Notebook “Trade and Finance 1868”. I. The Daily News, August to November 1868

Newspaper cuttings, mostly from the Daily News, cut out and pasted in for Karl Marx by his daughter Jenny Marx in the notebook “Trade and Finance 1868”, London, 1868-1869 (IISG, Amsterdam, Karl Marx and Friedrich Engels Papers, P 1). Text from MEGAdigital (MEGA² IV/19), without the editorial apparatus; words in square brackets are missing from the cuttings and supplied by the MEGA editors.¹ Traducción al español

Trade and Finance 1868.

August 10. 1868

TRADE AND FINANCE.

THE accounts of the principal London joint-stock banks have been completed by the formal issue of the report of London and County at their meetings in the past week. The meeting of the Consolidated had been held at Manchester a little while before. Comparing the balance-sheets for six months ending June 30, 1867, with the same period of 1868, the most important items are on the whole more than ordinarily satisfactory. The customers’ balances, whence bankers’ profits are chiefly derived, have varied but little. The acceptances are essentially a fluctuating total, and convey no material information. Subjoined are the actual figures:

CUSTOMERSʼ BALANCES, ETC.

LIABILITIES ON ACCEPTANCES

It is, of course, impossible to determine how far these sums have been affected by the changes in deposits left at interest or in ordinary bankersʼ balances. Probably the difference is rather on the former side. The current rates of discount have doubtless led to a withdrawal of sums upon which 1 per cent. only was allowed. It necessarily follows that banking profits must have decreased in proportion. Hence the dividends for the two half years have been:

It may be observed, however, that in one case at least there has been a material addition to the capital. The reserve funds are also higher. The special fund of the Consolidated is retained to meet any loss from obligations connected with the Atlantic and Great Western Railway. The capitals and reserve funds are as under:

As every depositor in, or creditor of a bank looks especially to his security, it is satisfactory to find that there is no falling off in this respect. Subjoined are the sums hold, and in round figures the percentage on the liabilities:

CASH AND INVESTMENTS.

PER CENTAGE ON LIABILITIES TO CUSTOMERS.

Another feature of the week is supplied by two meetings of shareholders of the Credit Foncier of England Company, naturally indignant at the loss of their money and the deceits which have been practised upon them, and as naturally sceptical of fresh promises from a fresh authority of an early dividend of from 4 to 5 per cent. One meeting, the first, decided to appoint a committee to consult with the directors as to the wisest mode of proceeding with respect to the interests of the shareholders, both as to the past and present affairs of the company. The second meeting, held the next day, showed much diversity of opinion, and strong comments were expressed upon the conduct of the Board. The result was an amicable agreement to defer further action until the committee formed the day before had presented their report.

It is well to be moderate on such excited occasions, but it is more important to be just and practical. We boast ourselves to be the first business nation of the world, but it is notorious that in foreign countries the popular verdict is against our self-estimate. The origin and fate of such an undertaking as this Credit Foncier and Mobilier Company justify their unfavourable opinion. No parallel can be drawn between this scheme and the Credit Mobilier of France, for the simple reasons that the latter was a creation of the Imperial Government, and that its management was confided to men of wealth and high financial repute. The English imitation, when started, had nothing to commend itself to public confidence. Its career has been a course of transformations both as regards name, capital, and management.

The new chairman, Mr. MOWATT, has made what he called at the last meeting of the company “a clean breast of it,” and confessed that the directors had received in cash, in addition to their salaries, a large but indefinite amount in per centage on profits which clearly have never been realized. He mentioned that the company had been paid in “stuff,” which means securities, while these fortunate individuals had coolly appropriated an enormous sum in hard money. Such was his avowal. Mr. ALBERT GRANT, he stated, had, as managing director, taken some 76,000l. of the total for his own share. The defence is that the Articles of Association provided for such remuneration; but if the shareholders would deal practically with their wrongs, they would soon find that their best remedy is a suit in equity, which would compel the production of all the books of the company. These books would easily show that the profits declared by the concern from year to year, and upon which the directors voted themselves their per centage, were utterly nominal, and that therefore on the ordinary principles of justice they must make restitution. It is quite clear that the greater part of the securities enumerated in the last report of the company were set down at fictitious values. The directors stated that they could not arrive at even an “approximate” valuation, but the notorious belief is that the major part of them are and have always been more or less unsaleable at anything like the prices affixed to them in the companyʼs accounts. All this could be easily ascertained in our law courts. Committees of Investigation are very hopeless for the most part. They involve expense and delay, and their results are generally unsatisfactory. What is wanted is an early and judicial opinion whether the monies appropriated by the board have not been unduly taken. It seems too clear that a large proportion of 2,000,000l. sterling has been lost in this disastrous undertaking, and it is beyond doubt that those managing it have largely profited at the expense of the proprietors.

TRADE AND FINANCE.

A BANK, whether considered publicly or privately, is a sacred trust. The depositary of millions of money from those who have no guarantee for safety but the reputed integrity and wealth of private individuals, or that terrible resource of joint stock enterprise—the uncalled capital of trusting shareholders—such an establishment should always stand like a rock, unassailable as to management, and impregnable when panics come. Many ruined homes, and many premature deaths, bear a sad testimony to the banking failures of the last twenty years; but, on the other hand, it is simple justice to say that these disastrous exceptions have been few, and that the banks of this country, whether conducted privately or as joint stock companies, have long been admirably administered, to the enrichment of their proprietors, to the help of commerce, and to the convenience of the community at large. It is much to be regretted that an institution possessing a deservedly high reputation, and a management once beyond dispute—in fact one of our leading banks, “The National Bank of Dublin and London”—should have become not only a subject for legal discussion during the last week in the County Record Court of Cork, but a ready theme for public criticism. The trial, which has brought to light within the past few days much that had better have remained untold so far as the present timid confidence of the public is concerned, is still highly instructive. The action was one of damages for libel—Sir JOSHUA NEALE M’KENNA versus Mr. THOMAS M. USBORNE, the first chairman, the second shareholder of the National Bank. The evidence is so voluminous, and the summing up of the judge, Mr. O’HAGAN, so full, clear, and conclusive, that we can only treat of a few salient features of the case, and must refer all those interested in it to the Cork journals of the past week. There they will learn from the proceedings in question that no institution that lives by credit can afford to take a speculative position, and that nothing can be more fatal to the name and prosperity of any banking establishment than the belief that its funds are used for market jobbing, or that those who preside over it occupy the double position of banker and promoter. For some years, under the chairmanship of Mr. Fowler Newsam, the National Bank enjoyed great esteem. Its shares ruled at high premiums, and its credit was impregnable. There is nothing whatever to affect the latter now, but the régime has been changed, and hence this lamentable suit at law. Sir JOSHPH MʼKENNA was the ruling spirit in Ireland, and some few years since was imported here as managing director of the Bank. Mr. NEWSAM and others quitted the scene, it is believed, to make way for the new and spirited element. Those who have gone, it is said, have left good and honourable marks upon the annals of this Bank, but what of the present state of things? Sir JOSEPH MʼKENNA brings an action for libel against Mr. USBORNE, practically for defamation, and after a long and assuredly a patient investigation, the defendant gets a verdict upon all counts. The proceedings are well worth reading. Sir. JOSEPH was more valorous than wise in undertaking this assault. Rashness is one thing, courage another, and when men go to law they should avoid impulse and be sure to have right on their side. The mingling of a bank holding the deposits of the public with the disreputable “financing” of the last few years is utterly indefensible. Imagine such house as Coutts’ or Glyn’s uniting with “the Credit Foncier and mobilier of England” to float bubble companies. More difficult is it to imagine that such an establishment as the National Bank should be allied even in name to such doubtful schemes as the Imperial Land Company of Marseilles, the Lundy Granite Company and the Peruvian Railways Company, &c. By some mysterious legerdemain, these schemes were made for very belief period to appear successful; but where are they now? The answer is very easy: they never had any real existence; the market was “rigged” by somebody, and from these facts, whoever or whatever the cause, follows the depreciated value of the National Bank as a property, and this unfortunate suit at law. It is impossible in our space to give any précis of the details of the case itself. We repeat, they are well worth reading. No excuse can be made for a banker, who ought to be the guardian of his depositors, becoming the co-operative agent of perilous speculation. Circumstances do and will arise when such a panic as that caused on “Black Friday” by the failure of Overend, Gurney, and Co. make menʼs hearts fail from fear. They do not attempt to reason with themselves. They simply hoard in fright. Bankers at such moments have to protect themselves against a panic run. Unfortunately, too many expand in the sunny speculative days when they ought to contract, and refuse legitimate accommodation when clouds come to customers they ought to aid. This is the history of the last three years. The principle of banking should be—personal experience of the customer, a certain amount of accommodation in storm or in calm to that customer, and no promoting or loan-mongering such as records of the Cork Assizes of the past week supply relative to the National Bank and its chairman, Sir JOSEPH NEALE M’KENNA.

