The Express.
London, England, 1861-02-25 00:00:00

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LONDON, MONDAY, ?88. 25.

THERE in increasing gloom in commercial and
financial circles. Although it is generally admitted
that trade is sound, the mass of the population
well employed, and the wealth of the country as
great as at any former period, and that we are,
therefore, in an excellent condition to meet elid-
ing trials, depression is becoming more plainly ob-
servable in most departments of business. There
is, indeed, much to bo contended against. To
whatever quarter we turn, there are at the
moment few elements of buoyancy calculated to
counteract the effects of depressing influences.
Trade with the Continent, the Mediterranean,
India, Australia, and America, is more or less
under a cloud. Even the movement in
the rate of discount at Bombay to 13
per cent serves to check one important
branch of business. The state of our own
money market also contributes powerfully to re-
strain any tendency to a revival of enterprise.
This is always the case when money rises to a
very high level; and it was the apprehension of
its benumbing effects upon enterprise which caused
many persona of calm judgment to regret the
recent rise in the Bank rate of discount to 8 per
cent., in the absence of any decided foreign drain.
Although there is no doubt that some departments
of trade are so profitable that the firms engaged in
them can pay a high rata of interest even for a
permanence, this is the exception and not the rule.
Above all, there is uncertainty in the money
market, and this always has an injurious effect.
Many traders, believing the difficulty to be only
temporary, would proceed with their business when
money is at 8 per cent. almost as hopefully
as they would when the rate is only
4 per cent., were they assured that the
requisite accommodation could be relied upon.
But in the present state of the money market there
is no confidence upon this point, and cautious com-
mercial men feel it incumbent upon them to limit
their transactions accordingly. Few people now-a-
days act upon the old-fashioned principle of regu-
lating their business strictly by their capital, and
holding themselves quite independent of money
lenders. There is so much competition in every
walk of trade that profits are cut down, and it
then becomes necessary to do a larger stroke of
business in order to obtain an income propor-
tionate to the high ant of living. To do a large
banner' the capital of • vast number of mercan-
tile houses is of itself inadequate. Hence their
dependence upon the capitalist, the banker, and the
bill discounter. Hence the vent influence which
has been acquired of late years by the money-
power of the country. Hence the wealth accu-
mulated by the class who stand as middle-men
between persons wishing to lend and those wishing
to borrow. A man who is desirous of extending
his business, or of erecting a new one, has no mod
of capital, according to the modern ooannereial
practice. AU he needs is credit, which commands
capitaL It is • system full of temptation to the
unscrupulous, and of danger to the unwary ; but
all the moralising in the world will not put it
down. The extent to which it prevails is attested
by the depression exhibited in every branch of
Moines* now that the channels of accommodation

yield less than their wonted supplies. Pimple who
trade upon borrowed money most watch the money
market narrowly, and so must elm those :non
legitimate traders whose interests are bound up
with theirs.

It is quite dear that there will be no relief in
the money market until we get, and retain, a sup-
ply of gold. For every 51. of bullion exported •
61. Bank of England note is cancelled. Within
three months we have sent upwards of three mil•
lions of gold to the United States ; and although
it has consisted of sovereigns, as distinguished
from bullion, it admits of demonstration that Bank
notes to at leest two-thirds of that amount have
been extinguished. This occasions an absolute
deficiency in the currency, which becomes the
more important when we consider how large a
proportion the sum mentioned forms of the total
existing in the country, and the rapidity with
which the currency is turned over and over every
week. The three miaime of notes orsovereigna have
hem drawn either from active circulation or from
bank reserves, where they were available for any
demand. In the latter case, their withdrawal
forces the banker to provide a fresh reserve, and
rains the value of the remainder of the currency.
We can trace the way in which this works by re-
freshing our memory with a comparison. On the
Tth of November, a fortnight before the flow of specie
to America commenced, the amount of Bank of Eng-
land notes actually in circulation was 21,206,070/.
It is now only 19,518,0801. ; that is to my, there
are now circulating in the country, cc held ready
in the tills of bankers other than the Bank
of England, 1,687,9901. less of Bank notes
than there were three months ago. Considering
the uses to which Bank notes are put, and the
swiftness of the duty which they are required to
perform, the deficiency in the supply of the circu-
lating medium is important. We could not pos-
sibly do with so small an amount of Bank of Eng-
land circulation were it not for the immense eco-
nomy which has been introduced by the universal
adoption of cheques, bills, and other forme of
paper orders for money, to some extent supersed-
ing the use of Bank notes. Even with all these
aids, it is • marvel how the business of the country
is conducted with so small an amount of circula-
tion, including in the account the circulation of
the provincial, Irish, and Scotch banks.

It is rather curious to remark that whilst the
active cireulation, as already shown, has decreased
1,887,9901. between the 7th oI November and
the present period, the decrease in the notes form-
ing the reserve of the Bank of England is only
383,7261. Tracing the bearing of the coin and
bullion upon the amount of Bank of England
notes in existence, we find that the aggregate of
coin and bullion is now 2,003,829 less than on
the 7th Novenibcr. This amount is almost pre-
cisely equal to the sum of the 1,687,9901. and

383,7251. already mentioned. We thus see that, in
round numbers, the despatch of three millions and
*quarter of gold to America has been accompanied
by a net withdrawal of 1,687,0001. of notes from
' the hands of the public, and of 383,0001. from the
Bank's reserve. The rest of the remittances to
America have been provided by the subtraction of
sovereigns from the internal circulation, or have
been compensated by the influx of gold to the
Bank from other foreign countries.
It is very remarkable theta variation of so small
an amount should have caused so great • change
in the condition of the money market. The coin
and bullion in the Bank have decreased only
2, 003, 829/., and the reserve of notes only 383,7251.,
yet the rate of discount, which was four-and-a-half
per cent. on the 7th November, is now 8. It is
apparent from this comparison that the movement
of a couple of millions of gold makes all the differ-
ence between a low and a high rate of money—
between an easy and a very tight market. Con-
eminently, as already remarked, we must get back
the supply of gold which has been draughted from
us before any real relief will be felt. The circu-
lation is much contracted. The present amount
—19,518,0801.—0 f notes in the hands of the
public is not enough for our requirements
and for reserves. When gold comes in,
more notes will be manufactured. Until then
stringency will continue to prevail. The bullion
movement rules the whole money market, and it
is rather surprising that our practical bankers have
so little real acquaintance with the causes which
sway the bullion current, and which therefore re-
gulate arbitrarily the price of the commodity that
they deal in.
Under ordinary circumstances, when a sudden
demand springs up in this country for a foreign
commodity, whether it be cotton, or corn, or
any other, the pressure upon us is materially re-
lieved by the impulse which is immediately given
by this enlargement of trade to the demand for our
goods in the countries where we seek the required
supplies. This is one of the compensating prin-
ciples of trade. But, upon the present occasion,
against the orders for grain which the deficiency of
our harvests has forced us to fling into foreign
markets, we have been left without the usual
compensation. Mort of the foreign centres of
consumption have been more or less disturbed,
and have taken as small • quantity of our goods
as possible. Above all, America, whilst send-
ing us all the grain she can spare,
en can get down to the sea-board, has found it
neemazy, under the influence of a severe political
and financial crisis, to cut down her purchases of
foreign commodities. In the one-sided character
of our American trade is the main explanation of
the drain of gold which has pressed so heavily
upon our resources.