16

A TREATISE ON MONEY

BK. I

the most mixed form of all and, alone of the fourforms, has relationships to each of the other three.It has come into existence by easy stages, and manyexisting monetary systems are still composite incharacter, made up partly of Managed Money andpartly of Commodity Money.

The first important attempt to lay down scientificprinciples for the management of a managed money,so as to make it conform to its standard (whateverthat standard may be), arose out of the controversywhich culminated in the British Bank Charter Act of1844. In the eighteenth century Commodity Moneywas still the rule ; but the evolution of Bank-Money in the shape of Bank Notes was showing the waytowards Representative Money. 1 The consequences ofthe French Revolution swung the currencies of France and England right over into Fiat Money ; and whenin England this stage was brought to an end by theintroduction of the Gold Standard, the uses of Repre-sentative Money had become so familiar and accept-able to the public, and so profitable to the Treasury and the Bank of England, that the new system wasnot a pure Commodity Money but a mixed ManagedSystem. If Ricardo had had his way with his IngotProposals, Commodity Money would never have beenrestored, and a pure Managed Money would have comeinto force in England in 1819.

But whilst a Managed Money came into force asfrom that date, the principles and methods of currencymanagement were but ill understood by those re-sponsible for its management, namely, the Governorsand Court of the Bank of England— indeed it may besaid that they were not understood at all. Twenty-fiveyears of trouble and threatened collapse of the standardensued, until the reformers of that day brought in a

1 By the middle of the eighteenth century the circulation of BankNotes was already predominant in Scotland, the glittering economies of notholding metal being as characteristically attractive to North Britain as theglittering certainties of holding it to Nearer Asia.