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London Money Market: GRESHAM'S LAW, gresh'amz, in economics, is usually stated as "bad money drives out good." The law stems from the fact that money has a value both as money and as a commodity in the open market. The former value is set arbitrarily by law and is relatively fixed; the latter is determined by supply and demand and varies from time to time, "Good money" has a higher value as a commodity than as money and will disappear from circulation.
The other traditional instrument, also wielded by the Bank of England, is that of "open-market operations"—the buying or selling of securities to affect the state of liquidity of the London money market. As noted above, the RadclifFe committee discovered that this could be neutralized by the other hanks, and its efficacy, therefore, is strictly limited.
The two traditional measures have been strengthened by others. From time to time the Bank of England "requests" the commercial banks to restrict lending.
Acquisitive individualism, once the pastime of Bronze Age kings, now became the general watchword of the age: for the first time in world history it is said that "money makes the man." The introduction of a money economy in Greece in the 6th century B. c. was accompanied by social and political upheavals. The supremacy of the landed aristocracy was undermined by the emancipation of the small peasants and craftsmen from the village and their reorientation toward the market in the city. |
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