The Sun.
London, England, 1839-12-31 00:00:00

'lt

PRICE sd.

1838 and the spring .of this year, ranging as it did
tioni two-and-a-half to four per cent., threw the mo-
ney market of London into the hands of the American'
speculators, who, by tempting our capitalists with every
variety of bank shares, state bonds, railway stock, and
other public securities,. paying generally six per cent.
Per annum, suceeeled in raising loans to an extent
A7liich has hee.n var'ausly. estimated at from five to ten
millions sterling. By means of funds thus obtained, the
price of cotton has been unnaturally sustained up to the
present day, in the face of an enormous decline in the
price of the manufactured article ; and, had it not been
for a deficient corn harvest in this country, and the
consequent- contraction of our circulation; there is no
reasonto4loubt that the same system of loans and cre-,
ri:ts.woulEthave been repeated, • until the ruin of our
spinners and manufacturers had exhausted the fund
'limn which the monopoly derived its profit.
In the mantis of August of last year, the prevalence
of: wet weather led to the general belief that -the har-
i;est would prove deficient,: and that a large importation
ofcorn would be the resnit. _ The public papers of the •
(lay announced, that the foreign exchanges had fallen,
in ecintequonee of the demand for bills to remit to the
pontinentinlpayment .for grain ; and the funds also de-
clin froths the same cause. In the beginning of Sep-
tentber,. dinaverage price of wheat in this market had
reacheilllai a.quarter, and the duty had fallen to Is.
It teas ;sew foreseen by, every experienced and intelli-
gent:Mindtliat a large amount of gold Would be required
to /jay for. foreign corn during the succeeding spring.
Under anatural:systern of trade, no such sudden drain
liirsitecieliould occur, in payment for corn, any more
't 4 461.1 ad. : to Arise la/exchange for tea, Cotton, or
4i ,'._ At 40: prfient Corn4aw,,however, imposes ai
r4iAlt
-'1). o titi've—itul); -iip-on foreign grain, until-corn of borne
growth reaches a certain high price, and then admits it
at a low duty, the trade in that article becomes an ex.
ception to the ordinary rules of commerce, and all such
sudden and extraordinary purchases are necessarily paid
for with bullion.

Notwithstanding that it must be supposed that the
Directors of the Bank were cognizant of the operation
of our Corn-laws, still the conduct pursued by
them, in November of last year, in offering to make ad-
vances, repayable in January, at 3_l per cent., not only
tity.m Exchequer bills and approved securities, but, con-
trary to custom, including India bonds and stock, was
marked.by a total disregard of the consequences to be
expected from such an imprudent course. The addi-
tional supply of paper money thus thrown upon the
market, and the consequent rise in the prices of com-
modities, speedily produced the effects which under
the circumstances might have been expected, viz., a de-
cline in the foreign exchanges, and an export of bullion.
The commercial crisis in France and Belgium, aug-
mented the, demand for specie on the Continent ; and
a diminution in the stock of bullion in the Bank took
place, during the months of January and February
of the present year. Yet, in the face of these critical
and warning circumstances, the Bank Directors, on
the 28th of February, 1839, again offered loans upon
all kinds of securities, includ.ng, as in the preceding
November, stock and India bonds, at the low rate
of 3:i per cent., to be repaid on the 23d of April fol-
lowing ! The average stock of bullion, which on the
Bth of January, amounted to 9,336,0001., had fallen,
on the 2d of April, to 7,073,000/., being a
diminution of 2,263,0001.; yet it is important to
remark, that the amount of bank notes in circulation
had, in the meantime, increased, from 18,201,000/. on
January Sth, to 18,371,000/. on the 2d April ; whilst
the securities had, in the same time, augmented from
21,980,000/. to 22,987,0001.; thus demonstrating the
fact, that instead of acting up to the principle laid down
by themselves, of remaining passive under this drain
upon their bullion, the Directors had actually re-issued
in exchange for securities, their notes, as fast, and, in-
deed, faster than they had been returned to them for
gold ; thus wholly deranging that proportion which the
specie in their vaults ought, by their own declaration,
to bear to their liabilities.

