August 11. 1866. N. 1198.

The Economist, 11. August 1866. S. 933/934.
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The State of the Money Market.

Deputation of Joint Stock Banks to Disraeli. Proposed that the 10% clause in Gladstone’s letter of licence shall be cancelled, and another written without that clause. The semi-suspension of an Act is puzzling. We fear that 10% must now be endured for some time longer.

There are two ways in which a high rate of interest tends to bring ease in Lombardstreet. First), it attracts foreign capital here. But this time no such magnetism. We doubt its drawing much; and we fear it will still deter some.

Secondly): A high rate operates in a more natural way, by diminishing transactions, lowering imports, increasing exports, and so righting the balance of trade and bringing bullion hither. And this process is now going forward.  Kommentar von Marx.
⦗Wunderschön! „righting the balance of trade“ and „bringing bullion hither“. Die Worte und der Geist des Monetar[-] oder rather Mercantilsystem. Aber dieser return nothwendig!⦘
And this Process is now going forward.  Zusatz von Marx.
Doch scheint es

 Zusatz von Marx.
Thirdly) auch damit nichts zu sein.
Denn: It is true  Zusatz von Marx.
(obgleich this process is now going forward)
that the figures of the Board of Trade do not yet show such to be the case. Aber there is „another disturbing agency“. At a time of crisis we call in our debts from foreign countries, and the first consequence is an increase of imports.  Der „Economist“ zitiert im folgenden Absatz aus: The Economist, 20. Februar 1858. S. 194.
We explained
this in 1858, just after and in reference to the crisis of 1857, as follows:

„When we arrive at a period of crisis, the country is more influenced by its past transactions than those of the moment or those which follow. When a crisis occurs, it is generally preceded by what is termed Overtrading; and this, usually, if not always, takes the form of very extended exports – accompanied by a relative increase of imports of raw materials and other produce. As a rule, however, this country gives a somewhat lengthened credit upon its exports, while its imports are drawn for at the moment of shipment from abroad, and are paid for in cash shortly after |90 their arrival. England gives credit to the whole world, and takes little or none.  Zusatz von Marx.
Then it must be borne in mind, that an adverse exchange is caused, by a balance of payments falling due at any one period, and not by the exports or imports of the moment. We may be exporting as largely, or more so, than we are importing; but if in the one case we give a long credit, and in the other are paying ready money, the balance of payments may be against us, while the balance of transactions is in our favour. That such was the case at the commencement of the late crisis, and is usually the case at similar periods, there can be no doubt. We had extended our credits beyond our means. Our capital was absorbed to an inconvenient extent by foreign shipments. What was the natural remedy? Not to increase our exports, but rather circumscribe our transactions, reduce our foreign credits, and wait the arrival of remittances as they fell due for shipments already made. At such times the commerce of the country is placed in a condition of partial liquidation. Liquidation can be, and is, effected as much by commodities as by gold. The same motives which induce to large shipments of gold to England at such times, lead also to shipments of commodities.“

In time we must expects expect our imports to fall off under the influence of diminished transactions. But such is not the first effect of a crisis. The goods sent in payment of old debts confuse the accounts, and make us look as if we were transacting an augmented business.

The Economist, 11. August 1866. S. 935–937.
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Sir Stafford Northcote and Gladstone on the Panic.

Northcote ascribes this panic to a scarcity of loanable capital. Wir finden darin no explanation of 10% interest for 3 months. Last year the rate was 4%, and there has hardly been an outlay of loanable capital to raise it to 10%; d.h. raise its value 150%. We must not reason first backward and then forward – we must not infer the scarcity of capital from the high rate of interest, and then account for the high rate of interest from the scarcity of capital.

Aggregate Capital invested in Railways at the end of:
1861 342,386,100£
1862 355,107,280
1863 373,246,200
1864 391,396,680
1865 412,558,100.
Showing an increase of 70 millions £ in 4 years, which surely is no unmanageable or stupendous sum.

Trade has gone at an equable rate. In 1865 it can hardly be said to have augmented at all.

1864 1865
Exports £212,619,000 218,858,000
Imports £274,952,000 271,134,000

 Kommentar von Marx.
(Der cotton famine verminderte das Geschäft. Aber zugleich setzte er Kapital frei, welches zu den Finanz etc schwindeleien im Innern führte.)
So for a whole year our trade was stationary. During the present year (1866), it is true, there has been a considerable increase.

Imports during the first 5 months of the following years:
1864 1865 1866
£77,111,991 59,933,184 92,029,657

Exports in the first 6 months.
1864 1865 1866
£78,047,586 74,128,638 92,857,830

Similar changes have often occurred in our railway expenditure and in our trade without causing an augmentation in the value of money either similar or comparable.

