Heft „London 1868“. III. The Economist 1866, Juni–August

Nach der Handschrift, MEGAdigital (MEGA² IV/19).¹ Traducción al español

June 2. 1866. N. 1188.

The Money Market.

Extraordinary (foolish durch die Dummheit einiger Direktoren, die aus Panic, ohne allen Grund, auf ihre eigne Faust die Thüren dem Publikum schlossen) failure of the „Consolidated Bank“ (current deposits and other accounts 3,037,435l. und acceptances 780,530l. 14 days since)

One of the first effects of general discredit in any country is, that even a very high rate of interest will not tempt foreign capitalists to send their money there, halten die high rate offered inconsistent with security. Hence slight drain of bullion after the rate of discount raised to 10%, (In der That rief der Peel’s Act dießmal European „run on England“ hervor.) withdrawing of foreign investments, instead of attracting them. Secondary effect (which has begun to act during the present week): Great discredit in any country discourages those who have to remit to that country from buying bills upon it even at a rate highly favourable to themselves. It is not worth their while to risk the value of the bill itself for the sake of any gain they may make by the purchase of the bill as compared with the cost of remitting specie. It happens not unfrequently that the value of bills will fall considerably below the specie level if there is any uneasiness as to their acceptance in the discredited country; so that the sellers even of good bills will have to offer a very great advantage as the equivalent of the risk supposed to be run. Besonders in banking crisis. Where banks have begun to fail, foreigners naturally feel that the men on whom they draw may, by no fault whatever of their own, be unable to meet their engagements. Hence the distrust of bills on a country in such a position. Thus we may now look for considerable remittances of specie from the very same cause which led at first to our loosing specie. Daher remittance of specie during this last week.

Feudalism and deer forests.

Amongst the items of news in a Scotch newspaper last week: „One of the finest sheep farms in Sutherlandshire, for which a rent of 1200£ a year was recently offered, on the expiry of the existing lease this year, is to be converted into a deer forest.“ Diese feudal instincts operate as at the time when the Norman conqueror destroyed 36 villages to create the New Forest. „In Yorkshire the whole country between the Tyne and the Humber was laid so desolate, that for 9 years afterwards there was not an inhabited village, and hardly an inhabitant left … Ebenso im New Forest … He afforested several other tracts. These favourite demesnes protected by the cruel forest laws.“ (Hallam) „Not content with these large forests which former kings possessed in all parts of England, he resolved to make a new forest near Winchester, the usual place of his residence, and for that purpose he laid waste the country in Hampshire for an extent of 30 miles, expelled the inhabitants from their houses, seized their property, and made the sufferers no compensation for the injury.“

Mr. A. Robertson lately read a paper at the Guildhall, Perth, on „Game Laws (diese moderne Ausgabe der Normännischen Forest Laws) and Deer Forests“. Cruel effects on the peasant population; detrimental effects on Agriculture. In reference to the Scotch Highlands he said: „The legalised protection to wild animals in the Highlands was most severely felt in reference to the peculiar products of that country. Two millions of acres had been laid totally waste, embracing within their area the most fertile lands of Scotland. The natural grass of Glen Tilt were among the most nutritive in the county of Perth. The deer forest of Ben Aulder was by far the best grazing ground in the wide district of Badenoch; a part of the Black Mount forest was the best pasture for blackfaced sheep in Scotland. Some idea may be formed of the ground laid waste for merely sporting purposes in Scotland from the fact that it embraced an area larger than the whole county of Perth. The resources of the forest of Ben Aulder might give some idea of the loss sustained by the country from these forced desolations. The ground would pasture 15,000 sheep, and as it was not more than  1/30 of the whole forest ground in Scotland, it might be roughly guessed that the country was deprived by the forests of ½ million of sheep. All that forest land was totally unproductive, never having repaid the money spent upon it. It might thus as well have been submerged under the waters of the German Ocean. With a rapidly augmenting population, it was nothing short of madness to continue adding to these desolations, and thereby diminishing the supply of those commodities indispensable for the sustenance of the people. … Such extemporised wildernesses or deserts ought to be put down by the decided interference of the Legislature. The vulgar notion of grouse shooting and deer slaughtering being advantageous to the Highlands was now almost exploded. People had begun to see that the visit of a few sportsmen for a month in the year could not make up for 11 months forced idleness.“

French Correspondent.

B. o. France.

Nach dem Moniteur (Return) hatte die Bk. 31. May 1866: 563,095,201f. gegen 536,652,692f. am 24 May in cash und bullion = Increase of 26,444,000f. Ebenso increase in discounts of 50,721,000f., in the circulation of Notes (919,878,775 gegen 879,688,525) of 40,191,000f. und in the deposits 43,572,000f. The total of the last item now exceed 378,500,000f. – a figure which shows depression in commerce and speculation.

Fraud in Cognac.

In a recent sitting in the senate, the declaration made by Marquis de Lagrange, that in the Charentes – the department in which Cognac brandy is chiefly fabricated – „immense frauds“ are committed in that article, 100,000,000 litres more being obtained than ought to be. The consequence is, he added, „that prices have fallen for the real as well as for the adulterated brandy, and that honest dealers are injured. Another consequence is that England, a large purchaser, last year took about 2,000,000 gallons less than is her usual quantity.“

Geo. Guthrie schreibt dem Economist on the Banking Question.

The monopoly of the B.o.E. has been the cause of commercial crises, by inducing an excessive expansion of credit, the facilities of which are afforded not by the Bank itself, but by the hybrid discount banks and finance cos. to which that monopoly has given birth. These institutions are at present freed from the obligation of holding metallic money as the basis of their transactions, while they have, by their bills and advances, an infinitely more important influence on prices and the value of money than the Gvt. Bk. Hence there is a separation of the power of affecting prices, and the responsibility of maintaining a proper supply of metallic money, which has led to the futile attempt to control the movement of bullion by the rate of interest or hire … The breach of the law was therefore required to save London from universal insolvency.

The Act of 1844 (by another correspondent).

The fact that the reserve in the banking department was reduced to 730,830l. shows the necessity of change. Why, one man, the late Dickie Thornton might have walked into the bank and put his cheque across the counter for 800,000l. As long as our present system continues, interested parties will endeavour to make the reserve of the B.o.E., the reserve of all the banks in England.

Money Market Movement.

B.o.E. 30 May: Circulation increase of 2,397,057l. in private securities. Increase of 20,989l. in coin and bullion, of 1,676,163l. to the private deposits. (Leztres shows continuance of precautions against pressure.) Decrease of Reserve: £528,236.

Discount and Money Market. Stoppage of the Consolidated Bank, on Monday morning last. Improvement in Exchanges.

Bullion: 218,000l. sent (in gold) to the B.o.E.

Bankrates: Paris 4%, Vienna 5, Berlin 9 (bills), 9½ (advances), Frankfort 7, Amsterdam 6½, Turin 8. Brussels 6 (bills) 6½ (advances), St. Petersburg 5½.

Railways: Slight reaction from the firmer prices quoted. The change chiefly owing to the decline in Consols on the receipt of lower prices from Paris, where the settlement is heavy.

Bankshares: general prices firmer; in a few cases, a decline to be noted.

Financial Shares: London Financial rather firmer; General Credit improved slightly; International Financial are held firm; and Credit Mobilier and Foncier , under continuous purchases, advanced to 2¼ to 2 disc.

Cotton Trade. Liverpool. May 31.

After a long period of depression, assumed a much stronger position, and during the last 3 days large business done at advancing prices.

Manchester. May 31.

In Folge of The strong accounts respecting cotton from the states, on Wednesday quite an active demand set in for both cloth and yarn at the low rates lately quoted. To-day the improvement not maintained, being regarded as too sudden under the circumstances. Fabrics made from the better classes of cotton maintain firmly their value.

Cardiff. The steam coal proprietors of the district are well off for orders and fresh ones are coming in freely. Brisk demand from the foreign markets, especially from Italy, France, Austria, Prussia. Freights to those countries have advanced considerably. Inquiry for pig iron slackened; the tin-plate works have to depend on old orders to be kept going.

Birmingham. Orders on account of the Home Trade have fallen off.

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June 9. 1866. N. 1189.

The Money Market.

The Bank Return of Wednesday exhibits 4 great changes. 1) The total bullion is 1½ millions more, arising from the large American arrivals. 2) Private securities 1¾ millions less, indicating greater facilities and here and there lower rates in Lombardstreet. 3) Banking Reserve is 2 millions more (nämlich 2¾ mill.) 4) Outstanding circulation is more than ½ mill. less. The drain of gold is quite at an end. The Java, just arrived from New York with dates of 30. May, brings a further 700,000l. in specie, and large sums are to follow.

Failure of the Agra and Masterman’s Bank.

On 7. June, sudden and unexpected. On the Stock Exchange the shares were marked out at an early stage of the panic as a favourite object of attack by the „bears“ … certain that devices of depreciation were resorted to in the last degree scandalous, and certainly rendering the perpetrators, if discovered, amenable to severe legal consequences. The adverse effect of these rumours and hostile attacks is not to be overlooked, and has probably rendered unavailable any chances of escape which under other circumstances the Bk. might have possessed. Aber der failure nicht wholly or even chiefly due to adverse rumours and speculative shares of sales. The directors [had committed] for some time false policy, and engaged its resources in kinds of business in the highest degree hazardous.

