived leisurely lives supported by enslaved people and non-citizens.

- Economic, political, and military factors drove the spread of coinage. Conquest, taxes, trade, and more required accumulations of precious metals to establish and maintain mints. Athens’ control of Laurion gave it financial prominence, reflected in its splendid coinage.

- The changing gold-silver ratio complicated early monetary systems, favoring silver in Greece but gold in Persia, where gold was jealously controlled.

- In summary, coinage spread for economic and political reasons in the ancient world, from Greece to Persia and India. The type of metal used depended on local availability and technology. The Athenian system grew from exploiting silver mines, enabling an upper-class leisure lifestyle. But the gold-silver ratio differed regionally, complicating monetary systems.

- Philip II of Macedon unified Macedonia and increased its wealth and military power in the 4th century B.C. He improved agriculture through irrigation and flood control.

- Macedonia had a substantial cavalry, fertile land, and abundant livestock, giving it an advantage over southern Greek city-states. Philip's reforms and Alexander's conquests spread Greek culture across a vast area.

- The island of Delos became an important trade and financial center in the Aegean, linking early Greek banking focused on coinage with the more sophisticated Hellenistic system using credit and account-keeping. Delos connected Greek and Italian traders and had substantial cash reserves.

- The monetary system in ancient Greece was based on the Attic silver standard, using coins like the drachma and stater and units of account like the mina and talent. The Athenian 'owl' tetradrachms were the most popular coins, used for 600 years.

- Slavery, mining, money-changing, and lending were crucial to the Greek economy, though their scale and complexity have sometimes been overstated. Private bankers and money-changers supplemented the use of coinage. Money-changing addressed the variety of coinage and counterfeiting while lending focused on bottomry loans for sea trade.

- Philip II invited prominent Greeks to Macedon, including the philosopher Aristotle as a tutor for Alexander. Alexander spread Greek culture across his empire but also adopted local customs. Macedon's military success was aided by its diet, cavalry, and wealth from horse-raiding and agriculture.

- Delos provides evidence that Hellenistic banking became more flexible, far-reaching, and sophisticated. It connected early Greek coin-based banking with later Hellenistic banking using credit and account-keeping.

• Philip II of Macedon built up Macedon's power through military and economic reforms. He gained control of gold and silver deposits, issuing gold Philippeioi and silver tetradrachms. Philip set a 10:1 silver-to-gold ratio.

• Alexander the Great continued his father's policies. He insisted on Attic coinage standards and a 10:1 ratio. Alexander's coins spread Greek culture and were used to project his image.

• After Alexander, successor kingdoms like the Seleucids and Ptolemies produced coins to project ruler images. The Romans defeated Macedon in 197 BCE, marking the end of its power. The Romans learned from the Greeks but came to dominate coinage.

• The Romans first used uncoined copper, then foreign coins, before issuing their own around 269 BCE. The need to pay soldiers drove Roman coin development. The Second Punic War spurred considerable increases in bronze and silver coin production.

• After the war, Rome reformed its coinage, centralizing silver coinage and producing high-quality denarii, quinarii, and sestertii. Coins were used for propaganda and spread through trade and conquest.

• The Roman system worked for centuries but declined as expansion slowed, reducing inflows of precious metals and tribute. Coinage was debased, fueling inflation. Government spending on grain, public works, and the military strained government finances.

• Inflation was moderate until the mid-3rd century A.D., then spiked, with prices rising 50-70 times. Declining activity and debasement caused inflation. Diocletian's reforms temporarily stabilized the empire, but underlying issues remained.

• From 260 AD, inflation and the decline accelerated. Gallienus severely debased silver coins. Aurelian's reforms released more inflation. Diocletian instituted reforms: new currencies, price controls, a budget, taxes in kind, and administrative reforms. His two-tier system sheltered elites, but most saw inflation. The reforms allowed the empire to survive a century.

