## 4 August 1866. N. 1197.

### State of the Money Market.

State of the B.o.E. unsatisfactory. Reserve very low, and Bullion little increased, for under 15 Mill. at which we wish to see it.

1863. 1864. 1865. 1866.
Its Banknote Circulation 1 August £.22,340,809 22,489,710 23,203,757 26,236,388

The reserve – part of whose usual quantity has gone out to the public – 3,273,000. It was 1865: £6,461,000, and rate of interest 4%. Anyone on the Continent who has a debt to receive in England now asks for money, not for bills. He will not as a rule, take bills except those of 3 or 4 first-rate houses, and the usual bill currency of the world is suspended to a corresponding extent.

### Proposed Inquiry into our Banking Laws.

Mr. Watkin brought in H.o.C. his motion for inquiry. It was admitted by that there was a „run upon England“. Watkin urged that Clarendon (late Foreign Minister) obliged to issue a letter to explain to foreign nations an Act of Parliament, and so to induce them to continue the credit which their misconception of that Act was inducing them to refuse; and surely such an Act of Parliament and such a letter are anomalies in English history. We have never before written a circular to Foreign Gvts to say we deserved the credit from their subjects. When the Habeas Corpus is believed to be dangerous, its operation is definitely and specifically suspended; but here we have only a letter from an extinct Gvt, saying that if the Bank directors have to break the law, that extinct Gvt will propose a bill of indemnity. For 3 months we have been living in the worst of all states, that of contemplated illegality. A rate of discount is prescribed for the permission to break the law.

### Indian Railways.

As to the outline of arterial lines of railways, the plan more coherent and useful in proportion to the outlay than in England. The object was to connect in a vast territory the great centres of commerce; to open up communication with, and thereby to utilise and render productive, an interior teeming with the means of wealth, but lying comparatively destitute for want of a method of intercourse; and to facilitate the gvt. of the country by rapid communication and easy transit of troops. The direct railways now on the verge of completion between Calcutta and Delhi, between Calcutta and Bombay, between Bombay and Madras supply these wants so far as they go … The guarantee of the State to Indian railways possesses at least this merit, that the states state looks after itself, and forbids the waste of capital squandered in this country in useless and competing lines, and forbids also that ruinous system of Parliamentary bungling and indifference which in England has given us bad railways at an exorbitant cost. … Mr. Danvers in his 8. Annual Report (1866), recently issued, shows that the system of guaranteed Indian railways comprises a length of 5000 miles, of which about 2/3 finished. The track is for the most part single; clear now that für grossen Theil it must be doubled, perhaps more than doubled. At present the cost estimates for the double line are confined to 1/3 only of the entire distance, and with that provision the minimum estimate for the 5000 miles is 81 mill. st., or something more than 16,000£. per mile. With nothing to pay for land, no parliamentary expenses, and a track for the most part single, this cost per mile extreme, might, under proper management have done for half the price. When the miles doubled, and rendered thoroughly efficient, the cost will now be much more than 81 mill. per mile. Of the 81 mill., nearly 61 mill., were raised and expended on 1st May last, and there remains, therefore, still to be raised 20 mill. to complete the system of 5,000 miles with only 1/3 of double line. … The gross receipts during the year ended June 1865, were 3,122,480l., as compared mit 2,303,288l. in the preceding year (1864). So from 1864 to 1865 the gross revenue of these Indian railways increased more than 35%. The |88 net profits of the year ended June 30, 1864 were 840,704l. und im folgenden Jahr 1,341,550l., increase of nearly 60%; and this rate of increase in net profit by contrast of gross revenue, completely accords with our experience of railway business in this country. The number of miles worked in the 1st year and the 2nd did not vary materially vary materially, and the cost of working was, therefore, not enhanced relatively to the receipt. A mile of railway costs no more for maintenance, or very little more, with 500 passengers p. day passing over it than with 100, and thus with the sudden growth of traffic the profit of Indian railways increases more rapidly than the business transacted or the freights conveyed. The net profits realised on the Great Indian peninsula relieve the Gvt. from all obligation on account of its guarantee. Population of India 5 × greater than in the U. Kingd. Bis jezt dort will be 5000 miles meist single railed, hier about 13 000 miles of double railway.