The Original Agra Bank founded in Agra, Upper India, 1833. It began with a small capital, and confined itself for several years to limited object of making temporary advances to members of Indian services. On the one hand it received deposits, mostly at considerable notice, and could safely give for them a comparatively high rate of interest. On the other hand it employed these deposits in loans to other members of the services requiring temporary assistance, and in this way did great benefice to the Anglo-Indian community by superseding the extortionate practices of the native money lenders. Gradually its business, besonders at Calcutta and Bombay, became principally mercantile. It opened an agency and then a head office in London, and entered largely into the exchange operations carried on between this country and India. The branches were next extended to China and Australia, and 15 years ago it had obtained the 2nd, and in some sense, the first place among Indian banking institutions. Prosperity increased until about 3 or 4 years ago, when directors fell largely in ordinary London banking business, joining to an Eastern banking connexion, extending from Lahore to Shanghai and Sydney, the operations of an ordinary City Bank competing for mercantile accounts, advances, and discounts, and, of course, attending the Clearing House. More completely to work out this policy, directors effected amalgamation, April 1864, with the firm of Masterman et Co , on High terms of purchase.

Bisher war die London und Westminster Bank ihre London Bank gewesen, worauf sie chiefly drew. Henceforward the branches drew only on the head office, that is to say, the drafts of the Bank ceased to be in reality bills of exchange drawn by one independent party upon a second independent party, and became mere promissory notes upon the Agra Bank. This change schadet their credit in India. Nach und nach oozed out that it had considerable transactions with finance cos. and finance undertakers. By and by a branch was opened at Paris. In the meantime the 6 month’s acceptances of the Bk. drawn from the branches were largely current and met with less and less favour. There was also evidence of the Bank trading upon its credit by accepting bills for a commission. Money market became uneasy, long-dated promissory bills more and more disliked. Then Panic. Then Bank forced to close its doors, after sustaining a severe and protracted drain, because it could not meet the recoil of its Indian business. The telegraph conveyed to Calcutta and Bombay and the other branches news of the difficulties of the London office, led to a pressure of depositors at nearly each place. To meet this pressure, the local managers had only limited local means, and they could only offer bills, i.e. promissory notes, on the head office – the very part of the institution most in Peril. Vergeblicher effort der directors to attempt to negotiate a credit with a first-class London firm against which the branches might be authorised to draw. Kam dazu nicht. Ausserdem too late. The points to be protected too distant and scattered. Its collapse almost a national misfortune. It will carry poverty and sorrow to hearts of 100nds of men and women, who, after a long Indian service, had entrusted all to this institution. The usance of Indian bills ought from 6 months’ sight to be shortened to 4. The Creditors are not only subjected to ultimate loss of part of their money, but for several months wholly ohne die means of raising a sixpence on the security of their estimated dividends.

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Protection for Public Credit.

Forged orders to bankers (to sell shares) etc. Telegrams ferner (falsche) of outbreak of war to Times, next day all over the world that a great Bank had failed. The next day after the signature of the Paris Correspondent of the Times is forged to a telegram which fortunately finds the Editor on his guard. Morning Post of Monday (2 June) folgender Paragraph: „Last night the person or persons who, by impudent forgeries, have lately succeeded in obtaining the publication of false news … attempted to play a similar swindle upon the Morning Post … the forger’s object is purely stockjobbing, for when affairs looked peaceful he forwarded warlike news to the Times, from Lord Clarendon; now that matters look warlike, and all funds are depressed, he is good enough to forward to us news of peace.“ (nämlich letter von A. H. Layard (Foreign Undersecretary), daß Prussia and Austria have come to terms.) Similar hoax attempted on the Daily News, also unsuccessful.

The real difficulty this: There is not the same difficulty in the detection of direct fraud, because darin ist something tangible, wie bei forged cheque z.B. But when a stranger sends off a telegram, the telegraph clerks have no interest in verifying it, or in taking note of its identity. … Der Telegraph the most enormous machine for the diffusion for rumour für all the agencies at work in the panic. Circulars warning the shareholders in different cos. of impending ruin, cautions to depositors, mere lies by word of mouth neben dem Telegraph. The evil that may be done by the telegraph is generally at a distance from the seat of the panic, but the panic itself is felt most on the spot. …

If bears can be taught the exact limit where cleverness ceases, and dishonesty begins (!), there may be panics in the money market, but they will not be such as that of 1866.

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Savings’ Banks Returns.

May. 19

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Money Market Movement.

Discount Market: The institutions indicated in the first instance by the bear operations meist die, which have subsequently fallen. Secret ihrer risked enterprises known by many persons. Von diesen die sales for the fall have evidently been effected.

The Influx of gold to the Bank of France continues. Ihr Increase in cash and bullion £.1,570,000. Decrease in bills discounted £.2,342,000, in Banknotes £1,660,000.

Foreign Stocks. The overcharged condition of the markets does not admit of any improvement in prices; unsettled state of European politics has led to further decline in several cases.

Railways: The markets firm.

Bankshares: fell heavily on the announcement of the suspension of the Agra and Masterman’s bank. To-day prices have rallied, and mostly close higher.

Financial Shares: General Credit shares better, International Financial firm at late price, Credit Mobilier has again given way.

Failures: Meeting der creditors of Peto, Betts and Co.

Cotton Market. Liverpool. June 7.

Monday large animated business at advanced prices on news from U. States of increased shipments of specie, and of reduced receipts and exports of cotton. Tuesday demand fell upon the warlike aspect of the continent, sales almost entirely confined to the supply of the immediate wants of trade. Friday news of suspension of Agra Bank , increased depression, decline of prices.

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June 16. 1866. N. 1190.

Still 10 Per Cent.

Attracts no money hither. Dazu our credit too much impaired. The ordinary international currency now deranged. It consists generally of bills, and bills largely upon London. Letztre now suspected; we pay gold and silver where we used to pay bills, and receive gold and silver where we used to receive bills. But zugleich high rate of interest contracts transactions, diminishes trades, lowers prices; tends to encourage exports, diminish imports, and so alter the balance of trade, bring in bullion, and what is more important still, to contract the sphere of our commerce, which was based on good credit.

Overend, Gurney, and Co. Limited and Unlimited.

The report of the authorised accounts reveal an „interior“, such as has seldom been seen.

The old firm at the time of its conversion into a limited Co. insolvent by at least 4 millions £. St. The new Co. took over the assets of the old one under a guarantee. Unter den assets die partners’ private estates, aber auch der goodwill, hoch angeschlagen und keinen farthing werth. Diese in den Assets eingeschlossen bleibt deficit of 4,246,000. It is difficult to understand how any honest et able men could persuade themselves to sell, and still more strange how any such men could be so blind to buy, such a business. The old firm had engaged in extra-bill-broking operations, which would compel the Gurney family and others interested in it to sell their private estates; the moment those operations were known, the credit of the old firm was at an end. Der Glaube an sie in the provinces dauerte fort.

Auf die neue firm a run since months. Their credit was daily diminishing. Von Juli 11, 1865 bis 10 Mai 1866 fielen ihre Deposits of other people’s money um 4,660,000£; Von 14,400,000l. auf 9,800,000; or nearly ⅓. The moment the partners in the old firm were announced to be ruined – and this began to be Town Talk from February at least – the new co. was drained, pressed upon, and weakened day by day, while the absorption of means by the bad assets of the old firm rather augmented than diminished as time went on.

At the stoppage, the current bills discounted by the new Co. were:

The first are said by the accountants to be good, but all will not been paid. Of the rediscounted bills „a large amount will be returned, and in the first instance rank against the estate“ of the Co. The bills in hand are estimated to produce only 1,100,000l., being a loss of nearly 50,000l. on that item, and their realisation even at that sum spoken of as distant and even problematical.

The current bills clearly contain many questionable ones, and there are other losses too.

The paid up capital of the Co, 1,500,000l., is all gone. Now the Co. bought and involved business:

which is by far the grater part of 1½ mill., and the bad bills and expense of liquidation will account for all the rest.

There must be a considerable call. Independently of other liabilities, the Co. owes to unsecured depositors 3,800,000l. Die shareholders werden wenigstens 20l. od. 17l. 10 p. share verlieren.

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Shortening the Usance of Indian Bills.

The crisis of 1847 enabled the banking and mercantile community of that time to reduce the India and China usance from 10 months’ date to 6 months’ sight, and the lapse of 20 years mit all the accelerations of speed and establishment of telegraphs renders necessary further reduction from 6 months’ sight to 4 months’ date as a first step to 4 months’ sight. The voyage of a sailing vessel via the Cape from Calcutta to London is, on the average, under 90 days. An usance of 4 months’ sight would be equal to a currency of say 150 days. The present usance of 6 months’ sight is equal to a currency of say 210 days. These 210 days renders it possible for a large part of the trade to be carried on by men who have little or no capital of their own, and who simply deal with other people’s money. They pay for the goods in India by the proceeds of the bill which they draw against them, and their correspondent on this side provides for the bill by selling or pledging the goods, assuming the English market to be favourable and to leave any margin in the operation. If the markets happen to be unfavourable the holder of the bill is left to pay himself as far as he can out of the hypothetical security. The parties most interested in shortening the usance are the Indian Banks (in London.) … Not only is the term of 6 months’ itself most objectionable even for single bills, but it becomes doubly objectionable and doubly dangerous, in consequence of large masses ⦗batches, in fact⦘ of these bills having to be accepted, and, therefore, to be made payable on some single day, from the circumstance that the Indian mail arrive at particular periods and bring masses of bills, all of which are of course presented for acceptance within an hour or two after the delivery of the letters. On the 9. June, f.i., the amount of acceptances by the Agra Bank due on that particular day was not less than ½ mill. l. St. The bank had closed 2 days ago, and the bills were not met; but the certainty of having to meet a large amount of acceptances on the 9. had a good deal to do with the resolution to close on the 7.

Movement of the Money Market.