TRADE AND FINANCE.

GOOD red English wheat was slow of sale in Mark-lane last Monday at 54s. to 58s. for old and at 56s. to 58s. for new. This was 2s. lower than the prices of the previous week, which represented an advance of 1s.; and as the crops have since been fully gathered, while imports are liberal, the reduction is hardly yet stopped. Wheat growers have done so well this season, and they can send their produce to market so rapidly, that we may look for a maintenance of home supplies until a price is reached which will induce farmers to hold rather than to realise. The price at which this may be expected is about 50s. for the descriptions named: and this price, now that the drought has passed away, will not improbably be seen by the middle of September. While it will ensure bread to consumers at reasonable and comparatively low rates, it will, for the most part, satisfy the expectation of farmers; and when these two classes are content with their position, it may safely be inferred that there will be a greater demand for manufactured commodities and raw materials generally.

That 50s. will be about the ruling price of wheat will appear from several considerations. One is the superior quality of the crops, not only England but all over the world where the harvest has been good. This is attributable to the effects of prolonged sunshine, which from the general accounts of excessive heat appears to have been universal. The ears have been swelled to their full. Of blight or disease we have heard nothing. The corn has been dried upon the spot where it was cut, and the moment it was garnered it might have been turned into bread. This quality renders old wheat less necessary, if not quite unnecessary, for mixing, and in consequence old wheat is competing with the new. As a greater breadth of land was sown last year with wheat in consequence of the full prices of 1866 and 1867, quantity is also an important element in estimating the future range of prices. We have no statistical means of ascertaining the increase in the area of land applied to wheat. We only know that it was more than in the immediately preceding years. On the whole, the farmers may be taken not only to have secured crops of high quality, but of exceptional abundance. Hitherto they have not fully shown their capacity for supplying the markets. They are only feeling them; and this process will go on until, as just observed, a price has been reached low enough to cause them to hold. That 50s. will be about the point we infer because it does not assume a fall of more than from 4s. to 6s. from present prices; and the probability of such a reduction is supported, not only by our stocks, but by the knowledge that imports will be ample. There is, however, one condition more which seems to assure us that what a week or two ago was barely possible has now become as certain as we can be of any issue yet in the future. The drought has passed away, and it has been succeeded by genial showers, intermittent with sunshine, which have refreshed and renewed the face of the country. Land that a fortnight ago was brown and scorched is now smiling with luxuriance; and the grass that had shrivelled up promises to give another crop to repair the deficiency of the first. A great portion of our root crops will either be saved of supplemented by others of a later season. Until this change took place it was with reason thought that, though the wheat harvest was good, much of its benefit would be neutralized by the deficiency of what has been called the meat harvest, which cannot be good if the hay and root crops fail. We are now assured of feed for our live stock, which, if dear, will still be cheaper than if the drought had continued only a week longer. The weather now is improving the meat harvest, just as the weather six weeks ago was improving the wheat harvest. All this will tell, in due time, upon the price of wheat.

Under these circumstances the estimated probable price of wheat which we have made is not an unreasonable price. At this season of commercial dulness, the prospect of lower prices for the chief article of food cannot but be a point of extreme interest. We have estimated a fall of from 4s. to 6s. before the end of September, by which time men will have returned from their vacations, renewed in spirits, we trust, as well as in health. Take the mean of 5s. as the probable reduction. At this estimate a sum of more than four millions sterling will be available among our own population for buying other articles. The general dispersion of such a sum out of the pockets of consumers must have some effect upon our domestic trade; and it is quite as certain that the excellence of the harvest in all the principal countries that we trade with will enable their several peoples to buy more of our exports. To support high prices of wheat or meat, the supplies must be less than the demand. These conditions in the case of wheat are universally reversed, and we do not despair of seeing them considerably modified in the case of meat now that the risk of general failure in the grass and root crops is removed. In these conditions there is rational ground for anticipating a revival in trade, sound and unspeculative; and trade in that state will compel where it may not invite financial confidence. A 2 per cent. minimum rate of discount at the Bank of England is the expression of a state of distrust, and the last twelve months has shown that the offers of money at this rate have failed to revive business. This was because the area within which the offers were made was contracted. Low interest offered no temptation. But with enterprise encouraged and trade invigorated, through the means which the harvest will furnish to the population of supplying their wants and increasing their luxuries or enjoyments, money-lenders and money-borrowers will speedily renew their former relations, to the advantage of both and the benefit of the community.

TRADE AND FINANCE.

WE referred last week to the excellence of the wheat crops, and to the consequent probability of lower prices than were then prevailing. The fluctuations in Mark-lane have confirmed this view, notwithstanding the partial firmness of Fridayʼs market; and the indications of good red English wheat receding to about 50s. a quarter are practically unmodified by the weekʼs events. The supplies from our own growers, without being pressed, are good; and they have been supplemented by considerable foreign arrivals, for which the competition is without spirit. As to the continental markets, it is only at a few places where local conditions are peculiar that full prices have been obtained, while at certain great centres, such as Marseilles and Bordeaux, business was exceedingly languid the whole of last week, through the unwillingness of buyers to pay the prices demanded. Under these circumstances we cannot anticipate a higher range of rate than that which now prevails, while all the leading indications point to a moderate, if not to substantial, reduction.

It is too early yet for trade to feel the effects of large supplies; but those effects are only temporarily delayed. They will be partially felt in the winter; but their main development may not appear until the spring of next year. Meantime it is not alone from reduced prices for cereal food that an improving trade may be anticipated; the abundance of capital, and consequent low rates of discount, must sooner or later exercise their ordinary effect. The Bank of of France is still accumulating specie on an unprecedented scale. If we refer to the condition of the Bank of England, which is held to be the reservoir from which the commerce of the country is ultimately to be supplied with the means of assistance, we find that it is in a position to render all, and more than all, the aid that may be needed. According to the last return (August 26) the Bank held 20,774,101l. of bullion, with a reserve of notes and coin amounting to 11,818,471l. At the same time its discounts and advances amounted to only 15,597,078l., while it held in private deposits 19,838,830l., This is a position which on the one hand indicates the power to render accommodation to trade without enhancing the existing rates of interest, and on the other it shows that the Bank itself would derive advantage from an enlargement in the applications for its aid. The private securities have not stood below 16,000,000l. for several years, though the private deposits have frequently been less than their present amount. Looking at the amounts of these items, and a reserve approaching 12,000,000l., there seems little chance, as far as commercial affairs are concerned, of any advance for some time to come from the minimum of 2 per cent. that has so long prevailed. It may especially be noted that the export of bullion to the Continent has ceased with the completion of the new French Loan, and thus our regular supplies from Australia and America are again taken to the Bank. Hence the stock of bullion promises before the close of the year to reach even a higher aggregate than in January last, when the total exceeded 22,000,000l.

Trade, however, is likely to be exposed to the competition of a very formidable borrower, whose necessities cannot be put off, and must be immediately supplied. This contingent borrower is the Government, which has seldom been in greater need of money than it is in the current quarter. Whatever may be the cause, whether from extravagant expenditure or from postponements in the receipt of taxes, it is a conspicuous fact that at the present moment the public balances are reduced to a point that is disagreeably, if not dangerously, low. At present we are within four weeks of the end of the quarter, and within five weeks of the time when the October dividends will be due, yet there is absolutely less than 3,000,000l. to the credit of the Government in the Bank of England! This is not a position that a State like England ought to be in at such a period; and it is inevitable that a very large sum must be borrowed from the Bank in order to enable the Government to meet its liabilities. Now the Bank, notwithstanding the satisfactory state of its reserve, cannot lend two or three millions out of it without sensibly affecting the market price of money on commercial bills; and the probability that a sum equal to the mean of these figures must be borrowed may be seen from the following statement of the Government balances in the present and the two preceding years:

PUBLIC DEPOSITS.

The comparison is very unfavourable with 1867, but it is worse with 1868, because the country at that time was in the deepest depression from the collapse of the previous month of May. Discounts in 1866 were for months at 10 per cent., but in 1867, as in 1868, they had dropped to only 2 per cent. Yet when the value of money was in 1866 at an inordinately high price, the Government was able to maintain its deposits at a respectable amount, and had no occasion to borrow to pay its way in October. We do not venture to affirm that the necessities of the State will so far compete with mercantile requirements that money will rise very high in price; but the future advance, whatever it may be, will have its origin in this cause; and the competition of the State with ordinary commercial borrowers will probably last until we are well in the new financial year. To the extent, therefore, of the difference between the price of money now and its price in April next, by which time the country will have been informed what new taxes will be required to equalise the income with the expenditure, the advantages of an abundant harvest will be to some extent neutralised. We may and do lament this prospect; but the position must be accepted. The only relief consists in the fact that a good harvest is provocative of a good trade. Had the case been reversed, and to the great deficit in revenue there was superadded, as was at one time threatened, deficient crops, the financial condition of the country might have become extremely serious. As it is, it is a misfortune that just when we are commencing to recover from the disappointment and losses of the greatest commercial collapse ever known, we should be exposed to the possibility of a dearer money market—a contingency that might easily have been avoided if a more judicious economy had been the guiding principle of the present Administration.

