The Sun.
London, England, 1847-12-01 00:00:00

THE COMMERCIAL DEPRESSION.

The CHANCELLOR of the EXCHEQUER said
he rose for the purpose of moving the motion which
stood first on the paper of to-day, namely, that a
Select Committee be appointed to inquire into the
causes of the recent commercial distress, and how far
it has been affected by the laws for regulating the
issue of bank notes payable on demand ; and,
in pursuance of the promise which he made on the
first night of the session, he should avail himself
of the opportunity, not only of stating the reasons
which induced Government to give that recom-
mendation to the Bank of England, which was con-
tained in the letter of the 25th of October, signed by
himself and his Noble Friend the First Lord of the
Treasury, but also to state the views which Govern-
ment entertained of the causes which had given rise
to the commercial distress. He need hardly say
that it was from no unwillingness on the part of
Government that this statement was not made at an
earlier period of the session, because so much mis-
apprehension had prevailed as to many things which
had taken place as to make it no less the in-
terest
of Government than it was their duty
to lay that statement before the House
and the country at the earliest possible period.
That duty, however, now devolved upon him, and
he need hardly say that he felt very sensibly the,
responsibility which attached to him, in the perform-
ance of that duty. It was no light matter for a
Government to be under the necessity of con•
templating a revolution of the statute law, though
he was happy to say none had taken place,
and it was not, therefore, necessary for him
to apply to the House for a Bill of in-
demnity. But still her Majesty's Government
stood there to be judged by Parliament upon this
important question, and it was for that purpose that
Parliament had been called together at an earlier
period than was usual. It was impossible not
to feel that as their feelings had been ex-
cited, and some of their interests affected by the
recent occurrences, that all the members of the
House could act in this matter as impartial judges,
and as this circumstance placed him in a situation of
peculiar difficulty, he hoped he might be allowed to
ask of the House more than an ordinary share of that
indulgence which he had so often experienced at their
hands. In taking the course they had pursued,
Government had been prepared to meet with
blame, which attached to all parties who
took
a middle course, but the view which
would be taken of their conduct would no doubt be
influenced in a considerable degree by the opinions
entertained of the Act of 1844 Those who disap-
proved of it were likely to blame them for not having
more completely
bdeparted from it, and accordingly
ought hadnoatlretado y
have mett by parties who said they
whomoerdfered—by others, who
said they had done
their interference
Now,
wnydet(illothat they ought
—and by others, goooNnt
musswteoVeulllgoresapladretdhetyo
to have interfered sooner.
ought to have interfered sooner
prove that an earlier interference
proved mischievous, instead of beneficial. inot haven
to those who said they ought to have departed
further from the Bill of 1844, he must tell the
had they done so Government would have acted con-
trary to their first eon WI
because the principle
WI continued they COO.
upon which that