Bank of England 13 June. (Wednesday). Increase of Circulation: 557,820l., Bullion 1,202,934, Reserve 689,509. Decrease: Private Deposits 79,336l., Private Securities 501,568.

Discount Market: notes to the extent of 5 or 6 millions have already been taken by country and other bankers and individuals to supply the reserve and additional circulation rendered necessary by the stoppage of so many banks and the loss of so much banking accommodation as has been thereby entailed. Indisposition to contract new engagements. The depreciation in the value of produce and in most kind of raw materials so great that few fresh imports are now engaged for. Outstanding indebtedness to this country is being discharged in gold; and, at the same time, foreign capital is again sent here for investment in longdated bills.

A number of letters, addressed to the holders of London and County Bank shares, anonymous, and posted in London, E. C. N. 73 stampmark, have to-day been sent up to the head office of the bank from the country. The contents were simply: „Sell bank shares at once. From a friend. June 1866.“

On the subject of speculation in bankshares, an injudicious proposal is to be brought before the H.o.C. with the view of rendering „bear“ or „speculative“ sales a misdemeanour.

• Hawkey, Whitford and Co, private bankers, of St. Columb and Falmouth bank, Cornwall. Liab. about 200,000l. Assets: 250 bis 300,000l., locked up in property.
• Messrs James Barnes et Co of Liverpool, and T. M. Mackey and Co., of London, the wellknown shipowners, in consequence of the suspension of Barned’s Bkg. Co.
• Stoppage of the „Universal Banking Corporation“ (Limited) (Eastcheap, London.)
• The Foreign Lands and Mineral rights Purchase Co. (Lim.) voluntary winding up; ditto the „Dining Halls Co.“ (Limit.)

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23 June. 1866. N. 1191.

Ten Per Cent still.

During the week the imports of bullion 1,651,481l., of which B.o.E. only received 369,000l., and the exports 865,233l., while large orders for exportation are understood to be on hand. The drain to the Continent would have been of very painful importance but for the opportune supplies from America.

The Crisis of 1866.

All panics in a large sense are credit panics. Aber der of 1866 specially so. The fabric of credit may be disturbed: 1) By our transacting too much business, and, as a consequence, engaging in too many undertakings. We may promise more than we can perform. There is only at the annual disposal of every nation a certain fund set free by the annual industry for production. We have only a certain set of commodities und nur by their help we can keep our engagements. So far as they suffice we can do so, but when they cease we must fail. In such a case a panic arises from a scarcity of capital. We have not enough things to do what we have promised. Something of this sort in 1847. We had made so many promises to build railways which were halfmade and were constantly requiring to be finished, that a large number of persons had to break their promises, that the rupture of these engagements caused first diffidence – then distrust – then panic. This could not be helped in 1847, for the error was in 1845 and 1846. A capital panic arises from our having made more promises than we can perform.

2. Bullion Panic: Though the ultimate object of all contracts is to obtain capital and procure commodities, the universal language in which contracts are expressed is money. The debtor undertakes to produce such and such sovereigns; the creditor absolves him from all claims by receipt in full when he does so. We have to keep our promises not only in articles, but in money. Indeed at first sight a person looking only to the terms of the contracts would say that we need money only, and need nothing else. And in law such is the case. But money will not make a railway. You must have land, sleepers, rails and labour. If these are scarce, the more money you have to spend on them, the more their price will rise. But money, though not sufficient, is plainly necessary, and in the last resort actual sovereigns. Banknotes, credits in ledgers, deposit receipts, are only so many different forms of contract to pay sovereigns. Our whole credit system may be described as an engagement to deliver gold and silver when required, and until a good stock of these metals is kept for that purpose, there is no assurance that such contracts will be performed. Without much of those metals many those contracts could not be performed. The public knows this, and as soon as the stock of money in the country runs low, they begin to doubt if contracts to pay money will be performed. In 1847 this happened: bullion was then scarce as well as Capital; a bad harvest had created a sudden demand for bullion to pay for foreign corn, and the B.o.E. did not then know to keep a stock of bullion. In 1857, also, the B.o.E. allowed the stock of bullion to get very low, and a panic came on in consequence.

3. The speciality of 1866: we had nearly enough bullion and capital, and panic as severe as 1847 and more severe than 1857. We have now 14,800,000l. bullion. We have never had less than 11,800,000l. 1847 we had 8,312,000£. und 1857: 6,484,000. As to our capital the test is not so easy. Was die investments angeht,

no terrible sum, when any truth in the estimate that our savings about 130 Mill. l. St. annually.

Aber ausser dem physical, moral element of credit. Persons, most largely in credit, and who most largely use credit, may have given occasion to distrust. Now, it has been conspicuously shown that some of our principal borrowers and men of credit have been quite unworthy of confidence. So Overend, Gurney et Co . The old firm was hopelessly insolvent, and could not, even after absorbing the millions owned in private by the partners, have paid depositors in full. But the new Co (nämlich durch deliberate fraud upon the public!) can pay every one. The shareholders will lose, nicht die lenders. (Aber ultimately, und dieß ist schon loss, ja ruin für Viele.) The fact is, the private firms, as Overend, G. et Co, unlimited banking cos, like the Bank of London , limited banking cos, as Agra bank, have all sinned alike. They all took securities not fit for them, they held their money payable at short notice; they invested in securities only to be realised after long time, and sometimes not realisable at all.

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Financial Reforms in the Irish Law Courts.

The Encumbered Estates Court worked its way though misconception and general distrust to appreciation and general confidence und ebenso its successor, the Landed Estates Court. A large portion of Ireland, more than ⅙ of its whole area, has passed under the jurisdiction of the Court. The value of the land thus sold much more than 30 Mill. l. St. A new race of proprietors has been created (schöne Kerls!), in the main solvent and enterprising men, who occupy the place of the reckless and impoverished squirearchy of former days.

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Movement of the Money Market.

Bank o. E. 20 June. Circulation: Decrease £886,572 und Private Securities Decrease of 61,115. Increase: Private Deposits 1,044,010. Bullion: 369,225. Reserve: 1,228,780.

Discount Market: As the note circulation rapidly increased and distrust, so its subsidence marks the mending of matters after the panic. The stoppage of commerce and trade in Germany durch war, will even more rapidly turn to the augmentation of the amount of the precious metals in this country. Money market easier; a better tone prevails, and satisfactory advices received to-day from Bombay. The marketrate for ordinary bills ½ below the Bank minimum; and for first class six months’ Bank bills the rate is 7 to 6¾%, with very few offerings.

Bankrate p.c. Paris 4, Vienna 5, Berlin 9, Frankfort 6, Amsterdam 6½, Turin 9, Brussels 6, Madrid 9, Hamburg (open market) 9, St. Petersburg 5½ . The accumulation of gold in the Bank o. France continues.

Railway shares: Depression. Operations on behalf of investors not numerous, hence speculative sales had full effect upon a sensitive market.

Bankshares: Improvement on all the quotations compared with previous week.

Financial Shares: Fresh efforts made 2 days ago to depreciate the value of the shares of the few remaining financial cos. Reports and rumours industrially circulated, set forth that further losses had been sustained by one or the other of these, and that additional calls had become necessary. Special attempt against the International Finance whose shares forced down nearly 1l. under the pressure of sales on a depressed market. All the rumours set afloat false, and bears will have some difficulty in providing the shares they have oversold.

• Suspension of George Furness, railway contractor.
• Acceptances of W. Rattray et Co, of Roodlane, Westindia merchants, returned unpaid. Liab. probably not over 70,000l.
• Failure of Th. Rose, of the Millfield Iron Works, Birmingham. Liab. about 40,000l.

Manchester, June 21: Depression, almost entire absence of business in Folge des German war in apprehension of commercial disasters in Eastern markets.

Bradford. transactions confined to the small purchases of spinners who have exhausted their stock, and require to keep some portion of their machinery at work. Continued depression in yarns. Neither for home or foreign account more than the most trifling transactions. A few insignificant transactions in piece goods for America. Unemployed machinery is on the increase.

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June 30. 1866. N. 1192.

Still Ten Per Cent.

10% and 15 Mill. l. St. in the till! The foreign exchanges, indeed, take away much of the gold and silver which comes here. This in the main quite as it should be. The bill currency in which international transactions are settled is now disordered, and as we receive more bullion than we used to do, so we ought for the same reason to pay away more. We need not try to augment our bullion beyond the amount which we commonly think about enough. The B.o.E. have till now retained some of the gold which passes through the country, but now they need not do so. A part of the remittances from America are upon German account. The Germans who invested in American securities when very low are now realising and bringing both their principal and profits home. Such remittances must go to Germany, and it is preposterous to try to retain them by a high rate of discount. Mit Bezug auf such money, the maintenance of the rate is an ineffectual means towards an undesirable result. Bullion in the Bank of France , increased again more than 800,000l., is now at the astonishing amount of 26,000,000l. It has often of late years been 12 Mill., and once, at least, 8 Mill. A foreign drain of bullion is, of course, infinitely less likely, when the principal continental centre for such matters is overloaded mit bullion and has money at 4% than if money were dear there, and bullion, as at some former times, snatched at by irregular means. Revival of confidence in England prevented by the [10]%. Country people think there must lurch a secret, in the possession of the B.o.E., behind it. The banknotes now wanted to fill the Bank till will never come back, till the signal is given durch lowering the rate of discount.

There is no reason why 10% should be fixed in Gladstone’s (treasury) letter of 11 May any more than a less rate. As money gets cheaper, the growth of auxiliary credit is likely to become more rapid; it will begin to increase when money ceases to be 10%. A letter in which the rate is prescribed requires a series of postscripts.

