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Large Format for easy reading. By the nineteenth century British economist and author of The English Constitution. A valuable financial work.


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Large Format for easy reading. By the nineteenth century British economist and author of The English Constitution. A valuable financial work.

30 review for Lombard Street: A Description of the Money Market

  1. 5 out of 5

    Steve

    Lombard Street is an early call for prudent national banking policies, especially regarding the provision of liquidity during a financial panic. This work can be summarized with three concepts: (1) banks should always carry sufficient reserves, (2) the central bank – in this case the Bank of England – should loan against “all good banking securities, and as largely as the public ask for them,” and (3) a sufficiently high rate of interest should be charged against loans to “operate as a heavy fin Lombard Street is an early call for prudent national banking policies, especially regarding the provision of liquidity during a financial panic. This work can be summarized with three concepts: (1) banks should always carry sufficient reserves, (2) the central bank – in this case the Bank of England – should loan against “all good banking securities, and as largely as the public ask for them,” and (3) a sufficiently high rate of interest should be charged against loans to “operate as a heavy fine on unreasonable timidity, and will prevent the greatest number of applications by persons who do not require it.” While Mr. Bagehot’s cautions merit repetition, times have changed; the world moved away from the gold standard to paper currencies that now function in constant competition. It’s an ugly picture for sure with the masters of the Dollar, Yen, Euro and lesser currencies conspiring to lower interest rates and create financing schemes, without destroying confidence in their fiat money, all with the objective of maximizing employment and economic vibrancy. I think it fair to say the word ‘prudent’ can no longer be combined with the words ‘central bank,’ at least with respect to the largest economies. Yet, there appear to be no consequences. Ah, something tells me Mr. Bagehot would warn us of plenty of consequences, all unpleasant; the trigger will revolve around the word ‘confidence.’

  2. 5 out of 5

    Al Maki

    This little book, published in 1871, describes the functioning of the first great capital market at the time when money first began to flow quickly and easily across distances and borders to wherever it would be most profitable to those who controlled it. (I suspect the telegraph played a role in this transformation.) Bagehot confined himself to describing the workings of the actual money market, intentionally keeping clear of economic theory. The fact he named the book after the specific street This little book, published in 1871, describes the functioning of the first great capital market at the time when money first began to flow quickly and easily across distances and borders to wherever it would be most profitable to those who controlled it. (I suspect the telegraph played a role in this transformation.) Bagehot confined himself to describing the workings of the actual money market, intentionally keeping clear of economic theory. The fact he named the book after the specific street where the activities took place is indicative. Although conditions have changed greatly since he wrote, the book presents a good introduction to the mechanisms of capital. The latter part of the book points out weaknesses in the then current workings of the money market that resulted from London having become an international centre for capital and it proposes methods of safe guarding against a panic. I think it demonstrates his astuteness that he was arguing this in 1871 two years before "The Panic of 1873" that triggered the "Long Depression", the first global depression, lasting twenty years. He was one of those uncommon writers who are able to express complexity clearly. I wish I could find somebody writing about money today with his skill as a writer, his knowledge (before becoming a journalist he had worked as a banker) and his scrupulous avoidance of economic dogma.

  3. 4 out of 5

    Mehrsa

    I've read bits and parts of this, but I just read it start to finish and I learned a lot. Most of Bagehot's insights helped form the structure of the Federal Reserve, but we still seem to forget some of his ideas. For example, that panics are primarily about a lack of trust. The book explains how modern banking works and how the central bank should act during crises. I've read bits and parts of this, but I just read it start to finish and I learned a lot. Most of Bagehot's insights helped form the structure of the Federal Reserve, but we still seem to forget some of his ideas. For example, that panics are primarily about a lack of trust. The book explains how modern banking works and how the central bank should act during crises.