### Restricted ownership of land.  Zusatz von Marx. Schließen (Land Improvement Cos.)

There are several Cos which supply the money for land improvements, and furnish the machinery by which they are carried into effect. The whole is subject to the approval of the Enclosure Commissioners. The money advanced with the expenses is repaid by terminable annuities, extending from 22 to 30 years, and such annuity takes precedence of all other charges on property. One Co. „The Lands Improvement Co“ has advanced within the last 12 or 13 years about 21/2 Millions l. St. to landowners in England, Wales and Scotland. Besides what this and other cos have advanced for improvement, there have been large sums advanced from the Treasury under the authority of several acts, of which the first was brought forward by Sir Robert Peel in 1842. In addition, landowners may themselves advance their own money for the improvement of their settled estates, and procure, with the approval of the Enclosure Commissioners, the annuities charged on the entailed property to be vested in themselves. Dieser plan wenig acted upon; terminable annuity ist nicht kind of property wie der landowner es braucht, z.B. als provision for a younger child etc. Interference with agriculture and the productiveness of our soil are necessary incidents to the modern phase of our feudalism. The root of the evil lies in the motives which lead to territorial aggrandisement, and that irrespective of the actual wealth of the owners. Thus a man retains or acquires the nominal ownership and control of a vast tract of territory, of the value of which not 1/2, perhaps not 1/3 belongs to him.

### Ten Per Cent Discount. Communicated.  Zusatz von Marx. Schließen (Interest and Profit)

Loans of capital being made in money, and interest being paid in money, every change in the supply and demand of money, in its rate of circulation, and in the state of credit, affects the rate of interest, disturbs its proportion to the rate of profit, and, as there is an accumulating force in these influences, often so clogs „the great wheel of circulation“, The proportion between the rate of interest and the rate of profit being for the time disturbed, the profit of the merchant or manufacturer is increased or diminished in proportion to the amount of capital on which he has to pay interest … A rise of interest involves the transfer of an increased share of profit from those directly employed in production, to those who devolve the task upon others … When a great deficiency occurs in the harvest, the general rate of profit is reduced, but the efflux of bullion diminishing the supply of money the rate of interest is maintained, and the simultaneous contraction of credit often raises it, increasing the disproportion between the rate of interest and that of profits. War, or a foreign loan, has the same effect in a minor degree. On the other hand, the fall in the rate of interest, which follows from the progressive increase of capital under ordinary circumstances, tends to raise profits for the time, and promotes the inflation of credit and a speculative rise of prices, which checks exports, increases imports, and drives capital out of the country. Required some means by which the rate of interest shall be made to conform more promptly and more uniformly to changes in the rate of profit, instead of oscillating as it now often does in the opposite direction … Though the rate of interest ultimately conforms to the rate of profit, it reacts upon it, and if it were possible to secure a permanently low rate, profits must fall in the same proportion. … It is the excessive extension of manufactures and trade caused by the reduction of the rate of discount to 3 or 2%, which gives rise to the necessity of a rise to 7, 8 or 10% and the consequent check to production and trade which ensues.|

### Reaction of the Agra Bank Failure on India.

Calcutta. June 21. On the morning of 14 known the Agra stoppage of payment; this led to the immediate suspension of a leading and much respected firm of produce brokers, having very extensive engagements with indigo concerns in the mofussil, and a panic followed paralysing business of every kind in a manner wholly unprecedented in the presidency, and from which the mercantile community has not yet recovered. During the past week the distrust, more especially in the bazaar, has been very great, fostered by rumours of the wildest kind as to the standing of various banking and mercantile firms. Money, however, continues plentiful, and is offering in the bazaar at 9% on Gvt. securities.

Madras. June 27. Very little doing during the past fortnight. Bankrates unaltered 10% for advances on Gvt securities, and 12% on private bills. The distrust in almost all our local banks has been so great, since the stoppage of the Agra and Masterman bank, that Madras Bank post bills have been chiefly used by our merchants for remittances.

### Money Market Movement.

Quotations of Discount. Bankrate. (Hamburg Open Market Rate.[)]
• P.C. Paris 31/2, Vienna 5, Berlin 6 (bills) 61/2 (advances) Frankfort 7 (open market), Amsterdam 7, Turin 8, Brussels 5 (bills) 51/2 (advances) Madrid 9, Hamburg 3 (open market) St. Petersburg 51/2 (bank) 81/2 (open market.)
Failures:
• Edington and Son, iron founders and engineers, Glasgow.
• Stopped: Bk. of Mssrs Kennedy et Co, of Dublin, and: Bank of G. W. Hale, of Congleton, Cheshire.

## 22 June 1867. N. 1243.

### The National Bank System of the U. States.

Table E brings into distinct contrast by means of Per Centage Proportions the 1649 National Bks., April 1867, mit den 1205 State Banks, in the Northern Portion of the Union, Dec. 1862.

