Western Reserve chronicle. [volume] (Warren, Ohio) 1855-1921, 1870-07-27
Financial AGrairs--.The Effect OF a
European War on American Bust

From the monthly circular issua1 by
the banking house of Henry Clews &
Co., No. 50 Wall street, New York,
dated July Is, we take the following:
The outbreak of war between France
and Prussia has subjected financial af-
fairs in this country to a evere strain.
The great u and the national
pride of the contestants, together with
the possibility, not to say probability,
that other powers may be ultimately
drawn into the struggle, too plainly
indicate that the war may prove to be
much more costly and protracted than
that of 1866; and the event has, there
fore, produced a profound sensation in
Wall street circles. The experience of
the effects of the war between Prussia
and Austria, when affairs in this coun-
try were substantially in the same con-
dition as now, educated Wall street to a
proper treatment of the effects of these
European outbreaks; and to this fact,
perhaps, may be attributed the fortu-
nate circumstance that the arrangements
growing out of this war have not been
so marked as those which attended the
war of 1866, although the foreign situa-
ton is more threatening nov than then.
The first effect of a foreign war is felt
upon our exchanges. In the present
case, circumstances are, in some respects,
pecuniarily unfavorable for resisting the
effect. From natural causes, the Euro
pean money markets have recently had
a hardening tendency; which, with ex-
IRENE ease in the home money markets,
has rather favored the return of securi-
ties to this side than otherwise. As
usual at this season, the foreign eX-
changes are against US. Our exports OF
cotton and produce are every week be-
coming lighter, from the working down
of stocks; and in addition to this inc
quality on the trading account, we have
to remit to Europe, during the first half
of this month, several millions OF semi
annual interest upon securities. n con
dition of things in Europe, therefore,
which is calculated to induce the calling
home of balances held here, a contrac-
ton of and an extensive realizing upon
our securities held there was calculated,
under these circumstances, to have a
very marked effect upon the home bond
marketa and upon the price of gold. The
disturbance, however, has been less than
might have been expected. The price of
gold has advanced from II14 to l223, and
bonds have declined three and three and
one-half per cent, while the decline of
SiXty-Twos on the London market has
been eight and one-half per cent. At
no period since the outbreak, has the
bond market here been high enough to
Ii r A. 80 80 49, AVNaGInH.Il
amount of bonds from Europe, the rise
in the gold premium having almost con-
stantly Kept the gold valued those secu-
rites a fraction below that of London and
Frankfort. If this relation between the
price of gold and the price of bonds be
maintained, no return of bonds is to be
expected. In the war crisis of 1866,
about $40, 600, 900 of Five-Twenties were
returned from Europe; bat scarcely had
the bonds begun to arrive here before a
rehux movement set in, which resulted
in our sending out, within two or three
weeks, about SIS, OOO, 600 of bonds to-
With this knowledge of the
preference for United States securities
in Europe in periods of war, there Is,
both abroad and at home, little DISPOSE
ton to run into panic upon them and
although it is possible that in the event
of the complications involving powers
at present neutral, prices might still fur
Their decline, yet it seems probable that
there would be an ultimate recovery.
This conviction produces a compare
steady feeling on the market here,
and is an efiectual stay against panic.
Although it would be a manifest error
to uppose that a country could be per-
manently benefited through war be-
tween other nations with which it was
in commercial intercourse, yet there are
some important advantages which this
country may be expected to derive from
misfortunes of Europe. Our exports
of food products will realize higher
our securities, being exempt
from the influences which affect injurl-
Ously the credit of some Of the leading
European governments, will naturally
stand higher in the foreign markets
after the first panicky effects OF war;
md when the war has terminated, the
population of Europe being oppressed
with taxation and wearied Of their ma
bilitv to be used as the tools of war, will
be more disposed to seek q home amid
he peaceful pursuits Of the United
States. swelling emigration and promot-
ing the commercial developments of this
But it must be admitted that
these hopeful views, TO which
buoyant people naturally incline,
here are dangers upon which II IS nee
essary to keep a close eye. Ii Is not
impossible that the struggle may enlist
all the leading powers Of
Europe, including even England; and
,lthou0h we cannotbut regard that dam
,er as somewhat remote, yet 1t involves,
4 realized, such an extent OF
ion, panic and common arrangement,
hat a certain degree Of tmldity and
.aution must prevail until the danger IS
1ast. 1t is not to be that at
we are running a trading account
Europe which requires us TO re-
nit nearly 100000, 900 of securities per
in settlement Of an adverse bal
This condition of things requires
Is not only to feel sure that our bonds
will not be sent home again, but also
o be satisfied that Europe Will continue
n increase its investments in our secu-
tiles. This Is the weakest spot in our
.rmor: and with this view, it would not
1e unfortunate were the war to embar-
ass our importing operations.
With so much uncertainty respecting
future course Of affairs in Europe,
I is impossible to form a satisfactory
as to the tendency Of prices of
class Of securities. Railroad stocks
lre HI DIGotuL Gull ely AAAAf aRNA
idea that an advance in Western pro-
luce, the ample crops and the active
for food products from Europe,
will induce a large traffic over the roads
nut, although there is some force in this
-iew. the dangers connected with the
var hang constantly oyer the market
md resist any speculative advance
borrower, the period approaches when
he demand for money for moving the
rops usually proves u~nfavOrable to the
arrying of stocks on speculation. As
o the market for government bonds, 1t
hardly be otherwise than unsettled,
While a condition Of war prevails IN
ountries where nearly q, 1000, 10000 Q OF
he bonds are held. At the same time,
lnless the struggle should assume Eu-
dimensions. there is reason to
that our securities will be better
ustained abroad than those of most
ther countries; for the United States
Dyernment, being far removed from
he probabilities of ENHANCEMENT IN
ostiiities, its credit will stand high, as
ompared with that of the governments {
involved in the Struggle or liable to De !
In spite of this, however, II IS 10 De I
egarded as possible that the situation
nav become so serious as to produce a
Universal distrust and indisposihon TO !
in any kind of securities. IL Is :
~ that all efforts at fundlng .