It is true that a part of this railway expenditure has been effected in a mode singularly calculated to affect the money market. These railways have in part been made by bankers who advanced money to constructors and others. Such loans are in the nature of an extra and additional conversion of floating capital into permanent or fixed capital. The usual course is that the proprietors and makers of the annual savings of the country, after letting them lie as it were in transitu in some bank,  Kommentar von Marx.
(Wie soll man das anfangen, die annual savings in einer Bank liegen zu lassen?)
, invest them on their own account. The banker holds a fund permanent in amount, but made up of many changing items.|


The customary accumulation of the country passes through the bank, but does not rest there. But if in addition to this normal and natural process, the banker on his own account begins to invest in a permanent form the deposits left with him, the pressure on the short loan market is necessarily greater. The ordinary outgoings made by the owner go on as usual, and the extraordinary outgoings made by the banker have to be met as well. The rise in the rate of interest consequent on investments in railways made by the banker out of his deposits, all else being equal, will be more than from similar investments made by common individuals from ordinary savings.

But these observations only apply to investments by banks, not those of finance companies. The latter are the channels into which common people have chosen to throw their money. These are not like investments from bankers’ reserves, but common investments from ordinary savings. Nor, again, do those observations apply to loans on railways made by the banker at first, but then repaid to him by individuals. These, again, are but the ordinary investments by individuals, forestalled, indeed by the banker, but repaid to him in the end. And the whole argument as to the peculiar effect of a banker’s investments is subject to an important distinction. Banker’s means have of late largely tended to augment. The high rate of interest, offered, not only in London, but generally through the provinces, has filled the coffers of banks with money which else would have been embarked in permanent investments by the owners of it. Accordingly bankers have had more than usual to invest, and common people have been willing to invest less. Ordinary operations have not gone on as usual; they have been diminished at the moment when the investments by bankers have been increased.

The substantial conclusion remains that there is no evidence, that an increased investment of loanable capital is cause of the value of money being 21/2 times as great now as at this time last year. The aggravating cause is the credit – a panic from bad business. The inevitable effect of a loss of credit, especially loss of banking credit, is to send up the rate of interest very rapidly. Persons under large obligations must borrow largely on their securities, and for a moment, even on the best securities, it is difficult to get money. The large loans by the B.o.E. would have quite met this difficulty, and long ere this the panic would have died away; but unhappily we had as a country been trading upon borrowed capital. Owing to the failure of Overend, G. et Co , the suspension of Peel’s Act, the explanatory letter of Clarendon, foreign nations took fright, withdrew from us the capital we possess, and placed it in safer keeping.

Gladstone sagte mit Bezug auf the banking business of the country: „practice of showing reserves on paper, which reserves themselves have been lodged in investments[“].

The Economist, 11. August 1866. S. 941–943.
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The movement of the Money Market.

Bk.o.E. 8. August.
Liabilities £ Assets £
25,665,018 Circulation Securities 36,681,678
3,160,456 Public Dep. 13,602,429
17,660,244 Private Dpts.
Banking Department. Reserve: 3,579,229l. (Increase of 306,839)
Issue Department Bullion: 12,775,260 (Decrease of 190,911)

Foreign Exchanges improving. On France: 25.221/2.

  • Suspension of G. Evans, Evelyn Iron Foundry, Newport.
  • Bomanjee, Framjee, Cama et Co, Parsee, liabilities about 500,000l.

June 29. 1867. N. 1244.

The Economist, 29. Juni 1867. S. 729.
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Austria. Iron, Coal and Railway facility.  Zusatz von Marx.
(Working of means of transport)

The ore of the iron mines of Styria and Carinthia abundant, produces steely-iron, renowned all over the world. Difficulty to work them because of the absence of fuel. Lignite was for a time employed, but there was not enough of it to be got; then turf used, but the supply not sufficient. Recourse must therefore be had to coal. This found in large quantities, and easy of extraction at Fünfkirchen, within some 40 miles of the river Drave, one of the tributaries of the Danube. The valley of the Drave extends to Styria and Carinthia, and is in communication by means of the South of Austria railways with Trieste on the one hand and Vienna on the other; also with Pesth. A railway from Bares on the Drave (not far from the railway) to Fünfkirchen would enable the coal of the latter place to be carried to the rich ore deposits of the 2 provinces. The Austrian Gvt. has taken active measures to execute it as quickly as possible. Part of the line will be opened on 1st July 1868, and the other part a year later. The iron of Styria and Carinthia of great hardness and solidity, and at the same time is light. It is pre-eminently suitable for Bessemerising, and for making steel. Wird daher market find in all the parts der world. All that was needed to turn it to full account was the construction of a short railway to pits. Not only will the coal pits of Fünfkirchen obtain by means of the railway a profitable market in the iron works, but [they will] be able to send coal to Vienna, where it is very dear; also to Trieste, and through Trieste it is believed to all parts of the Adriatic and the Mediterranean. The coal is very good, and the deeper it gets the better it becomes. It is specially suitable for making coke. At the pit mouth it only costs about 6d. p. cwt, so that the use of it will not affect the cost price of iron. The pits are of considerable extent. In 1866, the extraction was about 225,000 tons.


  • 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