The protracted continuance of this crisis makes this variation of rate during the period of permitted infraction of more than usual importance. In 1847 and 1857, the panic being mainly mercantile, the cure was quick; as soon as the condition of trade changed, and we regained enough bullion, all was right. But a credit, a banking panic is a subtler thing; it attacks confidence not in its adjuncts, but in itself. Nothing will cure it but a reduction of the rate.

The Bank reserve must be less for the next 2 weeks than it is now, and it would be very pernicious that for a fortnight longer a terrifying value of money should be artificially maintained.

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The Mode of Dealing in Bank Shares. („Bearing“)

Mr. Leeman, the member for York, has brought in a Bill to regulate the traffic in Bank or other shares. He proposes in substance that no one shall sell Bank or other shares unless he already possesses them, and as a test of his already possessing them, he requires that they shall be described, if possible, by the number of the shares in the register, and when there is no register, in the next most intelligible manner. The object of course is plain. A great number of persons have acted as „bears“, that is have sold the shares of some particular banks which they never owned, have depressed the price of those shares and have ruined the credit of the bank. Of course, where the bank perished, the speculation was most profitable; the „bear“ sold Agra and Masterman’s shares at a premium for future delivery, thereby depressed the market price, and bought them afterwards if necessary when they were at a discount. Such operations certainly profitable to those who deal in them, and certainly disastrous to those whose property is so dealt in.

The prohibition, if there is to be one, ought to be a legal prohibition, and not a prohibition by the Committee of the Stock Exchange. The whole jurisdiction of that Committee is an anomaly. Why any particular set of men – in fact a sort of „Trades’ Union“, – should have the power to regulate the traffic in millions’ worth of property is very strange. … Diese bears useful: they have served as detectives of bad cos. Overend’s and the Agra are obvious cases of concerns which might for years have gone [on], and might have got worse and worse if it had not been for this effective and stringent check. (Sehr charakteristisch! Eine Infamie stets checked by a still worse infamy! Dieß ist satte Tugend und zahlungsfähige Moral.) (Uebrigens, wenn der Economist sagt, daß no good concerns ruined durch die bears, so massenhaft private possessors of good securities frenzied into selling them.) »Unless there is a true and important nucleus for calumny, it is powerless.« The bears may not have a pleasant trade, but they are useful as scavengers are useful. They remove pernicious and evil matter which taints the air.

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Deer versus sheep. (Communicated)

The public does not suffer more from this circumstance than from most other unproductive expenditure.

The best result of augmented wealth and civilisation is to increase the desire for expenditure not strictly productive, and also to increase the means of bearing it. Has not one institution, the London and Chatham and Dover railway, wasted more of the national wealth in a few years than could be wasted by all the deer forests of Scotland during many generations?

Game. Farmers Protest.

Gegen Lord Denbighs ukase of 19 May durch 120 of the largest occupiers, within a radius of 30 miles of Denbigh’s seat. Represents the views of at least occupiers of 50,000 acres.

(Correspondence.) Usance of Indian Bills.

The Brazilian usance remains at 2 and 3 months’ sight, bills from Antwerp are drawn at 3 months’ date, and even Manchester and Bradford draw upon London at 3 months and longer dates. By tacit consent, a fair opportunity is afforded to the merchant of realising the proceeds of his merchandise, not indeed before, but within a reasonable time of, the bills drawn against it fall due. Daher die usance für Indian bills not excessive. Indian produce, for the most part being sold in London, with 3 months’ prompt, and allowing for [loss of] time in effecting sales, cannot be realised much within 5 months, while another period of 5 months will have previously elapsed (on an average) between the time of purchase in India and of delivery in the English warehouse. We have here a period of 10 months, whereas the bill drawn against the goods does not live beyond 7 months.

The question lies between the large and the small capitalist. The extinction of the latter class of traders, and the concentration of the Indian trade in the hands of the large capitalist, … would be a return to the system of monopoly by which this important trade was formerly restricted. A trade of 10 millions, carried on by 1000 traders will be safer than if carried on by 100. It is to the subdivision of credits characteristic of the present system that we owe the comparative fewness of commercial failures during a period without parallel as regards the fluctuations in the prices of produce. The opulent merchant has already an advantage in purchasing his export goods at cash prices; 2) that of saving the bank commission if he buys with funds of his own in the markets of Asia; and 3) he is able to compete with the banks themselves in exchange business, by transmitting bullion from this country to be invested in bills or produce.

Money Market Movement.

• Decrease in: Circulation of £308,566, Priv. Deposits 331,607, and Private Securities 325,352.
• Increase in: Bullion of 191,279 und Reserve 479,079.

Discount Market: Additional gloom. Bad rumours afloat. The pressure of 10% discount must tell upon ordinary operations.

Railway Shares: Subsequent to the Breaking up of the Bank Court yesterday prices gave way, and have been further to-day depressed in consequence of vague rumours regarding the financial position of some of the cos. and their outstanding engagements.

Financial Shares: Considerable advance had taken place, again declined at the news of the non reduction of Bank rate of discount.

• Drafts of Messrs Snead et Co, private bankers of Chepstow, have been returned by their London agents.
• Price, Marryat and Co, private bankers, King William Street, London, stopped payment. Liab. about 250,000.
• Dadabhai Naoroji et Co, East India merchants, of Great St. Helen, stopped payment, owing to losses in cotton and other produce. Liab. about 300 000l.

Manufacturing markets.

Manchester. June 28. Towards the end of last week telegrams of 17. inst. from Culcutta and Bombay were received here, reporting favourably of these markets, in the face of very adverse advices from this side to the 7. inst. These dispelled the depression previously existing here. Considerable business done, before close of the week recovering of prices to a large extent from their late fall. Later telegrams from Bombay, rumouring the suspension of large Parsee firm, contributed to check further advance. Today business decidedly limited, but the extension of the engagements of producers, since the 21st prevents much quotable decline on the advanced prices, although continuance of 10% is a disappointment tending to favour buyers.

Birmingham. Very dull foreign trade. The best part mit U. States. On account of that quarter a fair quantity of orders in hand.

Sheffield: Steel trade decidedly dull except in railway material. Cutlers fairly employed, owing to improved American and Canadian orders, and arrears of country orders not yet entirely completed.

Wolverhampton: No improvement, works generally at half time.

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Saturday, 7 July 1866. N. 1193.

Still 10%.

We hold that the Bank is still acting under the sanction of the Treasury letter, that on other grounds it ought not to have its till so low as it now is, and, if it is so acting, its conduct not wise and prudent. ⦗On the contrary! They acted very prudently – for their own pockets! They used the letter only to buy a tax of 10% and allow their reserve to run down to any amount. They issued too many notes – according to their own theory – in proportion to their reserve, that is, in proportions to their banking liabilities they cared nothing for any reserve whatever. But in proportion to their Bullion they did, by their note issue, not infringe on the Act of 1844. They did not want to do this, 1) because, by the Treasury letter, they would then have been obliged to pay so much to the State; 2) because a nominal infringement on the Act of 1844 – instead of their real one – threatened to give the occasion to their adversaries to spring the whole Peel machinery, so extremely profitable to them.⦘

Why the Panic in England has not caused a Panic in America.

Früher dieß immer der Fall. The apprehension hier um so grösser when it was seen that large sums in gold were paid by America to England. Aber 1) The connection between the U. St. and England violently broken by the civil war. Our commerce has begun to grow again with stupendous rapidity. But still, the trade being recent, has not yet had time to create that close, intimate, and indissoluble union between the 2 countries which there was in former times. Allied houses here did not as formerly pull down allied houses in New York, because allied houses are not so common – at least not so closely bound as once – and because houses of that sort have not failed in any great numbers here. We had very few mercantile failures.

2. The large payments which America has made to us in bullion would undoubtedly have deeply affected her if bullion had been the basis of her credit system. But it is not so; greenbacks are its basis now. Gold is there simply an article of common merchandise. As long as they have „lawful money“, they can get [on] without gold or without silver.

3. What has happened is this. When it became necessary to remit gold to Europe, gold rose rapidly in value; and the Gvt., which is the principal holder of gold, sold freely. The Gvt. is always a large holder, because it receives Custom duties in coin, and only pays the interest of part of its debt in coin – an out-going much less than the receipt. A balance of gold, is, therefore, constantly accumulating in the treasury, and a large item of the miscellaneous revenue is composed of „profit“ on gold sales. Specie dollars are received as before the war, and, as if there were no greenbacks, at the Customhouse, and so credited in the books, but when surplus comes to be sold, it yields in „lawful money“, in the common currency in which Gvt pays its way, a large percentage more, and that premium is added to the revenue. When, in consequence of the remittance to Europe, the price of gold as measured in greenbacks rose, the Gvt. hastened to sell, in order to gain the additional premium. The sum wanted, therefore, for commerce was supplied without trenching on the wants of commerce or the habits of credit.

This facility of meeting sudden foreign payments may seem a great advantage in the system of inconvertible currency, and in truth so it is. Die disadvantages overweigh it. The constant, incalculable, illimitable variations in the price of commodities, the feeling that the price of everything, and, therefore, the property of every man, may be reduced at any moment for the Gvt. convenience; the disturbance of debts; the impossibility of long credit, because no one can make contracts for a long time in a currency which may during that time be wholly changed in value.

