Heft „London 1868“. IV. The Economist 1866, August–Dezember

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

August 18, 1866. N. 1199.

The Reduction of the Bank Rate to 8% (16 Aug.)

The foreign exchanges have now been turned, notwithstanding the discredit drain. They now bring gold here and take it to the Bank.

This panic has happened in the spring, and from a concurrence of 2 causes money is always dearer in the autumn. 1) There is usually a tide of coin in the hands of non-banking classes, consequent on the harvest. 2) The imports of England from tropical and other countries being vegetable raw products, are dependent on the seasons, and happen to arrive here, and therefore happen to be paid for, in the latter part of the year. Most panics have happened in November, in the naturally dearest month of the money market, and the reaction towards cheap money occurred at a time when money would usually have tended to be cheaper. But this panic has occurred in the summer, and the consequent reaction will fall upon the period when money would naturally become dearer. The present movement towards cheap money will therefore be a mitigated movement, while those of 1847 et 1857 were intensified movements. The usual rate of interest has risen since 1847 and 1857, and the number of ways of carrying off and investing surplus money have largely increased.

Necessity of Selling Insolvent Railways.

The directors of London, Chatham and Dover Railway have issued a letter to their creditors stating that they cannot pay, and the railway itself has been thrown into Chancery.

London Joint Stock Banks. – The Recent Accounts.

Last half year, the profits of the London and Westminster Bank at the rate of more than 50% p. annum upon the paid up capital; Union Bank: 30%, Joint Stock Bank 25%, London and County 23%, City Bank 12%. These 5 out of the 8 to be mentioned afterwards seem to have had all the cream of the jointstock business.

Half Year ended June 30, 1866.

The 4 old Banks, viz. London and Westminster (diese allein ⅓ of the whole), Union , Joint Stock , London et County together earned 650,499l. or nearly 90% of the whole. The profits earned und Dividends (incl. bonus) nicht identisch. F.i. Profit earned by the London and Westminster at the rate of more than 50% p. annum, rate of dividend and bonus only 28%.

London Gas.

The Bill promoted by the City of London for providing better gas than that which gives bad light, but good dividends, was referred to a Select Committee, dessen Report und Evidence nun vorliegen. The Corporation and the gas Cos. were heard by counsel (Advocaten). Diese examiniren schärfer als members of a committee. The Committee says that the illuminating power of the gas in other towns is greater, the quality better, and the price to consumers cheaper than in London. „The purification of the gas in the metropolis is imperfect, and an excess of sulphur remains highly injurious to pictures, leather, metals, etc. Since the passing of the Act 23 et 24 Vict. c. 125, the price of gas to consumers has been increased until recently, whilst the power of light has been less, and the quality of the article worse.“ It (the Report) then states that since the Gas Act of 1860 the market value of gas shares has risen considerably, and every Co. in the metropolis pays a dividend of 10%. According to a table at the end of the Blue Book, during the last 4 years the dividend of one Co. averaged more than 18%, of another more than 13, of three Cos. more than 12%, of 3 more than 11%, and of 3 more than 10%. It therefore recommends that the minimum illuminating power should be increased, and the minimum price reduced; that a chemical board should be appointed by the Secretary of State, at the expense of the Gas Cos., to fix a standard of purity and illuminating powers; that testers and analysts should be appointed by the local power; and that, in the event of the local authority making default in the appointment, the Secretary of State shall have power to appoint officers at the expense of the local authority.

Faule defences der Gas Cos: As for the existing state of the gas, Mr. Jeffery, of the firm of Howell and James, said that the colour was at times almost an ochre, and that it took out the colour of silks and satins. Its action on metals was to deposit a thin film, which eat into the metal if not removed every day, and necessitated regilding. These complaints had not arisen in the same business at Liverpool, while at Clapham the gas was rather worse than in Regentstreet. The effect on leather, as proved by a boot maker was utter rottenness; the witness produced a boot that had never been worn, and tore up the leather as if it had been blotting paper. He had sold hundreds of these boots at 1s. and 1s. 6d. a piece, though they had cost him 18s. to 20s. … Dr. Letheby found as much as 10 grains of oil of vitriol in two inches of the leather, and he mentioned a case where 2 volumes of a work were bound at the same time with the same leather, and one remained on the shelf in a room lighted by gas, while the other was taken away by a reader. After a considerable time this volume was restored by the reader, and its binding was sound, while that of the one of the shelf was rotten. Mr. Hedley, a gas engineer, described the gas as subject to variations; „occasionally during the middle of the evening, it is as if a cloud passed over the gas.“ He observed too that the gas was so overcharged with ammonia, „that when the servants washed the globes of the chandeliers they complained that it was just like standing over a bottle of smelling salts, the smell of ammonia was so strong in the water.“

It was proved that at Manchester 22 candle gas was supplied at 3.s. per 1,000, while the illuminating power required in London is 14 candles, and the price is 4s. 6d. Mr. Baxter, solicitor to the gas cos., says that if the illuminating power is to be 14 candles at the end of 6 miles, it must be 17 candles at the works, and that Newcastle coal will not make more than 14 candles. Dr. Letheby, however, says that gas will travel 6 miles without losing any illuminating power and proved it. At Hastings they are making gas from Newcastle coal, and they are producing 14 candle gas at the very end of St. Leonards. In Birmingham the works are 6 miles from the town, they use Derbyshire coal, and supply gas of 14½ candles.

But if there is no reason why our gas should not be better, sufficient reasons for our having no redress under the present system. Fälschung der tests und Kapitalmacht baffling the legal proceedings of individuals: The tests are notoriously evaded, and attempts to enforce the Act are met by technical objections which no doubt would be cleared away in process of law, but which show that the Cos. are resolved to fight to the last, and have the means of commanding the best legal assistance. „There have been some futile efforts made occasionally by some desperate men (to put the Act in force), but they have died off“, says one witness. Another says it would be knocking your head against a post to appoint a gas inspector. The result of the inspection, as admitted by Dr. Letheby, proves this.

In the first place, the test is applied with a specific pressure to a particular burner, while the consumers have no control over the pressure, and have not generally the same burner. Then the testing houses provided by the Cos are often unfair; in one of them the walls are not blackened, and a large reflector is placed in the room so as considerably to enhance the illuminating power. The ease with which the tests may be defeated appears from the evidence of several engineers. The Co has 3 hours notice before the test is to be applied. So lange dieß der Fall, the test must prove inadequate. „By throwing a little cannel coal into a retort“, says Mr. Hedley, „or charging a certain number of retorts according to the size of the work, you may change the quality of the gas 6 miles off in a quarter of half an hour; or by having a syphon made at the entrance of the gas works by pouring spirits of petroleum or coal-tar naphtha into it, as the weak gas goes through it will lick it up, and you can increase your 10 candles to 16 candles as the gas travels.“ Mr. Hedley did this himself at Uxbridge, to convince Dr. Letheby. „Whilst he was on the works I converted 12 candle gas into nearly 15 candle gas in less than ¼ of hour.“ Another engineer says the same effect can be produced by a slight mixture of photogenic oil, the gas might be raised 5 or 6 candles in value under the eye of the experimenter without his knowing that any trick was being played upon him.

Dr. Letheby shows that during the last 16 months the violations of the law of which 3 Cos. were guilty amounted in one instance to 71%, in another to 58, and in another to 48% of all the testings … To the question, „What is a poor man to do if he gets a grievance from the gas Co.?“, we have the reply, „Why, to be robbed and submit to it – nothing else.“ The Parliamentary Committee hat diese Spitzbuben wie immer sehr zimperlich behandelt. »Dividends averaging from 10 to 18%, tests that can be evaded, Acts of Parliament through which they can drive a coach and four, and charges that they can enforce at their pleasure, are, doubtless, equally sweet to directors and shareholders.«

One complaint against the Gas Cos is the state to which they reduce the streets … they are solely answerable for the pollution … wilful manner in which the Cos. wait till new roads are put down, and then break up the surface for their pipes; as well as gas escapes, traced 30 or 40 feet under the pavement, by the earth, taking fire whenever a brand was applied to it.

