The Currency School Versus the Banking School: A Debate Over the Rules Governing Money Supply Fluctuations

The sound money doctrine reached the peak of its influence in the mid-nineteenth century after another great debate in Great Britain between the “currency” school and the “banking” school. Supporters of the “currency principle” favored a monetary system in which the money supply of a nation varied rigidly with the quantity of metallic money (gold or silver) in the possession of its residents and on deposit at its banks. Their banking school opponents upheld the “banking principle,” according to which the national money supply would be adjusted by the banking system to accommodate the ever fluctuating “needs of trade.”

--Joseph T. Salerno, introduction to Money: Sound and Unsound (Auburn, AL: Ludwig von Mises Institute, 2010), xii.