This data is annual, as of December 31 of each
year. From 1928, we get monthly data, at month-end. These are
"aggregate" data, combining both the Bank of England's Issue
Department and Banking Department balance sheets. "Notes and
coin" seems to refer to vault cash held by the Banking
Department.
Total base money rises quite a bit during the war. In 1921,
there is a major contraction, mirroring what was happening at
the Federal Reserve at the same time. Although there were some
"public deposits," which could include government deposits, most
of the deposits were deposits of banks ("bank reserves"),
showing that the deposits of the BoE were acting as a final
payment method, much the same as is the case in central banks
today.
After November 1928, the data series changes. "Other Assets" of
the Issue Department increase by a large amount, and are mostly
unchanged over long periods. The notes to the data say that this
represents "securities and silver coin held as cover for
fiduciary issue [banknotes], the amount of which is also shown
by these figures. The Currency and Bank Notes Act, 1928, fixed
this issue at £260,000,000, and it has subsequently been altered
by direction of the British Treasury under the terms of this Act
and in accordance with the Currency and Bank Notes Act, 1939." I
don't know what this means, and it probably isn't that important
for our purposes here.
More notes from the data indicate: "On January 6, 1939,
£200,000,000 of gold (at legal parity) transferred from the Bank
of Exchange Equalization Account of March 1, 1939, about
£5,500,000 (at current price) transferred from Exchange Account
to Bank; on July 12, 1939, £20,000,000 of gold transferred from
Exchange Account to Bank; on September 6, 1939, £279,000,000
transferred from Bank to Exchange Account." By the end of the
1930s, especially as WWII was beginning, capital and exchange
controls were heavy.
"Effective March 1, 1939, gold valued at current prices instead
of legal parity."
"Fiduciary issue increased by £50,000,000 on June 12, 1940, and
April 30, August 30, and December 3, 1941."
Banknotes in circulation makes a big jump upward with the new
data series, from £78.3m in October 1928 to £367m in November
1928. Eh? The notes say that:
"Notes issued less amounts held in banking department and--from
1919 through October 1928--amounts held in currency note
account."
That is a rather large discrepancy, but it actually doesn't
matter too much, since the BoE was on a gold standard system at
the time. We are really interested in the transition to the
Great Depression in the 1929-1935 period.
The most interesting portion is total base money, 1928-1941 --
the orange line. This is composed of notes in circulation
(blue), and the various forms of deposits (banks, public and
other). I suspect that "public" is mostly the British
government, and "other" might be the holdings of foreign
governments and central banks.
Total base money is quite stable during this time. It did not
grow very much before or during the devaluation of 1931; nor was
there any contraction of meaningful size. The little spikes are
related to year-end seasonality. By the onset of WWII in 1939,
things are transferring very much to wartime mode, with heavy
capital and exchange controls -- although capital and exchange
controls had already become common worldwide due to economic
difficulties during the 1930s.
