"...Go back to 1825, when the Bank of England first explicitly takes on its monetary policy mission in an attempt to stem the systemic impact of the banking crisis of 1825. Before 1825 or so a sudden shock that makes investors seek to hold portfolios of shorter duration and less risk does not have a great impact on values: the economy responds by unloading the trade goods from the ships about to sale for Hudson’s Bay or Batavia or Madras and selling them on the domestic market instead, and the fall in demand for long-duration and risky assets is met by deleveraging the real economy without much impact on values. But by 1825 the capital stock of the economy now has large components that cannot be deleveraged: plantations, canals, factories, and soon railroads. So a crisis shock to the demand for duration and risk now has a big depressing effect on asset prices—and that in its turn has a feedback effect further decreasing demand for duration and risk. And so it is in and after 1825 that we see the origin of central banking: the judgment by First Lord of the Treasury Lord Liverpool that the prices of risky and long-duration assets are too important to be left to the free play of market forces: that it is important for the government to support them, at least in crisis, to prevent mass unemployment by making sure that the firms that should be expanding and hiring workers can get finance to do so on terms that make it profitable for them to expand."