Nashville union and American. [volume] (Nashville, Tenn.) 1868-1875, 1871-10-04
The Bank of England Rate.

IL i not easy TO explain the motives OF the Di-
rectors OF the Bank Of England in putting up the
rate of discount per cent i'll the short space Of
tao weeks 1t is true, the sudden turn in the
course OF exchange at New York, calling FOR re-
mittances of specie TO this side. was quite uneN-
pected, and, coming simultaneously with other
adverse movements, was calculated 10 cause
some sensitiveneSs in the London money market;
but We are not 10 assume that the Bank Direc-
tors were so ill-infOrmed as to be ignorant that
the state OF affairs at New York was artificial
and mOmentary and .likely to be suddenly
changed, As il has since been, BY the Intervention
OF the Secretary of the Treasury. 1t is further
true. that the payments Of France to Germany,
on account OF the war indemnity, have resulted
in active Withdrawals of specie from the Bank of
England, and that further Withdrawals on that
account may yet be necessary. Herein, We pre-
sumo, lies the main cause influencing the action
OF the bank; and il may be well 10 consider some
facts OfiSetting this etfluN movement In the
first place, the foreign coin received BY the Ger
man Government is, in large measure, paid
out again, and as the banks refuse to receive the
coin on deposit, it passes into the hands of the
bullion dealers, and from its excessive supply
must be expected to soon find its way back 10 the
country OF issue; and this return movement will
be stimulated by the fact that the comparatively
stringent condition of the German money mar
kets causes bullion dealers to have to pay hi Oh
rates OF interest for having their treasure 'car-
ried." In the next place, although there has
been considerable withdrawal of bullion from
the Bank of England for export within the last
month OF five weeks, vet there must be large
accumulation of the precious metals in London.
The imports of gold and silver into Great Britain
Ia eos 400 600 against Ell 900 600 for the like Pc
rod of 1870; while the exports OF both metals for
the same months were f16,9OO,OOO against tll,-
6OO, 900 in 1870; so that there has been an accu-
mutation, up to the end Oh August, OF $500 900;
and during the first hall OF September, just be-
fore theffirst advance in the bank rate, the inn
ports showed a slight excess over the exports,
while very large amounts were reported in transit
from Australia. Further. ii was well understood
in London, at the middle of September, that the
German Government was making such disposal
of its indemnity receipts as would secure the
early return of the funds into general circula-
ton, Large amounts having already been paid out
in redemption OF war obligations, while arrange
ments were in process for the disbursement OF
the whole. 1t seems, therefore, that the bank has
made the advance i'll the rate when the with
,lrawals TO Germany have had almost their fun
effect on the market, AMI at the period when the
favorable reaction from Germany might DC tx
pected 10 set in.
n NAV seem that this conclusion is at yari-
snce with the suppOstiOn that the Bank Direct
urs are to be credited with ordinary discretion
but that is no presumption against lts sOununeSs;
for the Directors are notorious for their lack OF
discretion, though famous for their indiscrimi-
nate caution. The week before the rate was adj
vanced to per cent, the bank held ia, lOO,osN
of specie at the same period OF last year, amid
the entertainments of war, It held Ell 100000
and the rate was per cent; at the like date OF
1853, il held go 1000, 900 and the rate was - per
held 40, 100, 600 and the rate was 2 per cent
Why, with larger amount of coin and bullion
than was hell at the same period of the preced-
ing wears, aud with the prospect rather OF re-
lux of the precious metals than of a continued
eifiuN, should the rate of discount have been
suddenly doubled? Ii is difficult 10 answer this
question from anything known or reasonably
suppOsablc. II, as some here imagine, IL was
done upon the suppOsitiOu that the subscriptions
to our five per cent loan might take CREST deal
of gOid out OF England, then We have to suppose
the Directors we're ignorant OF the fact that the
United States Government had called In -lOO-,
600, 600 bonds held chiefly in Europe, and that
the bonds called in would be accepted III pay
rneIt for the new bonds. No doubt there has
been considerable buying OF the "called" i've
tyeniies in GERMANY BY London bankers; bat
for this, London will be reimbursed either by
the payments OF Germans on their subscriptions
10 tie new fiveS or by the redemption of the bonds
bv the United States Government; 50 that these
operations cannot affect the specie movement
at the Bank OF England, except moment
arily and to q very slight degree. We cannot
therefore, come TO any other conclusion than the
Bank Directors have been Influenced by narrow
fesrs; that their object has been to avert dangers
NOT 10 he reasonably expected; and consequently
that they have caused much Inconvenience TO TIT
money markets of the world without any real Oc
casioI We venture little in predicting that tins
course of the London money market viii not %
found to sustain their action, ana that the rate II
the open market viii soon fail below the srtlllcia
minimum established by the ''fOgies" OF the Bans
parlOr.-NsJg York Bulletin, Oct. Z