The one great fear, however, that forms the most serious check upon a thorough revival of commerce must be looked for abroad, not at home. Scarcely a day passes without more or less open threats that Europe is about to be plunged in war, and war on a scale that will dwarf even the tremendous contests of the First Empire. It is to no purpose that now and then some official disclaimer, couched in terms of studied ambiguity, is put forth with the hopeless attempt of reassuring the commercial world. It is impossible conceive upon what ground these clumsy devices are adopted. No one, certainly not the mercantile and financial public, believes one syllable of what are complacently termed “pacific utterance.” The rulers of France know this well; and they also know that when facts are distorted to produce untrue inferences’ the fraud will not impose for a moment upon the lowest clerk in a merchantʼs counting-house. For instance, the success of the late loan was held out as a proof of the confidence of the people in the Imperial régime. It has, on the other hand, been conclusively shown that it is because of the want of that confidence that such enormous sums of money have been kept idle, that trade as carried on only to meet the wants of the day, that all classes spend as little and hoard as much as possible, and that enterprise even of the safest and best considered description is at a complete standstill. As for the magnitude of the sums subscribed, that proves nothing. The purchaser of Rentes lent their money to the State, not to the Dynasty. In the latter case there is good reason to believe that the result would not have been equally satisfactory.

Above all things let us be fairly relieved from this incessant state of uncertainty. Even if “pacific utterances” commanded credit, still commerce would be reduced to mere gambling. A careful merchant would cease to reckon upon all the ordinary chances of trade—overstocked markets in one quarter of the globe, scarce supplies in another, productive or failing harvests, and the like. His calculations would rather be based upon the gossip of courts, the varying temper of men high in power, and early reports of the instructions that are daily given to official journals for the morrowʼs number. It is time that this state of affairs came to a close, and there are many slight indications which go far to prove that the change is near at hand.

TRADE AND FINANCE.

AN event of great and general interest is often converted by a large class of people into a pretext for carrying out a purpose with which it has no connection whatever. There is a certain fascination in thereby turning an unpromising opportunity to advantage. Is it not in reality essentially convenient to have provided ready to hand an indirect mode of performing a disagreeable duty?–of giving sham reasons when, from mere timidity, or even force of habit, the real causes are by tacit consent sedulously kept out of sight? Somehow or other this style of dealing has spread through all classes of society. In church, law, or state, actual offenders often suffer on implied transgressions which were neither known nor cared for. The practice has even extended to commerce. It is a rare occurrence for the manager of a bank or great house of business to be publicly displaced, and when it does happen it is rarer still for the precise facts to be made generally known. In the case of a public company it is especially advisable for all parties to hush things up as much as possible even when at most only want of judgment or a tendency to overtrading or some other comparatively venial fault has been committed by the outgoer. No one can benefit by too much discussion. The directors dislike it, since it might betray a want of competence or proper care on their part. The shareholders dislike it, since it may cause the price of the shares to fall in the market. The public are little interested, save that a small and calculating portion will feel more chary than usual in investing in the concern. The gentleman who retires can have no possible motive for saying that it is not from ill-health, long service, or any other equally substantial reason. Thus affairs are made pleasant. Everything turns out to be apparently quite right and above board, although somehow or other suspicious will exist that there is something kept in the background.

The Board of the National Bank have lately resolved that their managing director should give his entire time to the business of the bank, and neither be a member of Parliament nor mix in politics. The present managing director, Sir JOSEPH NEALE M’KENNA, M.P., is well known to be an able and active politician, but he concurred in the resolution–although its passing involved his retirement from his present position–and it was consequently carried unanimously. The Board have made up their minds on this point much quicker than is their usual fashion. To the outside public it certainly seems strange enough that the directors of the Bank should have taken several years to make the discovery that politics and business are apt to interfere with each other, and still more so since it looks very much as if their new opinion had been considerably quickened, if not awakened altogether, by the remonstrances of their constituents on a different subject. It is further noticeable that this displacement should occur within a very short interval of a late trial for libel, when Sir J. N. M’KENNA did not come off with flying colours, although politics had next to nothing to do with the case. Again, it is no new thing for the managing director to be in Parliament; certainly he was so in some of the palmiest days of the Bank’s prosperity. His attendance at the House of Commons never interfered with his securing valuable concessions for his (mercantile) constituents–concessions which possessed but one disadvantage—that of being particularly fair on the outside, and exceedingly rotten within. In the first instance there were, at all events, good commissions to be got, which helped to swell the dividends. So far so good; but when evil days came, and the apparently profitable speculations had proved certainly prejudicial to the standing of the Bank, a sudden light seems to have burst forth on directors and shareholders. The manager ought to have nothing to do with politics. The logical inference is that, in the opinion of the proprietors, the mere fact of his being a member of Parliament was the cause of the shares having fallen in the market, and the credit of the Bank to be thus, to some slight though immaterial extent, weakened. And all this knowledge of the incompatibility of politics with the management of the Bank must have been ascertained in the short interval that elapsed since the trial of M’KENNA against USBORNE, about six weeks ago.

Sir J. N. M’Kenna is unquestionably a man of considerable talent, and of unimpeachable personal integrity, as Judge O’HAGAN remarked in his summing up; but there is no dispute that he has connected the National Bank with some schemes which no bank ought to introduce, and least of all an establishment of such deservedly high position. We give every credit to the managing director that he was actuated by the wish to benefit his clients, and that whatever mistakes have been committed are fairly attributable to errors of judgment. Still it requires but a very cursory perusal of the evidence given at the trial to show that these errors were serious enough to involve the promptest notice. A few years employed in fostering companies of the stamp of the Peruvian Railways, the Marseilles Land, and others of the same sort, although profitable at the outset, must inevitable jeopardize any bank in the kingdom. An institution whose breath of life is its credit cannot with impunity sink into the position of a prompter of projects, at the best of doubtful success. This false step Sir J. N. M’KENNA has induced the National Bank to make, and a change in the supreme control was therefore inevitable. This is doubtless the real, if unavowed, reason of the retirement of the managing director, and the Board would have shown more frankness and more courage in avowing it, than of adopting the sidewind of political engagements. The plea is especially unlikely to command respect, coming as it does on the eve of an election.

TRADE AND FINANCE.

ANOTHER quarter of the year is drawing to a close without that revival in trade which has been so long and so anxiously looked for. For many years the autumn has been regarded as the time when commercial activity is most likely to recommence, especially after a protracted period of distrust and stagnation. Equally in 1868 as in 1867 these hopes present little chance of fulfilment. At certain intervals a few signs have appeared which promised a gradual awakening from the present lethargy. Thus far they have, on the other hand, been productive of nothing but disappointment. It was a fair conclusion to draw, that if the public showed a renewed disposition to seek for better profits and higher rates of interest for their capital they would not merely support foreign loans and enterprises, but would naturally turn to home industry. If Russian companies could issue prospectuses and fill their subscription lists in a few hours, capital ought not to be wanting for British or colonial ventures. Here, at all events, was one encouraging feature. Besides, this kind of movement reacts upon all departments of commerce. Trade generally is never so brisk as in times of joint stock or other speculative activity. However, it is evident that the success of the late foreign railway loans has caused no corresponding demand for, or creation of, new investments at home. The reports from the manufacturing districts also afford conclusive proof that the business of our great industrial centres is yet far from recovering its former healthy tone. The position of the London money market again shows how little capital is needed. Money is coming in from all quarters, and there is no outlet for its satisfactory employment. It seldom happens at these periods of the year that the general rate of discount should be materially below the Bank minimum. Usually it is, if anything, higher. Therefore, since London is, for all practical purposes, the financial centre of the empire, it seems an inevitable inference that capital is overabundant in all parts of the kingdom; and in a country like England, at once wealthy and commercial, when the supply of capital is much in excess, it only signifies that trade is more or less below its ordinary level. Merchants and manufacturers refrain from borrowing money since they cannot profitably use it.

A formidable, and apparently irremovable, drawback to the revival of confidence rests in the continued tension of political affairs. This tension is so well known, and has been so thoroughly discussed, that is seems hardly deserving of more now than a passing allusion. But the evil seems to be never ending, but always beginning. Scarcely a day elapses without some peaceful reassurance, sufficiently alarming in itself, and safe to be followed by a warlike article or speech on the morrow. These tactics only serve to prolong the uncertainty of suspense; and uncertainty, as we all know, is fatal to the prosperity of commerce. In the past week some remarks of the King of PRUSSIA caused a panic on the Paris Bourse. The plan taken to counteract their effect sounds strangely at variance with English ideas. Three Ministers of the Imperial Cabinet sent a joint letter to the Syndic of the Bourse, giving their views—of course pacific—on the speech in question. Suppose an analogous case were to occur here. The Chairman of the Stock Exchange would be considerably surprised to receive a collective note from Lord STANLEY, Mr. W. HUNT and Mr. G. HARDY, to say that in their opinion the remarks meant nothing, coupled with a request to placard the note in the house. This sort of official commentary would certainly have in London, and probably had in Paris, pre-cisely the effect it sought to avoid. An ostentatious avowal of confidence in the maintenance of peace has come to be considered rather more alarming than a warlike manifesto. So at least it is judged by the mercantile classes, who have the best grounds for forming an opinion both from public and private experience.

