6. The Bank of England

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Length: {4:20 minutes}

By the end of the 1600s, England faced severe financial difficulties due to continuous wars with France and Holland. To address this, government officials sought loans from money changers. The solution was the establishment of the Bank of England in 1694, the world’s first privately owned central bank, despite being deceptively named to suggest it was a government entity. Initial investors were supposed to provide £1.25 million in gold, but only £750,000 was actually received. Nevertheless, the bank began operations, issuing loans and creating money out of nothing, leading to inflation and economic instability.

The Bank of England provided loans to politicians, backed by taxation of the British people, effectively allowing legal counterfeiting for private gain. This model of a privately controlled central bank has since been replicated worldwide. Central banks, though necessary, should not be privately controlled as they impose a hidden tax through inflation by creating money to buy government bonds. This increases the money supply, devaluing existing money and raising prices, leading to economic booms and busts rather than stability.

The formation of the Bank of England flooded the nation with money, doubling prices and funding speculative ventures. By 1698, government debt had soared from £1.25 million to £16 million, resulting in repeated tax increases. The economy experienced a series of booms and depressions, contrary to the central bank’s purpose of ensuring stability. The British pound has rarely been stable since the Bank of England took control. The chapter concludes with a mention of the influential Rothschild family, who would later play a significant role in banking and finance.

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