⦗Under the present system bleibt Gold und Silber Weltgeld. Es bleibt mit der Warenproduktion überhaupt die Nothwendigkeit des Geldes und zwar bleiben gold und silver das Material dieses Geldes, das measure of value, weil sie als Weltgeld functioniren. Die zu lösende Frage die: Erstens die Noten (Papiergeld überhaupt) equivalent mit dem Gold und Silber zu halten, dessen Werth sie repräsentiren. Zweitens a treasure of gold und silver für die Weltmarktsbedürfnisse zu haben. Dazu:

1. Inconvertibles Staatsgeld, wie in Preussen. Dieß ausgegeben für Zahlung von dem Staat und returnirt durch die Steuern. Aber nur ein Theil des so cirkulirenden (currency) erfahrungsmässigen Minimums muß in Papier, der andre in Gold und Silber ausgegeben, also auch die Steuern zum Theil in letztren gezahlt werden. Diese Ausgabe to keep gold and silver in the channels of every day circulation bei diesem System unvermeidlich, soll das GeldStaatsgeld nicht depreciiren. Dient auch im Nothfall als Reserve. Das Gleichgewicht des Werths zwischen Gold und Silber nichts, paper andrerseits nicht nothwendig durch ihre convertibility bedingt, sondern dadurch daß sie gleichmässig nebeneinander cirkuliren, wie in Preussen der inconvertible Papierthaler neben dem Silberthaler, der 10 Thalerschein neben dem doppelten Friedrichsd’or. Depreciation des Geldes und Fluctuation besonders der Arbeiterklasse schädlich. Beweis: U. States und England während der suspension of cash payments.

2. Inconvertibles Staats-Bankgeld, ausgegeben auf bills und Handelssecurities. Diese müssen (ihr Charakter) gesetzlich bestimmt sein. Staatsbank (ausschließlich) mit Zweigbanken, wie in Frankreich und mehr und mehr in England. Namentlich auch Depositenbank (mit discount of bills) vom Staat zu monopolisiren. Die Sicherheit liegt hier in der Art und Weise des Ausgebens, wie der dadurch bedingten returns, wie bei den jetzigen Banks of Issue.

Kein Kapital. Banking trade ist Handel mit other people’s money. Jezt das Kapital der Banks nur security für das Publicum gegen Privatpersons. Die Banks of England und France haben jezt in der That kein disponibles Kapital. Es ist ganz dem Staat gepumpt. Ihr Kapital ist also blosser Credit, den das Publicum dem Staat giebt, und hat nichts mit ihrem Geschäft zu thun. Sie haben Schuldscheine auf den Staat. Der Staat braucht natürlich keine Schuldscheine auf sich selbst.

Das Personal der Staatsbank muß ebenso unabhängig von den Geri von der jedesmaligen Regierung sein wie die Gerichte. Sind zu ernennen und unter direkter Controlle der Parlamente etc, kurz der Volksvertretung.

Soweit der Staat selbst Geschäft treibt, Eisenbahnen, Minen, Telegraphe etc, und dieß wird er in immer grössrem Umfang thun, sind diese Departements gänzlich getrennt (Fremde für) von der Staatsbank. Wenn er die Vorlage hier hat, hat er auch die Einnahmen. Er kann daher nur soweit bei der Staatsbank discontiren lassen oder leihen, soweit er ihr Sicherheit giebt, ihr seine Einnahmen überweist (wie bei der B. o. England) etc. Die Staat dRegierung darf nicht vermittelst der Staatsbank Geld ins Publicum werfen, außer soweit sie es ihm entzieht.

3. Sichrung eines treasure für den International Commerce. Der Staat giebt mintnotes zum Ankauf von Gold und Silber aus, nach dem fixed legal standard, also nicht höher im nominellen Belauf als das Gold. Diese mintnotes gegen Barren ausgegeben oder gegen Gold gemünztes Gold und Silber zu ihrem Preis (den Schlagschatz eingerechnet.) (Ein Standard, z.B. Gold. Silber dann nach seinem jedesmaligen Marktpreis berechnet) Diese mintnotes dürfen , wie Ricardo dieß vorschlug, nur für höhere Summen sein, die einzigen, die im international commerce Rolle spielen. Schlagschatz muß sind, D. Silberbarren und Goldbarren Silber- und Goldbarren müssen damit der Staat nicht münzt für die Bullionhändler. Es ist möglich, daß by heavy drain of bullion, die Münznoten (die auch legal tender sein müssen, wie alles andre Geld) deppreciiren, prämium tragen, gegen das inconvertible Staatspapier und die inconvertiblen Banknoten. Dieß geringres Uebel als die zu vermeidenden. Perfect ist diese Sauce nicht zu machen. Sieh über einige Details Fullarton p. 231 sqq.⦘ (Auch securities bought by the State Bank, i.e. Foreign Securities, foreign Staatseffecte which it can send, in times of drain to foreign market, and there buy bills for them, really withdraw national bills from their market.)

The Shortened Usance of Indian Bills.

On 2 July notification von Oriental Bank, Chartered Mercantile Bank of India, London, and China; the Chartered Bank of India, Australia, and China; the Bank of Hindustan, China, and Japan (Lim.); the Delhi and London Bank (lim.); and the „Comptoir d’Escompte de Paris“ which has a large business in Calcutta und elsewhere, – also notification to the effect „that from 1 Jan. 1867, their branches and agencies in the East will only buy and sell bills of exchange at a term not exceeding 4 months’ sight“.

Influence of Entails upon Agriculture.

The law of primogeniture, by which land not disposed of by its owner descends entire to his oldest son or other heir male, and entails, which limit and restrict the power of the actual possessor of land – rendering him in fact merely a tenant for life – in order that the land may devolve entire to the male head of the family for the time being, are entirely feudal in their origin, and due solely to the exigencies of the feudal system.

Husbandry in this county has come to be carried on by farmers possessed of considerable capitals, who hire their farms at yearly rents from the proprietors of land. The division between the occupation and the ownership of land is complete … It is the fact that the owners of land do not perform their part in the work of production. On the vast majority of farms in England, permanent outlays are required to be made in effecting permanent works, which would constitute investments of capital – additions to the value of the property – the return for which would consist of increased rental, and which, as the rule, can only be properly and prudently made by the owner. In ordinary cases the tenant cannot prudently invest his own capital in executing those permanent improvements, viz: draining, building, road making, the removal of superfluous fences and timber, straightening and deepening brooks and outfalls for water, warping, irrigation, and so forth. It is not too much to say that fully ¼ of the fee-simple value of the farm ought to be and might profitably be so laid out by the landlord upon 3 farms out of 4 throughout England. Until that is done farmers cannot farm their land properly, cannot make the profits or raise the produce of which the capacity of the land aided by modern skill and appliances would admit. Why then are not these permanent outlays made? The chief reasons are that the owners of land are not full owners, but are so restricted by entails and settlements to be only life tenants, while the estate will go exclusively to their eldest son. They are to a large extent only nominal owners, because the estates being charged mit debts, jointures, portions for the younger children of former owners, and the like, great part of the rental is applicable to the satisfaction of these encumbrances. Then, when the estate is encumbered, – and most estates are both settled and encumbered – the landowner, who occupies the social position of owner, and has all the expenses of an estate much exceeding that which is really his, as tested by the income he can retain for his own use, is practically unable to execute the improvements his estate demands.

The Bank Rate of Discount. (Correspondence)

1865 Bullion der Bank 16,407,666l. being 1,365,276 in excess of the bullion on hand this year (1866). (Same date of 27 June.)

Ebenso on the same date, 27 June: 1865 liabilities der Bk.o.E. £24,663,912, 1866: 29,364,399. The Reserve 1865: £.9,931,821, und 1866: £5,218,409. This year daher die liabilities 4,700,487l. in excess of the liabilities of last year, and the reserve in the till of the Bank this year: £4,713,412 less than last year. Last year the reserve 1,700,517l. beyond ⅓ of the liabilities, this year l.4,569,724 less than ⅓ of the liabilities.

Compared daher to last year same date:

Usance of Indian Bills. (Correspondence)

The reasons urged by the 5 banks (sieh vorige Seite, p. 80) for the course they have pursued are, the large losses incurred by them during the last 2 years, and their unwillingness to run the risk of so variable a market as cotton for so lengthened a term as 7 months. Their losses, however, have chiefly arisen from their own imprudence in making enormous advances upon cotton during a speculative period, and having by such means encouraged speculation they now turn round upon the merchants whom they have helped to ruin, and say: „In future we will have a 5 instead of a 7 months’ risk.“

Bulling and Bearing. (Correspondence)

The public appear to suppose that this thing is peculiar to the Stock Exchanges; while the fact is, it prevails in every business of any extent, where prices have more or less of fluctuation. It is just as common to sell corn, or cotton, or iron, or tea, or any produce whatever, for a fall, as it is to sell shares. The simple difference is, that in case of stocks or shares the various shades of prices and almost every particular transaction is noted and publicly quoted; while in the case of produce the transactions are only noted in the lump, with the general prices of the day. Moreover, the thing is carried on every day on the Stock Exchanges, while in produce it is pretty well confined to market days. But still the practice really prevails as much in one case as in the other. Every man in business of any magnitude often sells first and buys afterwards. In Manchester, f.i., a spinner, just as often as otherwise, sells yarn for future delivery, when perhaps an ounce of it is not spun, hoping and thinking that he can cover, by buying cotton in Liverpool in a few days or a week an advantage. What is this but bearing the markets? … If a seller of shares is to be compelled to produce vouchers that he actually possesses them, why should not every merchant be compelled to do the same before he enters upon his transactions? … It is supposed that „a bull“ never takes his stock up, and that „a bear“ never delivers what he has sold while in other business he does. Now this is simply a mistake. A „bull“ of shares at the end of every account must, and does, either take up his stock or get others to do it for him, or he must lend it to some one who wants to borrow it. One of these things he must do, and always does, and the seller invariably gets his money for his stock … In what business is more done than paying for what is bought. On the other hand, it is not true that a „bear“ never delivers the stock he sells. On the contrary, when he sells he enters into a distinct engagement that he will deliver at the end of the account, and he always does. He either buys back before the end of the account, or he borrows from some one who wishes to lend, or in some other way he gets for delivery what he has sold, and the buyer invariably gets the shares he has bought. What more can the seller do than provide that the shares shall be ready at the time stipulated, which is never longer than ½ month, from the time the transaction is entered into.

