1st May 1821. Gold v Currency.
Since the early 18th century The Gold Standard had attempted to keep the currency of Sterling stable as an international currency, but was to break down between 1797-1821.
The gold shortages in the 18thc resulting from the Seven Years War and French Revolution began to affect British gold reserves giving rise to The Restriction Period from 1797, when the Banks were no longer able to pay out in gold (as promised), as the reserves were fast running low.
The resulting contraction of bank-note circulation was deflationary and caused a fall in commodity prices, unemployment and a fall of prices and contraction in trade.
It resulted in low denomination notes of £1 and £2 notes being issued in 1797 and many forgeries began to enter the system.
The Bank of England’s indifference to easily imitated notes raised cries of humanity with the increase of hangings for forgery, 300 in the period of the Restriction Period.
Richard Brinsley Sheridan MP was to famously refer to the Bank of England, ‘as the elderly lady in the City who fallen into bad company’, and satirised by Gillray in his 1797 cartoon.
So after a period to offset inflation and allow exchange rates to realign with the Gold Standard and after the Peel Act, the Bank of England resumed specie payments in full Today in 1821 thus re-establishing a Gold Standard by which notes could be redeemed in fixed values of gold: the gold sovereign appeared.
Thus was restored ‘sound money’, but brought complaints from landowners and the rising industrialist class in that convertibility brought hardship as it cost farmers more in real terms to pay rents and loan debt taken out under the previous depreciated currency.
The result according Thomas Attwood (1783-1856) was that the Peel Act created; ‘more misery, more poverty, more discord, more of everything that was calamitous to the Nation except death than Attila caused to the Roman Empire’. (1)
Proving you can’t please everybody all the time.
(1) Attwood was a representative of the new Birmingham manufacturing classes and helped to found the Birmingham Political Union based on the Catholic Association of Daniel O’ Connell seeking Emancipation.
bankofengland.knowledge-bank/Old Lady of Threadneedle Street/Pic.
branchcollective.org. Mark Crosby. Bank Restoration Act 1797 and Forgery/Pic.