Chambers of Agriculture.

Recent movements in 2 English counties, Shropshire and Gloucestershire, to establish Chambers of Agriculture. (durch die farmers gebildet.) Already have the Chambers of Agriculture in Scotland given to the farmers a certain political and social power.

Money Market Movement.

B.o.E. 15 August Notes issued: 28,151,595. Active Circulation: 25,234,029. Reserve: 3,611,505. (Zusammen mit gold and silver coin in Banking Department 4,610,866.) Increase in Reserve: £1,030,637. Bullion: 13,151,595; Increase: 548,527l. Private Deposits: 18,125,280; increase: 636,000. Priv. Securities: 25,224,317; Decrease: 932,238.

Discount Market. Bankrate on the 16 Aug. reduced to 8%. The activity in the money market yesterday and to-day not been greater; on the contrary, the tendency of rates is downward, and a rapid decline is now looked for in the value of money. There is a much more general disposition to take ordinary mercantile paper at about market rates. The joint stock banks are working freely under 8%.

Railway Shares: The difficulties of the London, Chatham and Dover Railway Co. have occasioned great anxiety in the general market. Although it must have been foreseen that railway Cos. were at the mercy of the money market for the renewal of loans falling due at various periods, debenture holders express uneasiness at the inability of the cos to fulfil their engagements.

• W. Hopwood and Son, spinners and manufacturers from Burnley, liab. about 70,000l.
• Joseph Fletcher, of the Spring Hill Iron Sheet Mill, Birmingham, suspended payments.
• Failure of W. Bates, Ironmaster, of Tunstall;
• Suspension of the Bourne Brook Mill Co announced from Birmingham.
• G. Little and Co (London) suspension of payments.

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August 25, 1866. N. 1200.

Overend, Gurney and Co. (limited.)

Nach dem Report der liquidators: even with the call (den sie noch nicht gemacht) they only propose 5 months after the failure of the Co. to pay its creditors a first dividend of 5s. in the £. Do not hint when the creditors are to have the remaining 15s. Die Liabilities of the estate theils those of creditors for money lent to the Co. und diese cannot be recovered from any 3d party; zweitens liabilities on acceptances and bills rediscounted by the Co.; davon part at least to be recovered from the parties to whom these acceptances were given, and from the parties whose names are on the bills. The account runs:

Liabilities

Against this the liquidators will have on 1 October immediately applicable:

Deficit. 3,500,000 against immediate liabilities.

Is it better that the Banking reserve of a Country be kept in Single Bank or distributed between several banks.

In England and France, the banking reserve is kept by a single bank. Country Bankers as a rule, only keep the minimum of cash sufficient for their daily wants; their reserves, properly so called, i.e. their extraordinary fund for extraordinary occasions, is held in Consols, Exchequerbills, money at the bill brokers, and other like modes. London Bankers add to these a credit at the Banking department of [the Bank of] England. But these so-called reserves are not money. They are but means of getting cash. The only reserve of real cash against the banking liabilities of the country is the reserve in the banking department of the B.o.E. Just so in France. Its reserve both against current liabilities and note liabilities is the Bullion the B. o. France holds.

In America the main reserve of the Banks is not specie, but greenbacks. The Bank Accounts of the 59 New York City Banks (Associated Banks) for the week ending with the commencement of business on June 23, 1866, were:

The banks themselves have a small circulation, but as it amounts to only  1/9 of the total liability, we can easily suppose it forfeited to the Gvt., and sufficient sum struck off both sides of the account. The entire reserve would then be, as almost all of it is now, kept against the banking liability. The general result of the 59 Banks:

or more than 35% of the liabilities; a very satisfactory account if compared mit der insignificant proportion which the reserve in the banking departments bears to the total liabilities not of the B.o.E. only, but of this country. The reserve is distributed about equally between all the banks; those who have the greatest liabilities have the largest reserve, and umgekehrt. Here is an example of many banks, each of which keeps its own reserve.

A single bank, overtopping and overpowering all others, feels that its credit is too good to be questioned. The B.o.E. and the B. o. France know that happen what may they are sure to be in good credit. But when a considerable number of banks keep the reserve of a country, each feels that its position depends on its own prudence. If it does not keep a reserve which will meet the demands upon it, when those demands arise, it will fail.

Again, a number of banks are much more likely to be independent of State control than a single bank. A single predominant bank is always the banker of the Gvt. It is connected with it by relations the most intimate. It receives its taxes, advances its loans, gets to be called the national bank. The credit of the nation and the stability of Gvt. come to be borne up with its reputation, and in a time of difficulty the State must come to the aid of the bank. It will suspend an Act of 1844 or make an Act of 1819; it will authorise a suspension of cash payments; authorise everything necessary to enable the bank to continue its operations and do the business of the Gvt. Ist nicht the case mit any ordinary bank. It is not the basis of national credit, and could not be treated as if it was so.

Indian News. (Money Market.)

Calcutta July 6. No fresh failures. Distrust continues very great. Discounts not obtained without difficulty. Business generally very restricted.

Madras. 13 July. The Bank of Madras rates for accommodation reduced 1%. Now 9% for advances on Gvt securities, 10% on 3 months private bills. No transactions reported. In fact business of all kinds suspended. Our principal exchange banks have decided upon reducing the currency of Indian document and other bills from 6 months’ to 4 months’ sight, from and after January 1, 1867.

Money Market Movement.

• Circulation: decrease of £436,301; ditto decrease of Priv. Securities 336,159.
• Increase: Private Deposits 638,194, Bullion 621,264; Reserve 979,239.

Discount Market. notes and gold sent in from the provinces at a period when, almost invariably, owing to harvest operations, withdrawn to meet the additional circulation exacted by so many diffused payments of coin.

Railways: Much disappointment in the declaration of dividends experienced, hence considerable variations in prices, besonders speculators.

Failure: Younghusband and Co, Australian Trade.

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Saturday September 1, 1866.

State of Money Market and Trade of the Country.

B.o.E. rate reduced to 6% on 30 August. It is certainly very difficult to believe that if the B.o.E. reduces its rate of discount to 5% next week, there has been since 17. August a reduction of 50% in the value of loanable capital.

A reduction in price here (and this is the usual effect of dear money) has a tendency to promote export, not to diminish it. The only way in which a high rate of interest affects the export trade is that it cramps traders who live by borrowed capital. They cannot do so much as usual; but for a trader with capital, it is better to export when a high rate of interest has sent down prices, than when a low rate has sustained them. At this period of the year our export trade usually increases, wie gezeigt durch folgenden

Abstract of Total Value of British Exports in each month.

so that the trade was in round numbers:

In fact our trade (within this year, compared the last mit den first months), in consequence of the high rate of interest, has not increased at all. This non-increase is for the purposes of the money market a natural decrease.

Computed Value of Principal Articles Imported.

showing an increase of 40 Mill. £, and more than 50% over last year. The greatest increase is in the value of cotton imported. The total account is as follows:

showing an increase of nearly 27 Mill. l. over this time last year, of which 25 Mill. is mit U. States. Returns, this trade, to its former state. Our imports from America used far to outvalue our direct export to America. The balance was made up by other countries, besonders Oriental countries which exported much to U. St. and imported nothing thence, but imported much to England compared to what they took from us. It was a triangular trade. So: (verte)

30,000,000£ bullion now in Bank of France und 15,000,000 in Bank of England.

Non Paying Railways.

Lord Redesdale has induced the H. o. Lords to pass a standing order reviving the old system of subscription contracts, and requiring the promoters of a railway to show that they are real people, with actual money, in fact intending to make it.

Monetary Crisis of 1866. (Communicated.)

