The Parable of the Fiscal-Military State: the Napoleonic Bank of England

Following Dickson (1967) I examine the role of the Bank of England in supporting the issuance of public debt during the Revolutionary and Napoleonic Wars. The Bank expanded its balance sheet with purchases of government liabilities. It was treated as an “Engine of the State” throughout the eighteenth century, allowing “Britannia to rule the waves on a sea of credit”. Although the Bank of England suspended the convertibility of pound sterling into gold in 1797, which may have allowed a monetary expansion, there is no strong evidence that this led to a permanent increase in the price level. Post-financial crisis central balance sheet expansions have rather been explained as a monetary rather than fiscal intervention, which over time looks questionable.