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stantly to break up social unities would not be possible. In fact, without the bond of a common trust, civilisation would be unendurable by strong minds, and would enslave weak minds. The fever of society, its superficial courtesies, its external smothering of passions which it gives no spiritual power to restrain, its halflatent pressure of opinion, its unsatisfying intercourse, its glimpses of higher things, would far oftener draw men into solitude, but for that faith which not only gives access to an eternal solitude, but habituates them to see in faint signs the images of deeper realities, and to recognise the apparently shallow channels of social life, as conveying to them an influence which is not measured by the light action and the passing word.
ART. X.-THE MONETARY CRISIS.
Report from the Select Committee on the Bank Acts; together with the Proceedings of the Committee, Minutes of Evidence, Appendix, and Index. Ördered by the House of Commons to be printed, July 30, 1857.
Debate in the House of Lords on the Bank-Issues Indemnity Bill, on the 11th December 1857. Reported in Times Newspaper of December 12th.
Debate in the House of Commons on the Reappointment of the BunkCharter Committee, on the same day, and reported in the same journal.
FOR Once the serious attention of business-men is applied to the subject of the currency. The recent commercial crisis, bringing anxiety to all active merchants; the failure of many houses believed to be solvent, and of some who really were so; the suspension of the act of 1844, which, being a repetition of what happened in 1847, looks, to say the least, like an indication of defect in that famous piece of legislation, these circumstances and others have called to the topic of the currency the real minds of many who generally regard it as the peculium of dry economists, and the puzzle of captious speculators. In Lombard Street, on Thursday the 12th of November, there was no denying that the bank-note question was a practical one. Some months ago, a parliamentary committee elaborately investigated much of the subject: it was curious to compare the listless curiosity of its speculative interest with the eager queries," Will the act be upset?" "What will the Govern
ment do?" "Is the Governor come back from Downing Street?"
This crisis throws a more remarkable light on our banking practice and currency legislation, because it does not seem to be the result of any circumstances so peculiar that we may not often expect to see others of which the effects may be the same. The circumstances of 1847 have been put aside of late years as exceptional. The extreme errors of the Bank directors, the railway mania, the bad harvest, were singularities of that time, and might never be expected to recur; at least, not all of them at one time, or in so aggravated a form. The present year has no such peculiar features. Our domestic trade-the trades of banking and money-dealing perhaps in part excepted -is, on the whole, sound. Considering the enormous development which our commerce, whether of export or import, has recently undergone, few thoughtful men looked without some apprehension at the probability of a severe pressure. Most of them perhaps really anticipated a good many mercantile failures from domestic and personal causes. There have scarcely been any; of large firms exceedingly few. The trade of two important foreign markets has been deranged by circumstances peculiar to them; we have been affected, naturally and inevitably, by these derangements; but, except among a few billbrokers and money-lending companies, no one, even with the acute anger of disappointed theory, has been able to find blamable error in our national trade.
The time is not yet come for attempting to estimate or analyse the causes of the American panic, or of the extensive failures in the North of Europe. We have hardly as yet the facts before us. We have enough to refute a few old popular fallacies. We know that they did not arise from any excess of paper currency; for in Hamburg, where the disasters have been greater than any where else, they have a pure metallic currency; and in New York, which seems the centre of the monetary disasters of America, it has been proved by figures that there was no extension of the bank circulation of any importance at all.†
*The chief exception to the remark that our trade is of itself sound, occurs in the houses connected with the North of Europe, who, contrary to what might have been expected, have not stood so well as the American houses. This exception is not, however, one of sufficient importance to affect our general argument.
†The Economist of the 28th November 1857 gives the following figures as representing the state of the New-York banks at their respective dates:
Yet many considerate persons still impute the disasters of the country to the
Our knowledge is only as yet, however, sufficient for the purposes of refutation; we do not know enough to advance a comprehensive and positive theory. We clearly discern, however, that the trade of the North of Europe has been conducted for a very considerable period on a most unwholesome system of fictitious credit. Houses in Hamburg have given their names to acceptances for which they did not know what was the equivalent―for which, in point of fact, there was no equivalent. These acceptances were discounted on the faith of the acceptor; and, though with changes of amount and detail, in reality renewed whenever they became due. The acceptor of course ran a great risk, as his liability was for a very large sum; but he considered that he was remunerated by a commission, of which doubtless the proceeds were considerable. Every system of renewed acceptance is, however, unpleasantly affected by a tightness in the discount market: the old bill becomes due with an unfailing rapidity, but the new bill which is to replace it can only be discounted slowly, after a hesitation, after a conversation with the banker-in the end, cannot be discounted at all. Such a pressure in the discount market was produced at Hamburg by the continued drain of silver to the East-silver being there the standard of value and the metal stored as bullion— and by the American panic, which largely affected the continental city most immediately connected with the Transatlantic trade. After all that has been said of the "dashing" system of Liverpool trade, after every concession to the opponents of "rediscount" and "fictitious" bills, it is nevertheless not without pride that we may compare the consequences of the American panic on the North of England with its effects at Hamburg The stability of Liverpool, Manchester, and of the vast industrial region which is situated round them, can only be explained by a generally sound state of industry. At what former period could a great failure of remittances, a great contraction of accommodation, a ten-per-cent rate of discount, have been borne by the most enterprising of our traders with so few disasters? We can only hope that the next time an American panic occurs, it may find us equally well prepared; very much better, we fear, looking to the past experience of commerce, it would be over-sanguine to expect. That panics will occur every now and then in many of the countries with which in our ramified trade we largely deal, it is impossible to question. We may not in many cases be able to trace them by very indismismanagement of the currency. Even Mr. Cardwell, in the debate on the reappointment of the Bank Committee, allowed himself to use language which would convey such an impression: "You have gone through a great disaster, emanating from a country, let it never be forgotten, that has this convertible currency, every bank of which has suspended payment," &c.-Times, Saturday, December 12th.
