Taking Stock: Monetary and Banking Policy in the Second Reign

The chapter analyzes the main contours of monetary and banking policy over the whole 1850–89 period. It starts by discussing the limits to the most widely used monetary data for the period, provided by Peláez and Suzigan’s 1976 book. Specie and liabilities (deposits and vales) of the non-corporate banking system are shown to have constituted, in certain periods, a significant part of the money supply in nineteenth-century Brazil. Private banks (casas bancárias) operated, largely, unsupervised by the government, unlike joint-stock banks. Most contemporaries deemed notes issued by the latter, together with Treasury paper, as the main determinants of the rate of exchange. Part of the reason why the Brazilian government tended to restrict the operation of banks of issue was the concern that an excessive amount of notes in circulation would cause the milréis to depreciate. The political economy of the exchange rate—with imperial finances benefiting from a stable and appreciated milréis—in conjunction with the preeminence of orthodox views on monetary doctrine, partly explain the obstinacy with which the Brazilian government had pursued money policies in the period.