The Press.
London, England, 1857-11-28 00:00:00

1146

than any one thoroughly conversant with the
subject could allow.

We do not, of course, mean to deny that any
thoroughly vicious systei . of tampering with
the medium of exchange would derange
even a prosperous commerce. All experience
proves that it would. Nay, we have no doubt
that even the recently suspended Bank Act of
1844, just so far as it is grounded on an unreal
and artificial principle, has tended in some
degree to enhance the embarrassments of an
already embarrassed commerce. But to seek
in any system of currency that is not posi-
tively fraudulent for the origin of a general
distrust and contraction of credit, is to suppose
that the passive instrument of all credit can
destroy what it is adapted merely to
register and transmit—that the tokens by
which you transfer wealth from hand to hand
are more powerful to depreciate or enhance it
than right or wrong judgment as to the sort of
wealth that you produce.

There can be no doubt—at least, since our
currency ceased to stand for what it was not—
in other words, since all paper money has
been convertible on demand into gold—that no
commercial crisis has been caused, nor in any
very considerable degree augmented, by cur-
rency evils. It is a mere delusion to suppose
either that the want or the superabundance of
circulating medium gives rise to these com-
mercial crashes. These troubles are due to
much more substantial causes—causes origin-
ating in the misemployment of capital, not in
the undue extension or contraction of circula-
tion. Between the causes of the crisis of
1847 and of the present year there is no doubt
much similarity; only then the evil was of
English growth, while now it is of American
growth. In both cases large amounts of
capital which was used and was needed as float-
ing capital had been abstracted from productive
employment to be sunk as fixed capital in railway
enterprises. Now this capital pays, or ought
to pay, a good profit, no doubt ; but, like all
fixed capital, it pays annual profit only, and
disappears itself in the course of the first con-
struction of the railway, whereas all floating
capital reproduces itself year by year and pays
a profit besides. The difference is the differ-
ence between burying your principal for ever
in a perpetual annuity, and paying it in the
shape of annual wages to labourers who
annually return you its full value and some-
thing more, so that it both supports the labourer
and remunerates the capitalist. It is obvious
enough that the permanent sinking of capital
in machinery of any kind tnay soon so increase
the value of your property as to repay the
temporary loss in the form of largely increased
profit& But the more capital is thus sunk at
the same time in any country the less likely
will this be ; and in the case of railway invest-
ments a limit is soon reached beyond which it
is quite clear that no such process can go
without a great and terrible shock to the
system of trade. Tempted by the hope of
large dividends, people withdraw their capital
from the regular permanent investments and
sitik it in enterprises where, at best, only the
interest is regained yearly, and the labour
employed in the first construction is never
employed again. Then comes the shock when
the ordinary investments, drained of much of
their floating capital, fail, and a general crash
succeeds. Now, that this has happenel
recently in America as it happened in 1845
and 1846 in England, no one who knows the
system of American trade can doubt A net-
work of railways of enormous extent has
spread like magic over that vast continent, and
almost all the means of creating them was
raised by loan on bond*. But the lenders even
in America could not really afford to lend—
they needed the capital for their own enter-
prises ; and they have sent their bonds over to
Europe—to England and Germany—and so
turned them into money. More than eighty
millions of these railway bonds are believed to
be in England alone. Hence the drain of gold
that has flowed to America to pay for these
often valueless securities. It is not for com-
modities, it is not for any excessive imports,
that we have been paying. We have simply
been buying t.iese American securities at a
price generalky, we fear, far above their real
worth.