The fact is, it is not the liberty to sell and buy shares that has produced the supposed mischief in the late transactions in bank and finance shares, but first, the reckless mismanagement and rotten state of the banks themselves, and next, the „Organisations“ which have been formed to bear the shares. „Organisations“ to raise or depress prices either of stock or produce, partake more or less of the characters of swindles. The ordinary buyer or seller has no chance again such combinations, and hence there is no fair play in dealing in those things in which a powerful organisation is operating. This is really the cause of whatever mischief has happened.

Failures.

• Messrs Charles Harvey and sons, private bankers of Longton, North Staffordshire, stopped. Liab. 40,000l. Bank established in 1821, had a fixed note issue of 5,624l.
• Voluntary winding up: Great Devon and Bedford (Colcharton) Copper Mining Co. limited.
• Wolverhampton: Any new sales of Iron now must be at a decided reduction.

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July 14, 1866. N. 1194.

State of the Money Market. (Still 10%)

The Decrease in the active circulation very satisfactory at this time of the year, when the payments for the dividends are going out … As long as the „danger“ signal is kept up, unusual reserves by way of protection will be kept … In ordinary times, all sound country bankers will hold proportionate reserves in London against their liabilities, but not a sixpence more than is wanted in banknotes in the country … Still efflux of gold. We drive the money away by maintaining the rate of interest at a point which makes everybody believe that there is some great calamity about to supervene which the exceptional rate is to prevent.

The Crisis of 1866.

Why did the banks and discount firms engage in this bad business, and as if by set concert select this special time for so doing? The bad business goes back to 1862 and 1863. Rate of interest for a long period very small, therefore difficulty in employing the loanable capital in the money market. This one of the fundamental causes of bad business. If you leave much money in people’s hand to employ it for their own advantage, and they cannot so employ it in obvious good business, they are very apt to search out recondite bad business. John Bull, it has been said, „can stand many things, but he cannot stand 2%“. As soon as the rate of interest has for a considerable time [been] very low, some bad business is likely to be undertaken.

In general the mercantile community, excited by the facility of obtaining money, engage in mercantile adventures properly so called, and their failure, when it occurs, is generally of vast magnitude. It is then that capital panics are generated. A whole nation of industrious men of business are excited by a long continued facility, and rush into adventures which never pay … though in the aggregate each of them is small, upon the whole swallow up many millions and strain the national capital. But this pervading stimulus to a trading community takes time to act; it has to diffuse itself over a vast surface, and can only produce its full effect after a long lapse of time. When this happens the banking firms, the holders of loanable capital, are relieved from this surplus accumulation; it is carried off in this surplus trade. And though that trade be bad, it does not follow that the bankers who advance the capital upon which it is carried on will lose in proportion to its badness. If the bankers take good security, they may preserve themselves from loss, though the traders to whom they lend are ruined. If there is only one good name on a bill, that in the worst event is enough for the banker, the unfortunate possessor of that „good name“ may pay other people’s debts and expiate other people’s follies. But still the banker gets out. He is not ruined. He witnesses tranquilly the ruin of others. But it sometimes happens that the banker is not willing to wait till the expansion, possibly the excessive and too sudden expansion of trade brings new and safe business within his reach; he is anxious to do „something“ when there is nothing safe to do for him.

The circumstances of 1862–3 rendered that difficulty natural. Concession of limited liability. Bad cos. formed. There was a great set towards the establishment of new banks and discount cos. The great English Banks were then paying enormous dividends, and we wrote on 24. October 1863:

„The causes of the great success of the original joint stock banks waren: The banking of the country was underdone. The richer classes kept banking accounts, the less wealthy classes did not. The shopkeeping classes were generally unaccommodated. Man sah nicht that a great number of small accounts is a much more valuable business to a bank than a small number of great accounts. Ebenso waren, obgleich nicht so viele wie jezt, many banks in large towns and great seats of industry, but the smaller towns had no banks. The system of banking now takes the savings of quiet country places, when they could not be employed, to large mercantile cities where almost any amount of capital can readily find employment, and this is one great source both of their profitableness and usefulness. In former times this was not done completely, and in many districts was hardly done at all. English Banking was underdone und badly. English law would not allow a bank to have more than 7 partners, and it is imposed on all these bankers unlimited liability … Many inferior people, especially those who had wages to pay, were eager for the money of others, wrote Bank over their doors, took deposits, and issued notes especially to their workpeople. They knew nothing of banking, kept no reserve, invested the money of the bank in some business of their own, and in a time of difficulty had no available resource. In 1793, in 1825, and other seasons of distress, these petty bankers failed by hundreds. There never was a better field for mercantile enterprise than the improvements of English banking 30 years ago. There were excessively few banks to receive the deposits of the richest nation in the world, and many of the existing banks were bad ones. The Joint Stock Banks changed this. Every little town has now at least one bank, generally two; all classes of the community, down to the small farmer, keep bank accounts … The same thing cannot be done twice. The best of this thing has been effected. Generally, the profits of a new bank must be made by diverting to itself some part of the profits of existing banks.“ Nun, in 1862 sqq. competition of banking in London extreme. The number of new banks of various kinds – some Indian, some provincial, some foreign, but all London too – which started in those years, was extreme. Each wanted to make a great and sudden profit on a considerable capital; each offered a large interest for money, since it could not make anything till it had money; each compelled others to give that interest too, or they would lose the funds which were the means of their livelihood and the implements of their trade. Just when the natural interest of money was low, because there was a difficulty in lending it well, a new class of money dealers sprang up who bid high for it, and therefore were almost obliged themselves and almost forced others to employ it amiss.

With discount companies the effect, though different, was even more pernicious. A great many new cos. were founded, and they came into competition with Overend, G. et Co . Overends, an old firm quite insolvent, and propping up its great reputation, by high rates of interest, could not let the money go, and the new Cos. wanted to make the money come. Between the two the rate of interest given by intermediate borrowers so to speak – by borrowers who insisted to lend again – was forced up to an unreasonable amount, and yet the rate of profit on actual undertakings, the earning fund, the productive capacity of the country, remained where it was. The specific danger of the time was the accumulation of loanable capital in the hands of those who did not know how to use it because the profits of active capital were at the moment so small, and yet, partly from the competition of banks and partly from the foundation of discount and finance cos, the rate of interest given by these intermediate holders was beyond all precedent excessive and dangerous. Greater folly than has been committed by banks and discount cos during the two last years has never been known before.

The True Mode in which a shareholder should watch its Co.

A shareholder only sees the half-year’s accounts – in too many cases carefully prepared to meet his eye, and concealing under delicate ambiguities and well-contrived words exactly what it most concerns him to know. Attendance at a halfyearly public meeting mostly useless. A public debate on a co’s matter has rarely, if ever, done it good; and a single shareholder can scarcely generate a debate at such a meeting if he desires it. The directors in office never wish it, and while the co. is prosperous, can always prevent it. After the Co. is ruined, of course there are discussions enough.

If the principal directors who start a Co. are leaving it as if in terror; if they who know its secrets are leaving its ranks; if they are selling their shares and diminishing their responsibility – there is something wrong. If the directors are selling their shares, other welljudging people sell theirs too. The whole Co. is weeded of its rich capitalists, and left to women, clerks, and vagrants.

Movement of the Money Market.

• Decrease in Circulation £.598,413, Private securities 1,710,620 und Reserve (total of l.3,800,640) £.264,440.
• Increase in Private Deposits £.1,532,578 und Bullion: £.883,479.

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July 21. 1866. N. 1195.

New Facts relating to the Act of 1844.

Weiß nichts Gutes von dem Act zu sagen, als daß durch rechtzeitige Erhöhung des Zinsfusses von 1861–66 we kept sufficient bullion. Die längre high rate (vor dem Panic) attracted hither an unusual supply of foreign money. But this money was lent us on credit, leaves us mit impaired credit. When you create by law a limit to the issue of banknotes, you entail by inevitable events occasional acts of the Executive to break that law. The foreign discredit occasioned by such acts must not be charged to them. They are part and parcel of the Act itself –, inseparable from it. So are the evils they cause. Ferner: the Act led the B.o.E. to keep the rate of interest higher than it ever was for so protracted a period. Mit gutem credit, the more interest you offer the more money will you get; as soon as your credit is doubted, the higher the rate you offer, the less the money will come in. Dann high interest means bad security. And the foreign holders of bills on England have lately largely acted on it. … For a moment all large holders of a commodity have great power over its price, and at a moment of panic the B.o.E. has nearly despotic power over the price of money. If the B.o.E. had charged 15% for the last 6 weeks, the general market would have approximated to it, and been guided by it more or less nearly.

… verschiedene English Banks (Union Bank, London Joint Stock Bank f.i.) do not distinguish between the acceptances they give and the money they receive (i.e. deposits), so daß kein Teufel ersieht, how much of this is paper given, and how much is money received.

Money Market Movement.

Bank o. E. Increase: Circulation: 227,418l. Decrease: Private Deposits 1,651,546, Private Securities 1,287,285, and Reserve: £576,045.

Railway shares. The difficulties of the London, Chatham and Dover railway have produced fears concerning the position of some of the other cos, with speculations adverse to firm prices.

• Birmingham Banking Co. Liabilities 1,800,000, Assets 200,000l.
• Carleton (Brothers), wholesale warehousemen. (London)
• Preston Banking Co on 19 June. Liabilities about 1,000,000l.

