December 15, 1866. N. 341.

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The Money Market Review, 15. Dezember 1866. S. 667/668.
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The Overends. „Justitia“ in „Times“ (11 December) „On Commercial Morality.“

 Zusammenfassende Bemerkung von Marx.
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Die Times indeed defender der Overends. Ausnahmsweis for sensation sale jener Artikel. Es heißt darin u.a:

The old firm saw ruin imminent, and they seriously set themselves to the task of averting the dreadful catastrophe. They had already wasted a great part of their own fortunes, and squandered in foolish speculation 3 millions of other people’s money; what were they to do? Craft and subtlety were to be employed to stave off the evil. Their own firm was ruined, but their name was still a potent spell, and that they believed they could persuade a credulous public to buy and so to save themselves. That by this process they might bring ruin upon thousands of helpless innocent people was apparently of no consideration to these „pious bankrupts in fortune and in honour“. They determined to obtain for themselves a large sum for their name and their goodwill, and then to transfer all liabilities to the new. new Co. To do this the public had to be deceived, „and this was done in a mode that in more savage times than ours would have brought to the gallows the perpetrators of the dead.“

In the prospectus issued by the directors of the new Co. no statement of the circumstances either of the old or new co.; nothing said of the 3 millions of liabilities; no hint of the actual insolvency of the firm for whose business they engaged to give £500,000. The public were cajoled into buying shares in a concern utterly bankrupt by persons thoroughly cognisant of the |238 fraud they were committing. The private arrangement (secret article) contained a full description of the actual state of the old firm, and set forth in „damning figures“ all the liabilities and debts of the bankrupt sellers. Who, asks Justitia, are the criminals? The members of the old firm and the directors of the new Co. They concocted and executed the whole scheme, etc. „These“, he says, „are the criminals, and their crime is that of obtaining money under false and fraudulent pretenses – or swindling – and for that they ought to be placed on the criminal charge at the bar of the Old Bailey.“

Aus:
The Money Market Review, 15. Dezember 1866. S. 668/669.
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 Titel von Marx notiert in „Heft 3. 1868“ der „Hefte zur Agrikultur“ (MEGA² IV/18. S. 587.39), einem Exzerptheft 1878 (IISG, Marx-Engels-Nachlass, Sign. B 148) und im Notizbuch 1878/1879 (IISG, Marx-Engels-Nachlass, Sign. B 152).
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The Crisis of 1866: A Financial Essay. By W. Fowler. (1866.)

Defends Peel’s Act, Overstone etc. A panic, he says, is invariably the result of the opposite extreme. Too much confidence – undue inflation of credit – invariably followed by distrust, but in all cases there must be one immediate cause – one culminating point – which precedes the crises. Before the panic of 1847 great railway mania which necessitated money borrowing to an extreme extent, then panic, with the attendant export of precious metals to buy food, which was the immediate cause of suspension of Peel’s Act. Before panic of 1857 extreme speculation in the Un. States, which extended to this country, and the immediate cause of the suspension of the Bank Act then was the failure of various banks and colossal commercial houses connected with the American trade. Before the panic of 1866, great speculation in cotton, finance Cos, banks, limited liability Cos of all sorts, and in merchandise of various descriptions, and pinnacle of the crisis stoppage of Overend etc, 11 May, necessitating for 3d time the suspension of Peel’s Act.

Fowler so far right,  The Money Market Review: but we cannot go with him in his declaration
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but fool when asserting
: that the B.o.E. was prepared for the emergency because the Act of 1844 had compelled her to take the utmost caution in the management of her business, and that, guiding herself, by the state of her reserve, she maintained the high rate of interest which counteracted an adverse tendency in the foreign exchanges.

1) As to the necessity for a high rate of interest as a means of retaining gold in the country and of counteracting adverse foreign exchanges … B.o.E. minimum rate of discount 10% from 12 May to 15 Aug., and in that interval the Bank increased its stock of coin and bullion from less than 13 to less than 14 mill. In the same interval the B.o.F. minimum rate from 3 to 4%, but its stock of coin and bullion increased in those 3 eventful months from 201/2 to 291/4 mill. Ten % brought the B.o.E. virtually no gold at all; 3 and 4% brought the Bank of France nearly 9 mill. From 15 Aug. to now (15 Dec.) the minimum bankrate of discount at the B.o.E. reduced from 10 to 4%, and from about 14 mill. on 15. Aug. B.o.E. holds now 18 mill. It is clear that a high interest does not always attract gold; and that, after the panic of last May, it was worse than inoperative. It was mischievous to all but the B.o.E. and some other banks. Rest and dividends of B.o.E. good.|

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2) Old, old theory that „the convertibility of the note“ secured by 10% rate for 3 months, that the 10% kept enough gold, and that convertibility was never in danger. Nonsense! The convertibility was more in danger from the 10% than from any other cause. Was the convertibility of the French note in danger from 3 to 4%, while ours was 10; or with 30 mill. of gold to back it, while B.o.E. could not get half the amount with 10%. If from 12 May to 15 Aug. the B.o.E. had acted up to the letter of the law, it must have stopped payment. And then the convertibility of the Note went to the wall. It was only by throwing the Act of 1844 overboard that the Convertibility of the note was preserved.

