Aus:
The Economist, 14. Juli 1866. S. 817.
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State of the Money Market. (Still 10%)

The Decrease in the active circulation very satisfactory at this time of the year, when the payments for the dividends are going out … As long as the „danger“ signal is kept up, unusual reserves by way of protection will be kept … In ordinary times, all sound country bankers will hold proportionate reserves in London against their liabilities, but not a sixpence more than is wanted in banknotes in the country … Still efflux of gold. We drive the money away by maintaining the rate of interest at a point which makes everybody believe that there is some great calamity about to supervene which the exceptional rate is to prevent.

Aus:
The Economist, 14. Juli 1866. S. 818–820.
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The Crisis of 1866.

Why did the banks and discount firms engage in this bad business, and as if by set concert select this special time for so doing? The bad business goes back to 1862 and 1863. Rate of interest for a long period very small, therefore difficulty in employing the loanable capital in the money market. This one of the fundamental causes of bad business. If you leave much money in people’s hand to employ it for their own advantage, and they cannot so employ it in obvious good business, they are very apt to search out recondite bad business. John Bull, it has been said, „can stand many things, but he cannot stand 2%“. As soon as the rate of interest has for a considerable time [been] very low, some bad business is likely to be undertaken.

In general the mercantile community, excited by the facility of obtaining money, engage in mercantile adventures properly so called, and their failure, when it occurs, is generally of vast magnitude. It is then that capital panics are generated. A whole nation of industrious men of business are excited by a long continued facility, and rush into adventures which never pay … though in the aggregate each of them is small, upon the whole swallow up many millions and strain the national capital. But this pervading stimulus to a trading community takes time to act; it has to diffuse itself over a vast surface, and can only produce its full effect after a long lapse of time. |83 When this happens the banking firms, the holders of loanable capital, are relieved from this surplus accumulation; it is carried off in this surplus trade. And though that trade be bad, it does not follow that the bankers who advance the capital upon which it is carried on will lose in proportion to its badness. If the bankers take good security, they may preserve themselves from loss, though the traders to whom they lend are ruined. If there is only one good name on a bill, that in the worst event is enough for the banker, the unfortunate possessor of that „good name“ may pay other people’s debts and expiate other people’s follies. But still the banker gets out. He is not ruined. He witnesses tranquilly the ruin of others. But it sometimes happens that the banker is not willing to wait till the expansion, possibly the excessive and too sudden expansion of trade brings new and safe business within his reach; he is anxious to do „something“ when there is nothing safe to do for him.

The circumstances of 1862–3 rendered that difficulty natural. Concession of limited liability. Bad cos. formed. There was a great set towards the establishment of new banks and discount cos. The great English Banks were then paying enormous dividends, and we wrote on 24. October 1863:

„The causes of the great success of the original joint stock banks war waren: The banking of the country was underdone. The richer classes kept banking accounts, the less wealty wealthy classes did not. The shopkeeping classes were generally unaccommodated. Man sah nicht that a great number of small accounts is a much more valuable business to a bank than a small number of great accounts. Ebenso waren, obgleich nicht so viele wie jezt, many banks in large towns and great seats of industry, but the smaller towns had no banks. The system of banking now takes the savings of quiet country places, when they could not be employed, to large mercantile cities where almost any amount of capital can readily find employment, and this is one great source both of their profitableness and usefulness. In former times this was not done completely, and in many districts was hardly done at all. English Banking was underdone und badly. English law would not allow a bank to have more than 7 partners, and it is imposed on all these bankers unlimited liability … Many inferior people, especially those who had wages to pay, were eager for the money of others, wrote Bank over their doors, took deposits, and issued notes especially to their workpeople. They knew nothing of banking, kept no reserve, invested the money of the bank in some business of their own, and in a time of difficulty had no available resource. In 1793, in 1825, and other seasons of distress, these petty bankers failed by hundreds. There never was a better field for mercantile enterprise than the improvements of English banking 30 years ago. There were excessively few banks to receive the deposits of the richest nation in the world, and many of the existing banks were bad ones. The Joint Stock Banks changed this. Every little town has now at least one bank, generally two; all classes of the community, down to the small farmer, keep bank accounts … The same thing cannot be done twice. The best of this thing has been effected. Generally, the profits of a new bank must be made by diverting to itself some part of the profits of existing banks.“ Nun, in 1862 sqq. competition of banking in London extreme. The number of new banks of various kinds – some Indian, some provincial, some foreign, but all London too – which started in those years, was extreme. Each wanted to make a great and sudden profit on a considerable capital; each offered a large interest for money, since it could not make anything till it had money; each compelled others to give that interest too, or they would lose the funds which were the means of their livelihood and the implements of their trade. Just when the natural interest of money was low, because there was a difficulty in lending it well, a new class of money dealers sprang up who bid high for it, and therefore were almost obliged themselves and almost forced others to employ it amiss.

