The current rate of discount charged for the negotiation of mercantile bills, and the rate of interest demanded by lenders generally for loans or advances against the security of bills of exchange or public or private securities, are matters in which all men of business are interested in proportion to the extent of their engagements in commercial affairs. This being the case it stands to reason that the laws of supply and demand as affecting loans and discounts will be automatically administered under the influence of those opposing forces when allowed free play, with a vigour that will, particularly in large markets where "cornering" is impracticable, leave nothing to be desired even by the most ardent advocate of free trade. It is impossible that all concerned either in borrowing or lending can have justice done them when they go into the open market to deal in money, unless that dealing is, as far as it possibly can be, free from every kind of trammel or hindrance to a just balance being struck between the supply and the demand for loans and discounts. The condition of the money market reflects that of commerce. If the business and trade of a country has been wound up to a high pitch of activity all the little rivulets of demand which meet at the various minor centres and form large streams will contribute to swell the total volume; and according to the fluctuations from hour to hour during the business portion of the day, the rise or fall in the value of money will be determined in proportion as the demand overtakes or falls short of the available supply. To analyze the infinite number of influences which can affect both of these opposing forces, with a view to bringing them systematically under any kind of control, is so entirely impossible, that the only safe course to pursue for either governments, chambers of commerce, committees of bankers, or any other combination that may be devised with the object of bringing money dealing under any set of arbitrary rules, is to seek to remove every kind of artificial restriction and allow supply and demand free play. When it is considered that in every large monetary centre there are numbers of the most experienced and thoughtful financial calculators ever on the watch to shave off the merest insinuation of a profit shown by a movement in either direction, and are sometimes even clever enough to gain something by anticipating the germination of a change of which they perceive sufficient indications, there is no room for doubt that the only safe course is to pit the intelligence of the one side against that of the other, and for makers of artificial laws to stand on one side.

The supply of money in a large mercantile centre ebbs and flows from the opening to the close of business like a tide. The influences which affect the increase or decrease in both the demand and supply are no longer confined to a particular radius immediately outside that centre. An electric flash from Bombay, Shanghai, or New York plays a part in these times in the same way that telegraphic advices from the various continental centres did a few years ago. The pecuniary pulses of the great money dealers is being felt all day long to ascertain which way they are. In the morning it will be ascertained that certain banks are not letting out the money it was thought the night before could be obtained from them; the circumstance is immediately felt over the whole market, and others either hold their funds or act timidly until they ascertain the reason. Money will be sometimes generally scarce all of a sudden some morning, and an impression will gain strength for an hour or two that there is going to be some hardness, as it is called, in the rates, when ease again prevails on it being known that the momentary tendency towards tightness was due to a large sum of money changing hands, or being collected for dividend purposes. All monetary centres are exposed to the sudden opening of the masked batteries of a hidden, but long accumulating demand, which when it unexpectedly shows itself draws attention to a condition of things which had not been expected, and some perturbation is the result. The gradual diminution of the available supply of money in a market will be less observed when trade is dull and business generally quiet, and lenders in their anxiety to employ their funds will work on under such circumstances, oblivious of a gathering influence which will one day show itself and find them quite unprepared for a change which will be as' sudden as it was unexpected.

