Respectable Banking

In this book, Anthony Hotson considers the reasons why London’s credit and money markets enjoyed a so-called ‘century of stability from the 1870s to 1971’ (p. 44) and why stability has been so elusive over the past fifty years. The focus is on London as a financial centre, but the argument relates to British and indeed, at times, global history. This is not a new subject, of course, but Hotson, a former financier who, in a long career, also worked at the Bank of England, does bring new insights. This is particularly evident in his detailed reconstructions of the London money markets and in his policy recommendations. Following a short introductory chapter, Hotson begins by considering the formalisation of ideas about what constituted respectable and stable banking. The discussion in Chapter Two focuses on formal institutions, notably the range of banking clearing associations which emerged from the late eighteenth century. These associations, such as the Committee of London Clearing Banks, had a practical purpose which was to facilitate orderly payments, but also functioned to impose informal regulation on the money markets. Chapter Three discusses the bullion market and is underpinned by a detailed and very useful long run of English Mint silver prices which are reproduced in the appendices. It is argued that the bullion markets were tamed by the recoinages of the eighteenth century. Yet the growth of paper credit continued to undermine stability. Thus Chapter Four explores the market for paper credit prior to 1971. It covers fractional reserve banking and the emergence of the Bank of England as the Lender of Last Resort. By the latter part of the nineteenth century, stability had largely been achieved. Competition between the various providers of money and credit was limited and cartels of clearing banks set deposit and lending rates. Policies were cautious. As Hotson points out, there is more than a little truth in the old joke that nineteenth- and early twentieth-century bankers only wanted to lend to those who had no real need of funds (p. 116). The system was stable but not responsive to the needs of the economy

Argument (complex analysis · Bullion · Business · Central bank · Clearing · Economic history · Economics · Financial market · Financial stability · Financial system · Keynesian economics · Lender of last resort · Monetary economics · Monetary policy · Money market · Payment · Diverse Historical and Scientific Studies · Finance · History · History of Science and Medicine