3) Fowler tells that there must be a limitation of notes, and that the power of relaxation must rest with the minister of the day. Where existed the power of limitation in the recent crisis? Country bankers would have big B.o.E. notes in their tills so long as the 10% rate lasted, as the return made to the H.o.C. at the instance of Alderman Salomons amply shows. It was not for the B.o.E. to choose. The B.o.E., during those fatal 3 months of 10%, had outstanding obligations to pay gold on demand to an amount far larger than it had gold to pay, and all these debts might have been demanded in full at short notice. If the B.o.E. had only been a little more obstinate and a little less accommodating, their gold creditors would have demanded prompt payments, and where would the B.o.E. have been then?

Fowler says that the Bank Act of 1844 point points to a limit to the available supply of money, and thereby is a wholesome check to speculation. Might it not also be said that when the Bank coffers are full, as they are now, and will probably continue, the Act of ’44’ ’44 stimulates speculation? This law has taught us that, with 18 millions of bullion and coin in the B.o.E., we may regard money as dirt |240 cheap, and that with 12 mill. it must be at panic prices. Was there ever anything so supremely ridiculous in the shape of a law framed to regulate the commerce of the greatest commercial nation of the world?

 Nummerierung von Marx.
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4)
Furthermore, we are told that the limitation of banknotes relatively to the accidental stock of bullion in the Bank vaults ought to exist by law, and that the law of 1844, therefore, a wise and expedient measure. Yet, nevertheless, that some relaxing power is necessary in times of emergency, but that the power of relaxation, meaning an extension of the paper money beyond the limits of the Act of 1844, should rest, at as it now rests, with the Gvt. of the day, and not be an integral part of our Currency Law. This means, in fact, that our currency system ought to be regulated by a stringent law, but that, however stringent that law may be in easy times, it should invariably be abrogated in difficult times, and should no longer be law at all. We are told that on three occasions of 1847, 1857, and 1866, the Treasury Letter suspending the Bankact of 1844 has sufficed, „as by magic“, to stop all panic, and quickly to restore the normal state of monetary affairs; and that, as this magical suspension is sometimes imperative, a general power should be given to the First Lord of the Treasury and to the Chancellor of the Exchequer to give the needful authority to the Bank to suspend the law at their discretion. That is, in fact, that the law should be sustained upon the statute book, but that it should never be really put in operation. One of the aims and objects of the law of 44’ was to provide against those crise crises from one of which we have just emerged, and we are now told that whenever such emergencies arise there must be no such law at all. The law was meant to meet all such emergencies, but it is now argued by this most earnest advocate for the law that the emergency must be met by suspending the law.

Yet again we are told that a high rate of discount will not put a stop to speculative operations so long as it is profitable to pay it, but that the Act of 1844 will and does check such transactions, because in points it points out, in a way that cannot be mistaken, that there is a limit to the available supply of money in the country, and that, however good may be the bills offered, it is not certain that money will be procurable just when and to the extent required.|

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Aus:
The Money Market Review, 15. Dezember 1866. S. 669/670.
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Lloyd’s Bonds  Zusatz von Marx.
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(Railway Debenture)

Lloyd’s Bonds are, or ought to be, an acknowledgement, under seal, of a debt due for work performed or materials supplied, and in that form are held to be lawful; but in cases in which they have been used as a means of borrowing, as distinguished from the discharge of debt incurred before their issue, they have been held invalid.

In the last session of Parliament Law was passed rendering compulsory the public registration, on and after January 1867, of railway debentures and all other loans; and this same Act requires that after 21st  January 1867 every mortgage deed, bond, and certificate of debenture stock issued shall be endorsed by 2 directors and 1 officer of the Co., with a certification that the issue is made under Parliamentary Powers. These 2 directors and the officer are liable to fine and imprisonment if they certify falsely. Presently, 45% of the net revenue is the maximum of the debenture interest, while the minimum is 73/4%, and the average less than 23%. (Dieß nach Coles’ Tables.)

Mr. Coles has prepared tables for 26 Cos (the most important:): important): In substance these figures amount broadly to the facts that the 26 Cos. have raised in all 348 Mill. St., of which 79 millions is, virtually, at this moment, in the form of debentures.

