Lombard Street: A Description of the Money MarketBagehot, Walter
History
Lombard Street: A Description of the Money Market
Bagehot, Walter
Banks and banking -- England -- London; Banks and banking -- Great Britain; Finance -- England -- London; Finance -- Great Britain
general rise of prices is no benefit at all; it is simply a change
of nomenclature for an identical relative value in the same
commodities. Nevertheless, most people are happier for it; they
think they are getting richer, though they are not. And as the rise
does not happen on all articles at the same moment, but is
propagated gradually through society, those to whom it first comes
gain really; and as at first every one believes that he will gain
when his own article is rising, a buoyant cheerfulness overflows the
mercantile world.
This prosperity is precarious as far as it is real, and transitory
in so far as it is fictitious. The augmented production, which is
the reason of the real prosperity, depends on the full working of
the whole industrial organisation--of all capitalists and labourers;
that prosperity was caused by that full working, and will cease with
it. But that full working is liable to be destroyed by the
occurrence of any great misfortune to any considerable industry.
This would cause misfortune to the industries dependent on that one,
and, as has been explained, all through society and back again. But
every such industry is liable to grave fluctuations, and the most
important--the provision industries--to the gravest and the suddenest.
They are dependent on the casualties of the seasons. A single bad
harvest diffused over the world, a succession of two or three bad
harvests, even in England only, will raise the price of corn
exceedingly, and will keep it high. And a great and protracted rise
in the price of corn will at once destroy all the real part of the
unusual prosperity of previous good times. It will change the full
working of the industrial machine into an imperfect working; it will
make the produce of that machine less than usual instead of more
than usual; instead of there being more than the average of general
dividend to be distributed between the producers, there will
immediately be less than the average.
Public-domain text, read in full here on John Shaqi.
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