1

LONDON,

, sidered was the only sound principle that
could regulate the issue and circulation of notes.
When he stated that he had the utmost confidence in
the Act of 1844, he did not wish it to be imagined
that he was one of those who contended that the prin-
ciple of that or any other measure arising from human
wisdom was, in all circumstances, at all times, and
at all hazards, to be carried into effect.—(Hear,
hear.) Nothing that arose out of human wisdom
could be considered inviolable. He spoke thus of the
Act of 1844; but his remarks applied with equal
truth and sincerity to other Acts embodying
more sacred principles still. He might make the
same remark with respect to trial by jury—with
respect to the still more sacred palladium of
liberty, the Habeas Corpus Act ; it was no-
torious that at various times these and other
Acts had been suspended with temporary ad-
vantage to the country. It was so in other
sciences as well as in that of legislation. In that
of medicine, it was notorious that a certain
treatment must be applied to some diseases,
whilst it was equally notorious that for others
a diametrically opposite course must be pur-
sued, and with the same success. 'What he said
of these laws he said also of the Act of 1844 ; it was
a measure which, like those to which he had referred,
could not, under altered circumstances be carried
into strict execution. It was first brought into opera-
tion under a combination of circumstances of ti peculiar
nature, because the state of things that prevailed was
unprecedented for years ; and he trusted it would be
unparalleled for years to come.—(Hear.) There had
been a heavy drain on the capital of the country for the
purchase of corn, and much alarm prevailed
amongst those engaged in the cotton and other
extensive manufacturing operations that they
should be unable to meet their engagements.
And they had not even met, during that period, with
that general mistrust—such an univesal alarm and panic
which they had witnessed six weeks ago. What system,
what legislation, could have provided against the
alarm and panic which prevailed at the period of which
he was speaking ? Legislation, and in fact every system,
proceeded upon the principle that men were at times
acted upon from various causes, by the principles in-
herent in human action. That they adopted stops
and indulged in fears and distrust against which the
wisdom of legislation could not provide. If the standard
was depressed in 1819, and was even now of much less
value, that would be no argument against what took
place in the interim. Debts were contracted in money
of the same value at the two periods, and if the depres-
sion had depreciated the value of gold, debtors would
have thereby been enabled to cheat their creditors.
Some entertained the opinion that there should be free
trade in gold, and that notes should be issued in propor-
tion as the transactions of the country—the demands for
cotton, for instance, increased—that they should
rise and fall in number and amount. In the
autumn the price of agriculture was low, and
commerce was stagnant, and, consequently, according to
this theory, a smaller amount of bank notes would have
been required than the Act of 1844 allowed. It was,
however, no condemnation of that Act to say that it
was made to meet the contingency which had occurred.
The pressure could not have been foreseen.
Mr. Jones Loyd, one of the most distin-
guished supporters of the Act, wrote in 1840,
in a work which he published in 1844,
that a change in the commerce of the country might
render a relaxation of the Act necessary, and Mr. Hus-
kisson also stated that if such a period should occur
during a depressed currency, that measures of relief
must be left to the wisdom of those in power at the time.
" These remarks," continued Mr. Huskisson, " form a
true answer to the memorial of the London bankers, in
which they urged the introduction of a special clause
the operations of the Bill in
times of peculiar pressure of the money market.
To accede to such a proposition would be virtually to
destroy the efficacy of the measure.—(Hear, hear.)
The commencement of a drain or pressure upon the
money market is the time in which the provision of the
Bill became the most important, and, except strictly
adhered to, the whole measure becomes a nullity. For
all contingencies which can reasonably be anticipated,
and which are susceptible of being previously defined by
law, the strict application of the provisions of the Bill is
essential.—(Hear, hear.) Against the occurrence of
those contingencies which are not capable of being fore-
seen or defined by law, but which are not altogether
impossible, the Bill itself affords the best protection
which can be obtained. Should occurrences ever arise
beyond all ordinary calculation, and not amenable to
the application of any ordinary principles, the
remedy must be sought, not in the opera-
tions of the Bill, but in the discretion of
those who may then be at the head of
affairs, subject to their own responsibility, and to the
judgment of Parliament." Believing in the truth of the
principles contained la the foregoing extracts, her Ma-
jesty's Government felt it to be their duty to act in the
manner in which they had done.—(Hear, hear.) He
would now proceed to show the House that the time
when they took the step to which he had alluded was
such a severe period has had not existed in the country for
a quarter of a century. The step was taken for the pur-
pose of allaying the panic in the market more than with a
view of relieving the monetary pressure upon the country.
The end which they had in view had been effected. The
causes of the pressure he thought lay far deeper than
was supposed by those persons who imagined it to be
owing solely to the issue of one or two million of
bank-notes.—(Hear, hear.) He thought that those who
