OH. 13
seventy-six years—from 1st May 1746 to 20th June1822, the Bank-rate stood unchanged at 5 per cent.From 1822 to 1839 there were small fluctuationsbetween 4 and 5 per cent. The rate of 5|- per centestablished on 20th June 1839 (and raised six weekslater to 6 per cent) was the first occasion on which theofficial rate of the Bank of England had ever exceeded5 per cent. 1
The traditional doctrine, which has been developedin the ninety years which have since elapsed, has beenwoven of three distinct strands of thought, difficultto disentangle, to which different writers attach differ-ing degrees of stress. All of them have been obscurelypresent from the beginnings of the discussion.
1. The first of these regards Bank-rate merely as ameans of regulating the quantity of bank-money. Thisis the basis on which the practical method of Bank-rate as the characteristic instrument of the Bank ofEngland was developed in the middle of the nine-teenth century. Lord Overstone, for example 2 —whomay be taken as typical of the reformers of this period—regarded Bank-rate as the correct and efficaciousmethod for reducing the demand on the Bank for dis-counts, and so for contracting the volume of thecirculation.
This notion, that an upward change in Bank-rateis associated with a diminished quantity of bank-money, either as cause or effect—or at least with aless quantity of money than if Bank-rate had not goneup—and conversely, so that the alleged association ofhigh Bank-rate with falling prices follows directlyfrom the usual Quantity Theory of Money, runs,indeed, through all the later nineteenth century litera-ture of the subject. It was an important part of
1 For elaborate statistics of Bank-rate during the nineteenth century andits relation to market-rate, see Gibson’s Bank Rate; the Banker 's VadeMecum.
2 “ Thoughts on the Separation of the Departments of the Bank ofEngland ” (1844); vide his Collected Tracts, p. 264.