THE COMMERCIAL HISTORY OF 1864.

Press, Volume VII, Issue 804, 29 May 1865, Page 3

THE COMMERCIAL HISTORY OF 1864.

Iα our files of the Economist for the month of March we have received a most admirable review of the commercial condition of Englaud during the past year, published in a voluminous supplement oa tho 11th. March, 1865. It is one of the most valuable documents which has come into our hands for a long time, containing a complete history in detail of all the trade, commerce, agriculture and finance of the country, and extending the information in financial matters to the principal towns of the Continent and to "America. The general review is so valuable, especially as pointing out the caxises of the recent scarcity of money, that we intend to lay it in fall before our readers, printing so much daily as our space will admit of: —

The commercial history of lS6d' is a record of the circumstances which have attended the operation of two principal sets of causes—the one set political, the other financial arid mercantile. The political causes were—first, the apprehensions produced by the Schlcswig-Helst«m war during tke iipsfc-four oj* five months of the year ; and secondly, the uncertainties occasioned in August and September and at some later periods by the apparent probability of peace between the Federal and Confederate belligerents in North America. The financial and mercantile causes were —first, the occurrence of three periods of pressure in the money market, namely in January and February, when the Bank of England minimum i*ate of discount was maintained for three weeks at 8 per cent; in April and May, when the rate was for a fortnight 9 per cent; and in September and October, when for so long a period aa two months the rate was again 9 per cent. In the second place, besides these periods of monetary pressure, there has prevailed once or twice great activity in the formation of new joint stock companies for home and foreign purposes, and also in the introduction of proposals for foreign loans. And in the third place, there has been towards the close of the year an opportunity of learning the actual results in practice of many of the joint stock schemes —banks, discount, finance, and trading companies—set on foot with great eclat of promises and premiums in the course of 1863. The Schleswig-Holstein war occasioned greater disturbance in foreign money markets than in those of fcliis country. Still, so long as it remained in any degree doubtful whether England would do more than offer diplomatic advice, the suspense and uncertainty were perplexing and hurtful. The Tote of the House of Commons on the 7th of July absolving by a majority of 18 the Palmerston Ministry from blame as regards their Danish policy, put a final end to the subject } but so early as March or April it had become tolerably certain that neither England nor France would actively intervene in the quarrel. The apparent rise of a powerful Peace party in the Northern States of America began to attract attention in July, and the acceptance - in the following month by the Chicago Convention of propositions favourable to negotiation with the South, justified for some weeks the views of those wTio held that on both sides there was a desire to put an end to the war. The refusal of General McClellan to become a candidate forthe Presidency on the Chicago conditions, and the" military succees of the Federal arms under Sherman, at Atlanta, entirely dissipated the hopes of peace, and secured for Mr. Lincoln an almost unanimous reelection. In England, the effect of these events "operated in several ways. In the first place, it wa9 necessary to consider the probable effect of peace on the political relations between the Federal States and ourselves, and especially between those States and Canada, as the British possession. nearest to them. The extreme language countenanced, if not actually employed, by Federal statesmen on the subject of the Southern -oruisers, which from time to time have evaded the vigilance of our police and escaped from English porta, seemed to warrant the inference that, under the pressure of a large army released from civil •war, it might be found convenient to launch it against this country. In the second place, the arrival of peace in North America would alter largely, and for some time, no small part of the trading arrangements of this country with many of its most important markets, —as, for example, India, Egypt, Brazil, and of course the whole of North America. It would also place on a new footing the cotton industry at home the occupations related to that industry, and the prices of the raw , material employed. ' The first of the three periods of monetary pressure (Jan. and Feb.) was occasioned wholly by the drain of gold and silver to the Levant and India, and for the payment of cotton, and to some extent by the apprehensions arising out of the Schleswig-Holstein The eeeond period of pressure (April and May) was also occasioned by a revival of the cotton drain in a less severe form, but chiefly by disquietoecasioned by the wholesale introduction of new companies, aad by the absorption of capital for the purpose of carrying on the the enormous mass of enterprises launched during the preceding twelve months. The third period of pressure (Sept., Ocfc, and Not.), was much more severe and protracted than either of thoee which preceded it. The primary cause was the pwijpect of e«riy peace » America, tb* coneeqpwnfc

great fall in the value of cotton, and the losses and discredit entailed by that fall upon considerable department? of trade, especially uj>on the trades centering at Liverpool and Manchester, and upon those can-ied on with India. There was also in operation, and upon a larger scale than in the earlier monthe of the year, the undns absorption of capital in new companies and enterprises. The following table (I.) will show in exact figures the progress of the causes which led to the severol periods of pressure : —

I. Foreign Exchoge3, Price op Silver, asd Bask of Jlsglajsj} Kates of Piscopst. 1864.

We can trace in these columns pretty accurately the commercial history of the twelvemonth, especially in the column (5), which gives the rate of exchange at Calcutta, and in the columns (2 and 3) which give the quotations on Paris and Hamburg. Speaking generally, as the Calcutta quotations fell, the drain of specie for cotton payments diminished; and as the rate of discount (col. 7) so also were the quotations oa Paris and Hamburg rescued from the tendency of decline which had been strongly manifested by them for some time past. The price of silver also (col. 6) follows closely the Calcutta demand.

