Tales of Two Cities

Abstract

Picture this: you are standing outside the Bank of England, somewhere near the hub of the City of London. Above the roar of the traffic, you can almost hear from the offices and dealing-rooms around you the expensive hum of the very latest microelectronic technology. Millions of pounds are changing hands as you stand and stare. You are staring at a pair of middle-aged men who stride purposefully and unselfconsciously towards the rather grand doorway of the Bank. They are: unaccountably, wearing top hats. Nobody else has given them more than a passing glance. They are representatives of the London Discount Houses Association. Discount houses act as intermediaries between the Bank of England and the other banks that form the London money market. The men have come to talk with the Governor of the Bank about the movement of funds to and from the banking sector. This will have significant implications for short-term interest rates. In a sense, then, the meeting affects every one of us in a direct and important way.