  4. 5 out of 5

    Justin Tapp

    Lombard Street: A Description of the Money Market by Walter Bagehot (1873, reprinted by Project Gutenberg). This is the original book about bank runs, financial crises, and the role of a central bank. This is on Ben Bernanke's short-list of recommended books, and he quotes Bagehot often. Bagehot influenced those who would later create the Federal Reserve. Bagehot is examining the British financial system, then the biggest and most well-capitalized in the world. (Known deposits in London in 1873 we Lombard Street: A Description of the Money Market by Walter Bagehot (1873, reprinted by Project Gutenberg). This is the original book about bank runs, financial crises, and the role of a central bank. This is on Ben Bernanke's short-list of recommended books, and he quotes Bagehot often. Bagehot influenced those who would later create the Federal Reserve. Bagehot is examining the British financial system, then the biggest and most well-capitalized in the world. (Known deposits in London in 1873 were 120,000,000 pounds, while New York was next with the equivalent of 40,000,000 pounds). The capital had done wonders for British industrial development, as a properly functioning financial market is necessary for any advanced country. But risk is inherent: "The peculiar essence of our banking system is an unprecedented trust between man and man: and when that trust is much weakened by hidden causes, a small accident may greatly hurt it, and a great accident for a moment may almost destroy it." England had recently (1866) gone through a panic very similar to our recent financial crisis, the Overend Gurney crisis, where some very large players dealing with risky schemes and assets went bust and triggered a panic, handled controversially by the Bank, which suspended payments as the system collapsed. Bagehot on Overend, Gurney, and Co.: "(T)hese losses were made in a manner so reckless and foolish, that one would think a child who had lent money in the City of London would have lent it better." The Bank hasn't always done a bad job of being the lender of last resort, and Bagehot gives a good bit of interesting history. The Bank of England was privately owned and operated by a large board of executives from various types of industry. It had a rotating presidency and governorship (which Bagehot actually recommends eliminating for a permanent governor and vice-governor) who seemed to run the bank well and rather conservatively. The Bank of England held deposits from all the other banks on Lombard Street as well as the British Exchequer, and foreign governments. In 1844, Parliament gave the Bank of England exclusive authority to issue notes (ie: currency), so long as they were 100% backed by gold (a rule the Bank could suspend during a crisis). The Act also created a fractional reserve banking system in the U.K., with no required reserve ratio. The Bank of England was the bedrock of the system, and it typically kept a very large reserve as a result. Bagehot gives a lot of insight and praise into its conservative governorship, but suggests it be even more conservative. Bagehot much prefers the British system to the American, which had just nationalized the currency after the Civil War. He deplores the 2-charter U.S. system with its different regulators required to keep tabs on what banks are doing. There are some interesting comments seemingly in favor of free banking, which I found interesting. Bagehot Bagehot's role for a central bank during a panic is to: 1. Before the panic, build up a large reserve. 2. During the panic, lend freely, at high rates of interest, and on good collateral. "A panic...is a species of neuralgia, and according to the rules of science you must not starve it. The holders of the cash reserve must be ready...to advance it most freely for the liabilities of others." The high rate of interest is to penalize the bad banks who can't afford the loan. Here, he is unaware of the concept of adverse selection--those who will borrow at high interest rates are more likely to be the bad banks, not the sound ones. He makes the point earlier in the book that a bank or creditor in trouble will pay any price for money rather than go broke, but seemingly misses the connection here. The collateral is important, it needs to be what Gorton would call "information insensitive," something everyone recognizes is most likely a good asset--bank loans, for example. If everyone sees the bank lending freely on decent collateral, then they will stop panicking. These are the days before deposit insurance. All banks during a bank run need to lend more, not less. Otherwise, people will think they don't have enough money to meet their obligations and the run will intensify-- wiping out good banks as well as bad. The best modern day illustration of this from the Great Depression was in Episode 3 of Milton Friedman's Free to Choose series, I show it to Money and Banking every year. Another aspect that Bagehot deals with is joint stock companies and the principal-agent problem. He totally identifies that managers and owners may have conflicting incentives. His suggestion is that the members of the board of directors with the most "spare time" basically micromanage the manager's decisions to make sure he's not engaging in overly risky behavior. Bagehot describes the speculation that happens just before a panic, reminiscent of our housing boom/bust: "The good times too of a high price almost always engender much fraud. All people are most credulous when they are most happy; and when much money has just been made...when most people think they are making it, there is a happy opportunity for ingenious mendacity." Another good quote: "I am by no means an alarmist. I believe that our system, though curious and peculiar, may be worked safely; but if we wish so to work it, we must study it...Money will not manage itself, and Lombard Street has a great deal of money to manage." I enjoyed this book and consider it a must-read for students of money, banking, and financial crises. I have one more book on my crisis reading list to finish before the semester starts.

