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Between the ‘Bank Screw’ and ‘Affording Assistance’. Rules, Standards, and the Bank Charter Act of 1844
Author(s) -
Frame Iain
Publication year - 2020
Publication title -
the modern law review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.37
H-Index - 22
eISSN - 1468-2230
pISSN - 0026-7961
DOI - 10.1111/1468-2230.12467
Subject(s) - dilemma , charter , discretion , expansive , scholarship , economics , context (archaeology) , lender of last resort , law and economics , monetary policy , order (exchange) , inflation (cosmology) , law , keynesian economics , political science , finance , central bank , history , economic growth , philosophy , compressive strength , materials science , archaeology , epistemology , composite material , physics , theoretical physics
This article explores a dilemma at the centre of the monetary order: how to counter inflation eroding the value of money and simultaneously allow bank‐created credit to meet the needs of an expanding economy. Building on recent scholarship on the history of money, the article analyses the Bank Charter Act of 1844 and the financial crisis of 1847 to reveal a response to this dilemma which continues to shape the modern context. That response relies on ex ante restrictive measures in a bid to limit the discretion of the monetary authorities and cultivate financially prudent behaviour. Yet the history of the mid‐nineteenth century exposes the challenges faced by those who enforce such rules, challenges which tie the mid‐nineteenth century to the post 2008 reforms in both the US and the Eurozone, and reveal the ongoing force of the dilemma: that simultaneous desire for both expansive credit and sound money.