The Express.
London, England, 1853-09-12 00:00:00

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LONDON, MOND.II; S'EPTEMBER 12.

THE Bank accounts published in the Ga:elle on
Friday, to the end of the week before last, show the
condition of the Bank to have bteome worse than we
had anticipated, and afford a complete explanation of
its conduct in raising the rate of discount. Its cos•
tourers borrowed from it in that week 713,119/., and
took hem it their deposits to the extent of 110,0431.
The deposits of its great customer, the Government,
were only increased by 99,913/., the Bank having
appropriated 231,406/. of the 351,3191. paid in on
account of the revenue to cancelling deficiency bills
and lessening to that amount the Government secu-
rities in its possession. The public, wanting their
own capital, had withdrawn 328,8301. of that which
they had lent to the Bank on its promises to
pay, or the circulation had decreased so much, while
the bullion in the Bank had become less by 462,8301.
The reserve had decreased 132,4901., and its liabili-
ties were augmented by the sum of 344,9801., while
its securities were only increased 1,8971. The sum of
343,0831. was placed, under the head of " Rest," to the
credit of the Bank proprietary, being required to pay
the dividends. The Bank then experienced in the
week a very brisk demand for money, and a con-
siderable diminution in its loanable resources.

Hence. on good banking and mercantile principles, it
demanded a higher rate of interest for the loans its
customers required. Its conduct needs neither
defence nor further explanation ; it followed
the market that was exhibited in its own
day-book and ledger. The subjects which need
elucidation are the circumstances which have
brought the money market into this condition and
its future prospects, and to elucidate them we must
go back a year or two.
Throughout 1852 money was very abundant. At
the beginning of the year the Bank minimum rate
of disoount was 24 per cent., and on the 22nd of
April it was lowered to 2, at which low rate it con-
tinued till January, 1853. But such was the abun-
dance of money that very little was borrowed from
the Bank at the low rate of 2 per cent. The rate of
discount in Lombard-street was still lower, from 11
to 2, and in many cases the discount brokers refused
to take money on call, because they could not lend it.
Towards the end of the year money became dearer.
The banking article of the Emu:mist of Nov. 27,
said the " demand for money has increased,
and the terms arc higher." On Dec. 11 it stated
" there continues to be a good demand for money,
and first-class bills are discounted at 11 to 2."
Oa the 18th it said "from bills being sent up
from the country to be discounted and other facts it
appears that the demand for money in most of the
seats of manufactures is also good. The Bank of
England is getting bills to discount." The demand
therefore had come from the country and gone from
Lombard-street to the Bank. Money, which had
been a "drug" through the summer, before the end
of the year was borrowed from the Bank at 2 per
per cent., its minimum rate of discount. By the
24th of December " the demand for money had in-
creased," and " the terms had become more stria.
gent." On January 6, following the market, the
Bank raised its minimum rate to 21 per cent. The
demand increasing, on January 20 it raised the rate
to 3 per cent., on June 2 to 31 per cent, and on
Sept. 1 to 4 per cent. This rapid and continuous rise
in the rate of discount—which we beg our readers
will bear in mind is not the rate of interest on loans
for long periods, based on landed or other security,
but the rate of interest which the mercantile classes
must pay on loans for short periods—beg= before
the end of 1852, and has continued to the present
time.

The source of the rise, and the date at which it
began, are very important. Not only was there a
demand amongst the mercantile classes, the ship_
owners and traders in London, for money, but bills
were largely sent up from the seats of our manufac-
tures to be discounted. The demand all through
the year has come from the same classes
and the same places. About the period when
it began, insurances had been effected at LLovo's on
4,000,0001. to come from Australia. It has continued
and increased, although that and a much larger sum
—.upwards of 10,500,0001.—came in from Australia
before Sept. 1, and although upwards of 4,000,000 i
came in, in the past seven months of the year, from
other quarters. But the rate of discount remained
low all thselleb.lB62, though gold then to the extent
of 16,000,0001. came in. Under the exactly similar
circumstance of a great influx of gold, the rate of
discount has both remained low and risen rapidly
and continuously. By that circumstance, therefore,
however great may be its influence, we cannot ex-
plain the present rise.
In the very lest month of the year the Bank raised
its rate to 3 per cent. Till the beginning of May
the insurrection in China excited but little interest
in this country, and could have bad no influence
whatever on the large rise in the rat e of discount,
I per cent., which took place in the beginning of the
year. Till the middle of May the dispute between
Russia and Turkey was not heard of, and that too
though much has been made of both these circum-
stances could not have caused a rise in the rate of
discount for mercantile bills, which actually began
in 1852. In the course of trade itself we shall find
the explanation of the difficulties is to money which
trade has had to encounter.

Our mercantile readers will be well aware, to bor-
row the language of a trade circular, that " the year
1852 contrasted very favourably in a commercial
point of view with 1851. Oa the Ist of January,
1832, we had to record a continuous and heavy fall
in produce in 1831, involving as a consequence seve-
ral mercantile failures, which, together with the ap-
prehension of political disasters, had given a severe
shock to anOdence and credit. We have now to
dwell on a constant and active demand for all our
chief articles of manufacture, and for those of general
consumption, as the result of the full employment of
the population at high wages." Very elaborate pa-
pers were written, wo recollect, after the beginning
of 1852, "on the mercantile losses of 1831." The
shock given to confidence and credit in 1831 was not
immediately restored. Enterprise was comparatively
slack in the beginning of 1832 ; the imports of
most articles declined, particularly in the early
months of 1852, as the following specimens will
show :