COLLAPSE OF THE SILVER BOOM.

Auckland Star, Volume XIX, Issue 139, 13 June 1888, Page 8

COLLAPSE OF THE SILVER BOOM.

DEFALCATIONS ON THE STOCK

EXCHANGE,

(From the " Melbourne Age.")

The crash which careful observers foresaw in the future of the recent mining boom has come at last. During the past month the fall of stocks pointed to the collapse which must inevitably follow the creation of fictitious values that condemned the present silver craze; and, as the fall in prices has been accompanied by more or less unscrupulous operations on the Exchange, the collapse is all the more severe in its effects. Several brokers have stopped payment and called in their creditors, and two have disappeared, leaving large deficiencies. The public will suffer considerably, but the crash will be most felt by straight-going brokers who have dealt with those who now declare themselves unable to meet their engagements. The primary cause of the collapse is the wild rush ol the public themselves for silver shares. A rotten state of affairs has been produced by this feverish craze for speculation, and the public have chiefly themselves to blame for'the circulation of valueless scrip and the grossly unjustifiable prices at which silver shares were lately quoted. "When the re-action set in, consequent on the reports of the state of the mines, there had been heavy sales of shares by tho Adelaide brokers for forward delivery, and these shares were forced on the market at a sacrifice. The results reached Melbourne, where a similar practice has been going on, and the effect has been a disastrous failure. Looking back at the latter period of the silver boom, about the beginning of last month, it was then apparent that the silver stock market was on the brink of disaster. In the full rush and excitement of its splendour there was a writing on the wall which many an unfortunate speculator is now translating at painful cost. Taking the Broken Hill Proprietary as the basis of calculation, it would be found that to yield paying dividends on the original investment that mine would have to "pay £1,160,000 per annum for seven years."' Its shares were then up to £290, which represented a capital value of £4,640,C00. But instead of paying: 25 percent., it gave only 8, and other Barrier stock gave less. The yield 'given by the Proprietory mine for the six months ending November, 1887, was 1,267,699 ounces, bringing a profit of £120,001, of which £100,000 was set apart for dividends. If the whole of the mines maintained a similar proportion between output and dividend, the position would be this—that to give the same rate of net dividends the output of the field would have to reach 34,227,873 ounces for the year. This means that the Barrier field by itself would turn out more than one-half of the total silver yield of the whole world; for the annual output of the globe has for many years steadily remained at between 50,000,000 and6o,ooojoooounces. But the mining mania took little note of such improbabilities, and did not stay to look at any aspect of the position that ex posed its weakness, and public credulity now pays for its costly experiment. THE FALL IN PRICES. The fall in the value of the silver stocks here mentioned was upwards of £1,500,000 in less than a couple of weeks, and for those who had bought largely there was no escape. THE DEFAULTING BROKERS. Some illustrations may be given of the conduct of these unscrupulous or reckless dealers. For example, one of the defaulting brokers bought, through another person, at the top of the market, at £10 17s 6d. The shares fell, and the defaulter would not take them up. The purchaser resold them at £4 2s and loses the difference. The defaulter had also bought shares and mortgaged them. He has been in difficulties several times, and at a meeting of his creditors held recently he stated that only at last Cup time all he had was £1. Still this man was buying thousands of pounds worth of scrip. The bank at last stopped his credit, and he left Melbourne and could not be found for about ten days. He turned up again on Friday week at the Melbourne Stock Exchange, stating that he had nothing, and they could do what they liked with him. He was suspended by the Exchange the momenfthey heard the complaint against him, and has since been arrested for passing a valueless cheque in payment for some scrip. Another sharebrokor who has just failed is involved to the extent of about £14,000. He began business about 12 months ago with only £150. A meeting of his creditors was held a few days ago, and he could not pay them. The only secured creditor is the bank which was carrying him on till it stopped his credit on the 23rd May. The broker dealt in large quantities, and took up several time transactions in which various other people are involved. He also was suspended by his Exchange.

The third sharebroker under suspension who may be mentioned has absconded from Melbourne, leaving large liabilities in silver shares, and nothing is known of his movements.

Under any circumstances this collapse will cause serious loss to many people, for the deficiences of the defaulting brokers amount to upwards of £30,000. The state of affairs in the stock and share market is worse than ever, and the failures now reported may turn out to be merely the beginning of a terrible smash. Where such gigantic operations have been conducted and so flimsy a foundation this result could only be expected, and perhaps the public have a sterner lesson still in store for them.