How the English Crown Lost Monetary Sovereignty
The transition from credit instruments governed directly by the royal sovereign , such as Tally Sticks (willow sticks with sums of money engraved on them and split lengthwise in two, one part for the creditor and one for the debtor. They were reunited by fitting together when the debt was settled), to Bills of Public Faith ( written undertakings by the Crown to pay a certain sum ) and finally to the consolidation of the power of the Bank of England marked a crucial step in the loss of the English monarchy's direct control over the issuance of money. This evolution was at the centre of a radical transformation in the management of public finances and political power in England, leading ultimately to a dependence of the state on private bankers.
1. Tally Sticks: Instruments of Royal Debt
Tally sticks were introduced around the 12th century and were used extensively until the mid-19th century. They were wooden sticks on which the Crown's debts and taxes to be collected from its subjects were recorded. They were split in half to represent transactions, with one half held by the debtor and the other by the creditor. Tally sticks represented a form of implicit trust between the ruler and his subjects and served as a secure means of payment accepted in the kingdom.
This form of debt not only allowed the Crown to accumulate funds without the use of cash, but ensured that control remained closely tied to royal authority. The strength of tally lay in the honor and legitimacy of the sovereign, whose power derived directly from “sovereignty” and not from private actors.
2. Bills of Public Faith: Financing Tools in Crises
As time passed and government spending increased (often to support wars or other emergencies), the Crown began issuing Bills of Public Faith to obtain credit from its subjects and merchants. These bills were not based on physical goods like tally sticks, but on an official promise of repayment guaranteed by the public treasury. They were used primarily as short-term debt and enjoyed public trust, fueled by the reputation of the monarchy.
During the English Civil War and afterwards, the Bills of Public Faith were used to finance the defence of the kingdom and other urgent obligations. However, the pressure of having to continually pay these debts strained the royal finances and weakened the Crown's ability to maintain exclusive control over the currency. The Crown's growing dependence on private credit and loans exposed the state to the growing influence of creditors, especially the great banking and merchant families.
3. The Founding of the Bank of England: The Transfer of Monetary Power
In 1694, the Bank of England was founded by order of King William III, but under heavy pressure from bankers and financiers. The official purpose of the bank was to provide the Crown with funds to finance its wars against France, but with the key condition that the Bank would issue money in its own name in the form of banknotes, marking the beginning of the issuance of private “fiduciary” money.
The creation of the Bank of England represented a private financial putsch that gradually replaced royal monetary sovereignty with corporate control. The Bank became the Crown's primary creditor, with the ability to issue money based on public debt rather than physical assets such as gold or tally sticks.
4. The Process of Disempowerment of Royal Sovereignty over Money Issue
With the founding of the Bank of England, control of money issue was transferred to the bank itself. This meant that the Crown now had to rely on a private source for credit. The bank began lending funds to the government in exchange for government bonds (promises to repay the money by the government), introducing public debt as a permanent system of state financing.
This transition had far-reaching effects:
Growing indebtedness: The state became increasingly indebted to private bankers.
Loss of financial sovereignty: The Crown lost direct control over money and resources, having to submit to the conditions and interest imposed by the Bank of England.
Stability for private bankers, instability for the state: The introduction of permanent public debt created a stable system for creditors, while the state, and therefore taxpayers, had to deal with a growing debt load.
5. Long-Term Consequences and Modernization of the Banking System
The Bank of England, with its independent authority to issue money, has been the model for modern central banks, reducing the role of the monarchy and gradually leading to the separation of state and monetary management . In the long term, this separation has favored the emergence of the international debt-based banking system and marked the beginning of the centralization of finance in the hands of unaccountable autonomous institutions (see: “ Group of Thirty ”) represented today in Italy by Governor Fabio Panetta of the private “Banca d'Italia” which has managed the “State Treasury” since 1894.
The founding of the Bank of England thus represents a turning point in which sovereign power over money was transferred from monarchs to a privately controlled financial structure, giving rise to the modern system of finance based on public debt and the power of bankers to influence government policies through control of money.
This transformation, long fought over, is considered by many scholars to be a sort of “silent coup d’état”, in which financial control and, to a large extent, even the decision-making power of the kingdom was subordinated to private finance.
Subsequent attempt, later rebuffed by Churchill, to recover monetary sovereignty:
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