ABSTRACT
The gold standard has long been viewed as a form of constraint over monetary policy actions-as a form of monetary rule. The Currency School in England in the early nineteenth century made the case for the Bank of England’s fiduciary note issue to vary automatically with the level of the Bank’s gold reserve (‘the currency principle’). Following such a rule was viewed as preferable (for providing price-level stability) to allowing the note issue to be altered at the discretion of the well-meaning and possibly well-informed directors of the Bank (the position taken by the opposing Banking School).1