attributed what took place to so inadequate a cause as
that had but little apprehension of the gravity of the
circumstances.—(Hear.) There was no doubt but that
the pressure had been exagerated by that circumstance.
In the summer of 1846 there was a most unexampled
drain of capital for the purchase of corn and for invest-
ments in Government works. He had no doubt but that
the country might have borne up under the pressure
of the vast purchases of corn and the permanent invest-
neat of large sums of money, but sooner or
later such abstractions of capital would effect the whole
superstructure of the credit of the country—(Hear, hear.)
In the year 1837 there was &great commercial pressure;
in the year 1838 there was a severe drain for the
purchase of corn; but those two circumstances came
separated not, as in the present year, together.—(Hear.)
Although the pressure for money had been very
great, sill the amount of accommodation afforded
by the Bank of England was considerably less in the
autumn of 1839 than in the corresponding time of the
autumn of the present year. He found that on the Ist
of October, 1839, the Bank notes in circulation, including
Bank post bills, was 16,800,0001., whereas on the 2d of
Oct., 1847, the amount was 19,577,0001., being an increase
of about 3,000,0001. The private securities held by the
Bank of England amounted on the let of October, 1839,
to 13,290,0001., but upon the 2d of October, 1847, the
amount was 21,260,0001., being an increase of no less
than 8,000,000/. in the amount of accommodation
afforded by the Bank of England to the mercantile
and commercial interests of the country during
the year 1847 as compared with the year 1839.
From that time the state of things changed. The har-
vest of 1846 failed, and it became necessary to import
largely for the relief of the people ; and it was also in
1846 that the increased demand of railroads took place;
and then it was for the:first time that a drain of gold was
felt. This was the state of things prevailing
through the autumn of that year. The drain
on the Bank of England was great in the extreme, but
the Bank was enabled to meet the demand out of their
own coffers. In the course of the next year, however,
the Bank was obliged to raise their rate of discount ; the
importation of corn became greater than in the last year,
and the result was a rise in the rate of interest to 5 per
cent. Then came the panic. He had stated before, and he
saw no reason to-change his opinion, that it was caused
by the imprudence of the Bank of England in letting
out money with the freedom they did—(Hear, hear)—
and then pulling up as suddenly as it let out its
money before, and the result was the alarm
that had taken place. The Bank kept increasing
their discount, and on the sth of August last
they raised it to 51. per cent. The first of the great
failures took place on the 10th of August, in this state
of things—Leslie and Alexander failed on that
day ; and it was a remarkable fact that almost
all the houses that had failed in the first instance
were largely engaged in transactions in corn.
Between May and September the price of corn fell no
less than 50 per cent. ; in fact, the average price of
corn in May was 1025., and in September 48s. The im-
portations that were made in Msy were most extrava-
gant, and although it was no part of his duty to warn
people against the consequences of their over- specula-
tion, be omitted no opportunity last session to state to the
House the extraordinary amount of speculation that wes
going on. He came to town early in September, and
he found the general impression was that the failures,
that were taking- place, were almost entirely confined
to houses in the corn-trade.—(Bear, hear.) That,
too, was his own impression and as Honourable
Friend had assured him that it was the impression
of some of the large brokers of Liverpool. Early, how-
ever, in September—on the 6th, in fact—the Bank of
England announced that they would make advances, up
to the 14th of October, at five per cent., which
was exceedingly unfortunate, because dealers did
not so much attend t.) the published accounts as they did
to the acts of the Bank and the rates of interest they
charged in making advances. Now, what was the eget
of those acts of the Bank authorities upon the notes in
circulation ? He had already stated that in the be-
ginning of June the notes in circulation amounted to
18,000,0001. odd, while on the 30th of July
they amounted to 18,892,0001. On the 17th of
September the amount of notes had gone down
to 17,840,0001. ; but on the 2d of October, when
the advances had increased, the amounts had in-
creased to 18,712,0001. ; therefore, the difference was
quite immaterial. During the whole time of the pres-
sure they were 200,0001. more than at the time of which
he was speaking. The other securities on the 24th of
July were 15,300,000/. The amount of accommodation
given to the pnblic at this time of extraordinary pressure
had increased to 21,265,0001. In fact, in August and
September the increase was considerable. If they took
the amount of securities in former years, with the corres-
ponding period of last year, they would find that the
amount in—

October 1844 was £10,500,000
1845 ... 15,000,000
- 1846 ... 15,000,000
- 1847 ... 21,250,000
He did not think that any inference detrimental to the
Bank could be drawn, because it appeared that they
had given accommodation, as at any former time,
and their notes were about 1,000,0001. below their limit.
In Scotland there had been little or no difference be-
tween August and September, in 1846 and 1847; in Ire-
land less than in the former year, and the failures there.
Lwere comparatively small. Now the Bank never refused
to discount bills which they had taken at former times. 11
They charged, however, a higher rate of interest. They