Lombard Street: A Description of the Money Market by Walter Bagehot

Lombard Street: A Description of the Money Market by Walter Bagehot

CHAPTER I.
Introductory.
I venture to call this Essay 'Lombard Street,' and not the 'Money Market,' or any
such phrase, because I wish to deal, and to show that I mean to deal, with
concrete realities. A notion prevails that the Money Market is something so
impalpable that it can only be spoken of in very abstract words, and that
therefore books on it must always be exceedingly difficult. But I maintain that
the Money Market is as concrete and real as anything else; that it can be
described in as plain words; that it is the writer's fault if what he says is not clear.
In one respect, however, I admit that I am about to take perhaps an unfair
advantage. Half, and more than half, of the supposed 'difficulty' of the Money
Market has arisen out of the controversies as to 'Peel's Act,' and the abstract
discussions on the theory on which that act is based, or supposed to be based.
But in the ensuing pages I mean to speak as little as I can of the Act of 1844; and
when I do speak of it, I shall deal nearly exclusively with its experienced effects,
and scarcely at all, if at all, with its refined basis.
For this I have several reasons,—one, that if you say anything about the Act of
1844, it is little matter what else you say, for few will attend to it. Most critics
will seize on the passage as to the Act, either to attack it or defend it, as if it were
the main point. There has been so much fierce controversy as to this Act of
Parliament—and there is still so much animosity—that a single sentence
respecting it is far more interesting to very many than a whole book on any other
part of the subject. Two hosts of eager disputants on this subject ask of every
new writer the one question—Are you with us or against us? and they care for
little else. Of course if the Act of 1844 really were, as is commonly thought, the
primum mobile of the English Money Market, the source of all good according
to some, and the source of all harm according to others, the extreme irritation
excited by an opinion on it would be no reason for not giving a free opinion. A
writer on any subject must not neglect its cardinal fact, for fear that others may
abuse him. But, in my judgment, the Act of 1844 is only a subordinate matter in
the Money Market; what has to be said on it has been said at disproportionate
length; the phenomena connected with it have been magnified into greater
relative importance than they at all deserve. We must never forget that a quarter
of a century has passed since 1844, a period singularly remarkable for its
material progress, and almost marvellous in its banking development. Even,
therefore, if the facts so much referred to in 1844 had the importance then
ascribed to them, and I believe that in some respects they were even then
overstated, there would be nothing surprising in finding that in a new world new
phenomena had arisen which now are larger and stronger. In my opinion this is
the truth: since 1844, Lombard Street is so changed that we cannot judge of it
without describing and discussing a most vigorous adult world which then was
small and weak. On this account I wish to say as little as is fairly possible of the
Act of 1844, and, as far as I can, to isolate and dwell exclusively on the 'Post-

Peel' agencies, so that those who have had enough of that well-worn theme (and
they are very many) may not be wearied, and that the new and neglected parts of
the subject may be seen as they really are.
The briefest and truest way of describing Lombard Street is to say that it is by far
the greatest combination of economical power and economical delicacy that the
world has even seen. Of the greatness of the power there will be no doubt.
Money is economical power. Everyone is aware that England is the greatest
moneyed country in the world; everyone admits that it has much more
immediately disposable and ready cash than any other country. But very few
persons are aware how much greater the ready balance—the floating loan-fund
which can be lent to anyone or for any purpose—is in England than it is
anywhere else in the world. A very few figures will show how large the London
loan-fund is, and how much greater it is than any other. The known deposits—
the deposits of banks which publish their accounts—are, in
London (31st December, 1872) 120,000,000 L
Paris (27th February, 1873) 13,000,000 L
New York (February, 1873) 40,000,000 L
German Empire (31st January, 1873) 8,000,000 L
And the unknown deposits—the deposits in banks which do not publish their
accounts—are in London much greater than those many other of these cities.
The bankers' deposits of London are many times greater than those of any other

Lombard Street: A Description of the Money Market by Walter Bagehot