Some strange fatality seems to hang over the crisis of 1866. On former occasions, if the pressure was at least sharp, it was decisive. Many suspensions and much unforeseen hardship and ruin were the immediate consequences, but they were to all appearances quickly got over. Whatever individual misery followed from the convulsions of 1847 and 1857, it soon sank out of knowledge, or was sedulously kept below the surface. A few months, even weeks, after the crisis and commercial affairs were proceeding as smoothly as usual, the only difference being the substitution of a little extra caution for excessive trust. We are now suffering from a kind of protracted crisis. Not only have speculative companies gone by the board, but the great railway interest has suffered severely, and in too many instances with justice. First one and then another large and outwardly prosperous undertaking, with its millions of capital, its immense works, and its armies of functionaries, has turned out insolvent, and been compelled to make the best terms it could with its creditors. Even that might have been got over, but political have closely followed upon financial difficulties. For more than two years there has been the daily dread of something going to happen. An indefinable fear and distrust have been constantly present. Week by week and month by month the same leaden weight has been paralysing the sources of industry and enterprise. We can thus claim little or no advantage for the crisis of 1866 over its two predecessors because in the later period commercial failures might be counted by tens, while before they occurred by hundreds. If the misfortunes of those days were more severe while they lasted, they were at all events much less enduring.

It is not agreeable to look forward to the future. If we were to judge by existing appearances alone, there is no likelihood of improvement over the past. The same elements of doubt and apprehension which have crippled commercial prosperity during the last two years are present now. Perhaps, however, for this very reason a change may be hoped for. It seems certain that public affairs have arrived at that point when there can be no holding back, and that some decisive step must be taken one way or the other. The sooner it occurs the better for the ultimate peace and prosperity of the world. All that can be done is to follow carefully the march of events. Prudence in business is always necessary, and at times what would ordinarily be over-caution is desirable. At present it is a simple duty to sacrifice the chance of immediate profit for the certainty of ultimate gain.

TRADE AND FINANCE.

EVERY day brings fresh evidence that trade is far from recovering from the unsatisfactory position in which it has remained for at least the last two years. The official accounts of our foreign commerce in the month of August have just been published, and although these statistics invariably appear too late to form the grounds of an immediate opinion, they at least serve to confirm previous and usually well-based conclusions. The broad facts are that in August, 1868, we exported goods to the nominal value of 16,427,597l., against 17,880,999l. in 1867 and 17,450,156l. in 1866. This decrease is heavy enough as it stands, but it is still more marked on comparing it with the totals for the first eight months of the year. Taking the amounts for the month alone, the diminution is a little less than 6 per cent. from 1866, and rather more than 8 per cent. since last year. But, on the other hand, the reduction for the eight months exceeds 6¾ per cent. from 1866, and is less than 3½ per cent. from 1867. It therefore follows that as regards the latter year at least we have been retrograding, since the average reduction has gone from 3½ per cent. in the eight months to 8 per cent. in August alone. The only possible inference is that comparatively with other years trade is at this period worse than for some time back. Private experience certainly corroborates this view. The revenue returns, when carefully examined, are equally conclusive. A decrease in the receipts from Stamp Duties and the Post-office provides one of the best and surest tests of the progress or retardation of commerce. This proof has been unfortunately too truly afforded, and it serves to show that the many causes which have effectually impeded the revival of commerce are still far from being removed.

It may seem strange that in 1866 trade (looking at it in a material sense) should be so much better in that year than at the present moment. A considerable decrease in our exports could be readily understood between 1866 and 1867 but less easily between 1867 and 1868. The year 1866 included an European war and a commercial crisis, and the decline in the first eight months of 1867 of 4,210,000l. In the same period of 1868 there was a rather larger decrease from 1867 of 4,270,000l. The reason is chiefly to be found in the invariable rule that any disturbance of the ordinary progress of trade shows its chief development after the proximate cause has passed. Thus a panic has no immediate effect upon the Board of Trade returns. Affairs may to outward seeming be progressing satisfactorily, but six or twelve months after their effect is seen in diminished orders, want of enterprise, dulness or deficient work in the manufacturing districts, and all those signs that too clearly show that trade is stagnant. It is impossible to escape from the teaching of these actual facts, even if they were not brought too clearly before us, that it would be simple folly to ignore them.

Some stress has been laid upon the circumstance that if the total estimated value of our exports appears to fall off, the deficiency is at least compensated (certainly as far as cotton is concerned) by the fact that the price of the raw material has decreased in proportion, and thus that little or no difference is made one way or the other. This result is perfectly correct so far as it goes, but what are called exceptional circumstances always happen. Hence it turns out that although on paper there can be no apparent doubt of making a profit on a certain transaction, in practice the result may be widely different. Other matters have to be considered than the ordinary ones of actual supplies of stocks in the market, and their current values. The great financers and merchants of the City, and those who are wise enough to follow them, know well this principle, and that if they desire success they must consult the temper not only of the mercantile, but of the larger general public. Leaving, however, this more important question aside, and looking only to the purely commercial view, it is tolerably certain that financiers, merchants, and the general public alike care little for new undertakings or new enterprises. A few new loans have been successfully launched, but they merely form the exception that proves the rule.

The ensuing week promises to give some token of the interest that shareholders have determined to take in their respective companies. We commented last week upon the change in the direction of one of our most important banks. In the present week it is understood that we shall have a more interesting specimen of a commercial cause célèbre. The case has yet to be judged, and the full facts to come forth. To judge from report they are not calculated to be particularly edifying.

TRADE AND FINANCE.

IT is just three years since we had to comment upon the introduction of a new Italian Loan in this market and the principal exchanges of the Continent. The object of the operation was to put an end to a provisional state of things (we quote the words of an Italian statesman) which had entailed upon the country a series of deficits of some eight to ten millions a year. Unless these were checked, it was remarked, the result must in a few years be disastrous. Various reforms were therefore proposed for saving expenditure and increasing taxation, so that the annual deficit would immediately be reduced to on four millions, and at no distant period be cleared off altogether. Apparently, however, some actual supply of cash was necessary, and hence the State Domains Loan was issued, of ten millions nominally, and of about seven-and-a-half in net cash. As Italian credit was not at that time in as favourable a condition as could be wished, it was thought advisable to protect the subscribers of the new bonds by a special guarantee of the State property. The operation proved successful, and it was hoped would be the last of the long series of Italian loans which, under one form or another, had been constantly offered to the capitalists of Europe. Nothing had, in fact, been more discouraging to the friends of the new country than to find a too faithful repetition of the worst financial extravagances regularly practiced by older governments. The consequences of such reckless waste were before their eyes, and it was certainly desired and believed that Italian statesmen would above all avoid the errors or corruption which have caused three-fourths of the European powers to become practically bankrupt. The lesson has not been learnt, however, and Italy follows in the well-worn path of deficits and loans which has been so long trodden by Austria, Russia, and a dozen others. It is only just, nevertheless, to admit that the war of 1866 has certainly shaken the calculations of 1865, and has of course retarded the equilibrium which was expected to be established after three or four years of peace. Yet, making this allowance, it seems a strange coincidence that at the very period when revenue and expenditure were calculated to balance each other, without counting extraordinary resources in hand to meet extraordinary expenses, we should have proposals for another loan of 9,404,762l., on terms which, reckoning the various advantages in the price of issue, repayment by periodical drawings, discount, &c., will give the subscribers a net return of nearly 9½ per cent. on their capital. There is, of course, a special security, that of the tobacco revenue. Thus we have once more Italy in the field for a heavy loan, and judge from appearances, it by no means promises to be the last.

