caprice of such a bank, of itself tends to create an immediate and
equal rise, so that upon an average the value is not altered.

What happens is this. If a bank with a monopoly of note issue
suddenly lends (suppose) 2,000,000 L. more than usual, it causes a
proportionate increase of trade and increase of prices. The persons
to whom that 2,000,000 L. was lent, did not borrow it to lock it up;
they borrow it, in the language of the market, to 'operate with' that
is, they try to buy with it; and that new attempt to buythat new
demand raises prices. And this rise of prices has three
consequences. First. It makes everybody else want to borrow money.
Money is not so efficient in buying as it was, and therefore
operators require more money for the same dealings. If railway stock
is 10 per cent dearer this year than last, a speculator who borrows
money to enable him to deal must borrow 0 per cent more this year
than last, and in consequence there is an augmented demand for
loans. Secondly. This is an effectual demand, for the increased
price of railway stock enables those who wish it to borrow more upon
it. The common practice is to lend a certain portion of the market
value of such securities, and if that value increases, the amount of
the usual loan to be obtained on them increases too. In this way,
therefore, any artificial reduction in the value of money causes a
new augmentation of the demand for money, and thus restores that
value to its natural level. In all business this is well known by
experience: a stimulated market soon becomes a tight market, for so
sanguine are enterprising men, that as soon as they get any unusual
ease they always fancy that the relaxation is greater than it is,
and speculate till they want more than they can obtain.

In these two ways sudden loans by an issuer of notes, though they