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TRANSACTIONS OF SECTION F. 923 
2. Some recent Changes in the Conditions governing the London Money 
Market. By Wynnarp Hooper. 
Bagehot’s ‘Lombard Street.’ His remarks on the ‘ natural system’ of banking, 
many banks each keeping its own reserve. The system that has grown up in 
London is one in which a single bank keeps the whole reserve of the country. The 
system cannot be altered. Bagehot showed how it could be worked safely. He 
ractically established a ‘canon of criticism’ in relation to the management of the 
Bank of Kngland’s reserve. The difficulties of the bank have increased since he 
‘wrote ‘Lombard Street.’ The volume of business is larger, and the liabilities of 
London and the whole country are much larger, but the reserve held against them 
is only slightly larger than was the case twenty years ago. Improved steam 
communication and the use of telegraphic transfers have made it possible to work 
with a relatively smaller reserve, by enabling the four great centres of business to 
support one another. é 
The fabric of credit as indicated by the London Bankers’ Clearing Returns has 
increased from 3,914 millions sterling in 1870 to 7,618 millions sterling in 1889, 
or by about 95 per cent. This is due mostly to the growth of internal trade. It 
implies an increased use of cheques, including ‘ international cheques,’ or tele- 
graphic transfers, and has been accompanied by a diminished use of bills of 
exchange. Cheques of very small amounts are now common, which was not so 
even ten years ago. Most people now ‘ keep a banker,’ 
The deposits of banks have enormously increased. Those of the fourteen prin- 
cipal London banks have risen from 103 millions in 1870 to 178 millions in 1889. 
Other banks’ deposits have also increased, and a larger proportion of the deposits 
are kept in London to be lent. 
On the other hand, the reserve of the Bank of Engiand is, on the average, very 
little larger than it was during 1870-79. Of course, the reserve is now ‘more 
efficient’ than it used to be, for reasons already given, but nevertheless it is too 
small. The Bank’s power over the market is not great enough to enable it to keep 
@ proper reserve without making special efforts. 
What should the reserve be? It need not, at any rate, be increased in propor- 
tion to the whole increase in the banking liabilities of the country. But some 
increase should have taken place on this score, and, further, the Bank cannot 
disregard the fact that it is the only free ‘ international bullion store.’ The Banks 
of France and Germany prevent withdrawals of gold from their coffers, The Bank 
_of England cannot do that. 
The remedy. Mr. R. H. Inglis Palgrave urges that the responsibility for the 
reserve must be shared by the great banks whose operations govern the discount 
rate; but they will not accept this responsibility, and the Bank must therefore use 
_ its resources, which are very great, more freely, and obtain more control over the 
market. This it has been to some extent doing during the last few months. It 
might offer interest on deposits and do more discount business, and thus deprive 
_the other banks of part of their power over the market. 
3. The pure Theory of Distribution. By ArtHur Berry, M.A. 
The paper attempts to give the outlines of a theory of distribution based on 
consideration of the ‘marginal productivity’ of each factor of production. Von 
» Thiinen and others have shown that the wages of the last labourer in any business - 
are measured by the extra produce due to his labour. This is not true if the 
increase of produce causes a sensible lowering of price, since this affects the whole 
_ produce and not merely the extra produce. A new equation, involving change of 
price, is then necessary. Von Thiinen’s equation holds if the produce of each busi- 
ness is a small fraction of the total amount of the commodity produced. This 
_ assumption is here made. The same considerations apply to the other factors of 
production. It is assumed also, for simplicity, that a small increase in a business 
causes no increase of work to the entrepreneur himself. 
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