The question is, how is this to end? When a State has arrived at that point of financial depression that it can only borrow at 9½ per cent., and is even then obliged to protect its credit by special security, it would appear a mere matter of conjecture among enemies how soon the inevitable stoppage must come, or among friends how late the evil day can be staved off. A State, like an individual, finds it no difficult matter at first to contract debts on moderate terms, but as its securities begin to multiply in the market lenders each time require a higher, and at last extortionate price. The 5 per cent. offered this year must be raised to 6, to 7, and at last to 9 or 10. Caution or timidity increases marvellously fast in these cases, and it does not take long before capitalists begin to ask for more than the mere general security of a Government. The next thing required is an actual pledge of specific property or revenue. As far as England is concerned this has already been done with the State Domains, and it is now to be done with the Tobacco-tax—probably the most reliable source of income, except the Lottery, of all the revenues in the kingdom. If another loan is to come out in the next year or two, some other available security must be given, and so as one portion of the public revenue disappears after another it will become a question how the Government can be supported at all without repudiation of the public obligations. We are ready to acknowledge that this supposition is an extreme one, but it is only the logical consequence of these incessant loans, which serve to foster financial extravagance to the point of ruin. Italy, it is true, stand by no means alone among both the great and second-rate Powers in this suicidal course of systematically exceeding her income, not to moderate, but, in proportion, to a very large extent. Turkey, for instance, has set the example of pledging successive items of revenue until it appears a puzzle, when we read in foreign papers of fresh projects of loans, where the security is to come from. The Turkish bondholders believe that they are safe enough within certain limits, since their guarantees are pretty certain to be enforced by the irresistible diplomatic action of one or more of the great Powers. An Italian bondholder, however, has no such safeguard. If an exceptional tax is laid upon coupons, or, in other words, a portion is confiscated, it is no easy matter to get anyone to interfere. Italy is not in any way under the same kind of European tutelage as Turkey. Hence, if from the pressure of necessity a temporary default should be made, the chance of redress is pro tanto diminished. As we have said, the supposition that public engagements will be repudiated is extreme; but, at any rate, there is a great temptation when a measure of this sort seems the only alternative to stopping the functions of the Government altogether.

The new loan contains one stipulation which will be accepted as a necessary though regrettable security. The bonds are to be subjected to no special tax, with the exception, if it be properly termed one, of the Italian income tax. The enactment of some particular impost upon the coupons of the public debt seems to be one of the latest forms of repudiation. Governments have so far subjected themselves to suspicion that they are obliged to announce formally that they will not commit an act of manifest dishonesty. It seems to have occurred to some ingenious financiers that, if they promised to pay 10 per cent. for a loan, they might reduce the interest as much as was advisable by an exceptional income tax. A pretext of this kind was of course readily exposed. In the case of Italy it is to be regretted that the precaution of stipulating for no special tax has not been uncalled for. The attempt to impose this sort of levy upon the holders of foreign loans could not be forgotten, and besides there are some questions with reference to the Cavour Canal and other industrial works in Italy, which, if not savouring of direct denial of legitimate claims, are, to take the most indulgent view, undignified specimens of sharp practice.

We have constantly expressed our opinion of the inadvisability, if not danger, of encouraging this never-ending succession of loans, which are turned to no good purpose, but are devoted to worse than wasteful expenditure. It is to be hoped that capitalists, both here and abroad, will at last cease to support them. We may be sure that, as long as persons are ready to lend, there will be no lack of governments to borrow. If the money were applied to reproductive works, no better use for it could be found. Unfortunately, it is all absorbed for armaments, war expenditure in time of peace, and in some cases for financial jobbery and peculation. One thing is sure, that lenders will sooner or later find out their mistake, when, having got to the end of their tether, governments discover it to be inconvenient to pay.

TRADE AND FINANCE.

A PARLIAMENTARY return has been lately published which tells with more accuracy than can be found elsewhere the low ebb to which commercial enterprise has been brought within the last two years. It gives a comparative view of the number of new companies established from 1863 to the first portion of 1868. The decline during the latter half of this period is necessarily very marked. Under any circumstances the extreme point to which the joint-stock movement was carried in 1864 and 1865 would have been followed sooner or later by the inevitable reaction. The crisis of 1866 served but to intensify the severity of the transition from commercial depression to commercial excitement. Nothing is more common than to ascribe important changes, whether for good or evil, to some great and striking event. The promoters who three or four years ago reaped so fine a harvest doubtless lay all the blame for their gains being cut short to the failure of Overend and Gurney, and of other similar companies. The fact is, however, that the public had already been so over-supplied with new projects that there was no room for the introduction of more. It was so in France. There, as in England, a constant stream of companies had been brought forward, for all kinds of objects—land improvements, gas, railways, banks, almost everything, until at last people got tired of subscribing for shares. The result has been precisely as we have seen it here. Although no mercantile crisis has occurred, it is as hopeless to start a new company in Paris as in London. Distrust reigns as paramount in one city as the other. Some allowance, perhaps, should be made for the effect of the war rumours that are so persistently, and with too much reason, circulated. Yet, admitting this plea, there are not wanting signs to show that some time before the Austro-Prussian war, French capital was not so freely obtained for joint-stock enterprises as in the palmy days of the Crédit Mobilier. Subscribers to these companies seem, if not to have exhausted their capital, at least to have exhausted their faith. However sanguine they might be, they instinctively felt there was a point at which it were best to stop. This feeling has of course been exaggerated, as any reaction from previous idea is almost certain to be. Instead of reasonable caution the effect has been general distrust.

As regards England, the result of the present inactivity is sufficiently exhibited by the following figures. In each year only the amounts of the nominal capital are given, a few companies—52 out of 4,264—being registered “without nominal capital.” The difference is, however, of no importance. The summary of the return is subjoined:

From the above statement it appears that in 1864 the subscriptions were about 70 per cent. more than in 1863, and 48 per cent. more in 1865. In 1866 there was a sudden drop of nearly two-thirds, and in the next year again of more than a half of even this reduced total. In 1868, calculating from the first five months of the year, even this sum will yet to be diminished.

Looking to the general figures of the return, there are some deductions to be drawn which are anything but satisfactory. It is true that of the 460 companies registered in the 12 months ending the 31st May, 1868, only about seven or eight are being wound up; but some three-fourths are returned as being “supposed to be in operation,” the remainder constituting the companies actually in existence. Of these also nearly a half are in Scotland and Ireland. We may reasonably conclude that of the companies “supposed to be in operation” a large proportion is represented by those which have omitted to send proper returns. The remark of “No return” meets the eye constantly in this paper, and therefore greatly detracts from its value. For this reason it is difficult, if not impossible, to estimate the actual amount of money paid by the public for joint-stock companies, since the nominal sum mentioned is often delusive. It has often happened that the amount called up has been materially disproportionate to the total named in the prospectus. In one case it was as little as 5l. per 100l. share.

It is of course a moot point whether the public gain or lose by their present excess of caution. Many will say that, after the severe lessons of the past few years, it is simply an act of prudence to have nothing to do with a joint-stock company. One thing is certain, that the public are acting upon the maxim. It is rare to find any one willing in these days to take shares in the most promising concern. Prudence of this kind is so far advantageous that when money is safely deposited in a bank or invested in Consols there is no fear of losing it. Safety is certainly ensured, but at a material loss of interest. If calculations of this kind had always prevailed, the wealth of England would be materially less than it is now. It is just, and in the long run advantageous, to incur some risk for the sake of ultimate benefit. If the traders of old days had thought only of safety and little profit, Eastern commerce might have remained to us a sealed book.

On the other hand, the extreme should be avoided of rushing into speculation simply because it is speculation. Oddly enough, it appears that men are prone to commit those errors in the practical purposes of life which theoretically they are so ready to perceive and denounce. Nothing is more absurd than a commercial mania, except perhaps a panic. In the one instance there is nothing but blind confidence bestowed where in all probability it is least deserved; in the other, an universal distrust as indiscriminate as it is unfair. The difficulty is to avoid these extremes. It seems hopeless to attempt to warn the public against them. The general opinion has a constant tendency to run in particular grooves, and is too often directed by insignificant circumstances.

TRADE AND FINANCE.

THE decline in the exchanges, and the consequent export of a large amount of gold, which it had been confidently anticipated would have been retained here, are the immediate indications of another change of feeling in the investing public. The British capitalist is returning once more to his old appreciation of foreign stocks. For a long period these securities were so persistently neglected that even the most habitual borrowers of the Continent deemed it hopeless to bring forward their never-ending new creations upon the London market. By the events of 1866 the English public had been taught the lesson that high interest means bad security: it was thoroughly taken to heart, and, as usual, carried to an extreme length. A mass of companies paying excessive dividends had been found to be utterly rotten; therefore such concerns should in common prudence be avoided. A similar kind of reasoning seems to have been insensibly applied to even the best classes of foreign bonds; they paid nearly twice as much interest per cent. as Consols, or more, therefore their security was doubtful. The fact was ignored that they might have been issued by Governments which had shown scrupulous care in maintaining their public faith. At length, however, investors have got tired of receiving no more than 1 or 2 per cent. in the Stock Exchange or the discount market, and are now buying back at enhanced prices the securities which not very long ago they were anxious to sell on almost any terms. Hence the bullion movement has taken a sudden turn. Instead of seeing an increase store of gold hoarded at the Bank, it is now more profitably, if somewhat less safely, employed for investment. As long as this revived demand is kept within moderate bounds, it will do more good than harm. A properly guaranteed stock issued by a country careful to allow not the slightest stain upon its integrity, and not given to habitual borrowing and extravagance, might be held by cautious capitalists. Unfortunately investments of this character are considerably in the minority. The danger that is to be apprehended is that the public may be induced to risk their money in those plausible, but hazardous and speculative loans by which so many have experienced often loss, and too frequently ruin.

