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The '''British Currency School''' was a group of British economists, active in the 1840s and 1850s, who argued that the excessive issuing of [[banknote]]s was a major cause of [[price inflation]]. They believed that, in order to restrict circulation, issuers of new banknotes should be required to hold an equivalent value of [[gold]] as a reserve.<ref>{{cite book|author=Nicolas Barbaroux|title=Monetary Policy Rule in Theory and Practice: Facing the Internal Vs External Stability Dilemma|url=http://books.google.com/books?id=1h6AAAAAQBAJ&pg=PA74|date=21 August 2013|publisher=Routledge|isbn=978-1-135-06794-6|page=74}}</ref>
The Currency School emerged from the beliefs of the [[Bullionism|Bullionist]] group, which was prevalent in the early 1800’s. When the French landed on English soil in 1797, financial panic arose in Britain. Due to the 18<sup>th</sup> century banking system, there was high concern of [[banking panic]], a financial crisis that occurs when many [[Bank run|bank runs]] occur at the same time and people rush to withdraw paper money or transfer money to other assets.<ref>{{Cite book|title=Culture and currency: Cultural bias in monetary theory and policy|last=Houghton|first=John|publisher=Political Cultures series. Boulder and Oxford: Westview Press|year=1991|isbn=0-8133-1191-8|location=|pages=}}</ref> The British government intervened by allowing banks to suspend convertibility of the notes issued by the Bank of England<ref name=":0" />. The Bullionist group, composed of mostly bankers and lawyers, formed after this potential crisis. They argued for convertibility, meaning paper money should be 100% backed by gold, in order to avoid inevitable inflation.<ref name=":0" />
The leading figure of the school was [[Samuel Jones-Loyd, Baron Overstone]], the British politician and banker. More than fifty years later his role in the debate was analysed and criticised by [[Henry Meulen]], an opponent of the Act. See [http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=1414&chapter=45564&layout=html&Itemid=27 Viner's book] .▼
▲After a long period of deflation following the Napoleonic War, the [[Bank Charter Act 1844|Bank Charter Act of 1844]] was passed. This Act allowed only the Bank of England to print money and required all banks to hold a specific amount of reserve and currency.This act was passed by the [[Conservative Party (UK)|Conservative]] government of [[Robert Peel]]. The leading figure of the school was [[Samuel Jones-Loyd, Baron Overstone]], the British politician and banker. More than fifty years later his role in the debate was
The Currency School was opposed by members of the [[British Banking School]], who argued that currency issue could be naturally restricted by the desire of bank depositors to redeem their notes for gold.
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[[Category:History of economic thought]]
[[Category:Classical economics]]
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