Aus:
The Money Market Review, 15. Dezember 1866. S. 672/673.
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Bills of Lading.  Zusatz von Marx.
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(Frachtbriefe) (Handelsschwindel)

At the bottom of all transactions there is money. In a rough kind of way the business community may be divided into 2 great sections, the one dealing with money and the other with merchandise. The 2 live by one another. The capitalist is always ready to lend, and the merchant willing to borrow, the fundamental basis of dealing being security. This is provided by certain well known contracts formulated upon acknowledged instruments of trade, such as bills of exchange, bills of lading, dock warrants, and the like, which pass current generally „to order“, and by simple endorsement from hand to hand. These, when complete, are recognised as valued transfers of value. Bills of lading, for convenience, are drawn in sets of 2, 3, 4, and sometimes 5 parts. The number of parts is stated upon the face of each, and the captain certifies that he had signed the number indicated. The important part of the contract between the captain and all other parties to the bill of lading is that he engages to deliver the merchandise in good order, „in witness whereof the master of the said ship hath affirmed to ―― bills of lading, all of this tenor and date; the one of which being accomplished, the others to stand void“.

Now the course of dealing is ordinarily after this fashion: A merchant in India buys a parcel of cotton for which he engages to pay. He ships the purchase to London, obtains the bills of lading, and negotiates with an Exchange Bank to draw on the correspondent to whom he consigns the cotton, and assigns the shipping documents as collateral security for the due honor of his draft. In return, the banker pays the amount agreed for, which enables the merchant to meet his engagements. In other words, the bank buys the |242 bills of exchange, reserving power of recourse against all parties as well as against the goods in case of need. The bill is then remitted to the London office, and presented to the merchant’s correspondent, who, being duly advised, accepts the same. In due course the vessel arrives, and the agent sends his cotton to a storekeeper or to a dock warehouse. The storekeeper holds the cotton as bailee for the captain until payment of freight, and, after notice, for the bank who claim a lien for the advances made. The agent next pays the acceptance he has given and takes possession of the documents. He then lodges one bill of lading and a release from the captain’s claim for freight, and obtains from the storekeeper a dock warrant or wharf note, as the case may be. He then possesses a clear title to the goods, and if he should consider the markets unfavourable for immediate operation he can wait, when the certainty of being able to obtain a loan upon the document should need a rise. The storekeeper makes himself responsible for the delivery of the goods on receiving one only of the set of bills of lading, and he does this in virtue of the understanding that „one of which being accomplished the others to stand void“.

Nun schöner case of Meyerstein vs. Barber. J. C. Azemar et Co, respectable firm, lately transferred their business to one Abraham, formerly in their employ and known in London first as their manager, and afterwards as their successor. A parcel of cotton came to him drawn against in the usual manner. The cotton arrived and was landed under Abraham’s direction, but he appeared to lack the means to obtain the shipping documents. Consequently he could not deal with the merchandise, and had to contrive some scheme to meet the difficulty. He went to the bank and paid the bill by a cheque upon his own banker. He thus released the documents and immediately negotiated with Meyerstein for an advance upon them. This was successful, and, Meyerstein’s check being paid into Abraham’s credit, enabled his bankers to liquidate the cheque already given by Abraham. So far no harm done. The scheme was bold, but it had gone through, and all parties stood to come out right. But here the mischief begins. Abraham had deposited two bills of lading with Meyerstein, and one still remained in his possession. Meyerstein at this time was in the dark as to the arrival of the ship. Meanwhile, Abraham became active. He had been in communication with Mssrs. Barber as to a loan, in the first instance, but the negotiation had dropped, for want of agreement as to the amount. This was no longer of consequence, and the matter was resumed and concluded, eventually, upon Msrs. Barber’s first proposals. Every precaution was taken; the merchandise was inspected, and, being found free of all liens, the advance was made, the one bill of lading lodged, and the wharfinger issued the customary warrant. The mortgagees, being thus in possession of the cotton, sold it in their capacity of brokers and repaid themselves out of the proceeds. Part of the cotton was sold by order of Abraham, but somewhere about this part of the business he disappeared or absconded. His flight roused Meyerstein, who instituted inquiry, and finding how the case stood, made his claim on the Barber for the net proceeds of the sale, on the ground that the property in the cotton passed to him with the transfer of the 2 bills of lading.



29 June. 1867. N. 369.

Aus:
The Money Market Review, 29. Juni 1867. S. 746.
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City Offices. Co. (Lim.)  Zusatz von Marx.
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(Directors)

Before seeing almost the shadow of a dividend, we had to pay, the present call included, 500,000£. Meanwhile the directors thriving. All this has been going on while the directors have had accorded to them and their friends fine opportunities to buy cheap our shares. The directors and their friends now hold the largest stock in the concern.



Inhalt:

  • 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