Bank Restriction Act of 1797

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The Bank Restriction Act of 1797 was an act passed by the British government allowing for Bank of England not to have to convert banknotes into gold.

Contents

[edit] Reasons for Restricting

An increasing number of people were trading their banknotes for gold. Due to the overprinting of banknotes, the Bank of England was losing its supply of gold, and due to the gold standard, the value of each banknote was diminishing.[1]

[edit] Reasons for Overprinting

The banknote was overprinted by the British government after they declared war on revolutionary France in 1793.[2] Due to increasing military expenses, the government began printing more banknotes, which they expected the Bank of England to exchange for gold should the banknote bearer request it. By the end of the war in 1814, the banknotes had a face value of 28.4 million pounds of gold, yet was backed by only 2.2 million pounds of gold, which caused the currency to depreciate by 30%.

[edit] See Also

[edit] References

  1. ^ Bank Restriction Act of 1797. Investopedia. Retrieved on March 10, 2007.
  2. ^ England. University of Pennsylvania. Retrieved on March 10, 2007.
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