ABSTRACT
After examining the circumstances that led to the suspension of cash payments at the Bank of England in 1797, this chapter then explores the role that the ‘suspension’ had in facilitating the raising of British government war loans. In particular, the paradoxical situation whereby the Bank of England, although technically bankrupt and being protected from insolvency by the British government, was subsequently in a position to greatly expand their lending operations as they acted as a source of credit to both the British government and the government’s would-be creditors through their ability to issue ‘un-backed’ paper-money in unprecedented quantities, is discussed in detail. This chapter also examines how the British government (by permitting the Bank of England to create the money they were lending) essentially devolved power over credit and the money supply to the Bank of England, a situation that concentrated immense fiscal power into largely unaccountable hands. This chapter places contemporary objections to the suspension in the context of who benefitted and who lost out as a result of these practices, as well as looking at how the Bank of England’s monopoly position in British finance was challenged by contemporaries fearful of such concentrated fiscal power.
