The Bank of England was founded in 1694. It was the first central bank to assume to role of lender …show more content…
When the Federal Reserve System first established in 1913 in the United States, the primary goal was to provide an “elastic currency”, because the world, at the time, was still operating under the gold standard, which provided stability in the value of the currency. But when it became impossible to maintain the gold standard in the 1930s after World War I and the beginning of the Great Depression, the world started to operate under a fiat regime, which made price stability priority for the central banks since the gold system was no longer in effect to control prices (Plosser, 2014). “Fiat money […] allowed central banks to expand without any clear constraints, on a permanent basis and with impunity, though at the cost of persistent inflation” (Selgin, 2010, 495). According to Selgin (2010), they did not prevent financial crises, nor did they reduce their severity. He believes that they are not less frequent now than before central banks, and that many of today’s crises can actually be blamed on central banks poor management of the money supply (ibid.,