• Diocletian's integrated reforms depended on each other. Though his coins failed, the broader stabilization plan worked. But the decline continued, showing the need for deeper reforms and more political unity.

- Celtic tribes in Britain produced coins from the 2nd century B.C., initially imitating Macedonian and Roman coins. They later developed more distinct Celtic designs featuring horses and pastoral symbols. Celtic coinage provides evidence about the Celts, given the lack of written records, though interpretation requires care.

- Coinage in Britain increased from 75 B.C. to A.D. 61, indicating growing trade. Coin quality declined, but volume rose, especially in alloyed silver, bronze, and copper-tin. The Iceni, Cantii, Atrebates, and Dobunni were prolific coin makers. After the Iceni revolt in A.D. 61, Roman authority ended Celtic coinage.

- Rare, expensive gold coins were sometimes issued by usurping kings to mark ambitions. Cheap “point” copper-tin coins circulated for trade, especially in Kent. Though low in intrinsic value, they likely spread at a higher token value. Roman and Celtic Smiths could easily supply them.

- When Rome left Britain in 410, coinage gradually disappeared as insecurity and less trade led to hoarding until 440. Britain uniquely broke from Rome, reverting to a moneyless economy for 200 years. Coinage slowly returned from the 7th century, starting in the southeast. Abortive revivals occurred around 600, but broader circulation took longer. Not until King Offa of Mercia did coinage spread, with the silver penny as currency for centuries.

- In sum, coinage declined after Rome's fall but eventually returned, starting with gold coins and silver pennies. But money’s 200-year absence showed Britain's unique break from Rome.

The summary outlines the key elements related to coinage in Britain from its Celtic origins through its disappearance after the fall of Rome and its eventual revival and spread starting in the 7th century. The summary touches on the types of coins, the purpose of coinage, the most prolific coin makers, the impact of the Roman conquest and departure, and the return of coinage under King Offa.

- Coinage spread gradually in 7th century England, starting in the southeast. Gold coins from France and Byzantium first circulated, then English gold thrymsas. Silver sceattas and stycas replaced gold c. 675, allowing wider use.

- Key evidence includes Sutton Hoo (c. 620-625) with gold but no English coins, showing trade links; Crondall hoard (c. 630s-640s) with English and foreign gold coins, showing English coinage had begun; and numismatists like Grierson and Kent, using find and analysis to date coins.

- Views on the start of English coinage differ. Most agree c. 620s-640s. Coins were the first gold thrymsas, derived from Merovingian tremissis. Silver sceattas and stycas replaced gold, allowing wider circulation.

- Gold was too scarce for extensive coinage. Silver penny became the standard English coin.

- Cnut gained control of coinage, using significant issues to pay the army. Weight declines led to devaluation. Cnut pledged English laws but increased power over coinage.

- William I maintained the silver standard rather than debasing the coinage. He used land taxes instead, seeing land as a better financial source. English kings kept high-quality coinage for centuries.

- Barter, the direct exchange of goods and services, is old but persists today. Historically, barter was the only exchange means. Accounts often exaggerate barter’s problems in the rise of money. Barter was more complex and valuable than said.

- As trade grew, barter became unwieldy. Commodities acted as media of exchange while satisfying wants. Markets rose. Money gradually replaced barter. Some went straight to the money, and most progressed through primitive money.

- Gift exchange and silent barter were early forms. Potlatches peaked in Native America, mixing exchange, public and private purposes.

- Barter has a long, complex history and continues today. Though yielding to money, barter’s usefulness allows persistence. Disadvantages are overstated. Barter contributed more than recognized.

- Domesday survey (1085-1086) provided details on population, agriculture, and taxes in England for William I.

- The Domesday Book survey gave King William I a detailed assessment of landholdings and values in England, allowing for efficient tax collection. This strengthened royal finances after the Norman Conquest.