There have been several signs of late that the mistrust of the last two or three years has been a little, if only a little, mitigated. After the first effects of the crisis of 1866, almost the only stocks which were in any demand were the Indian guaranteed railways. They presented the double advantage of safety hardly second to that of Consols, and next a rate of interest of 5 per cent. The supply being soon absorbed, attention was directed to the debenture stocks of our best home railways and colonial loans. The former constituted merely a change of the form of investment, since it is probable that the bulk of the subscriptions came from the holders of the previous current debentures. The latter formed a fresh outlet of capital. Without reckoning the previous debts of the colonies (exclusive of India), estimated on good authority at about 68,000,000l., the bulk of which was raised here, the new loans introduced in London in 1867 and the current months of 1868 amounted in round numbers to a nominal total of about 5,000,000l. They were issued almost exclusively for public and reproductive works, and therefore it is satisfactory to observe that they have commanded general success. New South Wales, Queensland, South Australia, and the other Australasian colonies have taken the largest sums. Beside these were the Russian railway loans, but it is difficult to estimate the aggregate held here, as probably a considerable portion was either subscribed abroad or has since gone there. It is sufficient, however, to mention that these three classes of securities—the Railway Debenture stocks, the Colonial Bonds, and those of the Russian railways—nearly all stand at a higher price than that of issue. It was clear that the public were becoming less difficult in employing their surplus capital. During the same two years a few foreign loans had been brought forward, of which the most successful were those for Chili, the Danubian Provinces, Egypt, Portugal, and the Argentine Republic, all for comparatively small sums. The total raised in cash was about nine millions in all, only one of those operations exceeding two millions sterling. Of these also a large part is probably held abroad. More recently there have been the Egyptian Loan of 11,890,000l. and the Italian Tobacco Loan of 9,404,762l. in nominal capital.

The Egyptian Loan, above mentioned, was professedly negotiated to clear off existing liabilities, and was satisfactorily heralded in the prospectus as no creation of fresh debt. This feature was accompanied by a further and still more satisfactory announcement, that Egypt, who has been for some years past so industrious in getting all the money she could, both in the home and European money markets, on any terms, contracts to borrow no more in the latter at least for five years to come. This unquestionably was the favourable condition of so large an additional issue—very large, taking into account her previous issues since 1862, and her existing revenue. To this contract she will be unquestionably kept by the markets in which these bonds are to be negotiated from henceforth. That spendthrift States will raise money as long as they can, is especially seen in the case of those in the East, which are paternally governed. The Sovereign and his Government both borrow on personal credit, and on any increased taxation they can levy with safety on the people. Take Turkey, for instance. For years we have heard of nothing but her reforms and retrenchments. She has had many friends in this country to parade both, but both have been almost always a happy incident reserved for the future. We have had even official estimates of a fast approaching equilibrium, but somehow or other the Land of Promise is never reached, and among those best acquainted with financial status at Constantinople it is believed that the Turk is still vitrually hard up, and only enabled to find money by borrowing at rates which even those mysterious resources of the Empire still undeveloped will not be able to support in the long run. Lenders are for the time of course enriched; but to common sense it is clear that reckoning must come sooner or later, and we have only to recall 1859, when the Italian war broke out, and when many of such securities melted away. Another allurement, skilfully prepared, for the British public and others, is the assignment of special revenues by the borrowing States. When railways and forests and river dues, &c., have all been converted into money to supply the pressing void, these needy Governments vend their monopolies. The Italian Government, no longer able to impose greater taxation without the risk of extreme popular discontent, has just raised a new loan of 9,404,762l. sterling nominal on the Government tobacco monopoly. This operation is said to be successful. It may be a perfect security, but it may not. It so happens that in Spain some of the provincial juntas have very recently taken advantage of the revolution to abolish this tax upon tobacco, which is regarded as especially oppressive by southern nations. It becomes a serious question, particularly for lenders, what is to be done when these various States have pawned and sold all? Necessarily if the money so obtained is expended on reproductive works, the temporary sactifice will be more than counterbalanced by the results; but hitherto it has certainly not been so—costly armaments, the evil fruits of despotism, or national extravagane have sapped the resources and wealth of too many foreign countries. Their money as well as their men have been spent in absolute waste. Our English capitalists will be wise to remember this, and reflect well before, merely to get a high rate of interest, they place their fortunes in the hands of such unceasing and unsound borrowers. They have had this year one specimen of confiscation abroad in the shape of exceptional taxes imposed on the public debt. It was quickly found that this system must be suspended if more loans were to be got, and we have now the re-assuring stipulation in some loan contracts, markedly in that for the Italian Tobacco Loan, that the subscribers are to be permanently exempt from similar deductions. If, however, evil times should come, especially if war should arise, this confiscating remedy must of necessity be again resorted to. Governments so long and seriously impoverished would be unable to pay and we should have nothing to do but grumble at their “Non possumus.”

TRADE AND FINANCE.

THE returns of our commerce for the first nine months of the year have just been published, and at the present period are of more than usual interest. It would be easy to deduce both favourable and unfavourable results from the figures, since, although there is a marked increase in September, taken separately, still there is an equally marked decrease in the total of the year. In the latter item, for example, a reduction is exhibited, compared with the panic period of 1866, of 8,232,635l.—from 141,936,898l. to 133,704,263l.—a difference of rather more than 6 per cent. Judging by this fact alone, it would appear that we are materially worse of than at a time when trade was utterly disorganised by the severest crisis in modern experience. The comparison is not much better with 1867. In this case the falling off is, it is true, only a fraction over 2 ½ per cent., but if, as we are assured, confidence were reviving, it seems strange to find that the difference is not the other way. There is indeed nothing extraordinary in the circumstance that our present exports should be less than in 1866. All exceptional disturbances of commerce have a prospective rather than an immediate effect. The orders given in the prosperous year, the ventures and engagements undertaken when everything appeared fair and untroubled, are often completed in a season of gloom and uncertainty. We are, therefore, prepared to meet a sudden decrease in the trade of the next year following a panic, but afterwards we look for a gradual though moderate recovery. Hence it may be inferred that if 1868 gives no better, but rather worse promise than 1867, the long-looked-for revival of trade is even farther off than ever.

On the other hand, there are signs that if the year itself shows by no means a favourable account; at least there is an improvement in the last month alone. The exports of September not only exceed the corresponding period of 1866 and 1867, but are higher than in any other month of 1868. The augmentation has been pretty continuous, as the following figures will show:

1868.

The three last month manifest an especial advance, and slightly exceed the sum for the same period of 1866, but are yet nearly half a million less than the past year. The returns for July to September are subjoined:

At the same time it may be remarked that in 1866 the exports for September had decreased, compared with August, from 17,450,156l. to 16,671,078l. and in 1867 from 17,880,999l. to 16,145,584l., whereas in 1868 there was actually an increase, as shown above. When, therefore, the question of an improvement in trade is disputed, it is a legitimate argument to point out that if dulness prevailed in the first part of the year, the latter months at least have exhibited a material recovery. We incline to take this view. There are unmistakable signs that the lethargy which has prevailed for the last two and a half years is giving way to a feeling of greater confidence. The demand for foreign stocks, and the readiness with which the Russian Railway loans have been subscribed, conclusively prove that the moneyed public have so far got over the shock of the disasters in 1866 that they think their capital can be better used than in leaving it idle and unproductive. Opinions of this nature are rarely confined to one class of men. Even as the small investor withdraws his deposit from a joint stock bank to buy a Russian or Egyptian bond, so the merchant once more takes confidence, and seeks to enlarge rather than to contract his business. The unexpected change in the political situation owing to the revolution in Spain has also materially contributed to this return of commercial activity. The best criterion is afforded by weekly accounts of the Bank of France. Instead of gold being accumulated to an almost fabulous total, week by week sums are now withdrawn. There can only be one reason for this alteration. The apprehension of war has for the moment died out, and money is again employed in trade. We must guard, however, against building too great hopes upon these apparent changes in public opinion. They are at best but indication of the actual tendency, and it will be the work of more than a few months to recover the confidence which was so rudely put to flight by the commercial and political events of 1866.

To return to the Board of Trade tables of September, it appears that among the principal items exported from this country cotton manufactures show a satisfactory augmentation. The totals of piece goods for the nine months have been as follows:

For the month only the figures are:

The difference in quantity between 1866 and 1868 corresponds nearly to the shipments in September alone, so that in the first eight months of the present year we exported about as much as in the nine months of 1866. But notwithstanding that the quantity shows an increase, there is a material decline in the value. The amount in sterling is represented as under in the nine months of the respective years:

In the month of September alone there is a decrease of more than a quarter of a million in value compared with 1866, and an increase of about 165,000l. over 1867.

