XLIII. 1847. 99. embarrass- fixed on other objects than the hustings, for the appear- CHAP. These causes necessarily renewed the pressure, and it became very severe in August, when the rate of discount CAPITAL AUTHORISED TO BE RAISED AND EXPENDED ON RAILWAYS. 4 XLIII. 100. monetary August. CHAP. at the Bank rose to 5, while the Bank reserve sunk to £4,704,000 against £14,000,000 liabilities; and consols, 1847. which had stood at 93 in the beginning of the year, fell Increased rapidly to 85. These were sufficiently strong premonipressure in tory symptoms, but the Government did not take the alarm, and persisted in the belief that, under the admirably constructed self-balancing system of 1844, the currency would right itself without any serious detriment to the general interests of the community. This idea was increased by the fineness of the season and abundance of the harvest, which was so remarkable that on the suggestion of Government a general thanksgiving was returned to Almighty God for the blessing. But though this lessened a danger of one kind, it induced another hardly less serious, which was the immediate cause of bringing on the catastrophe which was approaching. The fineness of the weather and harvest, coupled with the enormous amount of the importation, which in the harvest year from September 1846 to September 1847 had risen to the unprecedented amount of 11,800,000 quarters, of which 5,000,000 were wheat, occasioned a prodigious fall in the price of grain of every description. Wheat, which in June 1847 had been at 92s. 10d., sunk in August to 66s., and in September was as low as 52s., at which comparatively low figure it stood during the remaining months of the year. This immense and rapid fall, coming suddenly upon so large a portion of the mercantile capital of the country as was engaged in the grain trade, was attended with the most calamitous results. One after another the greatest houses. in the corn trade came down, and with them a whole host of the lesser firms engaged in the same traffic, or involved with them in business. The effect of these failures, of course, was to augment in a most serious degree both the demand for money and the general alarm. Everything tended to the same point, and that was an augmented * In May the average price of wheat was 102s.; in September it was 48s.— CHANCELLOR OF EXCHEQUER'S Statement, Nov. 29, 1847.-Parl. Deb, xcv. 386. XLIII. 1847. pressure on the Bank for advances which the Bank Charter CHAP. Act left them absolutely without the means of meeting. Free Trade had landed the country in a balance of imports over exports, requiring for the most part to be paid in gold, which had come now to exceed £40,000,000 a-year; the Irish famine had sent half as much out of the country to buy food; railway undertakings required an expenditure at home of above £40,000,000 a-year, and the great houses which had so largely imported grain were assailed by a fall in the article to little more than a half of its prices three months before. Never was there a time in European history when, from the combination of so many concurring causes, large Bank advances to support credit and carry on undertakings were so loudly called for, and the Bank had ample means to meet them, for they had still £9,000,000 in their coffers. But here the Bank Charter stepped in and locked up £8,000,000 sterling, amidst the universal pressure, in the issue department. Reduced to £1,000,000 in the banking department, the directors were compelled to be extremely cautious, and accordingly on 1st October they intimated Tooke, iv. that "5 would be charged on all bills falling due before Economist, the 15th October, and that they declined to make any 1847. advance on stock or Exchequer bills."1 314, 315; Oct. 9, cies. 101. This announcement produced, as might have been expected, a fearful impression on the Stock Exchange. Con- Commercial sols rapidly fell from 85 to 831; Exchequer bills were at bankrupt 378. discount; and such was the pressure for money that interest at the rate of 50 per cent was given for the use of it for only nine days. The failure of mercantile firms of the oldest standing and the highest respectability, beginning with that of Gower, Nephews, & Co., soon became very frequent, and much exceeded in amount anything recorded in British history, the severe monetary crisis of 1825 itself not excepted. It soon appeared that the crash was not to be confined to the grain trade, in which it had begun, but extended to other branches of business XLIII. 