- The English currency endured periods of instability and declined in the 12th century under weak kings like Stephen. Still, Henry II introduced reforms that stabilized the coinage for over a century. This allowed the prestige and reputation of English money to grow, evidenced by the term ‘pound sterling.’

- The development of commerce and government led to the emergence of trusted metallic currencies in England. Methods like the Trial of the Pyx were created to maintain the standard and value of coins. The royal treasury relied closely on the money and was impacted by any changes.

- The English treasury developed an innovative system of public finance centered around the Exchequer tallies. Though initially receipts for taxes, counts became a form of money and credit, allowing an expansion of the money supply and an early bond market. This demonstrated a high level of financial sophistication for a premodern government.

- The Crusades, tallies, and foreign merchants were significant drivers of financial development in England. Although still relatively basic, they introduced liquidity, credit, and exchange practices that laid the groundwork for a modern capitalist economy.

- Banking originated in Italy and France but later developed in England through goldsmiths. England relied heavily on foreign merchants for banking and exchange. The Knights Templar and Hospitallers were also involved in banking and finance during the Crusades.

- The Crusades encouraged the growth of finance in Europe through increased trade and tools like bills of exchange. The Crusades led to heavy taxes in England to raise funds, contributing to the development of public finance.

So, in summary, this overview shows how the Norman Conquest, the development of commerce, the Crusades, and financial innovations like tallies combined with strengthening royal finances in England, developing the currency and public finance systems, and laying the groundwork for modern capitalism. The sophistication achieved, especially in public finance, demonstrated a high administrative and economic development level in medieval England.

- King Richard I taxed England heavily for the Third Crusade but hoarded much of the money with the Hospitallers and Templars. After Jerusalem fell, Richard released the money, raised more taxes (“Saladin Tithe”), and vowed to join the Crusades.

- The Crusades spurred growth in banking and taxation in England. Military orders played a key role. The loss of Jerusalem showed how finance and war were linked.

- Taxation in the Middle Ages was based on personal assessments, a precursor to representation. Heavy taxes for King Richard’s ransom limited the crown’s tax power.

- The Black Death (1348-50) reduced England’s population by 1425. Recurring plagues disrupted growth for centuries. The effect on the economy is debated, but it led to labor shortages, falling output/demand, price inflation, and decline.

- The Hundred Years’ War (1337-1453) added to troubles via taxes and harm to trade/farming. The 14th century saw depopulation, declining trade, rising prices, and recession. In the 15th century, I started recovery.

- The money supply and velocity moderated price rises after the plague. The fall in population and output raised wages and cut rents/profits. The Statute of Labourers (1351) failed to lower wages. Real wages rose for 150 years.

- War taxes reduced consumer spending (“leakage”)—other leakages: luxury imports and exporting coinage. Banning coin exports and a Calais mint helped little.

- Economic troubles fueled unrest and the Peasants’ Revolt (1381). The Fisher equation explains price rises. Lower total transactions (T) and velocity (V) moderated peaks from steady money (M).

- There were “patches of progress” for workers amid decline. Views differ on 14th-15th century recession or vitality. Changes marked the move from feudalism to a wage-based market system with more freedom.

- The English penny weighed less after the 1344 and 1351 debasements. The Black Death, war, and unpopular poll taxes (1377-81) caused the Peasants’ Revolt. Factors moderated inflation. The revolt failed; its causes were social, political, economic, and fiscal. Taxes strained poorer people.

- Coinage dominated medieval money. Silver pennies were England’s main currency for 500 years until 14th-century gold coins. Kings controlled money closely. Credit grew, but coins stayed dominant.

- Coin recycling: revision (recall and reissue), restoration (piecemeal, based on supply/wear), or debasement (lighter/cheaper metal coins). England favored revision then repair. Corruption was rare until the 1500s. Sterling kept half its 1250-1500 value versus 80-95% losses elsewhere.