The characteristics of 1866: a complete exhaustion of the national capital in enterprises of all kinds, at home and abroad, and the vast amount of engagements to furnish more capital. It is to the vast extension of deposit banking, and to the absorption of capital by new cos., that our main difficulties are mainly to be attributed. By deposit, as opposed to ordinary banking, is here meant that form of banking in which the depositor receives interest on the sum placed or left in the banker’s hand. Solche banks existirten seit long in Scotland. Only introduced in London since about 30 years. Has been since then gradually growing in importance and now threatens to swallow up the system of ordinary banking, as still carried on by private firms. The sums thus held in London probably about 150 mill., in the British Islands must exceed 300, perhaps reaches 400 millions. The limited liability Cos., (other than banks, discount and finance Cos) are all collectors, some of them also distributors of capital; the object of the latter class being to make loans either to individuals or other bodies, while the former employ their money in mercantile or industrial occupations of their own. … The mode in which it was proposed to raise the capital for all these cos., both banking and miscellaneous, was by instalments, and this fact had a material influence on the march of events, and largely contributed to the exhaustion of the money market. The shareholders paid their deposit and the first call with little regard to the necessity of meeting subsequent calls, or to their means of doing so.

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8 September 1866. N. 1202.

The Circulation of Banknotes in England since the Panic.

Overends failed on Friday Evening (9 May), and by the next Friday the active circulation had increased by 3,776,000l. , und zwar, wie Return by order of H.o.C. zeigt, folgendes der change in der increase der notes of different denomination:

Daher evident, daß by far the highest percentage increase in the notes above 20£ und daß 2,500,000l., or in round numbers, ⅔ of the whole sum, were in notes as above 20l. also. This shows the purpose for which the great demand on the B.o.E. was made – for deposits. The demand for notes above 20l. could not be to supply the place of the country circulation, which consists wholly of 5l. and 10l. notes.

The country circulation did not instantaneously fall, but it very rapidly did so. It fell at the worst period 909,000l., while the B.o.E. 5l. and 10l. note circulation increased at the worst time, 1,225,000l. The main strain of the demand on the Bank was for a reserve – the deposits of other bankers – for notes of a high denomination suitable for that purpose, and for it only.

The return also shows that before the Panic and since February there had been an increase of the banknote circulation, of 1,782,000l., nämlich:

Similar change in 1864. Febr. 24, 1864 active circulation was £19,857,000 und 9 May 1866: £21,484,000.

The Meeting of the London, Chatham, and Dover Railway Co.

There was a most startling revelation of the mode in which railway debentures are issued. As soon as the power of issuing debentures is obtained, large numbers are at once issued en masse, and a loan raised upon them. As the public, i.e. as real investors, ask for debentures, new ones are granted. But when the limit of the borrowing powers is reached, this process becomes very dangerous. The public money comes in in exchange for new debentures, and with this money the existing loans are paid off, and the old debentures redeemed. But almost necessarily the new debentures are issued before the old ones are got in. There is a moment when both the new and the old are running together. And sometimes the money received in exchange for the new debentures is not used in paying off the old debentures. This happened in the case of the London, Chatham and Dover : the Co. was in great difficulties, their financial agents, Peto et Co , were under immense obligations, and the money was used for other purposes. Hence 128,000 debentures have been issued in excess of the borrowing powers, and these the public, the real investors, hold. The first and good debentures were only advanced upon by bankers and others.

Mr. Rankin, a railway solicitor of the greatest experience, says this is the general practice of railways companies. Who can be sure, then, that his debenture a legitimate one, and not, a fraud? The credit of railway debentures as a security will not survive a series of instances like the present.

The second minor point ⦗dieser ist aber sehr wichtig in den U. States.⦘: It seems these metropolitan cos. turn their compulsory power for taking land into a happy machinery for land speculation. People must sell to them; the value of land near great cities is always rising, and so the Co. eke out their own deficiency of capital. Lord Sondes, the chairman of the Lond., Chat. and Dov. , said: „Their solicitor, Mr. Newman, had obtained for the Co. as much land as possible in the city; any portion of it could now be sold at a profit of at least 20%.“ Also die Co have got a large profit by buying as much land as possible whether they wanted it or not. In future Parliament must be more rigid in confining the area of the land powers it grants, and probably a future juries will compel railway cos. to pay a price for their land higher even than at present.

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Money Market.

On 6 Sept. Bankrate of Discount reduced to 5%. Increase of bullion in B.o.E. of £363,192, und Reserve 40,457. Decrease in Private Securities £.711,697.

Failures: Suspension of R. Morrison et Co, of the Engine works, Ouseburn, Newcastle.

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September 15. 1866. N. 1203.

The Crops and the Harvest.

Promises ill in consequence of the immense quantities of rain which have fallen in the Midland and Northern counties of England. In many places heavy floods, and the quantity of grain still in the fields – many fields of barley still uncut – is very considerable. In the Midlands besonders schlechte arable cultivation. The great prevalence of grassland has commonly a prejudicial effect on it. Schon leztes year’s crops below an average; dieses noch mehr. „Last year the England and Scotch harvests were simultaneous; this year the harvest in the North is fully 3 weeks later than in the South.“ Wheat on all high-conditioned loams, welldrained clays and deep chalk soils will be a fair average, and the grain well developed. The area of wheat is gradually diminishing as not so suitable for stock husbandry and less favourable to turnip-growing as the other grains. Barley crop is rapidly supplanting wheat wherever the mixed system of husbandry is progressing. Turnip crop seldom before so good in England as this year. Potatoes as well as hay abundant. „With the exception of wheat, all the crops in England average or above average; while in Scotland, except barley and potatoes, all crops are under average.“ Everywhere pastures are abundant, grass and roots together will furnish more than the ordinary supply of autumn and winter food. A great demand for autumn store stock will be the consequence, which Ireland, the North of Scotland, and Wales, have surplus stock to meet. Sheep have proved the most profitable stock. The high price of this stock have led many who hitherto but fattened, to become sheepbreeders … . Mr. James Sanderson (in seinem Hauptreport in der Times) confirms our views that at present British agriculture is non-progressive: He says: „Apart from improved machinery and more liberal manuring, agriculture, on the whole is in a non-progressive state … Nor need marked agricultural progress in England be expected, for, until tenants obtain a proper security of tenure, and unmeaning covenants, which only rob landlords and fetter tenants, be removed, a large area of British soil, especially in the southern counties, will remain, as now, undeveloped.“

Failures:

David Murray, of Belmont Row (Birmingham) Contractor.

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September 22, 1866. N. 1204.

Bill Brokers and Bankers.

The bill brokers were in 1857 very much what the bankers were lately; the borrowers who wanted sudden and incalculable advances. But the bill brokers were told not to expect the like again.

General Court of B.o.E. Proprietors.

Erklärt dividend von 6½% für Halbjahr, wäre 13% für Jahr. Einer der proprietor Kerls, named Jones, says: „The main cause of the recent monetary crisis was that, while we had bought 250 Mill. l. worth of foreign produce in 1865, the value of our exports had only been 165 Mill. l. St., so that we had a balance against us of 110 Mill. l. “

Indian Money Market.

Bombay 22 Aug. (Stoehr, ! Prieger et Co.): Features of the money market same as before; abundance of money for legitimate trade with few opportunities for employment, and continued distrust, kept alive by the numerous failures and petitions for winding up under trustees, and has during the last few days rather increased through rumours of fresh embarrassments at home. Bankrates remain 8 to 10%.

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September 29. 1866. N. 1205.

Deranged Action of the Eastern Exchange and its Effect upon the Money Market.

Large remittance from India, nearly 1 Mill. l. St. in a single ship, and others besides. The common international currency is a Bill Currency. Those who have payments to make from country A to country B buy in country A as cheap as they can good bills – bills sure to be paid – upon country B. When these bills get very scarce, their price rises, or, their „premium“ is augmented, and at a certain point it becomes better to incur the loss of interest, the expense of carriage, and the cost of insurance incident upon the transmission of bullion, rather than to pay a premium upon bills unusually augmented. But such a scarcity of bills and such a premium are exceptional. The balance of international payments is settled in the precious metals; the ordinary current payments are made by bills. But a bill is an instrument based on credit: Its value depends on the fact that the acceptor can pay and will pay. When credit is disturbed, all the first class bills in the market rise in value; everybody knows them and competes for them, but the inferior bills no one touches. Accordingly the premium upon first class bills – upon the only bills practically useful – becomes considerable, and bullion is accordingly transmitted. This happened in America, as soon as the news of the panic here reached that country. Immediately, there was a great demand for bullion as a remittance, and, under ordinary circumstances, it would have been difficult to meet that demand. Just so in the East now. The premium on the best bills has become so great that even the Indian gvt are ready to send bullion. The very same cause, the distrust of longdated bills accepted in England, makes distant countries, as India and America, send us bullion, and makes near countries, as France and Germany, take our bullion.