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July 28, 1866. N. 1196.

Irish Railways.

Whole United Kingdom

Deer versus sheep. (Communicated)

As some indication of the proportion borne by the expenditure on deer forests when compared with other forms of unproductive expenditure, it may be stated that many years ago the disbursements of the English subjects, travelling or residing on the Continent, almost wholly unproductive, was valued at 12 millions p. annum. It is now far greater.

Cattle feeding.

Long is England treated as an axiom that feeding cattle were merely manure making machines, and expensive machines too. The profit was looked to from the corn crops, whose increase formed the purpose of all the elaborate processes of stock feeding. The beasts had as much cake or corn as they would eat for long periods of time, besides large quantities of hay or root. Hence Loss, charged to the manure. The Scotch farmers long in advance of the English farmers in this respect, that by the consumption of their turnips with straw they chiefly produced their fat cattle; though in their case also when any artificial food – cake or corn – was used, they usually gave too much and too long – that is, for profit. Hauptsache: Skill in selecting, – in breeding and buying the store stock – and careful management in feeding them. Dieß subject of 2 papers, one by Mr. George Hope , the other by Mr. Wm M’Combie , read in the Edinburgh Chamber of Agriculture at a recent meeting. Hope said: We must begin with well bred animals, as they fatten easily, have little offal, and get flesh on the parts that fetch the highest prices per lb. Coarse and large boned animals are invariably large consumers of food, while their meat is of less value. Warmth and comfort are of great importance in promoting feeding, and the cattle ought to be separated into small lots. The greater the subdivision or the smaller the number in any one place, so much the better do the animals thrive … ample shed room or cover is indispensable for profitable feeding. „In the Lothians, the cattle feeding was long considered as merely subservient to the production of cereal crops, but from the great change that has taken place in the relative value of grain and butchermeat, crops are more and more grown for the purpose of being converted into butcher meat. Foreign substances also, such as linseed and other cakes, white peas and tares, are being used to an extent that 50 years ago would have been thought incredible.“

A piece of grass that will maintain an ox grazing will not keep more than 6 sheep, although as a rule animals generally eat in proportion to their live weight, modified by their age and condition. Sheep kept in great numbers on meadows will soon diminish the quantity of the grass produced. In England der Ausdruck „meadows … oversheeped“. In Hertfordshire, on the strong loams, we always found the hay crops to be disappointing whenever sheep were much fed on the meadows. Cattle for meadows, and sheep for arable land, and upland pastures … the practical rule for stock farming.

To return to cattle grazing. The great secret of profitable feeding is to supply the best food at the right time. Hope says: „When an ox is becoming ripe for butcher he gradually eats less and less; he rests more and becomes fatter. And it is at this stage that cattle pay best for linseed cake and rich feeding, and it is most profitable to give it to them without measure. Feeders frequently lose the best part of their profits from selling their stock a month or 6 weeks too soon. An ox may be very good, fat, and readily find a purchaser; but if kept on for another month, or even 2, he would increase more rapidly in weight in proportion to the food consumed than he ever did at any previous stage of his existence, and also from becoming extra quality, he would be worth from 3 to 6d p. stone additional.“

„Almost all cattle are sent too soon to the butcher. Cattle grow steadily, and increase in weight until 4 if not 5 years old. But the practice is not even to give them time to attain their natural size, but to force fat on them, as quickly as possible and then off with them to the market.“ Ferner nöthig: variation in the kind of food – such as potatoes, beans and peas, as well as turnips and oilcakes. … Feeding stock should be kept always improving, and the richest food and greatest warmth and shelter ought to be reserved for the last part of the feeding process.

Money Market.

• Decrease: Circulation 248,985£, Private Deposits £.1,274,170, Priv. Securities 1,009,933
• Increase: Bullion 70,854. Reserve: 229,144.

Bk. Shares. Of the newer cos dull, with, in some instances, a heavy fall.

Financial Shares. Steady.

Failures: Getherton Iron Co. (Birmingham) liab. about 20,000l.

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4 August 1866. N. 1197.

State of the Money Market.

State of the B.o.E. unsatisfactory. Reserve very low, and Bullion little increased, for under 15 Mill. at which we wish to see it.

The reserve – part of whose usual quantity has gone out to the public – 3,273,000. It was 1865: £6,461,000, and rate of interest 4%. Anyone on the Continent who has a debt to receive in England now asks for money, not for bills. He will not as a rule, take bills except those of 3 or 4 first-rate houses, and the usual bill currency of the world is suspended to a corresponding extent.

Proposed Inquiry into our Banking Laws.

Mr. Watkin brought in H.o.C. his motion for inquiry. It was admitted by Sir Stafford Northcote that there was a „run upon England“. Watkin urged that Clarendon (late Foreign Minister) obliged to issue a letter to explain to foreign nations an Act of Parliament, and so to induce them to continue the credit which their misconception of that Act was inducing them to refuse; and surely such an Act of Parliament and such a letter are anomalies in English history. We have never before written a circular to Foreign Gvts to say we deserved the credit from their subjects. When the Habeas Corpus is believed to be dangerous, its operation is definitely and specifically suspended; but here we have only a letter from an extinct Gvt, saying that if the Bank directors have to break the law, that extinct Gvt will propose a bill of indemnity. For 3 months we have been living in the worst of all states, that of contemplated illegality. A rate of discount is prescribed for the permission to break the law.

Indian Railways.

As to the outline of arterial lines of railways, the plan more coherent and useful in proportion to the outlay than in England. The object was to connect in a vast territory the great centres of commerce; to open up communication with, and thereby to utilise and render productive, an interior teeming with the means of wealth, but lying comparatively destitute for want of a method of intercourse; and to facilitate the gvt. of the country by rapid communication and easy transit of troops. The direct railways now on the verge of completion between Calcutta and Delhi, between Calcutta and Bombay, between Bombay and Madras supply these wants so far as they go … The guarantee of the State to Indian railways possesses at least this merit, that the state looks after itself, and forbids the waste of capital squandered in this country in useless and competing lines, and forbids also that ruinous system of Parliamentary bungling and indifference which in England has given us bad railways at an exorbitant cost. … Mr. Danvers in his 8. Annual Report (1866), recently issued, shows that the system of guaranteed Indian railways comprises a length of 5000 miles, of which about ⅔ finished. The track is for the most part single; clear now that für grossen Theil it must be doubled, perhaps more than doubled. At present the cost estimates for the double line are confined to ⅓ only of the entire distance, and with that provision the minimum estimate for the 5000 miles is 81 mill. st., or something more than 16,000£. per mile. With nothing to pay for land, no parliamentary expenses, and a track for the most part single, this cost per mile extreme, might, under proper management have done for half the price. When the miles doubled, and rendered thoroughly efficient, the cost will now be much more than 81 mill. per mile. Of the 81 mill., nearly 61 mill., were raised and expended on 1st May last, and there remains, therefore, still to be raised 20 mill. to complete the system of 5,000 miles with only ⅓ of double line. … The gross receipts during the year ended June 1865, were 3,122,480l., as compared mit 2,303,288l. in the preceding year (1864). So from 1864 to 1865 the gross revenue of these Indian railways increased more than 35%. The net profits of the year ended June 30, 1864 were 840,704l. und im folgenden Jahr 1,341,550l., increase of nearly 60%; and this rate of increase in net profit by contrast of gross revenue, completely accords with our experience of railway business in this country. The number of miles worked in the 1st year and the 2nd did not vary materially, and the cost of working was, therefore, not enhanced relatively to the receipt. A mile of railway costs no more for maintenance, or very little more, with 500 passengers p. day passing over it than with 100, and thus with the sudden growth of traffic the profit of Indian railways increases more rapidly than the business transacted or the freights conveyed. The net profits realised on the Great Indian peninsula relieve the Gvt. from all obligation on account of its guarantee. Population of India 5 × greater than in the U. Kingd. Bis jezt dort will be 5000 miles meist single railed, hier about 13 000 miles of double railway.

Restricted ownership of land. (Land Improvement Cos.)

There are several Cos which supply the money for land improvements, and furnish the machinery by which they are carried into effect. The whole is subject to the approval of the Enclosure Commissioners. The money advanced with the expenses is repaid by terminable annuities, extending from 22 to 30 years, and such annuity takes precedence of all other charges on property. One Co. „The Lands Improvement Co“ has advanced within the last 12 or 13 years about 2½ Millions l. St. to landowners in England, Wales and Scotland. Besides what this and other cos have advanced for improvement, there have been large sums advanced from the Treasury under the authority of several acts, of which the first was brought forward by Sir Robert Peel in 1842. In addition, landowners may themselves advance their own money for the improvement of their settled estates, and procure, with the approval of the Enclosure Commissioners, the annuities charged on the entailed property to be vested in themselves. Dieser plan wenig acted upon; terminable annuity ist nicht kind of property wie der landowner es braucht, z.B. als provision for a younger child etc. Interference with agriculture and the productiveness of our soil are necessary incidents to the modern phase of our feudalism. The root of the evil lies in the motives which lead to territorial aggrandisement, and that irrespective of the actual wealth of the owners. Thus a man retains or acquires the nominal ownership and control of a vast tract of territory, of the value of which not ½, perhaps not ⅓ belongs to him.