Table H Abstract of the official Returns of 1626 National Banks, Jan. 1866, and of 1649 National Banks, April 1867 (Union, North und South)

Table F. Results of Detailed Return (Table I) on New York State brought in Smaller Compass.

Table G Total U. States Circulation in 1861, 1862 und 1867.

Table I New York State.

Table K Distribution of 1466 State Banks, Dec. 1862, and of 1649 National Banks, Dec. 1866.|

143
Table E.) United States. Condition of 1205 State Banks, Jan. 1863, compared mit 1649 National Banks, April 1867. Per Centages of Liabilities and Assets.
1649 National Banks. April 1867. A.) 6 Eastern St.
807 Banks.
B) 5 Middle St.
491 Banks.
C) 9 North Western St.
207 Banks.
D) Total
1,205 Banks
Liabilities
Per Cent. Per Cent Per Cent Per Cent Per Cent
20.4 Circulation 26.0 5.7 32.5 13.2
7.7 Due to other Banks 7.1 12.4 10.2
37.0 Deposits 23.0 48.6 34.1 40.2
Other Liabilities 4.0 5.1 1.0 5.0
65.1 Total 60.1 71.8 67.6 68.6
34.9 Capital paid up 39.9 28.2 32.4 31.4
100.0 Total 100.0 100.0 100.0 100.0
Assets.
P.C. P.C. P.C. P.C.
7.0 Cash Reserves 4.5 15.3 13.7 12.0
8.8 Other Banks 14.1 12.7 26.8 14.6
34.7 Stocks 2.9 24.3 13.7 17.2
48.2 Loans 76.0 44.2 39.2 53.0
Real Estate 1.7 2.0 2.6 2.0
1.3 Other Investments 0.8 4.5 4.0 1.3
100.0 Total 100.0 100.0 100.0 100.0

In group A circulation of the 507 Banks 26.0% of their total liabilities, the deposits to 23.0% and so forth.

A distinction must be made between the State Banks of the 5 large and leading Middle States and the Banks of the East and NorthWest. In the National Banks the circulation is 20.4%, but in the Middle States it was in Dec. 1862 only 5.7%. In the National Banks the Cash Reserves are 7%, but in the Middle States they were 15.3 p.c., and even the average of the 3 groups gives 12%. In the National Banks the Cash Reserves and Gvt. Securities together are 41.17% of the assets. In the Middle States they were 39.6%, or very nearly the same; and in the North West the proportion was 27.4%.

Table F.) New York State. 308 State Bank, Dec. 1863, und 313 National Banks, April 1867 (Details in Table I.)
National Banks. April 1867. State Banks. Dec. 1862.
Per Cent. Per Cent.
Liabilities.
Circulation. 13.0 9.1
Deposits 45.0 47.0
Due to other Banks. 13.5 13.4
Other Liabilities 2.0 4.3
73.5 73.8
Capital paid up 26.5 26.2
100.0 100.0
Assets.
Cash Reserves 22.3 16.7
Due by other Banks 5.4 10.3
27.7 27.0
Government Securities 26.6 28.0
54.3 43.0
Other Assets 2.5 2.0
100.0 100.0

The State Banks held 28% assets in Gvt. Securities, the National Banks hold a trifle less, 26.6%. Cashreserves in den National Banks , Discounts grösser in den National Banks by 6/10% (er sagt about the same.) Paidup Capital grösser in den National Banks (er sagt (der Economist ) about the same) Deposits etwas grösser (by 2%) in den State Banks. Aber, Circulation der National Banks 13%, der State Banks 9% (Unterschied von 4%) (in both instances secured by the deposit of public securities). |

144

We have seen that in New York State, the National Banks are hardly more numerous than were the State Banks. But the case is very different in the less commercial parts of the Union. A statement (K) gives the distribution of the 2 kinds of banks in detail; and we find there an increase of 120 banks in Pennsylvania , 85 in Ohio, 31 in Iowa, 57 in Illinois, 34 in Indiana etc. Früher, obgleich das building derselben free, 207 State Banks had grown up in the 9 North Western States, at the end of 1862. Jezt statt dieser 207 sind da 434 National Banks. The State Bank Circulation of these 9 Banks was 191/2 mill. of dollars in Dec. 1862. The National Bank circulation pertaining to them in Dec. 1866, was 501/2 millions, or 21/2 times greater. Diese expansion der Note Circulation in the North West – the eminently agricultural and grazing region – sicher Schuld an increase in price of articles of food, and in the wages of ordinary manual labour which has occurred during the 2 last year years.