The demand for gold for exportation continuing, not-
withstanding that the Bank Directors had suddenly
raised the rate of interest to 51. per cent., it was, on
the 20th of June, advanced to per cent., and on the
Ist of August fixed at the unprecedented rate of 6 per
cent. In July the Directors made proposals for the
s►le of the dead weight, but the manner in which the
tenders were refused raised a doubt whether they
really desired to dispose of any part of it ; a supposi-
tion that has been since strengthened by the fact,
that, notwithstanding that a continuation of the
drain for gold has led the Bank to incur the dis-
credit of borrowing two millions from the Bank of
France, no further attempts have been made to find
purchasers for this annuity. Instead of replenishing,
their exhausted coffers by the sale of the dead weight,
or of their other Government securities, the Bank Di-
rectors have curtailed their loans upon commercial se-
curities, and thus thrown the whole of the pressure upon
the trading interests. The effects of this partial policy
are strikingly manifested in the circumstance that Ex-
chequer bills bearing three per cent. interest, have been
at par, and three per cent. Consols at upwards of 90,
whilst discounts on the very best commercial paper have
ranged from six to seven per cent. The injustice of
thus sacrificing exclusively the commercial class, is ag-
gravated by the circumstance that a very small portion
only of the advances of the Bank are made upon bills
of exchange ; a fact that may be ascertained by a refe-
rence to its balance sheet, presented to the Committee
of the House of Commons in 183, in which, out of an
aggregate of assets amounting to upwards of forty-four
millions, not three millions were commercial bills and
notes discounted, the remainder consisting of the per-
manent debt due from Government dead weight annuity,
Exchequer bills, stock, mortgages, and other similar
investments.

The last publication of the state of the affairs of the
Bank in November, announced that its average stock of
bullion had fallen to 2,545,0001. ; but, down to the
present time, its operations have produced scarcely, any
influence upon the Foreign Exchanges, and they have
had but little effect upon the price of cotton wool,
notwithstanding that it is know❑ that much of the
stock at Liverpool is held, , under advances, at high
and artificial prices. To the latter circumstance
may undoubtedly :be attributed the restricted Euro-
pean demand which, for a time, prevailed for our
manufactures and yarns ; the merchants of the Con-
tinent cautiously abstaining from purchasing, in
the expectation that the price of the raw material
would fall to its natural level. That the measures of
the Bank have not had the effect hitherto of putting an
end to the speculation in cotton, notwithstanding the
suspension
.of the United States' Bank, with which it
originated, may be accounted for by the circumstance
already alluded to, viz., that the funds, 5y means of
which the scheme was sucessfully accomplished, were
raised upon State bonds and other securities, having one
or more years to run ; by which means the curtailment
or recal of the credit was, for a certain time, placed
beyond the control of the Bank ; a state of things alto-
gether dissimilar from that of 1836, when speculations
were fostered by a system of open credit, which were
no sooner checked, by the refusal of the Bank of Eng-
land to discount the acceptances of the great Anglo-
American houses, than the prices of cotto❑ fell .almost
instantaneously 30 to 50 per cent.
Having thus taken a review of the principal events
illustrating the course pursued by the Bank of Eng-
land from 1835 down to the present time, the Board
are desirous of directing the attention of the members
to the losses which these forced contractions and ex-
pansions of the currency inflict upon 'the manufacturing
and mercantile community ; an evil, the magnitude of
which has not been sufficiently appreciated by those
who have investigated the questions of banking and cur-
rency. Without attempting anything like an accurate
estimate of the amount of the sacrifices incurred, suffi-
cient proof may be adduced to show the extent of the
pecuniary loss and the still more serious nature of the
moral mischief inflicted upon the manufacturing and
trading world.
It may be estimated, that, in the production of the
five great manufactures of cottons, woollens,
linens, and hardwares, capital, fixedt and floating, is
employed, amounting to a hundred millions sterling.
The rates of depreciation, caused by the late panic
upon all those great articles of production, may be ga-
thered, without difficulty, from the prices current of the
spring and summer of 1837. Tney fell in price variously,
from 20 to 50 per cent.

To estimate the amount of loss upon these manufac-
tures, they must also be followed into the hands of the
wholesale and retail dealers, whose losses, upon stock,
consequent upon the operations of the Bank of England
on the currency, are incurred simultaneously with those
of the first prolucers. Scarcely one of these escaped in
1837, without the sacrifice of the whole of the ordinary
profits of the year's trade, and many lost by the fall in
the value of their stock the whole of their capital also.
In proof of the latter fact, it may he stated that 1,939
fiats in bankruptcy were issued in 1837, the average of
the four previous years amounting to 1,266 only ; whilst
a proportionate increase occurred in the number of pri-
vate compositions.

At a moderate computation, from twenty to thirty
millions of capital may be estimated to be employed
by the wholesale and retail traders engaged in the
distribution of the five great manufacturers enumerated
above.

It has been shown how the policy of the Bank of Eng-
land effects the foreign trader, by compelling him to

• f The value of fixed capital, such as buildings, ma-
chinery, &c., engaged in cotton-spinning, or in manufac-
turing, has undergone a depreciation, taken at the present
time, as compared with 1836, of at least f. om 30 to 40 pct.
Cent.