ABSTRACT
The various ways in which a lowering of the bank rate is held to indicate and to produce an increase of credit are familiar to business men.
A fall in the bank rate, or price of money in the Bank of England, is the index of a similar movement in all the great joint-stock banks whose credits stand in the last resort on the gold reserve in the bank. So the market rate for loans is lowered, and ‘money’ is cheapened. Now the primary meaning of this ‘money’ in ‘the city’ is the advances for a few days made by bankers to bill-brokers. A cheaper and freer supply of money to bill-brokers encourages them to discount bills at low rates, “so that the banks who regulate the money rate thus exercise a strong and direct influence on the discount rate.”1 Not only so, but bankers are large discounters themselves, using brokers as intermediaries and buying from them the bills. They also largely furnish credit for stock exchange purposes to their customers, and especially to stockbrokers who finance the buying and selling of stocks for the investing and gambling public. Finally, the banks make credit advances to business men, merchants, manufacturers, etc., for their temporary convenience in emergencies, or to enable them to take advantage of good business opportunities by enlarging their plant and output, or to seize some favourable turn of the market. 1 Withers, The Meaning of Money, p. 126.