Generally, if England receives money from India, it is perfectly certain that she will not have to send money to India. But when credit is deranged bullion may easily have to go both ways. The ordinary balance of payments may cause the transmission to the East; the extraordinary perturbation of credit may cause the transmission from the East.

Liquidation of the Overends.

Various shareholders refuse to pay, weil betrogen durch den Prospectus der Directors. Aber sie müssen die creditors zahlen, die defrauding directors prosecute.

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October 6 1866. N. 1206.

The Money Market.

Both here and in France the harvest of this year is materially inferior to the harvest of last year. Even up to the present time in England there has been considerable increase in the import of foreign breadstuffs.

We have imported 1866 für £53,569,684 raw cotton ⦗davon für £28,004,469 aus Amerika⦘ statt für 24,534,839 im Jahr 1865. India von den 53,569,684l. für raw cotton lieferte für 13,905,053l. doppelt so viel wie 1865. Er (Economist) gratulirt England, daß Overends die Mine im Frühling, statt Herbst 1866 sprengte.

Cotton.

Four years ago our cottonsupply in jeopardy. This year larger than ever before. Already the aggregate importations during the first 9 months of the year exceed the average of the 2 years before the war, and we have still large quantities to receive, much of which is actually at sea. Er rechnet auf about 570,000 bales between 1st Oct. und 31st Dec. und giebt dann folgende comparative receipts from all quarters:

Under the stimulus of extraordinary prices and profits, between 1861 and 1865, or in little more than 4 years, Egypt and Brazil trebled their production, while the production of the East Indies, or rather their supply to this country (for a good deal was diverted from China (and ass! from the home market)) increased in a greater ratio even.

Prices have fluctuated even more widely than supplies, as always in articles of general and indispensable consumption. Total Supply in 1862 = ½ supply of 1859; but the average prices of 1862 were threefold, and the extreme price fourfold those of 1859. Aber erst 1863 und 1864 prices reached their maximum. In der folgenden Lese the average and the highest price per lb of middling Orleans und fair Surat, the usual standards of comparison are given.

Thus, in fact, a falling off of less than 30% in the supply brought about an advantage of 450% in the price. Quantity of cotton reduced ⅓, cost increased near 5 fold. At the present time the current prices of the 2 qualities are 12d. for Orleans and 9d. for Surat. They have been lower in the course of the year.

The consumption of cotton has nearly recovered its former dimensions. The weekly deliveries in 1860 bales 50,600 und in 1866 bales 49,000 up to the 1st of October. All the factories in full work, wo nicht, cause is not want of cotton, but deficiency of hands. It is a remarkable fact that factory operatives, so fearfully redundant 3 years ago, are almost scarce now, at least in some of the country districts.

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October 13. 1866. N. 1207.

The History of the London, Chatham and Dover Railway.

The law has been systematically evaded; published accounts have been totally misleading; many persons – some probably of small means – have been altogether deceived; a property of great natural value has become of no value at all. Daher Lond., Ch., Dov. Railway „is not a single railway“, sondern „a group“ connected by a personal union. The several sections have a common board of directors, but in other respects they are always independent, and sometimes hostile to each other. The largest davon is „the General Undertaking“, has 116 miles out of 136, und the next largest are the „Metropolitan extensions“ (14 miles). Und the „General Undertaking“ has taken off many small lines, and has subsidiary agreements peculiar to itself. Besides which there is a „common fund“, a sort of general contribution from all the units, and regulated by laws of its own.

The Lond., Chat., and Dover is a „contractor’s railway“, … was made by borrowing money, not by subscribing capital. „Since 1860“, say the investigators, „Messrs. Peto et Co. have subscribed for the whole share capital of the Co. of every kind, and such capital was subsequently placed upon the market by Messrs. Peto et Co., either on their own account, or in some instances, as they allege, on behalf of the Co.“ These loans were often secured by Peto et Co’s acceptances, and have been floating about Lombardstreet these 6 years, growing each year larger and larger.

In one case „2,207,300l. stock was publicly sold, in respect of which Messrs. Peto et Co claim to give the Co. credit for only 27l. 10.s. % of its nominal amount, less 38,500l. further deducted as the expense of placing it“.

Such was the mode of dealing with share capital upon which advances could be procured upon the market, but there were parts of the line, the shares in which were an unmanageable security, and would yield nothing. There was especially a certain unfortunate „Eastern Section“ out by Greenwich peculiarly intractable. But though no money could be obtained on shares on that line, „debentures“ being a first charge on it might be more useful. A legal impediment certainly existed. Parliament required that debentures should not be issued until one-half the amount of the capital was actually paid up, and „certified to be so by a justice of the peace“. But in the year 1864 financial ingenuity was exceedingly sharp. Receipts were given by the contractors as if for work done „in respect of the contract“; and on the same day the Co. gave receipts as if for money paid „in anticipation of calls“ on subscribed capital. These receipts were as follows:

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„These feigned payments (heißt es im Bericht des Investigation Committee) were then entered in the books of the Co., the only authority for the entries being the receipts above-mentioned. Upon this the statutory declaration was made, and a certificate of a justice of the peace obtained in order to bring the borrowing powers into operation, whereupon the full amount of debentures authorised (356,300l.) were issued and are still outstanding.“

These documents are in fact, two mutually destructive fictions. The contractor acknowledges the receipt of money never paid on account of work never done; the co. acknowledge the receipt of capital subscribed by the contractors which never was subscribed. Debentures were then issued, and their produce is the only real money ever actually expended on the Eastern Section. We doubt the legal effect of this „balance entry“ of two deceits; but its financial effect is certain, the Co. got 356,000l. by it which they still owe on debenture.

But this legal impediment thus adroitly encountered, was not the only one which the Lond., Chath., and Dover met with. After the right to issue debentures had been obtained, the amount of debentures so to be issued is limited; it must not exceed ⅓ of the paid up capital. There are 2 ways in which debentures may be used. First, they may be issued to the lender in the usual way, to be held by him or his assigns till they run out; or they may be pledged in the money market to bankers and others for temporary loans, to be repaid when the time fixed for such short loans is expired. But there is a difficulty about using both modes. If a Co. pledges all its debentures to bankers and money dealers, it has none to give to the ordinary investor who wants one, and yet it is on the ordinary investor that at last everything depends. The Lond. Ch., and Dover did, through Peto et Co., pledge all its debentures, and when common investors wanted some, issued new ones, and trusted to Peto et Co’s redeeming the old ones, which they did not always do. New and old ran on together, and a large amount of illegal debentures is outstanding still.

The investigators report that the accounts are very faulty; for the year ending 20. June 1866:

「Peto et Co. were at the same time contractors to the Co. subject to no competition, and financial agents subject to no control. Accordingly, the Co. claims 186,000l. from Peto et Co, and Peto (wie sich herausgestellt hat, mere imprudence) claims 384,000l. from the Co. Das übrige frißt ein Court of Chancery.

Das Capital von 1,000,000 der railway created on 12 August 1864. Von dem share Capital 300,000l. contributed by the Great Northern Co., 700,000l. nominally by Peto. „Immediately after the publication of the (false) accounts (half year Dec. 1864 (nämlich Peto figurirt hier als having paid)) in February 1865, the Co. began to take money from the public on mortgage of these lines, placing the sums to credit of separate accounts with the banker, to be drawn against by the Secretary of the Co. jointly with Mr. Christian, the Financial Manager of Peto et Co., and the arrangement was, that the money received from the public should be paid over to Peto et Co. for the express purpose of ‚retiring‘ the pledged debentures, that they might be returned to the Co. and cancelled.“ Von 303,905l. so paid to Peto and Co, they applied 180,000l. in retiring an equivalent amount of the pledged debentures, which were delivered to the Co, and cancelled, leaving a balance of 123,900l. in the hands of Peto et Co. …

Die als reich verschrienen Citykerls etc, die als directors der cos gewählt, heissen: „guinea pigs.“ 」

Mr. Fawcett in the North.