  5. 4 out of 5

    Ben Peyton

    I thought this was a very interesting book on the history of the money markets and the Bank of England and the need for a lender of last resort in financial markets. I was a little worried that the book would be overly dry or written in a style that I wouldn't understand because it is from the late 1900s. I was surprised by how light the writing style was and it was really easy to follow. I think the main argument that Bagehot makes is that in a time of crisis when credit or liquidity dries up y I thought this was a very interesting book on the history of the money markets and the Bank of England and the need for a lender of last resort in financial markets. I was a little worried that the book would be overly dry or written in a style that I wouldn't understand because it is from the late 1900s. I was surprised by how light the writing style was and it was really easy to follow. I think the main argument that Bagehot makes is that in a time of crisis when credit or liquidity dries up you need a central bank that will lend money easily and quickly. For that to happen a the bank needs adequate reserves to lend and so figuring out the amount of those reserves seems more art than science. This seems to be his main argument but it's probably not even applicable anymore. The structure of the Bank of England is probably different now and the Federal Reserve is very different. But the basic idea I think applies - when in a crisis you need a central bank that will lend money freely to protect against a crisis getting worse. The book also has some very good chapters on the different entities that make up the money markets at the time. All of it is historical now but the basic ideas still apply.

  6. 5 out of 5

    Nate

    Good essential reading albeit outdated. Solid primer for central banking topic as a whole.

  7. 4 out of 5

    Will

    "Nothing, therefore, can be more certain than that the Bank of England has in this respect no peculiar privilege; that it is simply in the position of a Bank keeping the Banking reserve of the country; that it must in time of panic do what all other similar banks must do; that in time of panic it must advance freely and vigorously to the public out of the reserve. And with the Bank of England, as with other Banks in the same case, these advances, if they are to be made at all, should be made so a "Nothing, therefore, can be more certain than that the Bank of England has in this respect no peculiar privilege; that it is simply in the position of a Bank keeping the Banking reserve of the country; that it must in time of panic do what all other similar banks must do; that in time of panic it must advance freely and vigorously to the public out of the reserve. And with the Bank of England, as with other Banks in the same case, these advances, if they are to be made at all, should be made so as if possible to obtain the object for which they are made. The end is to stay the panic; and the advances should, if possible, stay the panic. And for this purpose there are two rules: First. That these loans should only be made at a very high rate of interest. This will operate as a heavy fine on unreasonable timidity, and will prevent the greatest number of applications by persons who do not require it. The rate should be raised early in the panic, so that the fine may be paid early; that no one may borrow out of idle precaution without paying well for it; that the Banking reserve may be protected as far as possible. Secondly. That at this rate those advances should be made on all good banking securities, and as largely as the public ask for them. The reason is plain. The object is to stay alarm, and nothing therefore should be done to cause alarm. But the way to cause alarm is to refuse some one who has good security to offer. The news of this will spread in an instant through all the money market at a moment of terror; no one can say exactly who carries it, but in half an hour it will be carried on all sides, and will intensify the terror everywhere. No advances indeed need be made by which the Bank will ultimately lose. [...] If it is known that the Bank of England is freely advancing on what in ordinary times is reckoned a good security - on what is then commonly pledged and easily convertible - the alarm of the solvent merchants and bankers will be stayed."

  8. 4 out of 5

    Fred Kohn

    My motivation for reading this book was a rereading of A History of the Federal Reserve, Volume 1: 1913-1951, especially chapter two, dealing with monetary theory in the 18th and 19th centuries. Not having sufficient economic background to get through this chapter the first time around, I had to go read John Chown's books on money before I was able to get through this chapter and the book. Now that I am reading it for the second time, I noticed Walter Bagehot's classic mentioned approvingly. Sin My motivation for reading this book was a rereading of A History of the Federal Reserve, Volume 1: 1913-1951, especially chapter two, dealing with monetary theory in the 18th and 19th centuries. Not having sufficient economic background to get through this chapter the first time around, I had to go read John Chown's books on money before I was able to get through this chapter and the book. Now that I am reading it for the second time, I noticed Walter Bagehot's classic mentioned approvingly. Since the book seemed short enough, I gave it a go. It is a much easier read than The Wealth of Nations, which I have been butting my head against for at least the past three years. The only downside is that there are large swatches of the book that are only of historical interest.