Cotton yarn shows a considerable increase in quantity, but a smaller augmentation in value. In the nine months the totals were:

This is not a satisfactory result, since it implies that it is cheaper to manufacture cotton goods abroad than to buy them in English markets. As regards woollen yarn also there is the same argumentation:

In linen yarn there has been no material difference. In linen manufactures the exports have decreased considerably. Taking piece goods alone, the following are the figures:

Woollens are also lower on the year, although the month alone exhibits an increase:

As regards iron similar results are shown. Although the totals for the year are rather unfavourable, those for September alone present a slight improvement. Taking the first nine months, the following are the figures:

The imports and exports of specie present some of those singular contrasts which appear destined to puzzle the scientific monetary authorities of the day. True that we imported more in 1866 than in 1868, but we also export more. The totals are:

IMPORTS.

EXPORTS.

BALANCE RETAINED.

On the whole it appears that the low rates of interest in 1867 attracted on balance little more than a million less than the 10 per cent. of 1866, although in 1868 there was a reduction of nearly three millions, when money has been nearly the same price. We leave these anomalies to be explained by the advocates of the flow of gold theory.

TRADE AND FINANCE.

THE British public, as is their wont, appear to be passing through the intermediate stages which separate the lowest suspicion from the highest confidence. A year or two ago the advocacy of a foreign security as a desirable means of investment would have been utterly scouted. Capitalists were more inclined to dwell upon the many instances of bad faith exercised towards the British creditor than to pay attention to the examples where public faith had been strictly, and even scrupulously, observed. One extreme, however, always begets another. At present there seems to be hardly any limit to the desire for subscribing to foreign bonds. In one and most important respect there is an improvement over old times. Russia figures still as an ever-ready borrower, but at least she alleges grounds for her claims more tangible than those which used to appear in the loan prospectuses of ten and twenty years ago. Whatever money is raised is at least to be devoted to an useful purpose. Capital is undoubtedly well employed in such works of general benefit as the Russian Railway Loans are intended to accomplish. Of course something can be said on the other side of the question. There is always the lurking mistrust that these undertakings are planned more with a view to military than commercial facilities. The same argument would indeed apply to every improvement in the internal communications of any great and powerful empire. The same railway that conveys the harvests of a province to a profitable market will on occasion equally serve to carry troops for hostile aggression. This, however, is the condition of all improvement; the best things are most liable to misuse. The concurrent testimony of the world certainly favours the belief that no better security exists against war than safe and frequent intercommunication between country and country, province and province. Hence there can be no doubt that subscribers to a railway loan have at least the satisfaction of knowing that the money advanced will not be misapplied in the scandalous fashion of covering annual deficits caused by extravagant and irresponsible expenditure. It is certainly a mark of the steady progress of public opinion that foreign governments approach the possessors of capital in a more rational and business-like manner than was their custom a few years ago. Then the idea of giving any explanation as to the manner in which the money should be employed was never entertained for a moment. To venture an inquiry was looked upon as equivalent to infringing a State prerogative. The bonds were offered without comment, whether by Russia or Austria, by Portugal or Venezuela, to be accepted or rejected at once. As long as foreign credit remained good this policy answered every purpose. Latterly, however, there has been a growing disposition to look more closely into the affairs of those States whose appearance on our markets may safely be expected once or twice a year. The change is easily discerned. We have elaborate tables of revenue, special guarantees, the precise objects for which the loan is wanted, all duly specified, and, in short, a whole accumulation of securities, none of which, it may be observed, would be worth anything if the borrower should choose to break faith. Whatever may be thought of these concessions, they at least serve to show that the public require a little more than they were wont to do. It is impossible to banish credulity altogether; but it is nevertheless a step in advance to expect statements and guarantees, however worthless they may ultimately prove. Anything is better than the blind and foolish trust that takes everything for granted, without even the semblance of inquiry or the desire to take the commonest measures of self-protection.

The desire of the public to invest in foreign securities is, however, more evinced at present by the purchases of bonds long ago created than of fresh issues. The Russian Railways are an exception, but as regards these creations there are special reasons for their being taken. They are based not only on the credit of the Government guarantee, but also on the actual value of the different lines themselves. Besides, the prices at which they are offered make them very remunerative in point of interest; and there is also the fact, which investors never fail to appreciate, that the market quotation has become materially higher than the amount of their original issue. Hence every fresh loan that is brought out is speedily taken. There is no doubt that the public will not have reason to complain of any insufficiency of these stocks. The prospectus of one is hardly distributed before we have another. Our Australian colonies show no desire to be behindhand. Almost every mail brings news that some fresh railway expenditure has been authorized in one or other of the provincial legislatures. Australian securities promise shortly to be as plentiful in the market as those of any borrower with whom England, for good or evil, has had to deal. Leaving, however, these two classes of railway loans aside, it does not appear that the public care much for new creations. The Italian Tobacco Loan is one of the last, and it can hardly be said to have had a brilliant success. At present the chief wish is to purchase those bonds which have been for years in existence, and all that time have been regularly paid. They have, as it were, the prescription of antiquity. Few people care to anticipate the chance of default or repudiation, but if ever they consider the matter they are sure to form the conclusion that the latest loans will be the first to suffer. This will to some extent account for the apparent discrepancies in price between stocks which, as far as security is concerned, stand on precisely the same footing. A bond issued fifteen or twenty years ago is considered more valuable than one created within the last twelvemonth. The latter may pay the same interest, and even possess special advantages in the way of repayment by drawings, but somehow it is almost invariably estimated to be of inferior worth.

The fact, however, of London market being again open to the needs of the foreign borrower is not likely to be thrown away. A fine array of loans may be expected within the next few months. The Bank rate of discount will of course be raised, but the difference between 2 and 3 per cent. will hardly discourage investors who look for 9 or 10. The position of financial affairs on the Continent is such that it is difficult to say what terms may really be offered. Formerly, when foreign loans were few, it was considered a great gain to invest at 5 per cent.; now nothing appears to have probability of success unless 10 or 12 is granted.

High interest means bad security; and certainly, if the former increases, the latter does not by any chance improve. It is to be feared that the public may not appreciate this circumstance. The old lessons of precaution which have proved of material value during the last three years may again be cast aside, and a foreign loan mania again inaugurated.

TRADE AND FINANCE.

THE general desire which has lately been manifested by the public to invest in foreign loans appears to have been partially checked. The possibility of a rise in the rate of discount has had a much greater effect than could have been anticipated. Instead of foreign bonds being imported into this country to meet the renewed demand from English investors, a portion at least of the securities recently purchased are sent back for realisation abroad. At the same time the influx of fresh Russian railway loans has been stopped, at least for the present. Since the Imperial Government are opposed to grant any further guarantees, appeals to British subscribers will be practically futile. There is little inclination here to depend solely upon the security that mere local authorities can offer. In nine cases out of ten the very names of the provinces are utterly unknown, and the privileges they offer are in consequence equally disregarded. There is, besides, always a lurking fear that these subordinate authorities wear their responsibility very lightly. In cases of dispute or default it is but slender satisfaction to be referred for redress to the local tribunals. On the other hand, a national guarantee gives, at all events, a solid and tangible security. Any infraction is, by common consent, liable to exclude the offending Power from the money markets of the world. Since this rule is rigorously enforced, only those Governments who have sunk so low in insolvency and discredit as to find it hopeless to borrow again care to incur the penalty. Hence, if a fresh railway loan were to be brought forward with the Russian imperial guarantee, there seems every probability that it would be as readily subscribed as the last. Without this essential condition success would be worse than problematical. The calculators in the money market need not, therefore, feel much anxiety on this score. Again, the late fall in the exchanges and the export of gold have brought about that vague feeling of anxiety, or even alarm, which for the last three years has appeared at only too frequent intervals. The chance of a rise in the rate of discount to all outward seeming has materially disturbed the public mind. Perhaps, however, the occurrence of a general election has had a great deal to do with it. People are always prone to false impressions at a tiWeme of political as well as financial agitation, and small capitalists especially. As this class comprises in the main the habitual investors in foreign stocks, it seems probable that they have left off buying until the present period of uncertainty shall have passed over.

