The Express.
London, England, 1866-08-20 00:00:00

HIGH WATER AT LONDON BRIDOL

Tots --iitesThrsoZZ: 9d 10 as.
To-Mossow—Morning, 88. 48m Afttesociu, 10b. Was.

LONDON, MONDAY, AUGUST 20.

Tim monetary crisis is at length at an end.
The reduction in the Bank rate from 10 to 8 per
cent. in the past week marks the first step towards
the usual reaction that succeeds a protracted period
of commercial pressure. Already people are anti-
cipating a further decline this week to 6 or at all
events 7 per cent., and the probabilities are that
before the close of the year the minimum will
stand at not more than 3 per cent. There is,
unfortunately, too much reason to believe that the
precedents of 1847 and 1857 in this respect will
be repeated. In the first place, bullion is coming
forward to a far greater extent than on either of

those occasions. While our continental creditors
have been calling in their debts from us, English
merchants, on the other side, have been calling
in theirs from India, Australia, and other distant
parts of the globe. This process of course involves
a considerable delay so far as we are concerned,
and the result is that large sums in bullion are
coming to England precisely tat a time when
the need has ceased for them. Secondly,
the crisis of 1866 has lasted much longer than
either of its predecessors, and trade has been pro-
portionally slackened. Hence, for some time to
come, the demand for money is likely to be very
limited, while the supply will be constantly in-
creasing. The only contingency that might keep
up the rate of interest is that of a bad harvest,
when gold would have to be exported to pay for
corn. At present, however, there seems no like-
lihood of such a calamity. The weather has be-
come suddenly favourable, and the crops are close
upon, if not reaching, a full average.
It is impossible to describe the relief to com-
merce which the long-deferred action of the Bank
has afforded. A weight seems to be taken off
every mind, and merchants begin once more to
buy and sell with something like their accustomed
freedom. The great mischief caused by 10 per
cent. was the inflexible bar that it opposed to the
revival of even ordinary confidence. The reduc-
tion in the rate has, therefore, proved the signal
for a subsidence of the vague feeling of distrust
that for nearly two months has unnecessarily
weighed upon all branches of trade. We say un-
necessarily, for there appears not the slightest
doubt that if the directors of the Bank
had wisely reduced the rate of discount six or
seven weeks ago, the result would have been not
only an absence of pressure from our creditors on
the continent, with a consequent export of bul-
lion, but, on the other hand, remittances of capital
would have been sent here for more profitable em-
ployment than could be got abroad. Eight per
cent. would certainly have accomplished what 10
per cent. failed to do. The offer of exorbitant
terms generally defeats its object. Foreigners
were unable to divest themselves of the idea that
the directors of the Bank, in persistently main-
taining the rate for three months at an exorbi-
tant point never before touched except during a
few disastrous weeks in 1857, foresaw and were
preparing for a crisis far exceeding in magnitude
any within living memory. The inference was
very natural, though we know it to be wrong.
Hence neither French, Dutch, nor German capi-
talists would afford us assistance, notwithstanding
the tempting profit before them, since they be-
lieved that they would be running a corresponding
and imminent risk of losing their principal. If
our Bank had shown the example of confidence, it
would have been speedily taken abroad. As it is,
in the early part of last week the general impres-
sion that the Bank would reduce the rate caused a
rise instead of a fall in the foreign exchanges, the
change being the exact reverse of ordinary cal-
culation. And now, when there is every pro-
spect of a further decline, we are about
to be inundated with foreign money. Nothing
shows more clearly the inexpediency of the policy
adopted by the directors, of being guided solely by
the state of their accounts. The exercise of a
little prevision and of a little courage would have
answered their purpose far better in dealing with
the exceptional difficulties we have lately expe-
rienced.
It is singular that during the late crisis we have
received aid precisely from that quarter from which
danger was apprehended. At the commencement
of the year England was solemnly warned against
the increase of trade with the United States,
and all sorts of misfortunes were predicted
from the renewal of our commercial relations

with that country on something like their old
footing. The assumed evil has nevertheless
turned out an actual good. Instead of a crisis
being caused by the revival of our American trade,
the effect has been a supply of gold which came at
a vital moment. Thanks to our large exports to
the United States in the autumn of the last and
spring of this year, we wore owed a balance of
specie which came forward and for a time miti-
gated the severity of the crisis. At any rate the
arrivals sufficed to save the directors of the Bank
from infringing the Act of 1844, which they
must otherwise inevitably have done. On the
other hand, the remedy afforded by the Govern-
ment has not been practically applied, although the
moral effect it created at first was undeniable.
It was universally hoped that the relief intended
for commerce generally should not be applied,
voluntarily or involuntarily, to the exclusive
benefit of the Bank. Such, however, was the un-
expected result. Instead of the Government
letter being used in its spirit, it has served rather
to prolong the pressure, supplemented as it was
by Lord CLARENDON'S ill-advised circular to