caprice of such a bank, of itself tends to create an immediate and equal rise, so that upon an average the value is not altered.
What happens is this. If a bank with a monopoly of note issue suddenly lends (suppose) £2,000,000 more than usual, it causes a proportionate increase of trade and increase of prices. The persons to whom that £2,000,000 was lent do not borrow it to lock it up; they borrow it, in the language of the market, to "operate with"—that is, they try to buy with it; and that new attempt to buy—that new demand—raises prices. And this rise of prices has three consequences. First. It makes everybody else want to borrow money. Money is not so efficient in buying as it was, and therefore operators require more money for the same dealings. If railway stock is 10 per cent. dearer this year than last, a speculator who borrows money to enable him to deal must borrow 10 per cent. more this year than last, and in consequence there is an augmented demand for loans. Secondly. This is an effectual demand, for the increased price of railway stock enables those who wish it to borrow more upon it. The common practice is to lend a certain portion of the market value of such securities, and, if that value increases, the amount of the usual loan to be obtained on them increases too. In this way, therefore, any artificial reduction in the value of money causes a