putable reasoning to causes we know to be real: at the present moment there is a mist over the whole topic of the American disasters; we indistinctly discern a vast series of investments in railways, hastily planned, and still more hastily made; we think we can see that an incautious course of banking has very extensively aided these over-rapid efforts. Thus, though we are suffering from the effects of the disease, we have not yet been able to set forth in facts and figures an accurate description of its causes. The point, however, which it behoves us especially to have in our minds, is that neither at Hamburg nor in America have any events happened so singular or out of the common course of mercantile things that we can be sure of their not happening again, that we cannot reasonably anticipate any thing but an occasional repetition of them, either in the same places or in others, that we must settle our mercantile usage, our banking practice, our currency laws, to suit the recurrence, not unfrequently, of events very similar and as dangerous.
If we look attentively at these subjects, as the very great importance of these remarks should incline us seriously to do, we shall perhaps be struck by two conspicuous facts, the development in this country of an extensive-possibly a too extensive system of credit, and the existence of a law which aggravates all disturbances and hesitations in that system of credit.
Nothing can strike the mind of an observer, who can sufficiently abstract his thoughts from the crowding detail of affairs to be alive to the just impression of great facts, more than the slight effect which the recent monetary panic, which we have seen pass like an epidemic across the two sides of the Atlantic, has produced on the trade of France. This time last year we heard many complaints that the imperial government, its stock-jobbing courtiers, the Crédit Mobilier, had produced a state of things in that country fraught with danger to European nations. At that period we took occasion to show, that though these accusations by no means appeared to be without a foundation, yet that the speculative temper so induced did not penetrate very deep into the country, and that its common and legitimate commerce was in all likelihood sound. The trial has come, and the truth has been found to be so. In fact, the trade of France is, as compared with the trade of more enterprising nations, so strictly a ready-money trade, that it is not possible to create any wild panic among those who are concerned in it. If you trust no one, you need not be in a fright as to those you trust the deferred payment for extensive purchases is the primitive ele⚫ment of commercial credit; it is this which creates bills of ex
change, promissory notes, drawings, indorsements: where that element does not exist, there is no occasion for credit and confidence; every thing is settled at the time. The same is the case with lending and borrowing. Where every body keeps his own money, no one need be alarmed, or need care as to the solvency of those around him. All banking, as well as all "the industry of credit," is based on trust. The revolutions which have been so frequent in France, by inevitably disturbing all contemplated transactions, have been so fatal to this essential confidence, that no ramified system of commercial credit has ever grown up there. Something too-such at least was the doctrine of Burke-of a timorous and peddling spirit may lurk in the recesses of the national character. At any rate, the result is certain; the trade of France is so little based upon borrowing or trust, that it is not exposed to a panic such as Lombard Street and Wall Street have experienced.
Our own system of commerce is precisely the reverse. A certain energy of enterprise is the life of England. Our buoyant temperament drives us into action; our firm judgment makes us steady in real danger; our stolid courage is inapprehensive of fanciful risk; an impassive want of enjoyment in that which we are prompts us to try to be better than we are. Accordingly our commercial men have for years been prone to great undertakings; possibly there may not be in the world at this moment a single large and adventurous speculation in which there is not some sum of Anglo-Saxon capital. The probity which, after every deduction, is really, as compared with most active nations, a conspicuous feature in the English character, has enabled us to aid our enterprises by a vast and elaborate system of credit, based on defined trust, and tested by verified anticipation. Both of the two elements of commercial credit, of which we have just spoken incidentally, exist among us to a greater extent than any where else in Europe. A deferred payment for large purchases is more general than elsewhere; wholesale dealers, as a rule, give and take very large credit. Our borrowing and banking systems draw from the pockets of the people every sixpence which is not wanted at once; and place it, through the intervention of bankers and brokers, at the command of the mercantile and active community. So deeply has this penetrated among the mercantile community, as to have become, perhaps even to a perilous extent, the habit of the money-lenders themselves. A correspondent of the Economist, who writes under the signature of "A Banker," has described this plainly: "The certain fact is, that, according to the existing practice, no private banker keeps more actual coin than he wants for daily necessary occasions. In London, the Bank of England is the bankers'