Ricardo's monetary policy and the currency principle

We show that David Ricardo's proposals from 1816 to 1823 for reforming the British monetary and banking system aim at defining a specific monetary policy which in rather important points is different from the one that will be implemented in 1844, the latter following the Currency School recommendations. According to Ricardo, currency only composed of banknotes convertible into bullion, should be issued by the State, that is to say a "national public bank", independent from the government but which neither lends nor behaves as a central bank. It is only responsible for the stability of the value of paper money through its intervening on the gold market. It is subject to price rules and not quantity rules or reserve requirements and this is why it can pursue an active policy which permits a flexible supply of money through an open market policy.