## Saturday September 1, 1866.

### State of Money Market and Trade of the Country.

B.o.E. rate reduced to 6% on 30 August. It is certainly very difficult to believe that if the B.o.E. reduces its rate of discount to 5% next week, there has been since 17. August a reduction of 50% in the value of loanable capital.

A reduction in price here (and this is the usual effect of dear money) has a tendency to promote export, not to diminish it. The only way in which a high rate of interest affects the export trade is that it cramps traders who live by borrowed capital. They cannot do so much as usual; but for a trader with capital, it is better to export when a high rate of interest has sent down prices, than when a low rate has sustained them. At this period of the year our export trade usually increases, wie gezeigt durch folgenden

Abstract of Total Value of British Exports in each month.
1864 1865 1866
£ £ £
January 10,413,586 10,489,339 14,354,748
February 12,698,121 11,376,214 15,116,063
March 13,554,674 13,770,154 17,520,354
April 13,225,039 12,071,111 15,366,414
May 14,176.640 13,194,758 15,870,131
June 13,978,526 13,227,062 14,630,120
July 14,394,364 14,113,410 14,957,834

so that the trade was in round numbers:

In First 2 months. £. In Last 2 months.
1864 23,100,000 28,300,000
1865 21,800,000 27,300,000
1866 29,400,000 29,500,000.

In fact our trade (within this year, compared the last mit den first months), in consequence of the high rate of interest, has not increased at all. This non-increase is for the purposes of the money market a natural decrease.

 1864 98,610,176£ 1865 75,340,872 1866 115,273,358

showing an increase of 40 Mill. £, and more than 50% over last year. The greatest increase is in the value of cotton imported. The total account is as follows:

Raw Cotton 1864 (£) 1865 (£) 1866 (£)
from United States 1,245,954 534,213 25,269,971
British India 15,023,536 5,880,043 11,737,547
Ejypt 8,952,379 6,193,841 5,466,635
Brazil 2,362,974 1,750,714 3,299,310
China 3,570,152 957,866 957,866 (?)
Bahamas et Bermudas 2,038,809 1,320,109 43,484
Turkey 1,296,529 747,676 490,221
Mexico 1,836,733 1,816,660 35,591
Other countries 1,531,226 1,277,450 1,013,009
Total: 37,858,292 20,487,572 47,348,759

showing an increase of nearly 27 Mill. l. over this time last year, of which 25 Mill. is mit U. States. Returns, this trade, to its former state. Our imports from America used far to outvalue our direct export to America. The balance was made up by other countries, besonders Oriental countries which exported much to U. St. and imported nothing thence, but imported much to England compared to what they took from us. It was a triangular trade. So: (verte)|

98

1865. £. 1866. £.
England imported from America 4,338,917 30,839,017
exported to America. 6,214,937 15,224,220
30,000,000£ bullion now in Bank of France und 15,000,000 in Bank of England.

### Non Paying Railways.

Lord Redesdale has induced the H. o. Lords to pass a standing order reviving the old system of subscription contracts, and requiring the promoters of a railway to show that they are real people, with actual money, in fact intending to make it.

### Monetary Crisis of 1866. (Communicated.)

The characteristics of 1866: a complete exhaustion of the national capital in enterprises of all kinds, at home and abroad, and the vast amount of engagements to furnish more capital. It is to the vast extension of deposit banking, and to the absorption of capital by new cos., that our main difficulties are mainly to be attributed. By deposit, as opposed to ordinary banking, is here meant that form of banking in which the depositor receives interest on the sum placed or left in the banker’s hand. Solche banks existirten seit long in Scotland. Only introduced in London since about 30 years. Has been since then gradually growing in importance and now threatens to swallow up the system of ordinary banking, as still carried on by private firms. The sums thus held in London probably about 150 mill., in the British Islands must exceed 300, perhaps reaches 400 millions. The limited liability Cos., (other than banks, discount and finance Cos) are all collectors, some of them also distributors of capital; the object of the latter class being to make loans either to individuals or other bodies, while the former employ their money in mercantile or industrial occupations of their own. … The mode in which it was proposed to raise the capital for all these cos., both banking and miscellaneous, was by instalments, and this fact had a material influence on the march of events, and largely contributed to the exhaustion of the money market. The shareholders paid their deposit and the first call with little regard to the necessity of meeting subsequent calls, or to their means of doing so.

## 20 July 1867. N. 1247.

### Finance of the American States. (VonGeorge Walker, Springfield Massachusetts gegen den Standard Correspondent )  Zusatz von Marx. Schließen (Loanable Capital of the West.)