In his Report of December 1861, Chase estimated amount of gold und silver coin in the whole Union at 275 Millions $(say 55 Mill. £. St.) Danach können wir in approximate form beurtheilen die additions to the amount of Circulating medium, besonders in the Northern or Federal States. Dieß in der folgenden Tabelle G. Table G. Estimates of Circulation in 1861, ’62 und 67 Jan. 1861. North. South. Total. Mill.$ Millions $State Banks Notes 140 60 200 Coin. Gold and Silver 200 75 (?) 275 Total 340 135 475 510 710  Notes of State Banks 180 Greenbacks 290 Fractional United States Notes 20 490 Coin 20? 510, increase of 50% over 340 Mill. of Jan. 1861.  Notes of State Banks 6 Notes of National Banks 290 Greenbacks 375 Fractional Un. States Notes 29 700 Coin 10? 710 These 710 Increase of 40% over the 510 mill. of Dec. 1862 und 100% over the 340 mill. of Jan. 1861.| 145 The 710 millions includes about 13 mill. of National Bk. Circulation established in the Southern States. In stating this part of the case, most American writers confuse themselves and their readers by making deductions for the quantities of Coin, Greenbacks etc held in the tills of Banks and the vaults of Sub-Treasuries. Such deductions are – fallacious and misleading Upon this , there seems to be good reason for concluding that at the present time the Circulating medium in the U. St. is very nearly double the amount before the Civil War, or in January 1861; and that out of the present 710 millions of dollars (say 142 Mill. £ St.), it will be necessary to redeem at least 220 to 250 Mill. dollars, (44 to 50 Mill. l. St.) before the volume of the currency will approach the level at which it stood when cashpayments were suspended. H.) U. States. National Banks. Founded Febr. 1863. Official Return at dates as under. 00,000 omitted. April 1867. 1649 Banks. Jan. 1866. 1626 Banks Liabilities.$ P.C. $P.C. Circulation National Banknotes 291.9 20.0 213.2 15.2 State Banknotes 5.9 0.4 45.4 3.2 297.8 2.586 258.6 Deposits Government Deposits 30.0 2.0 29.7 2.1 Private Deposits 510.6 35.0 513.6 37.0 540.6 543.3 Due to other Banks To National Banks 91.1 6.2 96.7 7.0 To other Banks 23.1 1.5 23.8 1.7 114.2 120.5 952.6 65.1 922.4 Capital Paid up 418.8 403.3 29.0 Reserves 60.2 43.0 3.0 Profits 31.1 29.0 2.0 510.1 34.9 474.3 1462.7 100.0 1396.7 100.0 Assets.$ P.C. \$ P.C.
Legal Tenders. 92.6 6.3 90.0 6.3
Specie 10.4 0.7 16.0 1.1
103.0 106.0
Due von Other Banks.
Balances Von Nat. Banks. 94.0 7.0 93.2 6.6
Other Banks 10.7 0.8 14.6 0.7
Notes 13.7 1.0 20.4 1.4
118.4 182.2
Government Securities:
U. S. Bonds for Circulation 338.5 23.0 298.0 21.2
for Deposits 38.4 2.6
in hand 46.6 3.1 142.0 10.0
Compound Interest Notes 84.0 6.0 97.0 7.0
507.5 537.0
Loans und Discounts 597.1 40.0 498.8 36.2
Stocks und Mortgages 20.2 1.3 17.5 1.2
Real Estate 19.6 1.1 15.4 1.1
Cash Items 87.8 5.8 89.8 6.2
724.7 621.6
Expenses 14.0 1.3 5.5 1.9
Total 1467.6 100.0 1398.2 100.0 |
146
K.) Distribution of 1466 State Banks in Dec. 1862, and of 1649 „National Bank“ in Dec. 1866.
Six Eastern States St. Banks. Nat. Banks. Five Middle Sts. St. Bk. Nat. Banks. Nine Northwest. States State Banks. Ntl. Banks. Five Southern States State Banks Nat. Banks Five South West. States St. Banks Nat. Banks
Maine 69 61 New York 308 313 Illinois 25 82 Virginia 66 35 Alabama 8 3
New Hampshire 52 39 New Jersey 52 54 Indiana 37 71 Nth. Carolina 31 5 Louisiana 6 3
Vermont 40 39 Pennsylvania 94 201 Ohio 55 135 South Carolina 20 2 Tennessee 14 10
Massachusetts 183 208 Delaware 5 11 Michigan 4 42 Georgia 28 9 Kentucky 44 15
Rhode Island 88 62 Maryland 32 32 Wisconsin 64 37 Florida 2 Missouri 42 15
Connecticut 75 83 491 611 Iowa 14 45 147 51 114 46
507 492 Minnesota 7 15
Kansas 1 4