April 28, 1866. N. 1183.

The Economist, 28. April 1866. S. 497/498.
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„Finance Paper“ and The Rate of Discount.

Facts [which have] become public during the last few weeks explain a considerable number of the phenomena of the money market during the last 2 years  Zusatz von Marx.
(1865 und 64)
or more. The lists of creditors of Mr. Savin, the great contractor for Welsh railways; of Mr. Watson, another contractor; of the Contract Corporation; of Smith, Knight and Co (Limited), also contractors; and of some others, show very clearly the sort of financial influence by which the 100 of Railway bills before every session of Parliament are suggested and sustained, and also the kind of financial devices by which the works themselves are started and carried forward.

Twenty years ago or less, when a railway was projected … people of some sort were found to subscribe beforehand for the shares, and to bind themselves to pay future calls till the line was made … with all the delusions and iniquities of subscription contracts, it is substantially true that until within a late period the costly public works of this country were made by virtue of a previous agreement among a large number of bona fide subscribers, each prepared, or believing he was prepared, to find his quota. In the numerous cases where the adventure was a mistake, the loss and suffering were diffused and severe, and the unlucky contributors were driven to straits and economies painful to contemplate. … The pressure of the period of excessive railway construction, from 1845 to 1853, fell directly, as it ought to do, on the savings of the country. The payments to the contractors were raised by calls from the shareholders, and the shareholders paid the calls by saving out of income, or by the sale of previous investments. But this system was gradually exploded, and for the last few years has been given up altogether. A project for a railway, dock, pier, or other public work, requiring a large conversion of floating capital into fixed, is now concocted by a knot of 4 or 5 persons, consisting of a solicitor, an engineer, a parliamentary agent, a contractor, and a financier. Some of the party have the command of the few thousands necessary to pay for surveys and indispensable preliminaries. They have, in most cases, name and position enough to enable them to borrow as much money as carries them as far as the Royal assent. That once obtained, the Act becomes a lively instrument of Credit. The directors issue Lloyd’s bonds, debentures, stock, preference shares, and the like to the contractor, and he in his turns turn finds avenues in the money market where, for rates of interest and commission almost fabulous, cash is to be had on these securities. Now, these securities are a mere speculation on the future, and a speculation subject to one principal and many smaller casualties. I) The line must be finished and placed in actual working before the obligations representing its cost can have any ascertained value at all. An unfinished railway or dock has no value whatever. II.) The line must not only be finished and actually worked, but in order to impart value to the bonds and shares there must be a positive profit surplus. The difference between securities such as these – wholly dependent on future and uncertain events to happen at distant and irregular dates, and liable to become worthless by the premature stoppage of the undertaking – and the class of securities which experience has shown to be best suited to the requirements of bankers and money dealers –, is not only marked in its character, but so wide and glaring |49 as to prepare any prudent person to expect mischief. Mischief has certainly followed in no limited measure.

There has been in the money market for some time past a very large amount indeed of these „financial securities“. Sicher no less than 5 or 6 millions or more. Many of them have been pushed off among banks who ought to have known better than listen to the temptation of extravagant rates on the bills of persons … wholly engaged in contracts more or less hazardous. Of course, there was the collateral security of bonds, debentures or shares. But both the promissory note or acceptance of the borrower and the collateral security were alike beyond the range of prudent bankers or discount brokers. The Joint Stock Disc. Co. with its millions of liabilities on one side falling due day by day, and its millions of finance securities on the other falling due goodness knows when or where, is the most extreme and lamentable carricature caricature of this folly.

The effect of the system has been to shift the burden of the largest part of the public works of the last few years from the savings in detail of the investing classes of the country and fasten it upon the merchants and others legitimately resorting to the money market for the discount of their ordinary trade bills, and for advances required for short periods to meet the nature of their business. The contractor making a railway in Wales, or Somersetshire, or elsewhere, has appeared in London, or Liverpool, or smaller places where banks are to be found, and has got his bill at 4 or 6 months discounted at twice or thrice the current rate of the time, fortifying it of course by a deposit of collateral security. When the due date arrived the bill could not be paid. It must be renewed, and renewed it has been, not once but several times. Now and then the lender has been lucky enough to get repaid out of his securities, or out of the pocket of some new party discovered and cajoled by the assiduous exertions of the well-paid and plausible emissaries of the people wanting the cash. The end of the process has been a lock-up of funds in advances which are really and truly mortgages on unfinished public works, or on public works struggling into profitable existence.