In the New York Financial (nicht Commercial) Chronicle of April 27, 1867 carefully prepared table on the indebtedness of the 36 States composing the Union, in 1860 and 1866. The figures are derived from the latest State reports, and are official. Total of these debts in 1866 = 352,194,290$, but in 1860:$255,839,769; increase only during the 6 years within which the war occurred of $96,354,521. In the 3 largest States of the West – Ohio, Indiana, and Illinois, the aggregate debt was reduced in that period from 37 to 31 millions, and in Pennsylvania, after New York, the most populous state of the Union, reduced 2 millions. The largest increase was in the rich States of Massachusetts (18 millions), Connecticut (10 mill.), New York (171/2 mill.) Hier und the other North Eastern States the greatest stimulus given by the war to manufactures, and other productive industry, and in them, consequently, the largest boundies bounties paid to voluntary volunteers, and most voluntary monetary relief furnished to the families of the absent soldiers. In the West, no considerable bounties were paid, and no debts, on account of them, could therefore be created. The State of New York has just published a return on its indebtedness, embracing the State debts, and the debts of counties, cities, towns and villages within it. State Debt now$51,753,082, but of this 34,182,975$existed before the war and more than 18 mill. of it represents the costs of the Erie canal, a gigantic work of internal improvement, nearly 400 miles in length, which has existed for 40 years, and has contributed many times its cost to the wealth of the State. Interest on it defrayed by the tolls of the canal, paid by the whole inland commerce between the West and East. The county, city, town, and village debts$85,675,645; of this $41,927,998 created for bounties and other war purposes; residue grown out of internal improvements, roads, bridges, waterworks, railways, schoolhouses, almshouses, prisons, asylums for the infirm, hospitals, all built by the help of the municipalities; debts temporarily created for them. Greater part of them only municipal guarantees; no burden whatever, on account of them, falling on the people. Total Debt of New York, alles zusammen, less than$ 140 mill. Population of New York nearly 4 mill. that of the late loyal states about 24 Mill. Southern states had never great local debts, weil no improvements. If the State and local debt of the whole loyal North on so large a scale as those of New York = 850 $mill. Aber die population of Ohio, Indiana, Illinois 51/2 mill., their aggregate state debt: 31 mill. The population of New York is 3,880,000 und its State debt 51 mill., more than twice as large as that of these Western States per capita. The disparity of local indebtedness noch grösser, weil in den new agricultural states not so many municipal bodies capable of creating debts as in the older and richer states in the East, and very few of them have an established credit. Their wealth is chiefly inland, and of this much is unimproved. No loan fund in the West to make the advances necessary to create debts. Little banking capital (proportionally), no savings’ banks, few insurance or trust company companies; and private capitalists can do better than lend their money on county or city bonds. To a very large degree, the ordinary hand to mouth business of that section is done on Eastern capital; and there is certainly no local capital which can have been immobilised in the manner supposed. Their absolute inability to borrow must, therefore, have kept the Western local bodies from contracting considerable debts. The total bank capital of the Union is 420 millions; and all of this is invested in Federal Bonds, and, therefore, the loanable capital which they control must come from the people in the form of deposits, and from their circulation of 300 millions. Of this bank capital, New York has 116 millions, the 6 New England States 145 millions, and Pennsylvania and New Jersey 60 millions; while the 12 Western and Border StatesOhio, Illinois, Michigan, Wisconsin, Iowa, Minnesota, Kansas, Missouri, Tennessee, Kentucky, Nebraska, Colorado, with a population of nearly 12 mill., have only 68 mill. of banking capital. The savings’ banks of the |155 East also hold a very large fund, much of which available for local loans. The savings’ bank of New York$ 141 mill., of Massachusetts 67 mill. $, the other North Eastern States, including Pennsylvania and New Jersey, hold proportionate amounts. Mit exceptions, here and there, z.B. 8 or 9 mill.$ in California, savings’ banks are unknown in the U. St. The savings banks of the West are her broad acres of cultivated land; and the only deposits of its people the seed, the growing crops, the horses, the meat cattle, the hogs, and the farming implements, with which the land was stocked.

Nearly the whole loanable capital of the Union is held in the Eastern und middle States, und no appreciable part of their capital is invested in the local debts of the West. Daher kann die indebtedness (State und Local) der U. St. not exceed $650 mill. Added to Federal Debt, as shown by the June statement, of 2515 mill.$, the total public debt of the American people would be 3,165 3165 mill. \$, a sum which does not much exceed the anticipated amount of the Federal Debt alone when the war was ended. Dagegen schreibt der Standard Kerl von 4 4000, und probably nearer 5000 millions.