Money System And Economic Growth In England, 1500-1750

1. Money system and economic growth. There is a definitive relationship between the competition power of money system and economic growth. From 1500 to 1750, through a series of transformations, compared with its neighbors in Western Europe, England gradually achieved the strong competition power on money system, which ensured the high economic growth rate during this period.2. The stability of money and economic growth. The stability of money is the precondition of economic growth. The stability of English Pound is a key factor of England's success. After the great debasement in the middle period of 16 century, the honor of English money suffered a disastrous decline. Elizabeth I's money reform triumphantly got the honor back and established the authority in the international finance market. The fail of recoinage at the end of 17 century resulted in an important transformation on money system that English Pound's price was fixed with gold in 1717, which led to the establishment of the factual gold standard. After that, the price index of England kept obvious low-range undulation. Stable money accelerated the development of credit, settled the firm financial basis for the development of money economy and accelerated the economic growth.3. Cheap money, low interest rate and economic growth. Coins need to be founded. The process of founding takes time and the cost is very high. For the convenience of exchange and carrying, more and more paper-made notes appeared. From the middle period of 17 century, these notes were all assignable. Thereby these notes became the early paper-money of England. In 18 century, Bank of England provided the discount service for its inland and foreign customers, these notes consequently achieved the complete assignment. And along with the establishment of Bank of England, bank notes became an important part of money. The cost of producing money was reduced from the founding of metal coins to the printing of paper notes. England created its own cheap money. At the same time, interest rate also declined greatly. The legal maximal interest rate declined from 10% in 16 century to 5% in 18 century. Cheap money and low interest rate increased the efficiency of capital, provided strong capital support for the development of money economy and accelerated the economic growth.