[Lombard Street: A Description of the Money Market by Walter Bagehot]@TWC D-Link book
Lombard Street: A Description of the Money Market

CHAPTER VII
54/57

And these principles taken together amount to saying that, by the doctrine of the directors, the Bank of England ought, as far as they can, to manage a panic with the Act of 1844, pretty much as they would manage one without it--in the early stage of the panic because then they are not fettered, and in the latter because then the fetter has been removed.
We can therefore estimate the policy of the Bank of England in the three panics which have happened since the Act of 1844, without inquiring into the effect of the Act itself.

It is certain that in all of these panics the Bank has made very large advances indeed.

It is certain, too, that in all of them the Bank has been quicker than it was in 1825; that in all of them it has less hesitated to use its banking reserve in making the advances which it is one principal object of maintaining that reserve to make, and to make at once.

But there is still a considerable evil.

No one knows on what kind of securities the Bank of England will at such periods make the advances which it is necessary to make.
As we have seen, principle requires that such advances, if made at all for the purpose of curing panic, should be made in the manner most likely to cure that panic.


<<Back  Index  Next>>

D-Link book Top

TWC mobile books