Sterling and the City-Bank-Treasury Nexus

For the City of London to become the world’s clearing house, a means of providing international liquidity had to have evolved, without which the explosion in international trade that accompanied the quickening of the industrial revolution and its expansion around the world, in the second half of the nineteenth century, could not have taken place. In providing this, by definition, the City became a market for global credit, which to operate efficiently, in turn, depended on the smooth mobilisation of ‘savings’ — not only British domestic savings, but also savings made available from the rest of the world. In other words, the City needed institutions to provide, as Leys (1986: 114) puts it, ‘a trustworthy world currency and an efficient way of settling international accounts, insuring international trade, arranging international shipments, extending credit and the like’. In the nineteenth century sterling took on the role of this dependable universal currency, the London Discount Market became the international clearing mechanism and the Bill on London was utilised as an instrument for the provision of international credit. Together they allowed the City to function as a transmission belt, aggregating, first, small domestic sterling deposits and then deposits from all over the world, and utilising them to provide credit for the financing of international trade and speculative currency flows.