Everywhere, Mr. Fawcett pointed out, the class of labourers is combined together in large masses, and weighing itself against the class of the capitalists, who wish to dictate the terms of labour … All over the country we hear of these combinations and counter-combinations. The masters are distrusted, the men are defied; time, which is all important to the rate of profit, is lost. Capital locked up in valuable machinery is lying barren while these articles of war are discussed. … So long as every great adjustment of terms between capital and labour has to be fought out, a great part of the natural advantages of this country for productive purposes must be lost in paying for the great waste of time, savings, and profits involved in fighting it out. … The only certain way of palliating this evil, is, the growth of such associations such as Messrs. Brigg’s Coal Co., in which the interest of the capitalist and the labourer are so completely identified, that, instead of higgling for terms, the workmen will be glad enough to take whatever rate of wages seems most reasonable, in the full certainty that if they are being underpaid, they will receive the difference at the end of the half-year in a bonus from surplus profits. The plan at Messrs. Brigg’s is to pay, first, the regular rate of wages in the district, then 10% on all the capital of the co, and finally to divide the surplus between the capital and the labour, so that mere labourers, even without a share in the Co., receive a bonus at the end of the half-year if the profits exceeded 10%. This plan has been found to conduce to economy of time and material to a degree scarcely credible to those who have not tried it. … Mr. Briggs explained that the result had been not only to put a good bonus into the pocket of the labourers – a bonus of 5% on their wages – but to yield to himself, as a capitalist, a larger profit than he had ever before received, even in the most prosperous years of the colliery’s existence.

… Free contract between independent persons is the natural and healthy system, but to give ignorant parents an absolute right to contract for their children’s labour … leads to shortsighted bargains in which the future of whole generations of men is mortgaged to secure a few extra shillings a week in the present.

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Saturday. October 20. 1866. N. 1208.

The State of the Money Market.

The mere fall in prices, when diffused, of itself causes, or at least much promotes, cheap money in Lombardstreet. Bills for the sale of the same quantities of produce amount – say to 10% less money, and therefore the efficient demand for money is diminished, while its supply remains as it was.

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October 27. 1866.

The State of the Money Market. (Selling of Securities after a Crisis)

The continued low price of securities still excites remark … During every crisis, and still more, before every crisis, loans are contracted which cannot be repaid till it is passed away. The securities upon which these loans were effected cannot be realised till the agony of the panic is passed; but when the panic is over, the lenders begin to require them to be realised. They call in their loans and at any price the securities must be realised. Such especially the case now, because the class most hit is the class possessing securities … . A large number of excellent shares have been pledged during the last few months to pay up calls in failed and futile Cos.

Peto again.

Half the directors in disorganised railways do not know what is being done, and others wish to do what is illegal. … It now appears that the debentures pawned by Peto at Lombardstreet are not fully filled up or not adequately registered and so are questionable. It is, indeed, certain that they were at the time treated both by the Co. and Peto as debentures. The Committee of Investigation state expressly: „Cheques were drawn from time to time on the joint account and delivered to Messrs Peto and Co. to the amount, in the whole, of 303,900l. and they gave written acknowledgements of having received such cheques on account of City Lines Debentures.“ The Lombardstreet lenders must have believed they held „debentures“, when both the Co. and Peto treated them as debentures. Now Peto says they are not. Dieß kommt hinzu zu dem case of the „Eastern Section“, wo debentures issued by the Co. when no real capital whatever was subscribed, sondern nur die fictitious receipts exchanged between the Co. and Peto. Some „Justice of the Peace“ must have certified the reality of the capital, and he could not have comprehended that there was none.

„If such things can be done by Sir Morton Peto“, ruft Economist aus, „what will not others do?“

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November 3. 1866. N. 1210.

The „Law“ of Demand and Supply.

(Mit Bezug und für Thorntons Article in der Fortnightly Review ): Price may be determined, i.e. may settle for a time at a given point, while demand and supply are not equal, and have no tendency to become so.

It may be shown that the cases in which Mr. Mill’s doctrine would hold good, are such as rarely or never occur in real life; while Mr. Thornton’s examples, purely hypothetical as they are, appear to us to represent pretty accurately the conditions of an ordinary market, and to be, as he maintains, fairly „typical of commercial transactions in general“.

Das s.g. Mill’s law (als wenn dieser Esel diese platitude erfunden hätte) lautet verbatim:

„Demand and supply, the quantity demanded and the quantity supplied will be made equal. If unequal at any moment, competition equalises them, and the manner in which this is done is by an adjustment of the value. If the demand increases, the value rises; if the demand diminishes, the value falls; again if the supply falls off, the value rises; and falls if the supply is increased. The rise or the fall continues until the demand and supply are again equal to one another: and the value which a commodity will bring in any market, is no other than the value which, in the market, gives a demand just sufficient to carry off the existing or expected supply.“ ( Mill. Pol. Econ. vol. 1 p. 541–2. 5th Edit. )

F.e. Mill says: „if the demand increases the value rises“, but the necessity for this entirely depends on the new demand being of such a kind that it will advance on the current price, whatever that price may be: short of this the demand might increase without producing the slightest tendency to a rise of value. And so of the other factor of the problem. „If the demand diminishes, the value falls“, which requires for its truth the analogous supposition with regard to the holders of the commodity, viz. that they are prepared to sell at any sacrifice rather than withdraw their goods from market. Where both these conditions are fulfilled, where demand and supply are both without reserve, where purchasers, numerous enough to absorb the existing supply, and sellers are each determined at any cost the one to obtain, the other to dispose of, goods will doubtless sell or tend to sell in conformity mit Mill’s law. Let us endeavour to present to ourselves the state of mind in which buyers and sellers enter an ordinary wholesale market – we say wholesale market, as it is there that competition comes most freely into play. The great majority of dealers have probably already formed some notion, more or less precise, of the price at which the commodity – the subject of the bargaining – ought to sell. This they take as their guide in their subsequent operations, allowing themselves however, to be drawn from it in one direction or the other by what they find in the market. If the purchaser finds the demand greater than he expected, he will be prepared to advance a little upon his ideal standard; while the holder of the commodity, in the opposite condition of the case, will on his side be prepared to make some concession in a decline of price. In general … these limits within which either will feel inclined to move in a direction opposed to his interest as buyer or seller will not be very great, though cases will occasionally happen when the market will reveal conditions of which both were before in ignorance, and may induce either to deviate widely from his original judgment. As a general rule, however, the data on which all, whether purchasers or sellers, form their opinion as to a legitimate price – the price, we mean, at which in the actual state of the market it is considered safe to trade – are pretty nearly the same. These data are what they know of the state of consumptive demand on the one hand and the supplies coming forward or expected to come forward on the other. … The object of their dealing is in general the same – to obtain the current profit on their transactions. Instead of the indefinite elasticity of demand on the one side, and the equally indefinite urgency to sell on the other, which Mill’s theory assumes, we should have sellers and purchasers conducting their operations within very definite limits – limits which for the great majority on either side would not lie very widely apart.

Mr. Thornton not „merely points out some inaccuracies in the ordinary statement of the law“, but, as it seems to us, proves that no „law“ of demand and supply, in any sense which has yet been assigned to these words, exists; that neither in fact, nor in tendency, do market prices conform to the rule which is commonly supposed to govern them. … What a theory of market prices ought to give us is a statement of the conditions which determine them. … All the phenomena of value which are not of a strictly temporary value are referred by the existing doctrines of political economy, not to demand and supply, but to the principle of cost, that principle no doubt acting through demand and supply. … the modes and conditions under which demand and supply affect prices (marketprices) are so numerous and complicated that they do not admit being brought into a precise formula, but can only be set forth in a number of distinct propositions more or less connected.