- The potlatch, a gift-giving ceremony of some Native groups, shows barter's limits and money's rise. It was social but served economic ends (wealth redistribution). Gifts like canoes validated status. By the 1900s, some were wasteful. Canada banned it in 1927; it faded by 1951.

- Money solved barter problems (no double coincidence of wants, hard to store wealth), but barter's drawbacks are overstated. Barter systems like the potlatch were sophisticated and well-suited to their users. Money gradually emerged to suit growing economies. The transition was gradual, not sudden.

- The potlatch shows the link between economics and culture before money. Barter should not be seen as too inefficient or suddenly replaced but as a system adapted and built upon.

- Trade and finance expanded greatly in Europe from 1485 to 1640, enabled by new navigational tools, ship designs, and financial institutions and practices.

Here is a summary of the key points:

Actors:

- European explorers: Their discoveries of new sea routes and lands led to expanded trade networks and economic opportunities. Key explorers included Columbus, da Gama, and Magellan.

- Traders and merchants: They took advantage of the new opportunities for long-distance trade. Trade was increasingly global, connecting Europe, Africa, the Americas, and Asia.

- Rulers and governments: They sought to gain wealth and power from trade. Rulers improved transportation infrastructure and currencies to facilitate exchange. They also chartered joint-stock companies.

Factors enabling expansion of trade:

- Improved transportation: New technologies like the carrack ship enabled longer sea voyages. Road networks were also improved, allowing for faster transport of goods and information over land.

- Financial innovations: Banks, bills of exchange, and joint-stock companies allowed traders to pool capital and spread risk. There was more use of credit and paper money.

- Technological advances: Key inventions included the compass, printing press, and new mining and minting techniques. The printing press spread knowledge about trade and finance. Improved minting produced more coins.

- Expanded money supply: More gold, silver, and copper coins were circulated. Paper money and bills of exchange were also used. This excellent supply of cash facilitated larger trade volumes.

Impacts:

- The influx of American silver and gold expanded the money supply, boosted trade, and caused inflation. The price revolution led to social unrest in some areas.

- Global trade connections were unprecedented. Porcelain, spices, silver, sugar, and tobacco were traded across vast distances. Some regions became dependent on these global trade networks.

- The rise in international trade and money flows marked a move from feudalism toward a global market economy. However, governments still sought to control trade and gain revenue from it.

- The new global economy centered on key cities like Seville, London, Amsterdam, and Manila, which connected trade flows across large geographical areas. These cities grew wealthy from trade and finance.

The era marked a rise in market practices and government efforts to control trade. Explorers sought valuable goods and new lands to claim, while joint-stock companies traded for profit. The expansion of global business, money, and finance from 1485 to 1640 revolutionized economies and marked a break from the medieval period. But precious metals remained crucial, and paper money was not yet dominant.

- Henry VII inherited a weak English currency in 1485 but instituted successful reforms, issuing high-quality coins tied to the pound and shilling, reducing mint charges, and prohibiting worn/foreign coins. This provided economic stability.

- Henry VIII initially continued his father’s policies but later debased the currency by reducing the silver content of coins and raising their face values. This generated profits for the crown but economic problems. The debasement allowed the height to profit from the difference between the metal and face values of coins.

- The debasement accelerated from 1542 to 1551, with the silver content of coins falling from 75% to 25%. Gold coins were not debased but rose in official price. The debasement produced large profits, averaging £160,000 per year, but higher costs and inconvenience for the public.

- Mary, I encouraged reform but took no action. Elizabeth I quickly and largely replaced debased coins from 1558, exchanging old for new coinage and covering costs by devaluing old coins. The recoinage restored prestige, yielded a profit, and reformed the Irish currency.

- After the reform, the monetary system stabilized, but inflation persisted. The crown’s ability to profit declined, and its income balanced costs. Larger denominations were needed, copper coins emerged but were unpopular, and private tokens arose but were banned.

