lombard street a description of the money market

An alarm becomes a panic when the belief is that most people won’t pay their creditors when payment is due. An alarm is a belief that some people won’t pay their credits when payment is due.Harmon, on behalf of the Bank of England, ‘by every possible means and in modes we had never adopted before…'” “The way in which the panic of 1825 was stopped by advancing money has been described in so broad and graphic a way that the passage has become classical.“In wild periods of alarm, one failure makes many, and the best way to prevent the derivative failures is to arrest the primary failure which causes them.”.“A good banker will have accumulated in ordinary times the reserve he is to make use of in extraordinary times.”.The first instinct of everyone is the contrary.” “In opposition to what might be at first sight supposed, the best way for the bank or banks who have the custody of the bank reserve to deal with a drain arising from internal discredit, is to lend freely.The important question: Is trust justified and wise? Will the promises be kept? Credit is trust given in exchange for a promise to pay. The banking system and money markets are built on promises and trust.

“In modern English business, owing to the certainty of obtaining loans on discount of bills otherwise at a moderate rate of interest, there is a steady bounty on trading with borrowed capital, and a constant discouragement to confine yourself solely or mainly to your own capital.”.“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 ever seen.”.First published in 1873, Walter Bagehot describes the intricacies of the money market and, more importantly, the necessary response when managing a financial crisis.

Lombard street a description of the money market