Discussion — Reading 4: Walter Bagehot

This session covers Reading 4: Chapter VII of Lombard Street by Walter Bagehot

This chapter describes the workings of the Bank of England's reserve system in the second half of the 19th century. Though divided into an Issue Department and a Banking Department starting midway through the 19th century, the Bank of England managed the equivalent of a single centralized monetary reserve through the second half of the 19th century.

The reading gives some context for next week's lecture: The World that Bagehot Knew, and describes the central banking approach that would later become known as the Bagehot rule or the Bagehot principle: In times of crisis, lend freely at a high rate against good security (collateral).

Study Questions

Bagehot Reading Discussion Thread