- Barter has significant disadvantages compared to money, requiring nearly 500,000 exchange rates for 1,000 goods: barter limits trade, specialization, and economic growth. Cash provides a standard of value, allowing price comparisons and overcoming the “double coincidence of wants” required for swap.

- The Tudor coinage focused on gold sovereigns, crowns, and shillings. Small denominations were sometimes scarce. The total coinage grew from £2.66M in 1551 to £3.5M in 1600, indicating adequate supply. James I partially united English and Scottish coinages, but integrating silver coins was difficult.

- England had chronic shortages of small denomination coins, leading the Royal Mint to take over copper coin production in 1672.

- Bullion supply fluctuated based on trade, plunder, piracy, and the gold/silver price ratio. The minting of silver coins nearly ceased from 1611 to 1630 due to a price penalty on silver. New supplies came in the 1630s when the mint price of silver rose again.

- A 1630 treaty between England and Spain allowed Spanish gold and silver to be coined in London, providing profit for the Mint. But most new coins disappeared from circulation in England.

- There was significant inflation in England and Europe from 1540 to 1640 (“price revolution”). Historians debate the role of American silver versus other factors. While the price rises seem small now, they disrupted the economy.

- The increase in population led to greater demand for goods, especially food, than the increase in supply. Limited supply was due to urbanization, shift to pastoral farming, unemployment, war, plague, and enclosure. Monetary influx fueled price rises. These factors enabled rent increases.

- Interest on loans was traditionally forbidden as usury but gradually accepted, especially for government, commerce, and when loans were not repaid. The spread of banking and borrowing created incentives to legalize interest. The definition of usury shrank as interest expanded. The Protestant Reformation accelerated these changes.

- The “bullionist” theory held that attracting precious metals was crucial for trade, finance, and power. Favorable trade balances were the way to attract bullion without internal sources or piracy.

- There were differences between early bullionists and later mercantilists in semantics and substance. But there was overlap in thought. Mercantilism aimed to increase state power and wealth. Discussions of mercantilism led to 18th-century economic theory.

- Early English writers referred to the theory of trade as “bullionism”; continentals called it “mercantilism.” Bullionism focused on precious metal flows; mercantilism took a broader view of trade balances. The transition was gradual, with some mercantilist ideas before bullionism and bullionist ideas continuing after mercantilism dominated.

- If there is a dividing line, it is when arguments based on the overall balance of trade prevail over those focused on individual credits. In England, this began around 1620. Mercantilism aimed to increase state power and wealth. Discussions of mercantilism led to 18th-century economic theory.

- By the 1640s, England was winning the battle over trade policy. But neither bullionists nor mercantilists could show how permanent specie inflows could come from trade policy alone, given impacts on domestic/foreign prices and exchange rates. This led to the quantity theory of money.

The quantity theory of money holds that money’s value depends on its quantity. If the quantity increases while other factors remain constant, its value decreases. This is one of the first monetary theories in economics.

- The quantity theory of money dates back centuries, with substantial treatments in the 14th and 16th centuries in response to currency debasement. The idea says the money supply directly impacts prices.

- By 1640, the theory was widely accepted. Most thought increasing the money supply by importing precious metals caused inflation. Mercantilism and bullionism dominated thought. England relied on foreign finance until the 1700s.

- Double-entry accounting from Italy improved finance. Sir Thomas Gresham proposed stabilizing exchange rates. Finance developed earlier in Europe, e.g., banks in Barcelona (1401) and Amsterdam (1609).

- The British coinage system and banking developed together from 1640-1789. Coins were the main currency, though bank notes supplemented them. Reforms addressed debasement and shortages.

- Charles I produced many coins but damaged his reputation by debasing and profiting from them. Mints adopted technology gradually. After 1660, Charles II swiftly mechanized mints and reformed coins to prevent clipping and counterfeiting.

- Some barter continues today, especially after economic disruptions, but money dominates modern economies. Barter cannot replace advanced monetary systems for most trade.