During the last month or two it is probable that there has been some clearance  The Economist: of this finance paper
of finance paper
. The borrowers on it have been, in one way or another, enabled to offer securities to bona fide at prices which had led to a real distribution among the public – or, what is the same thing, a class of real shareholders has been found, not before the line was made or the calls required, but after both these things have been accomplished at a sacrifice about which prudence and pity alike counsel silence.

The finance cos. were set up expressly to do this sort of intermediate work, but have not done it at all well. Sie konnten nur lend safely what they possessed safely, their own capital and the deposits lent to them for long periods expiring at various dates. They resorted to credit; they counted upon the facilities of the market; and when the market ceased to be facile, because contractors were found to miscalculate and to fail, then the finance cos. had to turn round on their shareholders and call up in a hurry and [in] the midst of panic the capital they had been foolish enough to lend to others before they had it in hands themselves. … A bill of exchange drawn against goods bona fide produced and sold is a security which the ordinary consumption of the country will carry off and pay for, and is therefore a safe and proper instrument for circulation among bankers or bill brokers. A bill of exchange drawn in reality against an unfinished public work is a pure speculation on the possibility of that public work yielding a dividend on its cost, and finding purchasers in detail for its bonds or shares.

Fraud or misrepresentation should be punished as a criminal offence; as, f.e., by rendering personally liable the directors and officers actually signing any bond or security, which on the face of it implies any material circumstance at variance with the real facts of the case … Wenn dieß finance paper cleared out of the market, the rate of discount will then resume its former and proper function of indicating the relation between floating capital expressible only in terms of money on the one hand, and floating capital represented by merchantable bills and securities on the other.|


The Economist, 28. April 1866. S. 501/502.
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The East Indian Railway Scandal.

Handelt sich um the great line which serves the valley of the Ganges. The Gvt was forced to order an inquiry into certain great mischief, which the enormous and unexpected prosperity of the railway is inflicting upon commerce. Pressure already severe (auf den rolling stock) when the full weight of the cotton trade fell upon the railway, producing a scene, when its duration is taken into account, entirely without parallel. Every European house rayed out its agents into the NorthWest and Central Provinces in search of cotton. Every native firm began making advances and bribing the little holders, and from 50 districts as big as English counties cotton, the very existence of which was hardly suspected, came pouring towards the line. The stations were choked to the roof, and in a little while the idea of housing was given up and the cotton piled upon the plain. At Cawnpore, says Mr. Robert, official Chief Auditor of the Railway, there were after the greatest efforts had been made 20,000 bales of cotton lying piled in the station, 20,000 more on the plain round it, and 24,000,000 lbs were in the store-rooms of the native town, all waiting transport at once. This represents a property of 21/4 millions lying idle at one station. The railway officials could not carry it, had not, after they had strained their powers to the uttermost, sufficient engines or trucks or time, and by the by they found a reason for not hurrying. The owners wanted the cotton very much – Heißt z.B. in extract from the evidence of a partner in the House of Schoene, Kelburn et Co.: „I have to complain generally of the detention of cotton at Mirzapore and an unfair distribution of waggons. We had goods at Mirzapore ready for dispatch in December and January last, 2,545 bales of cotton, of which up to date we have only received 260 bales. Application to agent on 18. January, reply on the 19. The traffic manager was doing all in his power towards distributing the waggons wagons fairly, and agent was very much surprised to find subsequently, that private instructions were issued to the traffick manager to give the preference to the Commercial Transport Association in the allotment of the wagons. … on our total quantity of cotton at this date there is a loss compared with the prices to be realised in January of 5rs. per mound, in round numbers 30,000rs, and, as the firm has paid for all this cotton, they lose monthly 2,500rs. interest.“

Thus pressed the great European firms used their social weight both with the Co. and its officials, and so obtained occasional preferences, but the natives went more directly to the point. They bribed the station-masters. Fabulous sums were offered to subordinates on 300l. a year, one man’s wife making by a sale of preferences above 1,400l. a month. Outcry. It was seen that the Commercial Transport Association was always served first. Besides being very great customers, they owed the railway a heavy debt … preference given them to pay this off. Committee of Inquiry proposed that the trains should be put up to auction. Whoever paid most, should have his cotton carried first … not met (this) the merchants’ approval … It would render the price of cotton at the part altogether uncertain, the bids being high one day and lower the next, would enable a lucky bidder to undersell his neighbour, and completely suspend all trade in goods unable to bear the heavy premiums. No final orders have, we believe, been issued, and whole the Board in England are straining every nerve to meet the demand, there the cotton lies heaped round the central and Northern stations[.]

