The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1866-06-16
r,e C.use ofthe English Panic.

p Though every English tnancier OF note i "A
stauucl believer In the doctrine that credit IS or
( should be only Il convenient representative lor
property. and that notes which on their face are
/ promises to pay gold on demand, should only ue
( issued by institutions which have the specie 10 IL
quidate them, there are differences of OPINION as
70 the extent t. which the doctrine can be wisely
carried into practice. Lord OverStone, VINO, rs
we said the other day, is the chief author oil tne
English Banking Act. Is the most prominent ad-
vocate Of the bulliJni>ts' theories. Ihree Years
after the Act came into operation, the Minister
whose influence carried 1t through IariIAHenl'
Wavercd IN hi faith, and IN the excitement u ,"c
panic caused by the bursting OF railway bUoOIeS'
had not the courage 70 stand aloot when great
houses were falling around him. Lord Over>tone,
over the signature Of Mercator. mas been aU-
vocating for years in the London Times the justice
and necessity of following abstract principles OF
right. even IN banking. come what may. After
the panic of 1897. when Lord Palmerston yielded
before the pressure, as his predecessor had done,
again Lord 0ver>tOne complained OF the injustice
done 10 cautious capitalists. who had kept their
money by them. by the Government stepping IN
and conSenting to the creation OF fictitious capital
iust when a particular class of wealthy men were
going to reap u rich harvest and profit by the
wreck Of their neighbors' fortunes.
The selfShno:s of the argument was too appar-
ent not To be exposed, though few believed that
Lord OverStone desired To see his views carried
out from any desire for personal gam. Ills OPP
poncuts considered him nothing more than L
bigJt-for his blind adherence u an abstract the
ory. He specially called, and with some justice,
the attention of the government 10 the FOLLY OF
making a law which could only come into play
on extraordinary occasions, and whenever one OF
these emergencies arose. abandoning the law
which they had deliberately enacted. Gladstone,
himself an admirer of the abstract. whose HE las
been one long struggle 10 reconcile the ideal with
the practical in religion and in politics, seems to
have determined this time to stand firm he evl-
IDENTIFY made up his mind 10 uphold the Bank Act
in its integrity, whatever happened. For hours
he resisted all entreaties to take the only step
that could allay the panic which had taken pos
session Of the mercantile classes. Nith his COM
mercial descent and mercantile associations, he
must have felt a miSgiying, when friends who,
inheriting fortunes, had worked all their lives
with industry, enterprise and judgment, had to
admit they We're dishOnOred, from the accident,
that on Il particular day, when they wanted.
perhaps, very reasonable amounts, al their vast
properties were unable to procure them the
accommodation.
Had Gladstone consented in the morning to
the measure he acceIcd to in the evening. not
only Peto and Belts, hut many men, whose little
fortunes have been swept away in the general
wreck, would have been living in honor and COM
fort. What was justifable ar 10 o'clock at night
could not have been very wrong at ii in the
morning. There can be no arbitrary point 10
which the failures must reach before the Minister
is justified in compromising with his conscience.
The welfare Of three or four honest solvent and
well conducted firms. who by no fault of their
own, are brought to stand-stjIl for Il few thou
sands, when all the liabilities together do not
reach half Il million, ought TO be as important
to the Government as the welfare of half Il dozen
of the colossal houses. If simple remedy like
sUspending Il clause in the Bank Charter will save
the larger houses. it ought TO be used to rescue
the smaller, unless there is something in their
to make them undeServing of sympathy.
These panics recurring every decade in London,
have 50 injurious an effect on the commerce of the
world generally, by creating mistrust where there
is no cause for it, that we hope Lord Overstone's
theories will be abandoned. No law which has
attempted to administer strict abstract Justice has
worked we'll. Human agencies and human
needs demand that justice should sometimes be
compromised by cxpediency. 1t might be well
in place of the arbitrary limit to the issue of
notes, u clause was introduced into the Bank
charter authorizing the directors, when an unu-
demand for accommodation arose during Il
crisis, after the minimum rate of dis
had been fixed at 10 per cent, to issue in
excess of their gold deposits, two millions of notes
on the Joint faith of the Government and the
Bank. If the demand still continued the rate
might be raised to u per cent, and an excess Of
SSue up to five millions permitted, and even fur
ii ever it should be necessary. it'll such Il
sliding scale to regulate the issue instead Of the
present system, crises might occur at intervals,
or they are but the efforts of oyerStTained COM
nerce to right itselt-panics never could; because,
Is long as English merchants knew that if they
lad the security they would be sure of the accom-
notation they would have nothing 10 fear. But
n such panics as the three to which we have
,eftrred. the great houses. like great oaks, are
up by the storm. while smaller ones, like
willows, bend to the blast. And in the hurri-
ane, the sound and vigorous tree with its
covered with leaves. fares no better than
hollow pollard with half decayed boughs.-S.
=. Bulletin.