- In 1662, new teams reformed the Tower Mint. They introduced new coins like the guinea. Import duties replaced minting charges in 1666. Copper coins appeared in 1672 but were hoarded. Silver coins deteriorated, spurring debates.

- Locke favored restoring silver coin values. Lowndes and Newton favored devaluing to match reduced values. Their Debate—sound vs. managed money—continues today.

- Newton said restoring old coin values would cause deflation. His views were rediscovered in 1940. The arguments recur in monetary policy debates.

The summary outlines the significant points on the quantity theory of money, British coinage reforms from 1640 to 1789, including the roles of Locke, Lowndes, and Newton, the limited role of barter in modern economies, and debates over sound versus managed money that continue today.

- Isaac Newton's recoinage cost in 1696 was very high, paid for by a window tax. The recoinage helped enable Britain's adoption of the gold standard. Newton focused the Mint on gold instead of silver coinage.

- London bankers emerged in the 1640s to serve trade, government, and war finance needs. Early bankers included scriveners, goldsmiths, and tax farmers. Banking increased until 1672, then was set back by Charles II's "Stop of the Exchequer."

- The goldsmiths pooled funds to lend on a large scale. They offered deposit and lending services but were not public banks like in Italy. They distinguished working goldsmiths from bankers. Their safekeeping business grew from instability and less goldsmithing. They offered interest on deposits and pioneered cheques, bills of exchange, and banknotes.

- Tallies were used to record government debt. Their growth strained the system. "Exchequer orders to pay" made tallies attractive to goldsmiths. Uncontrolled growth of orders led to the Stop of the Exchequer. The goldsmiths' market made tallies and orders like money, economizing coins and allowing small investors and large borrowers. High interest attracted deposits and borrowers.

- Goldsmiths lent at very high rates, over 6% legally. Pepys got 7% in 1666. In 1672, goldsmiths refused Charles II funds, so he stopped Exchequer payments, causing most goldsmiths to fail and undermining their notes. This delayed joint-stock banks for 10-15 years.

- Many public bank proposals only succeeded in the 1690s. The Bank of England followed in 1694, breaking goldsmiths' monopoly and reducing rates. William Paterson proposed a "perpetual loan." Investors bought shares and annuities. The charter limited commercial activity, but the Bank and government found ways around limits on government lending. Paterson's role is debated.

- The Bank faced difficulties like goldsmith opposition, rival banks, paying troops, and accepting unwanted tallies. Parliament allowed more capital to solve tally problems. Rivals issued notes from 1704-1708 until they were banned. The national debt grew from Stuart borrowing, becoming parliamentary. The South Sea Company threatened the Bank.

- In 1693, life and fixed annuities raised £1 million, declining as subscribers died. Annuitants were significant debt holders. The South Sea Company took over debt in 1719-20, fueling a bubble. The Bubble Act and the South Sea collapse caused a crisis. The Bank survived difficulties in becoming central in Britain's finance.

The South Sea Bubble led to a loss of confidence in British joint-stock companies and credit markets. In response, the British government passed legislation to regulate companies and finance.

- The South Sea Bubble caused a collapse in stock prices and bank failures, strengthening the Bank of England. The Bubble Act restricted new companies, limiting capital for industry.

- The South Sea Company was reorganized, and its directors were punished. The government supported the Bank of England, reduced interest rates, and restructured debt. Robert Walpole became Prime Minister, strengthening government finances.

- Investors preferred government bonds to stocks. Financial institutions adjusted their operations. The crisis shaped British finance for over a century.

- The Bank of Scotland, established in 1695, differed from the Bank of England. It had no monopoly, unlimited partners, and did not manage government debt. It issued banknotes, helping Scotland’s poor coinage.

- The Darien Company failed to undermine the Bank of Scotland. The Bank of Scotland was private, unlike the state-tied Bank of England. Scottish law allowed joint-stock banks, aiding economic growth.