Every business has in one way or another its runners, or go-betweens. The runners in the money market are the bill-brokers. For a fractional commission this fraternity ties the knot between borrower and lender. They go to the merchant and bid for his bills, incurring very often a risk which sometimes results in a rather serious loss, but which, on the other hand, may lead to their gaining a handsome profit. When the market is falling the broker is particularly anxious to get bills from the merchant, as he can the more easily place them with the banks to his own advantage. In a falling market a bank-manager desires to get out as much as he can of his surplus funds, and encourages the bill broker to fill up his portfolio with bills as fast as he likes. When the broker's great chance comes he is, however, met with some reluctance on the part of the merchant to negotiate his paper, as the morrow may see him in a position to do it on lower terms. In a rising market the broker fears to be caught with any considerable amount of bills, as he may be compelled to place them with the banks at rates which leave him a loss on the business. He therefore contents himself with a smaller profit and passes on the bills he gets without delay. Although the term "the value of money "is used commonly as meaning the rate of interest it has two significations, one applying to the commodity itself, and the other to the variation in the medium of exchange in which value is estimated. The demand for money, the commodity, may be said to be regulated entirely by its value, and the value by the quantity in existence. The value of money, used as it so generally is in the sense of the price of loans or the rate of discount, is regulated by the demand for loans or discount in relation to the supply. We cannot do better than repeat Ricardo's words on the subject. " Money, from its being a commodity obtained from a foreign country, from its being the general medium of exchange between all civilised countries, and from its being also distributed among those countries in proportions which are ever changing with every improvement in commerce and machinery, and with every increasing difficulty of obtaining food and necessaries for an increasing population, is subject to incessant variations." When Lisbon and Amsterdam got the East India trade from Venice and Genoa, they also got the profits and money which were derived from it. As the centres of trade shift the money necessary to carry trade on obviously shifts too. How poor a territory will remain, however, notwithstanding a ceaseless flow of money into it, when there is no art or industry, is shown in the case of the Pope's landed possessions. The poorest of all the territories of Italy have been the Papal dominions, in spite of the flow of money to Rome for a couple of thousand years. In stating the principles which regulate exchangeable value and price, we should carefully distinguish between those variations which belong to the commodity itself, and those which are occasioned by a variation in the medium of which value is estimated or price expressed. If, for example, the value of money, the commodity, falls it will produce an effect on all prices and cause necessarily a rise in wages, because more must be given of that commodity which is the measure of the value of all others, to enable the labourer to procure the same quantity of necessaries as before. A rise in wages in such a case will not affect profits, but where they are raised by a larger portion of the annual produce of the country being given to the labourer, profits will of necessity be lowered. The other meaning of the value of money, which is held conventionally to signify the charge for loans of the commodity, money, or whatever form of purchasing power represents it, is expressed in the term the rate of interest or the rate of discount, and is a very different thing. One individual we will say is the owner of £10,000 worth of purchasing power in more or less tangible forms. He has £1000 at the bank; £3000 in consols; £2000 in bills accepted by good banks; £2000 invested in a house: and £2000 in land. In some degree the inclination of that individual from time to time assists in influencing the money market. If he is induced, through circumstances that come to his knowledge concerning a foreign market, to draw his money out of the bank, sell his consols and his bills, and to send the money to Lyons to buy silks, or to China to purchase tea, he withdraws money from the available supply in the market. The £1000 from his own bank is gone, the £2000 from the bank of the purchaser of his consols, and the £2000 from the funds of the house which discounted his bills. If the whole available supply of money in the market is, we will assume, £5,000,000 at a particular time, and a great number of other individuals or firms withdraw the proportions of it they own in a similar way it is obvious the total fund must gradually diminish, and as it does so the difficulty of granting loans will increase and the charge rise. Sometimes money flows into a market faster than it flows out; and then, of course, there being plenty for all requirements the terms upon which accommodation can be granted fall. According to the degree of general confidence which prevails regarding both political and commercial affairs will it be difficult or easy to negociate securities of all kinds, and will the charge for loans or discounts be high or low. Such is the singular power of sympathy in spreading through a whole community an inclination to swim with a stream whichever way it sets, that what we call inflation in the various markets will grow and gather strength like a huge fungus before those whose individual efforts are engaged in promoting it have realised the probable consequences of the movement. Even the most astute among bankers are drawn into the vortex of speculation which may be developed in this or that branch of trade without having any idea of the risk they are running, or of the danger to which their general position is exposed by encouraging gambling in trade, until they have themselves to pay the bills which were created to obtain impossible profits. Money thus withdrawn from the available supply exercises a doubly injurious effect upon the market. The banker in the first place loses other people's money, for the use of which he is paying; causes the trader who speculates within legitimate limits to pay an excessive rate for his accommodation; brings a loss upon the seller of the goods sold to the gambler; spoils the market where the goods are sent for sale; is instrumental in inflating the freight market; encourages the creation of new insurance companies, and stimulates an unsound demand for all kinds of commodities which are required to support the labour necessary for the conduct of new business which would never have been originated if the banker had been better informed as to the position and prospects of the person whose paper he negociated.