  9. 4 out of 5

    Isaac Chan

    Considering that this book is so heavily endorsed and adored by central bankers around the world, I am not going to pretend that I was not slightly disappointed by its content. The book revolves around principles that should ought be second nature to any individual with the slightest interest in the financial markets, such as free lending by the central bank in times of a financial crisis, and I would deem it slightly exaggerated to label this book as the bible of central banking. But then, I pr Considering that this book is so heavily endorsed and adored by central bankers around the world, I am not going to pretend that I was not slightly disappointed by its content. The book revolves around principles that should ought be second nature to any individual with the slightest interest in the financial markets, such as free lending by the central bank in times of a financial crisis, and I would deem it slightly exaggerated to label this book as the bible of central banking. But then, I presume that these principles was not known to the general public before the publishing of this book, so I suppose I should not be so harsh on my review.

  10. 5 out of 5

    Arbraxan

    In a crisis lend freely and against good collateral at a high rate of interest. Straight from the 1870s but as valid today as back then, this is Bagehot's recommendation to central bankers all around the world. They are the financial system's last reserve and through that special status bear responsibility for acting as the system's lender of last resort. The chapters on the Bank of England are rather interesting, but some descriptions of Lombard Street's inhabitants - bill brokers, private bank In a crisis lend freely and against good collateral at a high rate of interest. Straight from the 1870s but as valid today as back then, this is Bagehot's recommendation to central bankers all around the world. They are the financial system's last reserve and through that special status bear responsibility for acting as the system's lender of last resort. The chapters on the Bank of England are rather interesting, but some descriptions of Lombard Street's inhabitants - bill brokers, private bankers, joint stock companies, and the like - might be most of interest to historians.

  11. 5 out of 5

    Darius

    Describes how a Central bank should cope with bank-runs. A must read for those interested in business cycles and fractional reserve banking.

  12. 5 out of 5

    Jeff

    Big Walt nails it here.

  13. 5 out of 5

    James

    still probably the clearest look at these dang money markets and what it is theyre up to

  14. 5 out of 5

    Stephen

    This is the first of two books I am reading about financial crises. Originally written in 1873, this volume alludes to the Overends financial crisis of 1866, and sets out the prudent principles that ought to govern the operation of a central bank in the face of a crisis. In our current financial environment, it has much to recommend it. The Overends crisis of 1866 bears an uncanny resemblance to the collapse of RBS 140 years later. Overends was a bank engaged in the boring, but essential, work of This is the first of two books I am reading about financial crises. Originally written in 1873, this volume alludes to the Overends financial crisis of 1866, and sets out the prudent principles that ought to govern the operation of a central bank in the face of a crisis. In our current financial environment, it has much to recommend it. The Overends crisis of 1866 bears an uncanny resemblance to the collapse of RBS 140 years later. Overends was a bank engaged in the boring, but essential, work of bill discounting in the 1840s and 1850s. The profits weren't spectacular, but they did provide a steady return on capital. Then new management came along, and they wanted to shake things up. To make their mark. The company moved away from the steady work of bill discounting and started to take on the more heady work of railway speculation. Needless to say, the bubble of railway stocks burst, and Overends tumbled with them. However, because of their central role in the discounting of bills, credit froze in London and the house of cards collapsed. The similarity to RBS is striking. In that case we have established banking brands (Royal Bank of Scotland, NatWest), earning steady returns from boring branch banking. New management looks to spice up the bottom line by engaging in casino banking. Everything works well until the bubble - a property bubble, in this case - pops. Credit freezes and the bank collapses. One key difference between 1866 and 2008 is that the Overends directors had the good sense to ringfence the casino operations to isolate the contagion from the bill discounting business. The geniuses at RBS didn't. How should a central bank respond to such a crisis? That is the subject of this book. In 1866, the Bank of England made credit freely available, but at a price. Bagehot considers this to be the best possible response, and his views still dominate today. In a policy of what we would now consider as QE, the Bank of England lent freely into the banking sector, but avoided the moral hazard of cheap money by making it relatively expensive. This was to separate those institutions suffering from a liquidity crisis (owing to a mis-match of maturities) from those suffering from a solvency crisis (they were busted flushes). The book doesn't touch upon how effective this was in 1866, but we now know that the difference between the two can be very fine at times, and that politics helps to determine which is which. Unanswered questions that remain in my mind from our own crisis include, was HBoS solvent when it was absorbed into Lloyds? Did Northern Rock have to be sacrificed? Was Lehman Bros a going concern when Barclays bought the casino banking business? I have no answers to these questions, just ill formed suspicions. What we do know from 1873 is that the resolution of the fall out took decades. Any hope for a resolution in our times, for our crisis, seems like pie in the sky to me. One final point of interest from the book is the way in which it charts the rise of London as a financial centre. According to Bagehot, the centripetal force in the English monetary system allowed large sums of capital to be accumulated in the London banks, which were then lent to promising ventures, first in England, and then around the world. The routing of capital to find a home at the highest, combined with the impact of leverage upon the balance sheets of the early capitalists, provided the impetus to allow London to rise as the pre-eminient financial centre in 1873. London still retains it's re-eminence today, but one wonders if it might not be compromised by Brexit? That is a question for another day, but the start of an answer is locked away in this book. The aim of the book was to outline the principles by which the Bank of England should assume responsibility for the English monetary system. It was quite influential in its day, and laid down the basis by which future crises were met - lend freely, but lend dearly. Of course, such principles can only be appraised when they are tested, and that is the subject of the second volume in my reading - the great financial crash of 1914.

