British Monetary Policy: a Context for Operations

Because of the very nature of their operations and of the peculiar position they have occupied at the centre of the British monetary system, the way in which the discount houses have at any time been able to conduct their business has been profoundly and immediately influenced by the goals of official monetary policy and the techniques employed to achieve them. This would be sufficient reason for an examination of the theoretical framework of official action in the monetary field between 1951 and 1970 but, in addition, interesting questions arise in connection with the part played by the houses in the process of monetary control itself. In the present chapter there is a general assessment of the aims and theoretical bases of British monetary policy during the period with indications of the discount houses’ strategic role. In Chapters 7–11 this role is analysed in the context of the houses’ operations in individual markets. Chapter 12 presents a close analysis of the discount houses’ role in the mechanisms whereby the Bank might have sought to regulate the level of bank deposits, via leverage on reserve ratios.