These Indian railways are in fact state railways. The state gives the land out of taxes, gives the interest out of taxes, and assumes a direct and most searching control of the administration. Muß also für das interest der natives so gut sorgen wie für das der Europeans, und das der community as well as that of the shareholders. This the sale by auction does not do. It is a direct prohibition to the grower of anything except cotton to use the state railway at all, and as regards cotton itself, gives the capitalist an unfair advantage over the small dealer.|


The Economist, 28. April 1866. S. 502/503.
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The Report of the Commission of Inquiry into the Pollution of the Thames.

»Pollution of the river from the paper mills and sewage. In both cases valuable manure wasted and river poisoned. From one paper mill above a ton of dry fertility matter is thrown daily into the stream. Throughout the whole course of the Thames, from Cricklade downwards, the sewage of cities, towns, villages and single towns is suffered to pass into the river.[«] [„]There is no form of scavenging practiced for the surface water of the Thames, but carcases of animals float down the stream until wasted by corruption. The river water receives unchecked the whole of the pollution, solid and fluid, of the district, and this same water, after it has so been polluted, is abstracted, sand-filtered, and pumped into the metropolis for domestic uses.“

The example of London in removing its sewage from the river has not been followed. The water below Oxford is useless for the manufacture of white paper and unfit for drinking … It is true that the river is not so absolutely sewer-like as it was when the main drainage of London was turned into it.

The Commissioners inquire what can be done with the sewage, and whether the irrigation of land with sewage, as carried on at Croydon, Norwood, Worthing, Carlisle, and Edinburgh, has any bad effects on the health of those places. It has no perceptible effect, and they strongly are urge its general adoption. Dr. Carpenter, of Croydon, said: no injury to the neighborhood had arisen from the irrigated fields, and there was but a very slight smell from them in hot weather, just before rain. According to Mr. Latham sewage is completely deodorised as it touches the earth. But great care is needed in the management of the sewer. They must be properly ventilated, and that outside the houses. The sewage water must be passed over a sufficient area of land, and not to near dwellings. But if these precautions be taken, the benefit of the sewage water to the land is invaluable. It goes off from the land bright, tasteless, and inodorous. Mr. Cousins, of South Norwood, who rents some of the irrigated land, has raised crops of grass of 50 tons of the acre. … Near Edinburgh, sewage irrigation has been used for two centuries, and though the conductors were suffered to get out of order, and to become reservoirs of stagnant sewage, no special class of disease has been generated through the sewage.

The Economist, 28. April 1866. S. 504/505.
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How to profit by the plague.

Take f.i. Cheshire and other localities where the plague has been virulent. Much of the disease which attacks the dairy cows due to the wretched accommodation, or rather the absolute want of accommodation in housing them, and to the poor system of feeding them during the winter months, well nigh universal in dairy farm districts.

[„]In no case should undrained stiff clay lands be ploughed; the first crop may be tolerably satisfactory, but the expense of tillage afterwards, and the uncertainties of the seasons, will add so much to the cost of production, that there will be little left as profit. I would advocate the allotment of none but good land for arable cultivation, but no more of it than could be well managed; a little well done will be more profitable than double the extent only half farmed.“

A certain number of sheep and a certain quantity of ploughed land would be great improvements on Cheshire farms as helps and auxiliaries to dairy husbandry. Without ploughed land there can be no straw, absolutely necessary to the comfort and good management of cattle during the winter months.

The best fields on most farms (I speak of the average class of land in Cheshire, and not of the very light or sandy portion) are those which were boned many years ago, when never less than from 1 to 2 tons per acre were applied, most of which was in lumps of the size of a thump. These bones, it will be found on ploughing, have sunk 9 or 10 inches deep into the soil, and are lying there in a half-decomposited state; by ploughing you replace them near the surface |52 where the action of the air and repeated tillage reduce them to powder, and lays them under a renewed contribution as fertilisers. There are hundreds of fields also whose grasses are run out, to use a common phrase, and which, by growing in a weak and spiral form and by matting together as they grow longer, ask to be ploughed; they can be returned to permanent pasture even in a better state than when first broken up. In expenses of ploughing, sowing, reaping, and harvesting good land are all less than they are in poor unsuitable soil, and less still in fields conveniently near the homestead , which will be better for the tenant.