Demand for labour is a demand without reserve, since it is the means by which the desire for profit, – an insatiable desire – seeks to satisfy itself. Dieß sagt er dagegen daß nach Thornton labour „forms a notable exception to the rule, that commodities are almost never offered unreservedly for sale“.

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November 10. 1866. N. 1211.

The State of the Money Market.

Bankrate reduced von 4½ to 4%. The disturbed state of confidence is still shown, because money is being remitted from the East, while the demand for remittance to the East rather augments than the reverse.

The North British Railway.

There seems no end of the railway scandals which this crisis will detect. While money is plentiful it can be borrowed, and used to pay dividends, debenture interests, any one in fact whom it is convenient to pay. But when money cannot be borrowed, these claimants become first irritable, then importunate, finally aggressive, upon which the latent sin is at once discovered. In the case of the North Brit. Railway no debentures have been issued in excess, no Act of Parliament intended to protect lenders has been violated, but a series of erroneous accounts have been palmed upon the shareholders and the public, and confirmed by dividends distributed, on the faith of which ordinary shareholders believed they had an excellent property, and preference shareholders – in several sets – lent money to the concern. The fraud here is a business, not a legal fraud; it consisted in publishing false figures, not in transgressing Parliamentary limitations. The North British is a very large railway and has many branches; more than 700 miles aggregate length, and an authorised share and loan capital of more than £22,000,150. Like so many railways in England, the North British has always been before Parliament, in a series of contests with the Caledonian etc … For a long time its dividends about 3% p. annum. But the Committee of Investigation find that they have been procured by „manipulation“. The accountant is examined:

„You have stated that from your examination of the revenue accounts of Jan. 1865, you found that the revenue was some £36,000 deficient to pay your preference dividends? – Yes. – Did you report that to Mr. Hodgson (the chairman of directors) or to Mr. Rowbotham (general manager)? Yes. – Before the January accounts were published? – Yes, I required instructions what to do. … I was told the dividend must be paid under any circumstances. That day or a day or 2 afterwards, I was told to bring out a dividend of 2¼% that half year. (these instructions given by Mr. Hodgson.) – How did you do that? By making these cross-entries? Yes.“ Mr. Rowbotham confirmed this. He was „cognizant of the irregularities in the accounts, and that dividends were declared and paid which had not been earned; but that he did not order or instruct the operations by which the balance-sheets were to show results unwarranted by the position of the co, and that the instructions on that point emanated directly from the chairman to the accountant. He also stated that, although he is the recognised medium of communication between the board and the department of accounts and audit, he did not convey to any member of the board his knowledge of the irregularities.“ Herr Hodgson in seiner published defence, in reply to the Investigation Committee, says: „it would manifestly have been impossible to obtain or maintain the value of the railway without a temporary departure from the strict rule, whereby the limits of expenditure out of revenue and out of capital are defined.“ Und daher North British pumpte sein Geld on preference stock and debentures, because the accounts of the Co. looked well.

so that 3½ × the capital of the Co. has been borrowed of victims of the „regulated“ accounts.

Hodgson seems to think that shareholders are necessarily benefited by false puffing accounts. But shareholders are a very fluctuating body. The shares of A become to-morrow those of B by transfer. Daher diese accounts a fraud on the buyer for the gain of the seller.

The mode in which the entries were managed was, that a certain amount of expenses which ought to have been by the halfyear were charged to various „deferred“ accounts. Das Investigation Committee says: „Apart from carrying to capital sums which should properly have been put to revenue, complicated and elaborated exertions have been made to conceal a large amount of expenditure under the head of suspense accounts, consisting of ‚line renewals‘, ‚line suspense‘, ‚surplus property‘, otherwise ‚postponed expenditure‘, ‚locomotive suspense‘, ‚suspense account, N. 2‘, ‚suspense account, 1863‘, and ‚contingent account‘. (‚Life‘, half the brokers of England think, in regard to railway accounts, ‚is not long enough to understand such things.‘) Purpose dieser entries, to bring out the intended dividend.“

The Persons most to blame are the Auditors. Hätten sie ordentlich zugesehn, so discovered daß die dividend paid out of borrowed money.

This latest development of railway misdoings has communicated fresh alarm to the minds of holders of railway stocks and shares. Auf dieser Basis renewed die Bear manoeuvres, wie früher mit den Bankshares, most of which have recovered from the unauthorised reports. … Unless the money market alter very materially, not in price, but in character, it will be impossible to renew the greatest part of the maturing railway debentures.

Failures:

• Dent and Co’s (China) drafts refused by their London Agents: Dent, Palmer et Co.
• Stoppage of James Russell et Sons, Crown Tube Works, Wednesbury.
• Uttley and Lee, manufacturers at Burnley, liab. 20,000l.

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November 17. 1866. N. 1212.

The First Interior of a Finance Company.

Nämlich Public account der „General Credit Co“. Gestehn loss by loans to Foreign railways, etc aber their capital intact, und reserve funds. »We scarcely consider the dividend of 15% which the Co. has divided, justified by the result. Such investments as they dealt in yield occasionally large gains; many private persons have made immense fortunes by dealing in them. But a company has very material difficulties in such a trade. First, it cannot be idle; it must employ its money, pay a dividend and it will not be entirely easy to carry on 2 kinds of business, one in times of enterprise, another in times of caution. An individual can stand still. A Co. is always restless, and always existing. It is, so to say, immortal. It has to take the average not of a year or 2 like a chance speculator, but of all years to come … The only permanent high dividends are those of Cos which in some shape or other are dealing with much money of other people, and have to divide only upon a small capital of their own.«

English Agriculture. (Tenant-Right or Leases?) (Improvements)

A more striking illustration of the stagnant condition of all, or nearly all, that concerns the management of land in England could scarcely be found than the fact that the Report on agricultural customs contained in a recently (1866) issued blue book is merely a reissue of the report of Mr. Pusey’s committee of 1848. „That part of the report which recommended the assimilation of the law as to agricultural fixtures to that of trade fixtures has been accomplished.“ Except that infinitesimal progression, for in all else this report might as well have been made now as 18 years ago.

Farmers may be certain – and there are few districts in England which have not afforded sad examples – that any reliance on customary allowances – (statt rational leases) – whether of the old or new pattern, are as unsafe in fact as unsound in principle. We know that many who seek to delude farmers, by a sort of mock liberality, represent such allowances as equivalent to a lease, but let any farmer holding his farm under such terms try it. Let him quarrel with the game keeper –, let him interfere with the game bred on his farm and fed on his crops for his landlord’s profit, – let him vote against his landlord’s candidate at the county elections, and he will then test the real value, the no value, of the „tenant-right“ panacea. The following extract from a letter to the Times by Mr. James Sanderson , a very able land agent, sagt u.a: „For my own part, whenever I fix farm rentals I put from 5 to 7s. 6d. per acre more upon land of medium quality farmed under the security of a lease than if occupied on the system of annual tenancy. But this additional rental is a mere tithe of the value that landlords obtain by granting leases. Farming under the lease system is progressive, and from the large tenant outlay which the security of a lease induces, it is no unfrequent occurrence for farms during a 19 years’ lease to be doubled in value without any outlay on the part of landlords. Indeed, what are usually termed landlord’s improvements on a farm let on annual tenure become tenant’s improvements on farms let on lease. Tenant’s outlay under the former system is too often limited to what one year will exhaust, while under the latter it embraces improvements which are recovered by periodical returns after a lapse of time. Taking into account the increased and increasing outlay in the shape of labour, manure and implements which land requires to make it remunerative, I consider the question of security of tenure no longer doubtful, and that farm leases are essential to the further development of British Agriculture.“

Failures:

• Suspension of Philip Levi et Co, Adelaide, South Australia, liab. 300,000l. Ditto:
• W. Dryman et Co, warehousemen, Sydney und ebendaselbst Love et Son; wholesale grocers, mit liab. respectively of 42,000 und 40,000l.

