Inflation and Deflation in 1694-1696

Abstract

Chapter VI of The Pound Sterling,' which deals with the foundation of the Bank of England and the Recoinage of 1696, is headed The First Credit Inflation . In it, Feavearyear refers to the beneficial effect upon Government financial operations in 1694-5 of the considerable measure of credit produced by the initial issue of Bank of England notes,2 and attributes to this the rises in the price of silver, the value of the guinea, and the foreign exchange rates, in 1694-5.3 In this, as he himself points out, he was following the Bullion Report.4 A rather different account is given by Scott in his Joint-Stock Companies to 1720. Referring to the situation in 1695, he says that Any inflation, that there may have been in 1694, was gradually reduced by the growing stringency of the money-market; and, by the summer of 1695, there were the premonitory symptoms of the beginning of a crisis .5 More recently, a third interpretation has been placed upon these events by Mr. Ming-Hsun Li, in his unpublished thesis, The Great Recoinage of 1696-99.6 In this he asserts that until September or October, 1695, general prices were falling ; their subsequent rise was due to four special causes which had nothing to do with inflation , viz.:-