  15. 4 out of 5

    Grace Cao

    This book clearly explains, with evidence from history and human nature, the principles of sound banking. It undoubtedly served as a playbook for the central banks in the GFC. As banking is founded on credit, and credit is destroyed in a panic, the key challenge for a bank is how to fight and survive a panic. According to the book, the answer is adequate bank reserve and brave, effective use of that reserve during a crisis. The peculiar history of Lombard Street leads to the peculiar situation t This book clearly explains, with evidence from history and human nature, the principles of sound banking. It undoubtedly served as a playbook for the central banks in the GFC. As banking is founded on credit, and credit is destroyed in a panic, the key challenge for a bank is how to fight and survive a panic. According to the book, the answer is adequate bank reserve and brave, effective use of that reserve during a crisis. The peculiar history of Lombard Street leads to the peculiar situation that in England, banks’ reserves are held at BOE instead of at individual banks. Thus, BOE shoulders the burden of providing liquidity in crisis of domestic deposit or foreign cash withdrawal. To fulfil this responsibility, BOE needs sound governance and reserve policy. Some quotes: “Organization of capital”: Concentration of money in banks is the principal cause which has made London so exceedingly rich. A million in the hands of a single banker is great power, he can lend it out, the borrowers know where to find him. But the same amount scattered in 10s and 50s around the country is no power at all. History of banks: their first function was money remittance, helping merchants pay each other over distance through inter-bank accounting. Second function is note issuance, helping public make payments in bank notes instead of hard metal currency. This advertises the banker’s credit and paves ways for deposit banking. Deposit banking: its essence is that a very large number of people agree to trust a very few people, even maybe one person. Banking would not be profitable if bankers were not a small number, and depositors in comparison an immense number. The distinct function of a banker begins as soon as he uses money of others; as long as he uses his own money, he is a capitalist. The business of banking ought to be simple. If it’s hard it’s wrong. Banking comes to near to fixed rules as any business. The business of old established bank has the full advantage of being a simple business, and in part the advantage of being a monopoly business (from its prestige). In a panic, bank should lend as much as possible and as fast as possible to solid credits (those that are solvent but may be facing a liquidity crisis). This is the only way to fight off the panic. The only plan is a brave plan; it may not save the bank, but if it doesn’t, nothing will. Fluctuations of value of money is greater than fluctuations of price of other commodities. At times there is great pressure to borrow it; other times great pressure to lend it (by bankers who pay interest on deposits). Central banks have two types of reserve: banking reserve held to meet deposit demand, and currency reserve held to defend currency. The abstract thinking of the world is never to be expected from persons at high places. A “board” can scarcely ever make improvements, for the policy of the board is determined by the numerous class of its members - its average members - and these are never prepared for sudden improvements. The life of a man of business who employs only his own capital, and employs it nearly always the same way, is by no means fully employed. Hardly any capital is enough to employ the principal partner’s time, and if such a man is very busy, it’s a sign of something wrong. Either he is working at detail, which subordinates would do better, or he is engaged in too many speculations, and may be ruined. In consequence, every commercial city abounds in men who have great business ability and experience, who are not fully occupied, who wish to be occupied, and who are very glad to become directors of public companies in order to by occupied.

