The Liverpool Standard and General Commercial Advertiser.
Liverpool, Merseyside, England, 1855-10-23 00:00:00

MONETARY AFFAIRS.

THE operations of the money market in London,
and the changes in the rates of discount, and conse-
quently in the facilities for accommodation, have a
sensible effect on commercial transactions, and there-
fore command a considerable share of attention at the
present time. They would otherwise be of compara-
tively slight import ; but, so long as panics and their
concomitant evils arise from mere vague impressions,
without reference to judgment or even to material
facts, it becomes necessary to pay some attention to
such movements. On Thursday last, the Directors
of the Bank of England made another advance in the
minimum rate of discount, that is, fixing the lowest
rate of interest at which they would lend money on
mercantile bills ; and forthwith we were told that the
Funds had considerably suffered, although the quota-
tions presented but little real difference. The inference
which is endeavoured to be drawn from this fresh
application of the screw is, that the Bank Directors
are in dread of a continued drain of specie, and pursue
this means in order to cheek the demand for accom-
modation. If this were true, it might be supposed
that money was becoming scarce, and that there were
in consequence grounds for apprehension as to mer-
cantile security, which is usually endangered by
difficulties in obtaining discounts. Other facts, how-
ever, do not seem to warrant this conclusion; for, though
the natural tendency of continuous advances in the
rate of interest is to induce demands for discount, in
order to make timely provision for expected difficulties,
and thereby to create the very evil which such
measures are professed to guard against, it is stated
that unemployed capital is more than ordinarily
abundant ; that loans are made on Government Secu-
rities at the low rate of three and a half per cent.;
and that Discount houses have money so freely offered
to them that they have been compelled to refuse it.
Yet, in the face of such evidence of almost a plethora
of capital, we find the Bank of England continuing to
attempt a restriction of its issues by increasing its
charge for accommodation ; so that we have a right to
assume that other influences are at work than those
which ordinarily operate in affairs of this kind,
Again, the efforts of speculators for a fall in the Funds
have been unceasingly pursued, and yet so large has
been the demand from the public for stock for invest-
ment, that these efforts have proved comparatively
ineffectual, and the Funds with all their fluctuations
bear now, and have borne through all these adverse
movements,—with an expensive war being carried on,
and money also required for the purchase of foreign
et a
p t
part
rt
o f the
Bankeof primary
England
supplies of corn,—a far higher price than at any pre-
vious period under similar circumstances.
It already
on th been
s d that th
of has
this
movement
was the operations of the Bank of France to obtain
a large additional supply of gold in order to compen-
sate for the drain which the exigencies of the war had
created, and the enhancement of the difficulty by the
home demand which the movement itself had. stimu-
lated. We may, therefore, view it in the light of an
operation confined to that establishment, rendered
necessary by its own circumstances, and justified by a
prudent regard for its own protection against the con-
sequences of liabilities imposed upon it by legal enact-
ment. Unfortunately for the quietude so essential to
mercantile security the Bank of England occupies too
prominent a position for the influence of its operations
to 'be confined within itself. The note of alarm is
sounded, and forthwith other Banks, upon whom no
special demand is made for gold, restrain their accom-
modation, which is the life-blood of commercial busi-
ness, and increase their rate of discount so as to trench
largely on the small margin of profit which is often
all that is left of mercantile transactions. There is,
therefore, a danger to be guarded against, while there
is the seeming paradox to account for, that money
should be so plentiful and at the same time so dear.
It is not the only instance in which resources which
might be mutually advantageous are rendered unavail-
able for the want of co-operation. Some years ago
there was much capital, for which profitable investment
was sought in vain ; land that urgently needed the
outlay of capital to render it productive; and labourers
who wanted employment ; yet it was long before these
separate elements of wealth could be brought together,
and each suffered in the meantime. There is now, it
appears, no real deficiency of capital, and yet, from a
feeling of alarm, the holders are afraid to venture it
in the channels through which they ordinarily seek
for profitable investment. By far the largest portion
of the national commerce is necessarily conducted upon
credit, acceptances forming a kind of paper currency
which represents goods passing from one to another.
It is this credit which is assailed by the movements of
the Bank of England—which may be designed solely
for its own protection—producing doubts which have
no other foundation, and therefore they become of an
importance which otherwise they would not possess.
From all that can be ascertained of the causes of the
present rise in the rate of interest, there appears not
the slightest doubt that they have sole reference to
that demand on the bullion resources of the Bank of
England made by the Bank of France ; that they are
not in any degree concerned with the amount of capital
at the disposal of other banks ; nor in any way induced
by the slightest suspicion of the soundness of com-
mercial credit ; and yet, because the head establishment
refuses to lend money for less than six per cent.,
other banks follow the example, and then the public at
large begin to entertain notions that something must
be wrong, when in reality we have reason to be thank-
ful that so little cause exists for any apprehension.
There is no doubt that the fact of a war being carried
on which adds so largely to the national expenditure
induces a belief that there must be a considerable
drain upon our monetary resources. This is partly
true, but not to the extent which is generally supposed,
as, notwithstanding the large amount in figures which
stands in the national account, the real outlay in actual
money is comparatively insignificant. It is also to be
borne in mind that the surplus profits of this country
considerably exceed the ordinary means of invest-
ment, and almost rendered necessary some mode of
expenditure which should afford security to the indi-
vidual possessors. It has been argued that the vast
sums spent in railway construction afford a proof of
the national capabilities ; but such investments were
in reality the creation, not the expenditure of capital.
It is a far better argument to refer to the concluding
years of the last war, when much greater sums were
expended, when our population was fewer, and our
means of production considerably less : yet, the
pressure was borne with as little inconvenience as
at present.
The whole of the existing difficulty appears to turn
on an alleged deficiency of gold, and why ? Within
the last few years the enormous supplies obtained in
California and Australia have been added to the
general stock. They must still exist for purposes of
commerce, in Bank hoards as security for notes, or
as representatives of material wealth ; and yet, be-
cause the Bank of England does not possess a surplus
considerably exceeding all possible requiremepts, or
rather because the Directors discover that they can
find a profitable use for a portion, and
choose to
imagine that the demand will continue to render their