The Express.
London, England, 1864-08-15 00:00:00

HIGH WATTS AT LOWDOS IMMIX

I®l DAY 6713
7.) homy Wanda& 260... .1/Owassi‘ OL hrmo.

LONDON, MONDAY, AUGUST 15.

THE expectation that the Bank rate of discount Ji
would again be raised has not been fulfilled.
Nothimg but the persistence of the public in press-
ing their demands for money in advance of their
legitimate wants could have rendered such • i
measure requisite, and as they have re-
frained from doing so, the necessity for a further
rise has been obviated for the present. There can
be no doubt, however, that the existing high value I
of money exercises a very prejudicial effect upon
trade. It may not prevent our commerce from
steadily expanding, but these constant changes in
the rate of dircount, whether actual or anticipated,
are eminently calculated to throw an increasing
element of chance into all mercantile affairs. A ;
growing temptation must necessarily arise to neglect
ordinary business, which • sudden rise in the rate
of discount may unexpectedly render unprofit- ;
able, and to turn to more speculative transactions 1
that may perhaps yield a larger return, but which,
on the other hand, are equally likely to result in a
heavy loss. Chance is beginning gradually to I
take the place of calculation. How far it may go
it is impossible to see, but the greatest check that
can be imposed upon the change is to deprive it of
its most powerful motive. If measures could be
taken by which the recent spasmodic movement in I
the money market could be prevented, a sensible
benefit would be obtained. The remedy is easy,
but like all obvious remedies, it excites the fiercest
opposition. It seems to be the settled course of '
imperfect human nature to contend violently
against any measure sure to prove of general ad-
vantage to the nation.
The question may be asked why there should
have been any pressure in the money market of
late, and it would be impossible to point out any
really good grounds in answer. Everywhere the
great moneyed.housee have alarge supply of unem-
ployed capital, so much so that a borrower on Go-
vernment securities may get assistance from day to
day on almost nominal terms. If, however, he
attempts to discount at three months, he is
charged 8 per cent., or nearly double the average
of several years back. The money market, in
fact, presents the anomalous appearance of being
decidedly tight, while everyone has • superabun-
dance of capital to lend. The reason of this state
of affairs is sufficiently indicated by the general
uncertainty under which commerce at present
labours. No one can blame • capitalist for re-
fraining to put out money at 8 per cent. to-day
when he may possibly get 9 to-morrow. Anyone
who has reviewed the commercial history of the past
ten years will clearly see that this possibility
is much more likely to occur in the present day
than at any previous period. Hence there is a
holding back of assistance and a consequent pres-
sure at the Bank of England, of necessity followed
by a rise in the rate.
It must seem an extraordinary thing that in a
country like England, where capital yearly in-
creases to an almost boundless extent, there should
be such comparative difficulty in obtaining money,
at least in present times. If we had subscribed,
in an immoderate degree, to foreign loans and com-
panies, or had exported a large quantity of the
precious metals to pay for an insufficient harvest,
the matter could be easily explained. So much
money would have gone out, and there
would be a corresponding deficiency at home.
Paradoxical as it may appear, we are suf-
fering from a similar result, though from
entirely dissimilar causes. Money is only the
medium by which capital is employed, and
if the medium is contracted, the employ-
ment of the capital :nust, for a time
at least, be contracted also. A corn factor in an
agricultural town may have, say a thousand
pounds' worth of wheat, but if, wishing to borrow
upon it, he finds that his neighbour, the banker,
has only a hundred pounds in hand to lend, the
available sum in cash that the former can com-
mand is of course only one-tenth of his actual
capital. The same thing occurs frequently on a
larger scale. Wealth may be superabundant, but
for want of its substitute—money or currency—
there is no possibility of that interchange which
benefits alike the lender and receiver.

The English money market is just now
experiencing these influences. The enor-
mous augmentation in our trade, toge-
ther with the increased price of staples,
necessarily resulted in a heavy demand on the
currency. Under the existing system the deficit is
considered to be met by the increased supplies
that may be drawn hither by the higher value of
money. This theory is so true in the abstract
that its absolute failure in practice hu met with
little attention. To cite places near England : it
does not follow that if the rate of discount in
Paris is only 6 per cent. while in London it is 8,
large sums of French capital will at once be sent
over here for employment. No doubt the prac-
tice prevails, but to a much smaller extent than is
generally supposed. A capitalist has rarely more than
a moderate proportion of his means in hand. They
are generally employed in discounting bills, loans,
and so forth, and hence some time must neces-
sarily elapse before he can call them in for remit-