  16. 5 out of 5

    Chris

    Why do banks exist, what function do they perform, and under what competitive & cultural circumstances did what kind of individual form them? Bagehot answers these questions concisely, after decades of reflection and experience. Banks attract small depositors whose funds would individually be too small to lend. They then lend to (hopefully) productive ventures, such as railroad building. (Note that this was written before the American mortgage, which now comprises much of a bank's loan book.) A boo Why do banks exist, what function do they perform, and under what competitive & cultural circumstances did what kind of individual form them? Bagehot answers these questions concisely, after decades of reflection and experience. Banks attract small depositors whose funds would individually be too small to lend. They then lend to (hopefully) productive ventures, such as railroad building. (Note that this was written before the American mortgage, which now comprises much of a bank's loan book.) A book that proves classics are still read 100+ years later for good reason. And unlike Smith/Keynes, Bagehot isn't famous enough to be classic simply by college syllabi. Currency and banking are gigantic issues---pick up Homer/Sylla, any of the histories of the Federal Reserve, or any history of the Bank of England, and you'll notice the texts are both huge and full of controversy. If you want a 50-page start to currency/banking/finance/lending/etc., you could do worse than starting with Bagehot. The political times that formed Walter Bagehot also formed The Economist magazine.

  17. 4 out of 5

    Paul Kearns

    An insight into the early structure of the money market, its participants and the attitudes within and towards the Bank of England. It shows how basic the financial system was, from which you can identify how various crises and cases of misconduct have since occurred. It also presents the genesis of ideas that have since advanced as financial subjects, such as Asset Liability Management, Liquidity Adequacy and Treasury Management. However, outside of a history lesson, I found that there is little An insight into the early structure of the money market, its participants and the attitudes within and towards the Bank of England. It shows how basic the financial system was, from which you can identify how various crises and cases of misconduct have since occurred. It also presents the genesis of ideas that have since advanced as financial subjects, such as Asset Liability Management, Liquidity Adequacy and Treasury Management. However, outside of a history lesson, I found that there is little to be learnt from the book. Whilst it may have been progressive at the time, it is hard to imagine it being by any stretch revolutionary. Personally I found it to be a hard slog to get through - a real eye-roll moment when, in the final chapter, he writes “I fear I must have exhausted my reader’s patience”. Yes, Walter, you have. An essay for those working in the industry with an interest in the history (my only excuse). Otherwise, for those looking a more progressive read on central banking, I highly recommend ‘The End of Alchemy’ by Mervyn King.

  18. 4 out of 5

    Tomáš Kreuzinger

    While Bagehot's insights are remarkable and fascinating, especially looking back at the state of 19th century knowledge of the financial markets, one must also take into account the density of information and Bagehot's propensity to repeat himself. If he had been more austere with the choice of his examples this book could have been half the length. One feels lost in the additional pages of whom the ultimate idea is still the same: "a reform of the financial markets and reevaluation of our curre While Bagehot's insights are remarkable and fascinating, especially looking back at the state of 19th century knowledge of the financial markets, one must also take into account the density of information and Bagehot's propensity to repeat himself. If he had been more austere with the choice of his examples this book could have been half the length. One feels lost in the additional pages of whom the ultimate idea is still the same: "a reform of the financial markets and reevaluation of our current value structures"

  19. 4 out of 5

    Max Lybbert

    This is a classic economics monograph that is constantly quoted by people at the Federal Reserve. Unfortunately, they all quote the same passage of how to operate a lender of last resort. Despite its age, the book remains highly readable and, at least for me, somewhat entertaining. Some details about the Bank of England have changed in the last century and a half, but it’s very telling, if somewhat depressing, that the Federal Reserve’s economists don’t have a better book to quote from.

  20. 4 out of 5

    Basili

    A theoretical book about the English banking system, Lombard Street is a densely book that is impressively important and relevant today. The book is a collection of 11 essays that details all facets of the banking system. The historical construct of the late eighteen hundreds banking system is a little much, but the work overall highlights the fragility and complexities of the financial system.

