CHAPTER V.
The Mode in Which the Value of Money is Settled in Lombard Street.
Many persons believe that the Bank of England has some peculiar power of fixing the value of money.

They see that the Bank of England varies its minimum rate of discount from time to time, and that, more or less, all other banks follow its lead, and charge much as it charges; and they are puzzled why this should be.

'Money,' as economists teach, 'is a commodity, and only a commodity;' why then, it is asked, is its value fixed in so odd a way, and not the way in which the value of all other commodities is fixed?
There is at bottom, however, no difficulty in the matter.

The value of money is settled, like that of all other commodities, by supply and demand, and only the form is essentially different.

In other commodities all the large dealers fix their own price; they try to underbid one another, and that keeps down the price; they try to get as much as they can out of the buyer, and that keeps up the price.
Between the two what Adam Smith calls the higgling of the market settles it.