NEWS OF THE WEEK.
THE extent of the pressure on the mercantile world is shown in many untoward signs this week. There are more failures ; and among them, an important bank at Liverpool has stopped, while another has suspended payments. From the cotton-factory dis- tricts come the gloomiest accounts of general stagnation. The occasion has brought forth a Swarm of demands and projects of remedy, not only in the shape of the usual currency schemes, which now bask in the sunshine of notice, but complaints and
cries for help from practical men : not only does the Anti-Gold- law League continue its select meetings, but a deputation of sub- stantial merchants comes to Government with a variety of sugges- tions. , Of the legion of counsellors, one set, imputing the pressure to excess of railway undertakings, would expunge that excess by forbidding the continuance of all railway works that can be post- poned; a sweeping operation, of considerable risk, which is likely to be superseded by the voluntary retrenchment of the speculators. Some, ascribing the pressure to the Act of 1844, expect a complete reaction from a repeal of that act, so as to make the store of bullion in the Issue Department of the Bank of England avail- able to the Banking Department for distribution among mercan- tile customers in the shape of" accommodation " ; a measure that would leave the convertibility of bank-notes to shift for itself, would probably pave the way to a new Bank Restriction Act, and would at all events be likely to add a panic on the score of monetary depreciation to that which exists on the score of mercan- tile discredit. Others advise a modification of the Bank Charter Act so as to release a portion of the reserve in the Issue Depart- ment—say two millions. The advocates of a mere paper cur- rency keep their schemes before the public. The deputation of practical men from Liverpool affords a remarkable example of the extent to which public opinion on the subject is unsettled : the
members of the deputation had nota d among themselves,
before coming out, what they should ask Government to do : three of them were for' an issue of Exchequer Bills on security of Consols and produce; another was for issuing 5,000,000/. of notes at 6 per cent on Government Securities, East India Stock, and Bonds- a fifth suggested "the promise of some relief within a week." Lord John Russell, with his Financial and Commercial colleagues, promised "consideration," but no measure. Ministers, it is understood, will stand firm on the Act of 1844.
The sections of the general public that are moved to offer practical suggestions appear to be quite at sea : their remedies are proposed with the earnest faith and vague reasoning of those who urge nostrums— with more hope than knowledge. No facts are adduced to show that there is really a deficiency of circulating medium, or that the Act of 1844 really comes into question. The facts that are stated concur in proving that the deficiency is one not Of money or circulating medium, but of credit. Hosts of speculators, notably in railways and corn, have
gone too far in anticipating probable returns and probable resources; there is therefore a redundancy of debt to be paid ; many are bankrupt, no one knows who will go next, and the moneyed classes withhold "accommodation "—decline to lend or advance on discount ; while there is a very general disposition to hoard money, in order to meet impending demands on the board- ers, or to make a profit of the hoard when the pressure shall have become still greater. All this difficulty was foreseen. It had.re- peatedly been shown that the reckless speculations must lead pre- cisely to such troubles as those that now press upon the mercantile world : but the warnings were unheeded by those who were in the fever of commercial gambling ; and now that the day of reckoning comes there is a painful outcry for -help. The relaxa- tion of the Act of 1844 might have postponed the-pressure for a time, by giving an apparent and temporary extension to credit ;
but it could not have prevented the day of reckoning, and would only have increased the difficulty which it deferred.
For although the want of credit is, as it were, a sentiment, it is not unfounded : there is, as compared with the gigantic scale of commercial undertakings, an actual deficiency of ready capital—of available materials or produce. Not only was capital wasted in the most multifarious and lavish expenditure—in speculation and luxurious living—but the probable resources of the future were anticipated, and were overestimated: credit was discounted, and. has for the time been used up. The merchant class has on the whole been the one to furnish the most distinguished victims—a class which conducts its affairs, private as well as commercial, upon a system of credit. The merchants of our day, abandoning the homely trading exactness of their forefathers, with vast and complicated operations, seldom know, out of any specific receiptsi what is gross income and what net profit : their incomings are reinvested ; they pay their way, both in business and in their household affairs, by " drawing "; and an ascertained surplus is perhaps a phtenomenon which they only know about retrospec- tively, if at all. This has helped to make 0,ireat establishments and "princely" merchants plunge into princely amounts of debt with- out knowing it. But if the pressure was not unforeseen, it is not without signs of reaction. Bad as it is, it is not yet so bad as the money crisis of 1825 was, although the immense scale of mercantile operations magnifies the present aspect of disaster : there has been no univer- sal panic among the banks, because the Act of 1844 has kept them generally out of speculation ; and, in spite of the railway calls, insolvency has not made an irruption into every section of the community, as it did in 1825. The failures have probably
weeded the commercial world of its weaker and more unsound growths. The "depreciation" of property and stock which is
observed is only the tangible evidence of that retrenchment which necessarily follows upon lavish expenditure : the bankrupt, or the man who foresees bankruptcy, to be averted only by retrench- ment, is obliged to sell off; he sells, and gluts the market ; prices fall ; the inevitable sacrifice restores a more healthful condition of finance; the public begins to purchase again, and prices rise. Such is the circle, of which we have reached the depreciation stage ; and from that stage we are likely to advance ere long.
