7 OCTOBER 1854, Page 12

STATE OF THE MONEY WORLD.

ME money difficulties at present experienced in the City have not been altogether unexpected. We find the last number of the Banker's Magazine explaining the reasons for the " tightness " in the money-market, and for not obtaining that relaxation in the rate of discount which might have been expected after so favourable a harvest. Even before this authority addressed himself to his task, a comparison had been made with the period of three years ending in 1847, as bearing some resemblance to the same period now closing. The data for this long comparison consist mainly in a steady decline of the bullion and of the reserve in the Bank of England, while the amount of discounts was increasing. In the former period, taking the weekly returns, and speaking in round numbers, the bullion decreased from 15,380,000/. to 8,880,0001.; the reserve, from 9,000,0001. to 4,948,000/. ; while the dis- count rose from 12,400,000/. to 18,740,0001. In the period ending with the _present season, the decline of bullion is from 21,867,000/. to 13,321,000/. ; of the reserve, from 13,914,0001. to 7,700,0001.; while discounts advanced from 11,325,0001. to 14,719,000/. In each period there was a de- crease in the deposits of private customers of more than a million sterling. These resemblances were noted before the present failures took place, and they are not without interest ; but the

differences are still greater than the resemblances, and we should draw very erroneous conclusions if we were to presttine the seine sequel in 1854 that we had in 1847. The proximate cause of the difficulty in 1817 was the railway speculation,—an enormous expenditure of money without present return, and in a great proportion of cases without any security for

the future. A throwing away of cash, accompanied by glaring in- solvency, naturally called up many claims that might Otherwise

have been treated gently, and so aggravated the consequences of miscalculation. The war expenditure is now made to do duty in accounting for the extreme and general want of money, instead of the railway expenditure : but it has no true resemblance to that expenditure, either in aimlessness or in scale; and we shall presently have proof how little it affects the market. Supposing the war expenditure had already reached 20,000,0001.—a' very large allowance—what is that sum spread over the whole nation, in comparison with the sums dragged out of a comparatively limited number of pockets during the railway crisis ? For the English nation can easily spare such an amount and scarcely miss it, whereas the large holes thus created in the money-market cut up the whole surface of the commercial world. Instead of baseless speculation, there are plenty of facts to ac- count for the present tightness of the money-market, to justify the caution which for the moment aggravates that tightness, and also to justify hopes of a recovery at no distant date. The oorn-market gives us one series of influential causes. The harvest, it was re- ported, would be in such fine condition that the new wheat would do without a mixture of the old wheat; a rash speculation with re- gard to English corn, and it was not substantiated. Hence, the old corn suddenly rose in value ; and the fact that the corn-market has its • bulls," as well as the money-market, helped to enhance the rise. Thus, more uncertainty was introduced into the operations of that department. The check, however, was not altogether to be regretted ; there had perhaps been somewhat exaggerated anticipations as to the cheapness of corn during the ensuing twelve months. Moderate prices no doubt there will be : as compared with the state of the market last year, the public will certainly save millions in bread outlay. But very great cheapness of corn does not result in this country from a single good harvest ; one good harvest after another is necessary to give us the prices of 1836. A slight reaction, therefore, on the expectations of extravagant cheapness, is natural, and not un- wholesome.

The state of our manufacturing districts, and of the countries abroad with which they are in immediate relation, furnishes another class of reasons. All is caution and dullness at Manches- ter; at Nottingham there is only a slight increase in the transac- tions, still some depression; and in the Irish linen-market, not- withstanding the complaint that the raw material had been out off in Russia, " stocks are accumulating." The reasons are only too evident. The last reports from Australia confirm those which have previously been received—markets are overstocked with goods, prices still dull. The sudden extension of the Australian trade with the discovery of the gold, had produced the usual effect of overstocked markets there, and over-stimulated production and exports in this country. Manchester—which had abused the relief then afforded to an overstrained trade—now feels the re- action. India, too, reports dull markets. In the United States, where they always trade fast, there has been a railway speculation ; that speculation has been aggravated by frauds in great shareholding companies—the creation of imaginary shares to an immense extent; and the partial deficiency of the grant-Drop,-- exaggerated, we believe, by reekoni4 that the deficit will amount

to one-third or one-fourth of the average crops,—suggest apprehen-

sions that our American correspondents will not be able to sub- stantiate their liabilities within the usual period of commercial transactions. Immense prices are given there for money—ten, twelve, and even eighteen per cent; prices which indicate distrust, and suggest a fear that we have not yet seen the last of the diffi- culties. This must tell severely upon our manufacturing districts,

whose wares are already to some extent forcing a market by sacri- fice of prices. It explains the absence of an American demand. in Nottingham. It helps to explain an American decline in the de-

liveries of cotton for consumption in Lancashire. In regard to trade generally, however, while the money-market is tight, while great houses at Liverpool are failing and those in Manchester and London are sympathetically shaking, there is upon the whole no general depression in any business or employment; a fact which we must in part ascribe to the sound state of our agricultural business,—blessings on Free-trade that created it! and to the sound state of the industrial market,--blessings on the emigration that helped it!

In addition to these causes for real difficulty in the operations of trade, there is another which tightens the screw. The close of the year is approaching; the bankers and the bill-brokers, as the Banker's Magazine observes, usually exercise a eloser vigilance.; and that periodical prudence must of course be strengthened by the peculiar circumstances at which we have already glanced. The mere anticipation that the war expenditure would create a demand for money—an apprehension much exaggerated—has also lent its help in making the tightness still tighter. We are now able to understand that there are substantial reasons for proceed- ing with more than usual caution,—substantial caution for the present diffiCulties; and grounds not less substantial for antici- pating that, with the sound state of production which really ex- ists in the principal countries corresponding with our manufac-

- — tering districts, and in our own land, the difficulty will be gra- dually and perbaps not slowly worked through.

A grand difference between the triennial period ending in 1847 and the present lies in the state of the Consol market : which is iudeed remarkable, though anything but unintelligible. Of the former period, although there were, considerable fluctuations, it might be said broadly that the price of Consols declined from 100;4 on the 4th joinery 1845, the highest price of that year, to 78; on, the 19th October 1847, the lowest price of that year. We now come to the present triennial period. The lowest price of 1852 was marked on the 24th of January, and it was 951 ; by the 9th December it had advanced to 10111. The subsequent fluctuations have been considerable:: at the end of April and beginning of May 1853, the price stood at jp1; the lowest price of the year was marked on the 27th September, and was alt. The actual declaration of mar begot a transitory panic, and for the moment the Bears seemed to have it all their own way : Consols were down to 851 on the 30th of March 1854; but when the folly of the saoritioe became apparent, Consols rallied; and on Satur- day last they were, as they had long been, steady above 93, with a rising tendency. Then came " the news," and a sudden burst upwards was expected—by all but those who kept their regard fixed upon the broader influences at work on commerce and " the City." The last price on Saturday the 30th September was a little below the highest of the day, and stood at 95Z 1 : the opening price on Monday the 2d October was 95Z to 96; "some" purchasers ventured 1-8th higher ; but the closing price was 951 a-1-8th above placid Saturday ! What should we infer,from this novel exhibition of firmness, if not that the men at the head of the money-market know how little this empire is affected by the vicissitudes of a weaker power such as Russia—know how sound, generally speaking, is the state of commerce, how sound the financial government of the country ?