The Fading Away of Crises After 1866

Charles Read ()
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Charles Read: University of Cambridge

Chapter Chapter 8 in Calming the Storms, 2023, pp 247-274 from Palgrave Macmillan

Abstract: Abstract The chapter provides a new explanation of how the Bank of England managed its Bank Rate in order to prevent major crises after the crisis of 1866. The Bank began to carefully monitor its bullion reserve and note reserve and to adjust its Rate promptly and in small steps, rather than in large and late ones, as occurred before the crisis of 1866. Fluctuations due to trade began to be given less weight than those caused by flows of investment capital. Under this policy major crises were avoided. There was also a proactive attitude towards assisting banks in trouble, such as Barings in 1890 that lessened the consequences for the countries in which they had invested. In short, rather than the Bank simply becoming the lender of last resort after 1866, it became the preventer of first resort and the mender of last resort.

Keywords: Banking School; Bank of England; Monetary policy; Bagehot’s dictum; Banking stability; City of London (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palscp:978-3-031-11914-9_8

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DOI: 10.1007/978-3-031-11914-9_8

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