The Economist, 28. April 1866. S. 508.
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Share Market.

In financial shares trifling business. There is, in the Stockexchange and its „entourage“ a considerable „bear“ account or speculation for the fall. On the other hand, the public are in many instances uneasy, and on the slightest unsatisfactory news, reliable or otherwise, send constant supplies of shares upon the market.

16 March 1867. N. 1229.

The Economist, 16. März 1867. S. 296.
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Emigration from Ireland (Communicated by Leslie)

Die figures der numerischen Reduction der population seit 1848 fail to show the real change, as they do not show what the natural increase would have been. Nevertheless, agricultural wages throughout the greater part of Ireland are still under 6sh. a week, deducting Sundays and holidays; in America the rate is 7 dollars a week, and even more in the Eastern states. Where skilled labour (in Ireland) dearest, it is so only because it is so only seldom employed, and hardly to be had. The price of common labour, on the other hand, is still below a shilling a day throughout the year; having risen in some counties from 8 to 9d. for a day’s work to a shilling, with more constant employment it is true. A rise to this extent, it is very clear, will not stop emigration … It is material to observe that these additions ⦗von food etc zu money wages⦘ are most common, and on the most liberal scale, where emigration has not reduced the number of the labouring population; and, in the second place, that while such allowances are far from being general throughout the island, a great rise of prices must be set off against the rise in money wages. In 1848, the cost of the Irish constabulary was estimated at 35l. 2s. 6d. a man; 1866 the Commission rated it at 51l. 16s. 4d.; a rise of nearly 50%, and prices have risen since then. In many parts of Ireland, the labourer earns 6sh. a week, where his father, or he himself in his youth, earned only 4; but potatoes were then at 2d. a stone, where they are now above 4d; meat was 3d. a pound, where now it is 7d. or more; the labourer’s clothing 10 years ago was from 50 to 100% cheaper than now; and his whiskey was both cheaper and better. His tea alone is considerably cheaper. He can, indeed, now live upon Indian meal, but his diet on that costs a good deal more than it formerly did on potatoes, and he does not like it so well. What is more to the point, he would not have to live upon Indian meal in America. Were it not for remittances from friends in America, it is certain that a great number of the peasants would be little better off than before the famine; I know cases in several counties where a labourer is positively worse off than he was then; that is to say, he earns now just what he did then – a shilling a day; for his employer can give no more on account of the scarcity of labour or the dearness of food. … It has been suggested that increased payments for labour may be met on the part of producers by increased charges on commodities, and that a higher cost of production must result in higher prices for the articles produced. Erstens Foreign Competition checks this, und: The limit to expenditure is fixed by the means of the buyer, not by the needs of the seller; and consumers are not enabled to pay more for commodities by having to pay more for services. In the case of commodities, as in that of labour, the equation of demand and supply at a higher price involves, if other things are unaltered, a diminution of both demand and supply – a decrease in the number both of the buyers and of the articles sold.

The Economist, 16. März 1867. S. 309.
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Manufacturing Markets.

Manchester. March 14. Wieder very dull week for all kinds of goods and yarns; stocks, consequently, have accumulated, and are pressing on the market with more severity than hitherto. Prices are, therefore, regulated, pretty much by the position of sellers, and when these are anxious to realise, low rates must be accepted; prices, consequently, are very irregular. Several failures of manufacturers show the unprofitable nature of the trade at the present time.

Birmingham: No improvement in the trade of this town; the country orders are small for hardware goods generally; as a rule, those given out by the factors are not more than 2/3 what they usually are at this season. Such slackness as now prevails has not been experienced here for a 12 12 years.


  • London. 1868.
  • 1866 „The Economist“ (Jahrgang 1866) vol. XXIV.
  • The Social Economist, 1. Oktober 1868
  • „The Economist“ (Jahrgang 1866) (Fortsetzung)
  • Jahrgang 1867.
  • Register der obigen Auszüge aus dem Economist für 1866 und 1867.
  • The „Money Market Review“. Jahrgang 1866.
  • The Money Market Review. Jahrgang 1867.
  • Register Money Market Review Jahrgänge 1866 und 1867