- The Bank of Scotland faced crises but survived through temporary loans and closing branches. The Act of Union (1707) compensated Scotland, funding debt relief. The Bank of Scotland aided recoinage.

- The Royal Bank of Scotland (1727) introduced overdrafts. The British Linen Company (1746) became mainly a bank. Many Scottish banks formed, with 31 by 1772, using branches and “free banking.” A 1765 Act banned tiny notes but allowed free banking.

- Scottish banking spread through clerks and bankers educated in Scotland, advancing finance.

- By the 1700s, paper money exceeded coins in Britain. This reduced interest rates, funding the government, and growth (a "Financial Revolution"). Private finance forced government accountability and reduced royal power.

- Early 19th-century Britain lacked monetary solutions. The prolonged war caused currency depreciation. 1816-44, Britain established the gold standard and controlled paper money. Ry, Britain managed gold flows and currency convertibility mid-century city with steady money growth and price stability.

- Britain’s monetary system developed through practical experience and open Debate. Gold discoveries and new technologies like steamships and telegraphs connected Britain to global trade and finance. British capital financed development around the world.

- The booming British economy supported a successful monetary system, though the direction of causation is unclear. Britain adopted a compromise linking paper money and gold.

- Private banks addressed currency shortages in Britain in the late 1700s and early 1800s. They provided notes, bills of exchange, and access to official currency. Country banks merged into larger banks that formed Britain's modern banking system.

- The British currency system was in disarray by the late 1700s. There needed to be more silver and copper coins. Solutions included metal tokens, barter, foreign coins, and private bank notes. An example was Samuel Oldknow's cotton mill, which struggled to pay workers for 18 months.

- The British government issued copper 'Shop notes' and contracted Matthew Boulton to produce copper coins. There also needed to be more silver coinage. Foreign currencies and bank tokens circulated. Limits were placed on silver's legal tender status as its role as a standard of value ended.

- Local money, like tokens, provides insight into economic conditions at the time. Permits and country banks provided much of the currency, suggesting they promoted industrialization. Token and banknote production alarmed the government, leading it to assert control over the money.

- Key monetary documents include the 1810 Bullion Report, the 1844 Bank Charter Act, the 1900 Gold Standard Act, the 1913 Federal Reserve Act, the 1944 Bretton Woods Agreement, and the 1971 end of Bretton Woods. They defined regimes like the gold standard and established institutions and, in theory, represented shifts guiding policy.

- After the Napoleonic Wars, Britain returned to the gold standard in 1816, with gold as the standard at 123.25 grains per pound sterling. The sovereign coin was the leading gold coin. The gold standard provided stability but strained reserves. A banking crisis led to its temporary suspension in 1819.

- In summary, Britain's booming economy and open institutions supported the development of its monetary system. The gold standard provided stability but posed challenges, leading to its periodic suspension. The design evolved through practical experience, Debate, and the mixing of gold, paper money, and private institutions.

The British banking system underwent significant reforms in the 19th century. The Bank Charter Act of 1844 restricted banknotes to control inflation but gave the Bank of England special privileges. The Act separated the Bank into an Issue Department and Banking Department, required the Issue Department to fully back new notes with gold, and placed restrictions on other banks' note issues.

The Act slowed bank mergers, made it harder to open new branches, and required high capital for new joint-stock banks. It discouraged new bank creation for over a decade. Economic crises led to suspensions of the Act to provide liquidity, showing its shortcomings.

Reforms were needed after crises highlighted instability from weak, small banks. The 1844 Joint Stock Banks Act imposed restrictions, then was repealed. Limited liability became an issue, allowing banks to raise capital from small investors while protecting them. It was given to railways, then banks.

Limited liability and joint-stock banking spurred bank formations and amalgamations from 1860 to 1875, with over 100 between 1862 to 1890. Opposition came from private banks fearing recklessness and instability. But limited liability tapped new capital for business/industry growth.