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24 November 1866. N. 1213

Why Overends failed.

The business established early in the century, was very profitable, gab for the 5 years preceding 1860 the average net income of 190,000. But then, or rather just before, a change occurred. Samuel Gurney , the great, ✝ in 1856 und David Barclay Chapman , his nephew retired soon after the panic of 1857. Danach a more lax and less intelligent regime began 1861, where John Henry Gurney , residing in Norfolk and doing the quiet local business, sah wie’s stand, interfered und decided that no profits should be divided till the bad accounts incurred were liquidated. The unique fact remains, that the principal partners drew nothing from the firm of Overend, Gurney, et Co. for 5 years, and thus arose the great sum of 940,000l., which stood to their credit in the books when the business was sold.

There were 13 large accounts open at the time of the transfer, and the partners on going into the matter estimated that there would be a loss on these of 2,788,000l. The details are these:

Everybody familiar with these names has heard that „Overends“ were „deep in with them“. Viele hieltens für böswilligen City Gossip. Dieß nur der estimated loss at the time the new Co. was formed; the real loss was greater still. At the time of the transfer the total amount of „exceptional“ loans was 4,199,000l., but it was „hoped“ that the securities held against them would yield enough to reduce the ultimate deficit to 3,117,000l. Against this the partners prepared to set:

leaving as was supposed, 688,000l. to the Gurneys and other partners. A terrible result doubtless, the old firm thought it in August 1865, though the reality has been much worse. Since 1861 (nachdem J. H. Gurney interfered) ging nach wie vor das „bad“ business in Lombardstreet voran. … The sum for the goodwill has been lost. The securities for the 4 Mill. l. exceptional loans seem to have been pretty well rubbish. Even on the showing of the old partners, an immense part of their private property must be sold. This is what happened. The sale of the old partners’ property attracted attention, showed the nature of the old business, and so ruined the whole firm … The shareholders haben vielleicht a remedy against the directors of the limited Co. for negligence in valuing their security and „incommunicativeness“, to call it by no harsher word, in their prospectus. No human being certainly could have gathered from that document that the bad debt account existed, and which the directors must have just been looking at. We do not say that the shareholders would succeed against the directors; they might do so, try. But they will fail in their present resistance to their creditors. They must pay their debts, however they may have been induced to incur them.

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1. December 1866. N. 1214.

State of the Money Market.

Reserve jezt 10,688,000, dennoch its proportion to the banking deposits nicht remarkably great. These liabilities are:

The reason is that the deposits are so much greater as sonst.

Private Deposits at Corresponding Date with the Present.

Am Tag von Overend’s failure die private deposits were 13,515,000l., and they are now in round numbers 4 mill. and ¾ more. The B.o.E. has therefore clearly gained business by the panic, and probably many accounts removed from other banks, because they had failed, or were distrusted, have been taken thither.

Baxter über „Railways“ Paper read to the Statistical Society.

Es scheint, der eigentliche Zweck dieses paper war, in any way den Eisenbahnen – häklich gestellt und damals sehr in Verlegenheit ihre debentures etc zu zahlen – durch den Staat zu helfen.

Short Weights and Measures. (Urgent case for interference).

The scandal of short weights and measures and adulterated articles is rapidly becoming so huge and intolerable as to amount to a national disgrace and grievance. At the Surrey Sessions several hundreds, we may say thousands, of retail dealers are fined every year for false weights and measures; and the worst part of the case is that the same people are fined over and over again, showing pretty plainly that cheating of this kind does not carry with it any heavy stigma among the class they belong to, and also that the fines are so insufficient as to afford no protection to the public. The same disgraceful state of things prevails more or less all over the country. The robberies committed by this sort of retail fraud are of fabulous amount, if they could be expressed in aggregate figures; and the hardship falls chiefly on the artisan and poor classes …

A trading community, which has gone so far to the bad that its public opinion rather chuckles over than condemns, the thievish astuteness of the persevering maintainer of a false balance or a short measure … The remedy is very plain, and has been already tried in France mit den best results. For the first offence, if not very aggravated, the fine should be substantial – if aggravated, the offender should be fined, and compelled to exhibit in his shop window for a few days a conspicuous placard, prepared by the Court, setting forth his offence and its penalty. The police to be charged und supervision of this part of the sentence. For the 2nd offence, the fine should be doubled, and the period of exhibition doubled; and, for the 3d offence, the punishment should be hard labour without the option of any fine, and a longer exhibition of the placard etc. The offence of adulteration is more difficult to reach.

Demand and Supply (Letter of T. E. C. Leslie)

Grade durch das Gefasel von der supply und demand „political economy itself becomes practically little better than the logic of established abuses“. … there is really more divergence of opinion among political economists than is ever made known to the public … the very fact of the absolute limitation of the supply may render it physically impossible to supply the whole demand at any price whatever.

Bank of England.

Das hoarding der Banknotes at an end. The average circulation is still exceeded by fully 2 Mill. l. St. at the date of the return of this week; but the total more than 3½ millions l. St. less than during the panic of May.

Railway Shares. Grosse Thätigkeit der bears, prices remain without any perceptible recovery.

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December 8. 1866. N. 1215.

The Sewage of Towns Progress.

An unsavoury Congress on this subject at Leamington.

The chief systems advocated were the earth closet system, the system of irrigation, and the system of deodorising sewage either by acid, sulphate of lime, or other chemical agents.

Die Croydon experiments (irrigation) schon früher erwähnt. Gesundheit: 1849, says Dr. Carpenter, before sewered, Croydon sehr unhealthy. Deathrate 1 : 36 (27.7 in 1,000), while that of the surrounding country was 1 in 58. The Population of Croydon was then 19,000, the number of inhabited houses, 3060 und the rateable value of the parish 70,000l. Population jezt 40,000, rateable value almost 200,000 und deathrate sunk to 19.5 in the 1000. All this owing to the introduction of good water supply with sewage and thorough drainage, while the irrigation of meadows with sewage has raised the value of land and diminished the amount of sickness … before it is passed on the land the sewage is drained of the solid parts, which are afterwards used separately. Liquid manure has an advantage over solid manure as being food for the plants at once, while solid manure needs time and the agency of water. The result of irrigating a field of rye grass was that 6 crops taken from it in one year, the total height of them being 187 inches. The grass was sown in the early part of November, and it was 6 inches in height by Christmas. Before sewage was applied to the claysoil the land was not worth 1£ per acre; the present tenant is willing to give 16£ per acre for land and sewage. The grass of the irrigated land is preferred by cattle to any other grass, and keeps the cattle in better milk and better condition than other grasses. … But any mismanagement of the drainage works would be a fruitful source of disease. If the sewers are not properly ventilated bad gases escape into the houses, and if any sinks are left untrapped the consequences may be fatal. The Croydon experiments are of great value to the towns too large for the earth closets.

In Manchester the system of taking away the refuse without entering the sewers is tried, but the removal of refuse costs a good deal more than the sale of its produces. It was found, too, at Aldershott, that though the surrounding soil was about the poorest in the Kingdom, no one would take the camp refuse even gratuitously, and the removal of it cost the War Office 500 o 600l. a year. Yet Mr. Hawkesley tells us that the product of the earth closets is really worth 1l. per ton, and the results, whenever the refuse has been applied to land, have borne out this estimate. Data z.B. darüber geliefert duch Convict Prisons. Lord Leigh, who presided at the Leamington Congress, said the earth closet system had been tried with much success at the reformatory school of which he was chairman. Many such towns as Leamington just now in awkward predicament about their sewage. They have been restrained by law from sending it bodily into the rivers. The new Thames Navigation Act and the local acts to which it is giving rise, are exercising the same pressure on the towns above London. Something must be done in these places. It will be a wanton waste of money to construct enormous works on the plan of the Metropolitan Main Drainage for the sake of throwing into the sea what is so useful on the land. It is well to bear in mind that lands cultivated by some of the early American settlers became barren after two generations, while the soil of China unceasingly fertile for upwards of 3,000 years. The waste of the ash constituents of bread and meat in London alone is said to amount to 602,676 tons.