Ten Per Cent Discount. Communicated. (Interest and Profit)

Loans of capital being made in money, and interest being paid in money, every change in the supply and demand of money, in its rate of circulation, and in the state of credit, affects the rate of interest, disturbs its proportion to the rate of profit, and, as there is an accumulating force in these influences, often so clogs „the great wheel of circulation“, that commercial crisis etc. The proportion between the rate of interest and the rate of profit being for the time disturbed, the profit of the merchant or manufacturer is increased or diminished in proportion to the amount of capital on which he has to pay interest … A rise of interest involves the transfer of an increased share of profit from those directly employed in production, to those who devolve the task upon others … When a great deficiency occurs in the harvest, the general rate of profit is reduced, but the efflux of bullion diminishing the supply of money the rate of interest is maintained, and the simultaneous contraction of credit often raises it, increasing the disproportion between the rate of interest and that of profits. War, or a foreign loan, has the same effect in a minor degree. On the other hand, the fall in the rate of interest, which follows from the progressive increase of capital under ordinary circumstances, tends to raise profits for the time, and promotes the inflation of credit and a speculative rise of prices, which checks exports, increases imports, and drives capital out of the country. Required some means by which the rate of interest shall be made to conform more promptly and more uniformly to changes in the rate of profit, instead of oscillating as it now often does in the opposite direction … Though the rate of interest ultimately conforms to the rate of profit, it reacts upon it, and if it were possible to secure a permanently low rate, profits must fall in the same proportion. … It is the excessive extension of manufactures and trade caused by the reduction of the rate of discount to 3 or 2%, which gives rise to the necessity of a rise to 7, 8 or 10% and the consequent check to production and trade which ensues.

Reaction of the Agra Bank Failure on India.

Calcutta. June 21. On the morning of 14 known the Agra stoppage of payment; this led to the immediate suspension of a leading and much respected firm of produce brokers, having very extensive engagements with indigo concerns in the mofussil, and a panic followed paralysing business of every kind in a manner wholly unprecedented in the presidency, and from which the mercantile community has not yet recovered. During the past week the distrust, more especially in the bazaar, has been very great, fostered by rumours of the wildest kind as to the standing of various banking and mercantile firms. Money, however, continues plentiful, and is offering in the bazaar at 9% on Gvt. securities.

Madras. June 27. Very little doing during the past fortnight. Bankrates unaltered 10% for advances on Gvt securities, and 12% on private bills. The distrust in almost all our local banks has been so great, since the stoppage of the Agra and Masterman bank, that Madras Bank post bills have been chiefly used by our merchants for remittances.

Money Market Movement.

• P.C. Paris 3½, Vienna 5, Berlin 6 (bills) 6½ (advances) Frankfort 7 (open market), Amsterdam 7, Turin 8, Brussels 5 (bills) 5½ (advances) Madrid 9, Hamburg 3 (open market) St. Petersburg 5½ (bank) 8½ (open market.)

• Edington and Son, iron founders and engineers, Glasgow.

• Stopped: Bk. of Mssrs Kennedy et Co, of Dublin, and: Bank of G. W. Hale, of Congleton, Cheshire.

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August 11. 1866. N. 1198.

The State of the Money Market.

Deputation of Joint Stock Banks to Disraeli. Proposed that the 10% clause in Gladstone’s letter of licence shall be cancelled, and another written without that clause. The semi-suspension of an Act is puzzling. We fear that 10% must now be endured for some time longer.

There are two ways in which a high rate of interest tends to bring ease in Lombardstreet. First), it attracts foreign capital here. But this time no such magnetism. We doubt its drawing much; and we fear it will still deter some.

Secondly): A high rate operates in a more natural way, by diminishing transactions, lowering imports, increasing exports, and so righting the balance of trade and bringing bullion hither. And this process is now going forward. ⦗Wunderschön! „righting the balance of trade“ and „bringing bullion hither“. Die Worte und der Geist des Monetar- oder rather Mercantilsystem. Aber dieser return nothwendig!⦘ And this Process is now going forward. Doch scheint es

Thirdly) auch damit nichts zu sein. Denn: It is true (obgleich this process is now going forward) that the figures of the Board of Trade do not yet show such to be the case. Aber there is „another disturbing agency“. At a time of crisis we call in our debts from foreign countries, and the first consequence is an increase of imports. We explained this in 1858, just after and in reference to the crisis of 1857, as follows:

„When we arrive at a period of crisis, the country is more influenced by its past transactions than those of the moment or those which follow. When a crisis occurs, it is generally preceded by what is termed Overtrading; and this, usually, if not always, takes the form of very extended exports – accompanied by a relative increase of imports of raw materials and other produce. As a rule, however, this country gives a somewhat lengthened credit upon its exports, while its imports are drawn for at the moment of shipment from abroad, and are paid for in cash shortly after their arrival. England gives credit to the whole world, and takes little or none. (?) Then it must be borne in mind, that an adverse exchange is caused, by a balance of payments falling due at any one period, and not by the exports or imports of the moment. We may be exporting as largely, or more so, than we are importing; but if in the one case we give a long credit, and in the other are paying ready money, the balance of payments may be against us, while the balance of transactions is in our favour. That such was the case at the commencement of the late crisis, and is usually the case at similar periods, there can be no doubt. We had extended our credits beyond our means. Our capital was absorbed to an inconvenient extent by foreign shipments. What was the natural remedy? Not to increase our exports, but rather circumscribe our transactions, reduce our foreign credits, and wait the arrival of remittances as they fell due for shipments already made. At such times the commerce of the country is placed in a condition of partial liquidation. Liquidation can be, and is, effected as much by commodities as by gold. The same motives which induce to large shipments of gold to England at such times, lead also to shipments of commodities.“

In time we must expect our imports to fall off under the influence of diminished transactions. But such is not the first effect of a crisis. The goods sent in payment of old debts confuse the accounts, and make us look as if we were transacting an augmented business.

Sir Stafford Northcote and Gladstone on the Panic.

Northcote ascribes this panic to a scarcity of loanable capital. Wir finden darin no explanation of 10% interest for 3 months. Last year the rate was 4%, and there has hardly been an outlay of loanable capital to raise it to 10%; d.h. raise its value 150%. We must not reason first backward and then forward – we must not infer the scarcity of capital from the high rate of interest, and then account for the high rate of interest from the scarcity of capital.

Aggregate Capital invested in Railways at the end of:

Showing an increase of 70 millions £ in 4 years, which surely is no unmanageable or stupendous sum.

Trade has gone at an equable rate. In 1865 it can hardly be said to have augmented at all.

(Der cotton famine verminderte das Geschäft. Aber zugleich setzte er Kapital frei, welches zu den Finanz etc schwindeleien im Innern führte.) So for a whole year our trade was stationary. During the present year (1866), it is true, there has been a considerable increase.

Imports during the first 5 months of the following years:

Exports in the first 6 months.

Similar changes have often occurred in our railway expenditure and in our trade without causing an augmentation in the value of money either similar or comparable.

It is true that a part of this railway expenditure has been effected in a mode singularly calculated to affect the money market. These railways have in part been made by bankers who advanced money to constructors and others. Such loans are in the nature of an extra and additional conversion of floating capital into permanent or fixed capital. The usual course is that the proprietors and makers of the annual savings of the country, after letting them lie as it were in transitu in some bank, (Wie soll man das anfangen, die annual savings in einer Bank liegen zu lassen?), invest them on their own account. The banker holds a fund permanent in amount, but made up of many changing items.

The customary accumulation of the country passes through the bank, but does not rest there. But if in addition to this normal and natural process, the banker on his own account begins to invest in a permanent form the deposits left with him, the pressure on the short loan market is necessarily greater. The ordinary outgoings made by the owner go on as usual, and the extraordinary outgoings made by the banker have to be met as well. The rise in the rate of interest consequent on investments in railways made by the banker out of his deposits, all else being equal, will be more than from similar investments made by common individuals from ordinary savings.

But these observations only apply to investments by banks, not those of finance companies. The latter are the channels into which common people have chosen to throw their money. These are not like investments from bankers’ reserves, but common investments from ordinary savings. Nor, again, do those observations apply to loans on railways made by the banker at first, but then repaid to him by individuals. These, again, are but the ordinary investments by individuals, forestalled, indeed by the banker, but repaid to him in the end. And the whole argument as to the peculiar effect of a banker’s investments is subject to an important distinction. Banker’s means have of late largely tended to augment. The high rate of interest, offered, not only in London, but generally through the provinces, has filled the coffers of banks with money which else would have been embarked in permanent investments by the owners of it. Accordingly bankers have had more than usual to invest, and common people have been willing to invest less. Ordinary operations have not gone on as usual; they have been diminished at the moment when the investments by bankers have been increased.

The substantial conclusion remains that there is no evidence, that an increased investment of loanable capital is cause of the value of money being 2½ times as great now as at this time last year. The aggravating cause is the credit – a panic from bad business. The inevitable effect of a loss of credit, especially loss of banking credit, is to send up the rate of interest very rapidly. Persons under large obligations must borrow largely on their securities, and for a moment, even on the best securities, it is difficult to get money. The large loans by the B.o.E. would have quite met this difficulty, and long ere this the panic would have died away; but unhappily we had as a country been trading upon borrowed capital. Owing to the failure of Overend, G. et Co , the suspension of Peel’s Act, the explanatory letter of Clarendon, foreign nations took fright, withdrew from us the capital we possess, and placed it in safer keeping.

Gladstone sagte mit Bezug auf the banking business of the country: „practice of showing reserves on paper, which reserves themselves have been lodged in investments “.

The movement of the Money Market.

Bk.o.E. 8. August.

Foreign Exchanges improving. On France: 25.22½.

• Suspension of G. Evans, Evelyn Iron Foundry, Newport.
• Bomanjee, Framjee, Cama et Co, Parsee, liabilities about 500,000l.

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1. Text nach MEGAdigital (Berlin-Brandenburgische Akademie der Wissenschaften), MEGA² IV/19, Lizenz CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/); der editorische Apparat der MEGA ist nicht wiedergegeben. ↩