1847. CHAP. and banking firms. On 13th October the Abingdon old bank came down; this was followed on the 18th by the stoppage of the Royal Bank of Liverpool, which was the more alarming as its paid-up capital was known to be £800,000, and it stood in the very front rank of the banking institutions of the kingdom. Consols in consequence fell to 77; a fall of 15 per cent from what they had been three months before, and the lowest point they reached during the crisis. Important bank failures ensued in Liverpool, Manchester, Lancashire, and Newcastle. In the last-mentioned town the banking discredit was exceedingly severe, and the most important bank in the district. had a very narrow escape from a suspension of payment. The Bank of England reserve sunk between 16th and 30th October from £3,070,000 to £1,600,000 against £13,900,000 liabilities, and the bullion in both departments was only £8,300,000 on 23d October, while the 445, 446; notes in circulation still amounted to £21,200,000. a word, the two weeks ending 23d October were an unincellor of terrupted progression of disaster, discredit, and dismay; Statement, and at the close of the week everything portended not merely a crisis, but a total suspension of all business and of all payments.1 1 Tooke, iv. 316, 317, Economist, Oct. 23, 1847; Chan Exchequer's Nov. 30, 1847. 102. of the Bank Oct. 25. In Still Government, supported by Sir R. Peel, stood firm. Suspension The most earnest representations were made to them as Charter Act, to the state of the country, and the imminent ruin which threatened the whole of its commerce if the Bank Charter Act were not suspended, without effect. A most respectable deputation from Liverpool, representing the trading interests of that great emporium, was coolly dismissed with an answer that the Bank Act must at all hazards be maintained. A highly important communication from the Marquess of Londonderry, as Lord-Lieutenant of the county of Durham, portraying the tremendous risk to which, from the suspension of credit and the want of money, the coal districts in that county were exposed, met with no better success. Even an earnest request for assistance Oct. 19. XLIII. 1847. from the Scotch banks, hitherto deemed so flourishing, CHAP. failed in shaking their steady resolve to maintain at all hazards the convertibility of a Bank of England note. But at length they were assailed in a quarter where they had no defence, and the country in consequence was saved. On Friday, 22d October, the London bankers Oct. 22. had a meeting, at which it was agreed that, if Government would not sanction a deviation from the Act on the part of the Bank, they would withdraw their whole balances from it. This was decisive. The bankers' balances in the hands of the Bank of England were £1,774,472, and the reserve in the Bank to meet this amount was only £1,600,025.* In these circumstances, submission was a matter of necessity. The bankers' resolution was communicated to Government on Saturday 23d, and early on Monday 25th Oct. 23. the celebrated letter signed by Lord John Russell and the Chancellor of the Exchequer was sent to the Bank, authorising a deviation from the Act. That which neither a representation of the impending ruin of Liver- 1 Chancellor pool and the manufacturing districts of Lancashire, nor the prospect of an hundred thousand colliers being thrown ment; Parl. out of bread in the mining districts, could effect,1 was at 397, 398. once brought about by the dread of the Bank being * "Question 2881.-Supposing the London bankers had been, from the pressure upon them, obliged to withdraw a large amount of the balance which, I believe, equalled pretty nearly the amount of your reserve on the 22d October, what would have been the effect?-On the 22d October, the reserve in London was £1,600,025, and in the country £776,447, making together £2,376,472. The bankers' balances were £1,774,472. Supposing their balances had been withdrawn from us in the course of business, we should have had an opportunity of going into the market, and, by selling securities, we should have strengthened ourselves by taking notes out of the market, and then met the bankers' demand."-Mr MORRIS'S (the Governor of the Bank of England) Examination; First Report on Commercial Distress, 1848, p. 221. "Her Majesty's Government have seen, with the deepest regret, the pressure which has existed for some weeks upon the commercial interests of the country, and that this pressure has been aggravated by a want of that confidence which is necessary for carrying on the ordinary dealings of trade. They have been in hopes that the check given to transactions of a speculative character, the transfer of capital from other countries, the influx of bullion, and the feeling which a knowledge of these circumstances might have been expected to produce, would have removed the prevailing distrust. Their hopes have, quer's State Deb. xcv. |