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15 December. 1866. N. 1216.

What to buy. (Der sich selbst vermehrende Wert, le système du capital.)

In Oriental countries a man puts his money into diamonds or gold and silver ornaments, or perhaps he buries the specie itself. He is content to keep what he has, if he can only keep it. He does not expect, as by invincible association we all now expect, our property to get more of itself. So deep did this conception of the unnaturalness of interest penetrate into early society that the laws against usury were stoutly defended upon a quasi-philosophic tenet that money was inherently „barren“ .

The broker may be paid a larger commission on questionable investments which hang over the markets, and which the holders are anxious to get rid of. Thousands of bad railway bonds have been in the last 2 or 3 years sold to people who could ill bear the loss, because the broker was paid much to dispose of them.

The Recent Strike among the Iron workers in the North of England.

Previous to the 15 July (1866) the iron workers in the North of England – i.e. in the district of Tees, Wear, and Tyne – gave notice to the men employed in the puddling furnaces and rolling mills that on the day named wages would be reduced 10%, giving as their reasons for the step, 1) that the price of manufactured iron had not risen by any means so rapidly as the wages of the workmen engaged in producing it, 2) that the accumulation of stocks and the scarcity of orders rendered the reduction unavoidable, and that 3) the increasing competition of Germany, Belgium and France, compelled the manufacturers of this country to economise the cost of production. Most of the workmen on the 3 rivers belong to the Northern Ironworkers Union, and with very little hesitation its leaders declared that the 10% reduction could not be accepted. Work therefore ceased almost entirely about the middle of July, and perhaps between 20,000, or 30,000 men, skilled and unskilled, became idle. Besides the Northern Union, there is a Southern Union, comprising the districts, represented by Staffordshire. The strike did not extend to the Midland or South Wales districts … At the outset the Union professed to be able to distribute 10s. a week to the skilled men on strike, but not more than 1 or 2 weekly subsidies at this rate were actually provided. The payments fell to 4s., 2s. 6d, 1s., and even 6d., and during several weeks there were no payments of any kind. In October an attempt was made to amalgamate the Northern with the Southern Union, but it led to nothing. The appeals also for assistance to other trades produced only trifling sums.

The protraction of the strike, and the almost entire absence for demand, led the masters to raise further points of controversy. 10% Abschlag on the puddlers’ wages; aber: the mill men, who work in gangs, ought to submit to a larger reduction, especially in work where, by great outlay of capital, rolling machinery of the best and most powerful kind had been provided. The mill men were paid by a given rate on the quantity of iron rolled and furnished, each pair of rollers being manned by a gang or set, working under a sort of sub-contractor, who alone dealt directly mit dem employer. Suppose, therefore, a mill of the latest and best kind, to be capable of rolling 100 tons a day at say 2.s. a ton, the payment to the middleman or subcontractor, for himself and his set, would be 10l. But if the mill were of old and inferior construction, the produce would be only say 50 tons a day, which at 2s. would only yield 5l., or half of the result in the former case – the amount of actual skill and labour being substantially the same. In other words, the owner of the new and mill was made to double the wage of the men in his employment, without receiving any equivalent. On 23 November, after a conflict of 19 weeks, the strike was terminated by the unconditional reentry of the men at the reduction of 10% on the puddlers, and the revised rates offered to the millmen. The men resisted a small reduction in the face of a falling market, a monetary crisis, increasing stock, and such an unanimity of the masters as could only arise from a general absence of orders.

So far as market price is concerned, labour is as entirely a commodity, and is regulated in exchangeable value in precisely the same way, as coffee or timber.

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22 December. 1866. N. 1217.

The Actual State of American Finance.

Report of McCulloch, Secretary of the Treasury. Bericht für dieß last financial year. (1866) dollar berechnet zu 4s.

The most unexampled fact in financial history. That a Gvt. which one year ago had no internal revenue at all, should be able to raise 60 Mill. l. is a miracle. In any other country the bare attempt would have caused a revolution.

Derselbe Account for the quarter ending 30th September last.

In form, it is true that 40 millions l. St. of American Public debt have been paid off since 31st August 1865, when the debt was at its maximum. But that payment was not made out of revenue, sondern from overloans which had become superfluous nach End des civil war. Die funds für reduction der debt from real excess of revenue over expenditure = 23,000,000l. … The Un. States have still the best possible land, the best mines, the best things above ground, the best things under ground, and an educated Anglo-Saxon race to make use of them all. Such means and materials for production, and such skill in making, the world has never seen together.

The Liquidation of the Bank of London.

The creditors have already had 12s. in the £, which has been entirely obtained from the assets of the Bank and without calls upon shares. The Bank deposit on 22. May: 2,315,000l.; on the 26: they were reduced to 1,038,000l., and to meet this stiff run there were only 27,510l. of India bonds and other available assets. The facility with which the B. o. London gave their acceptances was injurious to them.

Die bills accepted beim stoppage waren £1,218,088, wovon 599,225£, Hälfte, unbezahlt an die Bank zurückkam. There were no securities to meet them. Die Bank hatte auch „financed“, i.e. taken securities of a possibly good, but certainly difficult character. Die Assets waren 26. May: £.2,383,979. Davon already received: £.1,361,751. Remaining to be received: 1,022,227. Mr. Coleman, the liquidator, only expects to get 584,696 eventually, and irrespective of what may be received from the unsecured balance due by the Atlantic and Great Western Railway , which balance will be represented either by shares in that undertaking or by certificates to fall due in July, 1871. 417,226l. are dependent upon the liquidation of the Ebbw Vale Co., the Imperial Mercantile Credit (Lim.) , the Joint Stock Discount Co (lim.), Barned’s Banking Co. (Lim.) , Smith, Knight and Co limited and – Peto and Betts ! The remaining liabilities are £496,662 to meet which Mr. Coleman estimates 229,224l. as likely to be extracted during the next year from the ruins of the specified Cos. The shareholders in the Bk. o. London will lose the capital they had in the concern, but not more.

Ownership of Landed Property in England. (Communicated).

An English entail does not last, on an average, more than about 30 years, once in a generation the entail is usually cut off, and the estates resettled. Most deeds of entail contain powers to grant long leases, to sell for special purposes and to exchange. By far the greater part of the land in England including some of the largest estates is not entailed. Estates are constantly sold in England entire, although, if a strong desire existed to obtain small portions of them for cultivation, and a higher price could thus be realised for them, they would infallibly be divided as we see to happen when a demand exists for land for building or accommodation purposes, owing to some peculiarities of situation. On the whole then it appears certain that although the effect of entails in preventing the division of estates is doubtless considerable, yet it is much less than is commonly supposed, and will not account for the phenomena before us. The number of small farmers occupying the land of others for agricultural purposes has diminished as much and as rapidly as that of small freeholders unless in a few districts where market gardening and fruit growing prevail. There a class of tenants holding small portions of land is rapidly increasing.

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29 December 1866. N. 1218.

Paris Correspondence.

The Banque Enquete. (Report of M. de Lavenay, Commissioner General in the Bank inquiry, viz. who conducted the investigation)

Decides (der Report) für Monopol der Bank o. France, no essential changes in its organisation to be introduced. 75 oral depositions heard und written depositions sent in by 65 French, and 10 Foreign Chambers of Commerce; also by 16 French, and 20 foreign merchants, bankers, or economists. Majority of witnesses established that there was a monetary crisis in 1863 and 1864, a fact disputed by some authorities, and that it was caused by the export of specie to buy cotton and silk, and by the large investments in industrial enterprises and foreign loans. Notes ought to be equal to metallic money. How was that condition to be fulfilled? By not exceeding the wants of the currency. How ascertaining the true limit thereof? By rendering the notes constantly convertible, in which case, if too many were sent out, they would be presented for payment.

Relative to the organisation of the B. o. France, the majority of the witnesses were of opinion that the elastic power it possessed of issuing notes (meaning thereby the absence of any restrictions beyond what prudence should demand,) was much preferable to the inflexible limit imposed upon the Bank of England.

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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. ↩