Why this book?
Lombard Street is the classic statement of how central banks began functioning to insure the private bank system against bank panics. Walter Bagehot wrote this at the time of a revolution in banking that came about after the Joint Stock Companies Act of 1862 allowed private banks to have limited liability. Banking then boomed in England, and the Bank of England went from being a private bank to a bank also serving the Crown of England, and finally into a central bank as we see them today.
The Bank of England would hold reserves for the entire private banking system should they need them in times of bank panic, which were periodic in those days (and still today). At the same time, the Bank provided the money supply through note issue. This created a money and banking authority that was efficient in its practice of stabilizing the money and financial system. By “pooling” all of the private bank reserves, less reserves were held in the entire system, and more capital circulated and increased the wealth of nations, making England the center of international finance, as Bagehot argues.
Lombard Street, a Description of the Money Market
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What is this book about?
This work has been selected by scholars as being culturally important and is part of the knowledge base of civilization as we know it.
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