With discount companies the effect, though different, was even more pernicious. A great many new cos. were founded, and they came into competition with Overend, G. et Co. Overends, an old firm quite insolvent, and propping up its great reputation, by high rates of interest, could not let the money go, and the new Cos. wanted to make the money come. Between the two the rate of interest given by intermediate borrowers so to speak – by borrowers who insisted |84 to lend again – was forced up to an unreasonable amount, and yet the rate of profit on actual undertakings, the earning fund, the productive capacity of the country, remained where it was. The specific danger of the time was the accumulation of loanable capital in the hands of those who did not know how to use it because the profits of active capital were at the moment so small, and yet, partly from the competition of banks and partly from the foundation of discount and finance cos, the rate of interest given by these intermediate holders was beyond all precedent excessive and dangerous. Greater folly than has been committed by banks and discount cos during the two last years has never be been known before.

Aus:
The Economist, 14. Juli 1866. S. 820.
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The True Mode in whic which a shareholder should watch its Co.

A shareholder only sees the half-year’s accounts – in too many cases carefully prepared to meet his eye, and concealing under delicate ambiguities and well-contrived words exactly what it most concerns him to know. Attendance at a halfyearly public meeting mostly useless. A public debate on a co’s matter has rarely, if ever, done it good; and a single shareholder can scarcely generate a debate at such a meeting if he desires it. The directors in office never wish it, and while the co. is prosperous, can always prevent it. After the Co. is ruined, of course there are discussions enough.

If the principal directors who start a Co. are leaving it as if in terror; if they who know its secrets are leaving its ranks; if they are selling their shares and diminishing their responsibility – there is something wrong. If the directors are selling their shares, other welljudging people sell theirs too. The whole Co. is weeded of its rich capitalists, and left to women, clerks, and vagrants.

Aus:
The Economist, 14. Juli 1866. S. 825.
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Movement of the Money Market.

Bk.o.E.
• Decrease in Circulation £.598,413, Private securities 1,710,620 und Reserve (total of l.3,800,640) £.264,440.
• Increase in Private Deposits £.1,532,578 und Bullion: £.883,479.

Aus:
The Economist, 1. Juni 1867. S. 612/613.
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Taxation in the U. States. (apart from Customs)

Nach dem „Commercial Chronicle“ (New York) the assessment per head of the New York State more than double the rate paid in England, nämlich. $9.95 per head in Great Britain und Ireland. und $22.75 in New York State.

Aus:
The Economist, 1. Juni 1867. S. 613.
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Emigration from Ireland.  Zusatz von Marx.
Schließen (State of Agriculture.)

Mr. Robertson, an agricultural expert, commissioned to report on the state of some Irish counties[,] states: „There is a very large area of grassland, which is in a very impoverished condition. The land is grazed year after year; young cattle are reared, and dairy produce sold; but nothing is returned to the soil. It will not be long before the Irish farmer experiences that this system will end in the total exhaustion of the land.“ Lord Dufferin himself, in his book, just published on Irish Emigration and the Tenure of Land in Ireland, says; in reference to the conversion of tillage land into pasture, p. 298: „It is attributable chiefly to the difficulty of getting labourers. The Irish tenant has to take his capital out of the farm in place of putting it into it.“ Caird in Brief an Times (May 1867) says: „What I feel is that the nation is being weakened by the withdrawal, year after year, of so many of the young, strong, and intelligent. It is no longer a question solely of landlord and tenant, for this constant drain is a national loss.“