  21. 4 out of 5

    Ask Franck

    Brilliant. Listened to it on audible, but have ordered a physical copy for a second read, since I only feel I got about 1/4 of the wisdom in the book, and there was a lot I just didn't quite catch or comprehend, especially in the later parts. Seemed to be a great book to learn about the fundamentals of banking. Brilliant. Listened to it on audible, but have ordered a physical copy for a second read, since I only feel I got about 1/4 of the wisdom in the book, and there was a lot I just didn't quite catch or comprehend, especially in the later parts. Seemed to be a great book to learn about the fundamentals of banking.

  22. 5 out of 5

    Michael

    A must read for anyone studying or who has a general interest in central banking and finance. The stark comparison between the market of England’s money dealers and the role of a quasi-central bank (The Bank of England) of the mid-1800s and that of the U.S. money market and the role of the Federal Reserve offer valuable lessons. Then book basically a blueprint of today’s “shadow baking” system.

  23. 5 out of 5

    Tianhang Hu

    Give you deeper understanding on the central banking system, using BoE as the main example. But it’s been so long since the book was published and a lot has changed.

  24. 4 out of 5

    James McDonald

    Interesting but tough book to follow owing to the time when it was written and published.

  25. 4 out of 5

    Frank Stein

    A great, surprisingly easy to read, description of the esoteric world of British banking in the 19th century. I kept finding this book referenced in other books about Victorian England, and also, again surprisingly considering the subject, recommended just as a good general read. The reason is that Bagehot, an early reporter for the Economist, knows how to explain abstract concepts in simple language, and because of that I finally feel like I understand, sort of, things like "bills of exchange," A great, surprisingly easy to read, description of the esoteric world of British banking in the 19th century. I kept finding this book referenced in other books about Victorian England, and also, again surprisingly considering the subject, recommended just as a good general read. The reason is that Bagehot, an early reporter for the Economist, knows how to explain abstract concepts in simple language, and because of that I finally feel like I understand, sort of, things like "bills of exchange," and Peel's Act of 1844. But Bagehot main purpose in writing the book was to argue that the Bank of England (then still a semi-private institution and not an official central bank) should use its reserves to prevent banking panics. So its an antiquated polemic disguised as journalistic history. In any case its well done. Some of the work seems very modern, like Bagehot's acknowledgement that the Government deposits in the Bank and its involvement with the Bank's policies meant that the Bank had an "implicit guarantee" from Parliament (it was the Fannie Mae of the 19th century!), or his discussion of how party politics should be kept out of the selection of the Bank's Governor (unlike the nefarious French, who, of course, had their central bank controlled by the central government). Some of the book, though, reminds one of how different finance was back then. For instance,Bagehot is almost exclusively concerned with the size of the Bank of Engalnd's cash reserve, and spends almost no time discussing its interest rate, which today is the preeminent subject of concern among Federal Reserve watchers. I highly recommend this book to anyone interested in finance and economic history, but I would recommend that anyone else who reads it gets an edition that isn't just cut and pasted from Project Gutenberg online (most double Ls are rendered as Ms, commas are scarce).

  26. 4 out of 5

    Jean

    (Audible; Robin Sachs, narrator) A highly technical description and history of the rough and tumble credit markets, with particular reference to England and the Bank of England in 1877. A description of currency exchange and transfer. It is still important today because of its discussion of crisis management after a bank failure. Bagehot explains that banking began in Genoa and other Italian city states. The early banks engaged in circulation and remittance of coin. The issue of paper notes led (Audible; Robin Sachs, narrator) A highly technical description and history of the rough and tumble credit markets, with particular reference to England and the Bank of England in 1877. A description of currency exchange and transfer. It is still important today because of its discussion of crisis management after a bank failure. Bagehot explains that banking began in Genoa and other Italian city states. The early banks engaged in circulation and remittance of coin. The issue of paper notes led to deposit banking in England, where the population had faith in the stability of the realm. The threat of foreign invasion led other countries (e.g., Holland) most likely to develop a deposit banking system that preferred precious metals over notes. France also was not an honest government in that it gave the contract for note issuance to a bad bank, and France later paid of its debts with bad paper. C. 1877 trade in England was largely carried on with borrowed money. A description of how the Bank of England discharges its duties as a single bank reserve; how it governs, how its governors are elected, what would be a better organization for the board of governors, and how to determine the pay in order to hire the right person. One conclusion: The solvency of the banker breeds confidence and encourages deposits. Once a season the Bank of England opens its doors to the public for a behind-the-scenes tour of the bank. My English friend and I took one of these free and virtually unadvertised tours in the summer of 2015. While other Yanks were visiting the houses of Parliament, I was gazing at gold bars in the BOE vault. After that we made our way to St. Olave's Church, where Samuel Pepys would pray during his lunchtime break at the Office of the Navy, where he worked.

