1844

In the United Kingdom, strict link between note-issuance and gold stocks

The purpose of the Bank Charter Act was to restrict the strong growth of bank­notes in cir­cu­lation, which had res­ulted from the sharp rise in the number of banks in the 1830s. It imposed the cur­rency prin­ciple, whereby, to avoid inflation, note-​​issuance by banks had to be pro­por­tional to the amount of gold held. This marked the triumph of the gold standard. In addition, the role of the central bank was strengthened since no other bank had the right to issue banknotes.