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Lombard Street : a description of the money market by Walter Bagehot
page 85 of 260 (32%)
rate. If you hold (as in Lombard Street some persons do) millions of
other people's money at interest, arithmetic teaches that you will
soon be ruined if you make nothing of it even if the interest you
pay is not high.

The fluctuations in the value of money are therefore greater than
those on the value of most other commodities. At times there is an
excessive pressure to borrow it, and at times an excessive pressure
to lend it, and so the price is forced up and down.

These considerations enable us to estimate the responsibility which
is thrown on the Bank of England by our system, and by every system
on the bank or banks who by it keep the reserve of bullion or of
legal tender exchangeable for bullion. These banks can in no degree
control the permanent value of money, but they can completely
control its momentary value. They cannot change the average value,
but they can determine the deviations from the average. If the
dominant banks manage ill, the rate of interest will at one time be
excessively high, and at another time excessively low: there will be
first a pernicious excitement, and next a fatal collapse. But if
they manage well, the rate of interest will not deviate so much from
the average rate; it will neither ascend so high nor descend so low.
As far as anything can be steady the value of money will then be
steady, and probably in consequence trade will be steady tooat least
a principal cause of periodical disturbance will have been withdrawn
from it.




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