  27. 5 out of 5

    Zach Zhao

    This review has been hidden because it contains spoilers. To view it, click here. This book is filled with words of wisdom on the way that money works under contemporary financial systems. Written more than a century ago, the words still ring true today. "The basis of it is false. It assumes that what works most easily when established is that which it would be the most easy to establish, and that what seems simplest when familiar would be most easily appreciated by the mind though unfamiliar. But exactly the contrary is true. Many things which seem simple and which work well This book is filled with words of wisdom on the way that money works under contemporary financial systems. Written more than a century ago, the words still ring true today. "The basis of it is false. It assumes that what works most easily when established is that which it would be the most easy to establish, and that what seems simplest when familiar would be most easily appreciated by the mind though unfamiliar. But exactly the contrary is true. Many things which seem simple and which work well when firmly established, are very hard to establish among new people, and not very easy to explain to them. Deposit banking is of this sort." "The cardinal maxim is, that any aid to a present bad Bank is the surest mode of preventing the establishment of a future good Bank." "The peculiar essence of our banking system is an unprecedented trust between man and man: and when that trust is much weakened by hidden causes, a small accident may greatly hurt it, and a great accident for a moment may almost destroy it."

  28. 4 out of 5

    Ming

    Read this book if you want to know the importance of keeping a healthy amount of capital reserve on top of liabilities. Really makes you wonder about our modern world. Massive amounts of derivatives, off balance sheet financing, financial voodoo has created an unbelievable amount of leverage-- Have we really gotten so much better at risk-management and liabilities management that we can now safely ignore the words of the pioneers of debt financing? I personally don't think so... after all modern Read this book if you want to know the importance of keeping a healthy amount of capital reserve on top of liabilities. Really makes you wonder about our modern world. Massive amounts of derivatives, off balance sheet financing, financial voodoo has created an unbelievable amount of leverage-- Have we really gotten so much better at risk-management and liabilities management that we can now safely ignore the words of the pioneers of debt financing? I personally don't think so... after all modern portfolio theory and risk management is built around "normal" assumptions, ceteris paribus calculations that is anything BUT the real world (and the fact that these logics has only been created mostly in the last 30-40 years is scary)... but I guess we'll wait and see.

  29. 4 out of 5

    Nick Klagge

    An incredibly modern book, though written in the 19th century. Bagehot is often cited for his dictum that in a crisis, the central bank should lend freely, at a penalty rate. I am not sure whether someone not interested in the history of central banking would agree, but I found the book quite lively and the descriptions of the 19th-century financial world colorful and engaging. Bagehot's understanding of contagion, liquidity, and the role of the central bank in a crisis is remarkable. Oddly enou An incredibly modern book, though written in the 19th century. Bagehot is often cited for his dictum that in a crisis, the central bank should lend freely, at a penalty rate. I am not sure whether someone not interested in the history of central banking would agree, but I found the book quite lively and the descriptions of the 19th-century financial world colorful and engaging. Bagehot's understanding of contagion, liquidity, and the role of the central bank in a crisis is remarkable. Oddly enough, I think someone interested in understanding the crisis of 2008 could do much worse than to read "Lombard Street."

  30. 4 out of 5

    Ken

    It's a lively and colorful description of the financial markets in Victorian England, and in particular the role of the Bank of England in maintaining financial stability. Bagehot is the first to articulate the idea of the "lender of last resort," which is just what the Fed (and other central banks) have been doing in recent months--though much expanded in scale and scope. Much has changed since then, of course, but not as much as you might think. Plus, who knew the Peel Act of 1844 could be so It's a lively and colorful description of the financial markets in Victorian England, and in particular the role of the Bank of England in maintaining financial stability. Bagehot is the first to articulate the idea of the "lender of last resort," which is just what the Fed (and other central banks) have been doing in recent months--though much expanded in scale and scope. Much has changed since then, of course, but not as much as you might think. Plus, who knew the Peel Act of 1844 could be so interesting?

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