The Sun.
London, England, 1862-05-16 00:00:00

THE _DISCOUNT MARKET.

The activity in the discount market continues
but there are as yet no signs that it is otherwis(
than exceptional. There has certainly been no sucl
revival of general trade as to cause an extra absorp.
tion of money either in London or the provinces,
and the foreign loans lately contracted can have had
but a limited influence in bringing about the present
alteration, since such sums as have already been sent
away in connection with them have been chiefly sup-
plied by the arrivals from other places, and their
effect, therefore, has simply been to prevent a great
increase of ease which would otherwise have taken
place. If the half-million sterling which has just
been despatched by Messrs. Rothschild to St. Peter-
sburg had not been wanted for that destination, it
would have swollen the amount already in the
Bank of England, and, to the great joy of all con-

coctors of companies and of those extensive and
active classes who can never get credit when money
is at its normal rate, might have sent the terms of
that establishment down to 2 per cent. But the

mere fact that this fresh inflation has been pre

vented will in no way account for the movement in
the opposition direction. Again, the circumstance
that, owing to the discount allowed for prepayment

on the recent loans, several millions have been
promptly paid up cannot create any actual scarcity
in the discount market until these amounts are
sent away. If the holder of £lO,OOO Egyptian
Scrip chooses to pay up all the instalments at once,
and draws a check for the purpose on Messrs. Jones
Lloyd and Co., the result is simply that the balances
held by Messrs. Jones Lloyd and Co., are reduced to
the extent of £lO,OOO, while those of the Bank of
England, who are the bankers tothe agents for the
lose, are increased by that amount. Just as the
..lending power of one bank is diminished that of the
other is augmented. So also if a prepayment on
Russian scrip is made, the check which the holder
gives is paid in by Messrs. Rothschild to their
bankers, and the operation in like manner is nothing
more than a transfer between kindred establish-
ments. In cases, however, where any large sums
are paid to the Bank of England, as in that of the
£BOO,OOO already paid on the Egyptian loan, the
effect is produced of bringing the market rate for
money more nearly to the level of that of the Bank
of England, since the sum thus absorbed by this
establishment will not again be let out, except to
those who are willing to accede to itsminimum terms.
So far, therefore, as the equalisation of the rates in
the open market with those of the Bank of England
is concerned, an explanation to some extent can
thus be furnished. As regards any tendency to a
further advance, the solution must be found-1, in
the momentary increase in the activity of the note
circulation during the days when payments on loans
or shares are in progress ; 2, in the possible desire
of the banks to act just now with especial caution
until they can better estimate the probable influence
of the foreign commitments incurred, and the
rapidity with which the sums paid will be des-
patched ; and, lastly, in the natural disposition of I
the discount houses to exaggerate to their customers
the upward aspect of the market, so that for all
paper having more than three months to run, and
which is not negotiable at the Bank, they may be
able to make full charges. The question really is
whether the receipts of specie from America, Aus-
tralia, and elsewhere are likely during the next six
months to be sufficient to meet the artificial outflow
that our loan instalments will cause. At present,
it looks as if such would be the case, but our re-
quirements will Vet be limited to the loans and
schemes already brought out. There will be a
daily continuance of them E 0 long as they can be
made to float at any premium, and meanwhile the
contingencies of the harvest and of American poli-
tips may introduce elements to control all other cal-
culations.— Times.