Goldsmith Bankers and the Birth of the Fractional Reserve System (Seventeenth and Early Eighteenth Centuries)

England (and Scotland) also fell out of the Middle Ages quite abruptly, with a Civil War (1642–1651), increasing the role of Parliament. War debts had eroded the financial system, and this is how London goldsmiths became trusted custodians. The Goldsmiths used their role to create paper money with banknotes and bills of exchange, above deposit levels, thereby introducing ‘fractional banking’. A lofty person was Edward Blackwell. British financial policy improved and opened up, but government debts remained an issue. Enter the Bank of England (1691), the world’s first genuine large central bank, also issuing banknotes. The U.K. had soon become the world’s leading nation.