The Express.
London, England, 1864-05-09 00:00:00

HIGH WATIIIAT LONDON BILIDGIC.

MI DIY —ions's& 4h. 0m..-
... Afternoon. 4h. 20m.
Tchaionow Ithaldas. th. ....Mlbrnoos. 4h. 5'J-ch.

LONDON, MONDAY, MAY 9.

Arras a short period of temporary ease the
money market has again become extremely strin-
gent. Within the past week the Bank rate has
been successively advanced from 7 to 8 and from
8 to 9 per cent., and the appearance of the last
return is sufficiently discouraging to warrant the
fear that even these exceptional measures may not
prove adequate to arrest the evil. For some
cause • sudden demand for money has arisen,
which has seriously trenched upon the Bank's re-
serves. Various reasons have been pointed out—
either a re-commencement of undue speoulttion in
the cotton market, the export of bullion abroad
for foreign loans, purchases of cotton, arc., and
the absorption of capital in the recent extension of
joint-stock enterprise. Against these views, how-
ever, it may be urged that there has not latterly
been anything like such a speculative movement
in cotton as was witnessed some months ago, the
tendency being, in fact, rather the other way ;
secondly, that our exports of gold have largely
diminished, so that in ordinary times they would
have provoked little or no remark ; and thirdly,
that as regards the new companies it will be
difficult to prove that they have materially con-
tributed to the pressure, while some reasons can be
brought forward to show that theoretically they
ought rather to have diminished it. The chief
charge, in fact, that has been brought against them
is that, by affording a superabundant supply of
capital, their competition, in the absence of •
sufficient demand for the legitimate purposes of
trade, will necessarily result in the development of
a series of unsound speculations. At first sight it
would no doubt appear that the creation of new
banks and credit companies would produce this
effect. The establishment of each fresh under-
taking would imply that a further portion of the
general savings of the nation is indirectly turned
into the discount market, already fully supplied.
The case would have been different if the ma-
jority of the new companies had been in
the direction of industrial enterprise calcu-
lated to absorb instead of to accumulate capital,
in fact, as was seen on the enormous scale of the
railway mania of 1845. Under present c"^cum-
stancea, however, the movement has been pre-
cisely opposite, and yet the new banks have con-
trived to incur the contradictory odium of affording
undue "facilities" on the one hand, and of causing
the money market to be tight on the other.
The most remarkable feature of the late course
of the money market seems to have attracted
little attention, and yet in this point may be traced
the entire cause of the disturbance. It lies in
the almost spasmodic movements in the value of
money. Without any assignable reason a demand
rapidly springs up and as rapidly subsides,
and the rate of discount fluctuates accor-
dingly as much as one or two per cent. in
the course of a week. No attempt is made to
account for these sudden perturbations beyond
that of using the old stereotyped phrases of undue
inflation, and so forth. If there had been • gra-
dual but increasing pressure, at last terminating in
a panic, these arguments would have seemed rea-
sonable enough. But in the present year there
appears a peculiar kind of tension, so that any
cause, however alight, produces an unlooked-for
effect. Why should the money market experience
these violent oscillations ? To what influence
should we ascribe a rapid rise, followed by an
almost immediate fall, to be succeeded in a few
days by a renewed advance f The strange part of
the question appears to be that there is still
everywhere an abundance of capital, but • singular
unwillingness or inability to lend. Only one
solution can be proposed for this enigma. It is
evident that there is some fault in the machinery
of commerce, and this defect it behoves the nation
to remedy with the least possible delay, for fear of
bringing about • series of calamities similar to
those witnessed, but partially averted, in the great
crises of 1847 and 1857.

The only argument that has been used by the
supporters of the Bank Charter Act of 1844 that
is worthy of notice has been the famous defence
of the issue of some fourteen millions of notes
based upon government securities. In itself the
question, on abstract grounds, is indefensible.
Money is coin, and its representative ought, there-
fore, to be simply a more portable substitute for
the precious metals themselves. Hence, according
to the bullionista, who in their way have, it must
be confessed, logical justice on their side, no issue
of notes should be made except upon coin, a con-
trary course being nothing more than the establish-
ment of an inconvertible currency. On the other
band, the supporters of the present system urge
that, as fourteen millions of notes will always be
required by the public for general use, it would I
be unnecessary and uneconomical to provide them
with a bullion basis, and that government soca- ,
cities will answer the purpose equally well ; in
other words, that they shall be issued on the go-
vernment credit alone. A more perfect anomaly
could not perhaps ever have been devised,
and, like all other anomalies, when brought
to the teat it has invariably broken down. The
whole Act of 1844 reminds us of the
paternal legislation of the Middle Ages. It goes'
far enough to be mischievous, and not far enough
to be useful. If it is required to secure the abso-
lute convertibility of the Bank note it is inopera-
tive, while as a measure of credit it stops short at
the precise point where it might be of value. For-
tunately the people of England listen as little
to the absolutism of • currency law as to that of
a monarch, and hence when need arises its provi-
sions have been set aside without ceremony.
Still, much inconvenience, to say the least, is
produced by the want of elasticity in our
existing system, and hence many losses are
incurred by the mercantile community which might
bare easily been obviated.
Adopting the entire theory (for the sake
of argument) of the Bank Act of 1844,