Economics: Currency and Banking Schools Debates | Free Essay Example

Economics: Currency and Banking Schools Debates

Words: 617
Topic: Business & Economics


This section will briefly introduce two scientific approaches to monetary policies. In particular, it will be important to mention the debate between Banking and Currency Schools. One should also identify the leading representatives of the two schools such as Robert Torrens and Thomas Tooke (Daugherty 140).

It is important to illustrate the influence of these theoretical approaches on the decisions of policy-makers. This thesis of the paper will be a statement about the importance of the Currency and Banking Schools, especially their influence on the decisions of policy-makers.

Theoretical views

Currency School

At first, it is important to show how the representatives of this approach perceived the monetary system. Furthermore, this section should illustrate the definition of money offered by the supporters of the Currency School. Furthermore, one should demonstrate why Robert

Torrens attached importance to the existence of a metal standard. The advocates of this school laid stress on the idea that the banknotes circulating in the country should be convertible into gold (Skaggs 361). The implications of this principle should be discussed in greater detail.

Moreover, this section will explain why the supporters of the Currency School laid stress on the need to control and restrict the circulation of banknotes in the country. This section will also throw light on the influence of these ideas on the monetary policies of Great Britain.

Banking School

This section will examine the theoretical arguments expressed by the advocates of the Banking Schools. In particular, one should discuss their views on the restrictions of currency circulation.

Furthermore, it is important to discuss the Real Bills Doctrine which implies that banks should be able to offer short-term credit in order to support trade. Thus, the restriction of banknote circulation can produce detrimental effects.

Additionally, much attention should be paid to the discussion of the so-called law of reflux which implies that the banknotes which are of no value to the citizens will be inevitably returned the financial institutions that issued these banknotes (Hortlund 219). This part of the paper will also illustrate the implications of this law for the work of financial regulators.


The information discussed in the previous section will be used to illustrate the main differences between the two approaches to monetary policies.

The Bank Charter Act of 1844

This section will illustrate how the ideas expressed by various economists influenced the decision of policy-makers. In particular, it is important to show the ideas expressed Robert Torrens and his supporters were reflected in the provisions of the Bank Charter Act adopted in 1844. This section will indicate that the British government adopted the principles identified by the advocates of the Currency School.


This part of the paper will examine the importance of Currency and Banking Schools. In particular, it is important to show how these theoretical ideas influence the decision of modern policy-makers. For instance, much attention should be paid to the relation of the Real Bills Doctrine to the U.S. monetary policies (Timberlake 196). This section will also show if the issues debated by the nineteenth-century economists remain relevant nowadays.

This debate can be related to the arguments put forward by such economists as Hayek and Friedman who study various aspects of monetary policies (Block 15). This analysis will illustrate the historical importance of the Banking and Currency Schools. These are the main issues that should be discussed in this section.


This section will contain a brief overview of the issues discussed in the paper. It is important to focus on the importance of this debate. Finally, this part of the paper will also include a restatement of the initial thesis.

Works Cited

Block, Walter. “The Gold Standard: A Critique of Friedman, Mundell, Hayek and Greenspan from the Free Enterprise Perspective.” Managerial Finance 25.5 (1999): 15-33. ProQuest. Web. 4 Nov. 2014.

Daugherty, Marion. “The Currency-banking controverse.” Southern Economic Journal (pre-1986) 9.2 (1942): 140-146. ProQuest. Web. 4 Nov. 2014.

Hortlund, Per. “Is the Law of Reflux Valid? Sweden, 1880-1913.” Financial History Review 13.2 (2006): 217-34. ProQuest. Web. 4 Nov. 2014.

Skaggs, Neil. “Changing Views: Twentieth-Century Opinion on the Banking School-Currency School Controversy.” History of Political Economy 31.2 (1999): 361-91. ProQuest. Web. 4 Nov. 2014.

Timberlake, Richard. “Gold Standards and the Real Bills Doctrine in U.S. Monetary Policy.” Econ Journal Watch 2.2 (2005): 196-233. ProQuest. Web. 4 Nov. 2014.