Yet it is to be feared that the sudden cessation in the demand for foreign investments is due less to moral than material causes. The plain fact appears—and it would be an useless attempt to disguise it—that the non-trading classes have not the means at their command which they had a few years ago. There is little chance of a succession of new loans varying from four to eight or ten millions being subscribed, not merely by speculators, but for permanent investment, as it happened in 1862 to 1864. The losses caused by the financial disasters of 1866 have affected all classes of the community. The tradesman whose custom has been diminished; the servant discharged because his master must reduce his establishment; the country curate, unluckily the registered holder of five shares in a bankrupt company, with calls actual or impending, has no money to put by; the savings of what the French term “the small public” have been either swept away or at least cannot be continued. The point is material, since it is among this class of persons that the steady holders of foreign bonds are chiefly found. They like the high rate of interest—no small consideration when only 200l. or 300l. can be invested; there is in addition the chance of repayment at par in the drawing, or in other words gaining a prize in a permitted if not positively legalised lottery; they may easily escape the income-tax on their dividends in a way well understood in the City; and besides, the bonds being “to bearer,” they can be held or transferred with hardly more difficulty and expense than in passing a bank-note from hand to hand. Married women used to find these securities an eligible mode of investing their earnings in the days before they could be protected by the existing law. For these reasons foreign bonds long enjoyed exceptional favour. The speculative public understood this well. When, therefore, it appeared that the distrust originated in 1866 was beginning, as regards foreign stocks, to pass away, that new issues were subscribed and old bonds bought, there was the usual wish among speculators to take advantage of the change in public opinion. The result has been that a large amount of these securities have been speculatively purchased and taken up with borrowed money. The low rate of interest lately prevailing especially facilitated operations of this nature. In the absence of demand in the discount market and the abundance of unemployed money bankers were of course ready to lend on fair terms with the protection of a good margin of security. In the meantime these purchases are held over, waiting till the small public are again in a mind to invest. It is not improbable that the delay will be long. The small public, in the first place, have, as we have mentioned, but little money to lay out; secondly, from the present aspect of affairs they will, just now at least, get little more; and, thirdly, that they are again so tentative and cautious that there is little profit to be looked for from an immediate return to the old fashioned credulity. It is to be hoped that before affairs return to their normal state when investments are bought and sold in the ordinary manner without the fear of extraneous influences, no European complication should occur. The mere apprehension of such an event caused in one day in 1859 a terrible fall on the Exchange, in some stocks of as much as 20 per cent. In the present state of continental politics a diplomatic difference, a sudden death, a popular émeute, might prove in like manner disastrous, though scarcely to as great an extent. Still in critical times a “margin” soon disappears when everybody is a seller, and bent upon realising as quickly as possible. Even the best and most cautious management may thus be at fault.

Money seems plentiful enough in the discount market, but that is simply the consequence of the continued stagnation of trade. We are constantly hoping for better times, and now and then there is an indication that trade is at last about to revive. No better sign could be found than in the rise of the Bank rate of discount. A drain upon the Bank’s resources often, if not always, means that the nation requires money, that it is able and willing to pay for it, and that in the end it will come back with a handsome profit. Nothing is more weary than to look back upon the long period when 10 per cent. denoted utter distrust, and 2 per cent. complete stagnation. It is a debateable point whether the nation at large was much better circumstanced in one period than the other. Commerce suffers severely for a time in the course of a crisis, but is altogether paralysed by the lethargy consequent on a tardy and ever expected revival. Let us trust that confidence is now about to return in good earnest, though repeated disappointments forbid entertaining any great hope.

Even the parlour of the Bank of England has now echoed to the cry which has been long resounding throughout the land. “Why is not Capital put out to employment, instead of being left to accumulate in stagnant and unprofitable millions?” “Will the public,” ask one of our correspondents, “never recover from an irrational and discreditable panic?” Look at our unenclosed, undrained, unreclaimed, uncultivated lands; look at out mineral wealth, evident to the trained eye of the geologist, but left unexplored for want of Capital; look at our boundless resources and our innumerable wants, and then turn once more to the spectacle of these unemployed heaps of money lying useless from year to year! Nearly three years have now elapsed since the financial panic set in, and confidence still seems almost as remote as ever. All this time “Capital has been on strike,” and very dim are the signs of its return to work. Can nothing be done to accelerate the consummation?

We freely admit that this question ought to be asked, and that it would be hard indeed to find a more important subject of inquiry. The mischief resulting from the panic is infinite. Unemployed Capital means unemployed industry. Nothing but money can create a demand for labour. If the millions now lying idle were put out to use, so many hands would be at once engaged, so many mouths filled, and so many households satisfied. Nothing could be imagined more beneficial to society than the theory on which the financial system of five years since was originally based. Formerly it was impossible for any man to invest anything in Jointstock Companies without investing all, and more than all, he possessed. The acquisition of a single share in any concern constituted the owner a partner, and as partner he was liable for the whole debts of the partnership to his last shilling and his last acre. That tremendous responsibility deterred ordinary people from embarking their money in such hazardous ventures, and, in order to remove this barrier in the way of wholesome enterprise, it was determined to “limit” the “liability” of partners or shareholders to the amount represented by their respective shares. The practical result was that any person became at liberty to invest 100l. in any undertaking without being liable under any circumstances for more than that sum. The expectation entertained was that this new law would attract vast volumes of Capital into central reservoirs, whence they might be diffused in fertilizing rills over new fields of enterprise. The small capitalists would thus obtain good interest for their savings, the abundance of money created would give an extraordinary stimulus to industry, and all classes of society would gain by a system which brought Capital and Labour together for their mutual benefit. In the face of all that has happened, we do not hesitate to say that the principles of this legislation were sound, and that the disappointment of the public hopes is traceable to two unfortunate incident of the first experiment.

The first of these was the difference established between the whole amount of the share and the proportion of it “paid up.” We have good reason to know that this point, familiar as it is to all men of business, was commonly misapprehended by investors at the time, and is but imperfectly appreciated even now. The new law of limited liability provided, as we have said, that the purchaser of a share in a joint-stock concern should be liable for the amount of that share, and no more. Thus, if the shares were of 100l. each and the investor had paid down his 100l. for one of them, he would be absolutely exempt from all further responsibility, and that was the notion properly impressed on the public mind. But the system on which the new Jointstock Companies were actually established upset this theory entirely. Shares were never brought into the market at full price. A portion only—and sometimes a very small portion—was “paid up,” while the remainder was left to be called for as the managers or directors thought fit. Thus, a share of 100l. might have only 20l. paid upon it, leaving 80l. payable. To take the example of a well-known case still before the public, let us see how the system actually operated in the matter of Overend, Gurney, and Co. In that Company the shares were 50l. each, and consequently any purchaser of a share would be liable for his 50l., and no more. But when these shares were introduced into the market 15l. only had been called up, while 35l. was still to be called for. By this the public was misled. It was perfectly true that the full amount of the shares in this, as in all other concerns, was published in every prospectus and could be seen in every share-list, but the fact was not apprehended by the ordinary purchaser. Investors looked at these shares with 15l. paid up as simply 15l. shares, and never gave a thought to the liability of 35l. which was still attached to them. Yet this liability, it will be seen, was so enormous as to be practically unlimited. The unsuspecting purchaser, when paying down his money, exposed himself to a demand of more than twice as much again. Worse than that could not have happened under the old system, and it is this unexpected result which has so prolonged the terror of the public. Men stood, as they fancied, to lose their investment, and no more; whereas, after the investment was lost, “call” followed upon “call” till the liability seemed interminable. All this must be rectified before Jointstock Companies can be brought into favour again.

The next and most glaring fault of the financial experiment was the outrageous extravagance with which it was conducted. Money did, according to the calculation, flow so rapidly and so abundantly into the reservoirs opened for it that it lost its old position in the market, and lenders were as eager to do business as borrowers. Capital might be had by anybody and for any purpose. The Companies, in order to attract the subscriptions of the public, offered fabulous rates of interest, and could only pay this interest by exacting still higher rates from those to whom they advanced their funds. But these persons, again, in their turn, were compelled by the very nature of their bargains to rush into daring speculations, for no ordinary enterprise could be expected to return the profits required. Capital, in short, instead of being “on strike,” was then competing against Capital for employment, and there was a glut of money, for which interest was sought without regard to security. The result might have been anticipated. The customers who were to pay the Company 50 per cent. for its advances, in order that the Company might divide 40 percent. among its shareholders, could not long make good their bargains, and when once suspicion became rife the whole fabric of finance as thus constituted came to the ground. When it is reconstructed shareholders must be content with more reasonable profits, and Directors must look less to rates of interest, and more to the value of securities. Limited liability will do a good deal, but it will not give people 30 per cent. for their money without risk.

All this, however, being conceded and established, it will be asked when and where the desired revival is to being. Our correspondents inquire why, if people will only trust their money to Banks instead of placing it out in investments, the Banks themselves cannot become investors, and so set industry going again? But the answer to this is that Banks have had their own share of the fright, and will put out their hands only so far as to allow of their drawing them back again when they please. They have had enough of “locking up” their funds. We are afraid there is no remedy for the mischief except in the effect of time, aided by the gentle pressure of the “strike” itself. We may again say, as we said some time ago, that Capital can sustain a “strike” far more easily than Labour, but it suffers something nevertheless.

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1. Text from MEGAdigital (Berlin-Brandenburg Academy of Sciences and Humanities), MEGA² IV/19, licence CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/); the editorial apparatus of the MEGA is not reproduced. ↩