ABSTRACT
This chapter provides the explanation and the justification for popular criticisms of the banking system. The system of currency, known as the gold standard, is an outstanding example of deliberate and effective currency management. The gold standard was excellently suited to the conditions of the nineteenth century. The raising of the Bank's discount rate, and the steps taken to make it effective in the market, necessarily led to a general rise in interest rates and a restriction of credit. Britain's commercial pre-eminence, and her position as the one outstanding creditor nation in the world, enabled her to give it a unity of direction and administration impossible in the post-war world. The objective of all currency policies is to secure the stability of the circulating value of money, or of purchasing power, or of the general price level-all different methods of saying the same thing.