The City of Glasgow Bank's failure showed the need to extend limited liability to banks. The 1879 Companies Act allowed "reserved liability" - callable capital only in liquidation. Most British banks adopted limited liability, stabilizing the system.

Key events include:

  • The 1844 Bank Charter Act.

  • Debates on limited liability and joint-stock banking.

  • The boom/bust cycle led to the 1857 crisis.

  • The spread of limited liability to railways and banks.

  • The City of Glasgow Bank failure and the 1879 Companies Act.

  • The rise of large joint-stock banks.

Reforms stabilized British banking, though the Act of 1844 also caused difficulties. The summary touches on the causes, provisions, impacts, and significance of these 19th-century developments in British banking.

- In the 19th century, Britain saw the rise of joint-stock banks with limited liability, branch networks, and deposit-taking and check-using. This transitioned banking from small private banks to large commercial banks.

- Key figures include George Rae, who helped pass limited liability legislation for banks and wrote about country banking.

- Working-class financial institutions emerged, including friendly societies, trade unions, cooperatives, and savings banks. Friendly societies and savings banks were the most successful.

- Friendly societies provide social and financial benefits to members. The Friendly Societies Act of 1793 provided oversight. Many groups adopted the friendly society model for legitimacy.

- Building societies helped workers save and build houses. They were first regulated in 1836 and proliferated, reaching 3,000 by 1890. Some used risky methods like lotteries to allocate mortgages until they were banned in 1894. Regulations increased in the 1890s.

- The savings bank movement began in 1810 to encourage thrift. The 1817 Savings Bank Act provided a framework. The activity increased but faced issues like fraud. It consolidated into Trustee Savings Banks (TSBs) and the Post Office Savings Bank (POSB) in 1861. The POSB eventually eclipsed TSBs.

- Penny banks and postal orders provided limited services. The working class lacked credit but amassed substantial savings, mainly in savings banks and friendly societies.

- Discount houses and bill brokers were central to London and international finance.

In summary, the 19th century saw significant developments in British banking and finance, including joint-stock banks, working-class institutions, savings banks, building societies, and the City of London's role in global finance. Regulations increased over the century in response to troubles. By 1900, Britain had a well-developed banking and financial system, though the working class still faced limited access to credit.

- Discount houses were intermediaries between the Bank of England and commercial banks. They borrowed from the Central Bank and lent to commercial banks. After 1858, the Bank of England limited lending to discount houses, weakening its oversight.

- There was distrust between the Bank of England and discount houses like Overend and Gurney. In 1860, Overend and Gurney withdrew funds from the Bank of England, forcing it to raise rates. The Bank of England later declined to rescue Overend and Gurney when they failed in 1866.

- Inland bills declined in importance after 1866 due to improved transport and finance. Discount houses turned to Treasury bills and foreign bills. They played a significant role in the Treasury bill market after 1877.

- By the late 1800s, the London discount market and merchant banks were highly international. Merchant banks were hard to define but were either merchants turned bankers or bankers involved in the trade. Immigrants like the Barings and Rothschilds founded central British merchant banks.

- Merchant banks facilitated international trade and investment in the 19th century. They had knowledge of foreign markets, arranged loans and bill acceptances, and helped raise capital for foreign investments. Their reputation gave investors confidence.

- Barings were originally German wool merchants who moved to London in the 1700s. They arranged significant loans like the Louisiana Purchase. Rothschilds were Jewish merchants from Frankfurt who made a fortune in the Napoleonic Wars, trading gold and silver. Though influential, Rothschilds were less involved in bills than Barings.

- The 1890 Baring Crisis occurred when Barings took on too much risk. Coordinated support from other banks and the Bank of England rescued Barings, showing the cooperation among merchant banks.

- In summary, London’s merchant banks, especially Barings and Rothschilds, greatly facilitated global trade and finance in the 1800s, though Barings focused more on bill acceptances and Rothschilds more on commodities. Their prestige gave them political and economic power.

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