If to table I. we add the next table (II.), giving for each month the exports of gold and silver to the East, we shall see still more closely at what precise parts of the year the drain made itself most felt:— ll—Expobts of Gou> and Silveb to the East per P. and O. Steamers from England. Gold. Silver. Total. 1864 £ £ £ January 389,000 ... 1,118,000 ... 1,507,000 February 198,000... 653,000... 851,000 March 256,000 ... 775,000 ... 1,031,000 April 298,000 ... "478,000 ... 776,000 May 143,000 ... 255,000 ... 398,000 June 120,000 ... 208,000 ... 328,000 1,404,000 3,487,000 4,891,000 July 91,000 ... 275,000 ... 366,000 Augtist 100,000 ... 755,000 ... 855,000 September ... 86,000 ... 622,000 ... 708,000 October 17,000 ... 221,000 ... 238,000 Jfesember ._ 122,000 ... 242,000 364,000 December ... 192,000 ... 412,000 ... 604,000 2,012,000 6,014,000 8,026,000 The export of treasure from Southampton a few years ago represented by far the larger part of the exports of gold and silver from Europe to the East. During the last four or five years, however, the largest share of the exports took place from Marj seifies, and from Gibraltar, Malta, and Suez. The following are the figures for 1863-4: — 1864. 1863. Conveyance. £ £ P. and O. steamers from Marseilles 7,777,000 ... 5,788,000 Imperial Messageries from Marseilles ... 7,770,000 ... 3,837,000 P. and O. steamers from Gibraltar, &c 553,000 ... 443,000 16,100,000 ... 10,068,000 P. and O. steamers from Southampton ... 8,217,000 ... 11,386,000 24,317,000 ... 21,454,000 The months of greatest export were January and February, March, and April, and August and September. Whenever the rates of discount were rendered sufficiently stringent, as, for example, in May,, and in October and November, there waa an immediate diminution of the drain.

There yrere fifteen alterations in the minimum rate of discount at the Bank of England between 21et January and 15th December (1864). In subsequent parts of this paper full details will be fonnd of the condition of the Bank at the dates of these changes. The year began with a minimum rate -of* 7 per cent adopted on the 24th December, 1863. In May the rate was altered four times, • and varied from 7 per cent to 9 per cent. There were eleven changes in the rate of discount at the Bank of France between thY 24th March, and 22nd December, 1864. Tie-extreme rate was 8 per cent maintained for ten days in May and for three sweeks in October. , . It is only necessary to refer in a few words to the total disuetude of the former phraseology which spoke 1 of the increase and diminution of the, quantity of bank notes in the hands of the publio—that is of the circulation—as the cause of greatest' potency in ■the money market and the markets for commodities. Experience has established beyond all dispute that in I this country the moving forces are capital and credit j acting through the rate of interest. The doctrine that a large central reserve of bullion ie the only means by which commercial crises can be prevented from assuming their most distressing forms has many advocates among the leading economists of other countries, and the party holding these "views has quite recently found.an expositor, as impartial and able as he is accomplished and acute, in if. Emile de Laveleye, who,' in two articles, entitled "Lea Crises Commereiales," in the "Bevue dcs Deux Mondes" on the Island 15th January (1865), has left but little to be added by any writer who may follow him. *

After stating at length and with remarkable clear* ness the actual experience of this country and France in 1864, M. Laveleye eaye, " According to this exact analysis of carefully ascertained facts,-it is easy to be convinced that commercial crisis are the results of a derangement in the balance of the external commerce of a country acting on a market where credit is most largely employed and where metallic money is economised to the utmost. All countries which carry on gigantic transactions with small reserves of gold and silver, and which have a vast movement of importations and exportation*, must be exposed to these economical perturbations. ■■» This is why England firtt, and then America, have most severely suffered from these visitations. France has suffered much lees, because up to the present time it has employed credit in but a limited degree, and has possessed & vast metallic circulation ; but during recent years France has began, to enconnter the perils and vicissitudes of the money market, because its credit circulation and it* external commerce hare very nearly doubled. The countries

of the centre of Europe have almost entirely escaped, because in them the external commerce is by comparison unimportant and the employment of creditalmost nil. Hamburg, although, having discontinued the use of bant notes, has experienced terrible disasters, because its external trade is enormous and almost all its operations are conducted on credit. The more a country expels the precious metals from the channels of circulation and replaces them by instruments of credit, bank notes, cheques, warrants, deposits, clearing-houses, &o , and the more at the same time it develops its relations with foreign countries, the more it will be exposed to the periodical return of financial perturbations, because more easily an unfavourable balance of trade and payments •will distnrb all the mechanism of exchanges, and ■will require from the managers of credit institutions redoubled circumspection, prudence and ability. It happens, fortunately, that the remarks made by if. Laveleye in this passage to the effect that the countries of the centre of Europe have hitherto escaped in great measure violent perturbations of the rate of interest, admits of being brought to the test of a wide range of facts. M. Maurice Aubry, in his recent work "Lesßanques d'Emissionetd'Escompte," has ascertained with great care the average annual rate of discount for first-class paper in the nine principal money markets of Europe during each of the ten years 1855-64 ; and from the elaborate diagrams and tables given by him, the following summary has been constructed:—

in.—Average Asxvxl Rates (pee cext. tee Aif>"UM) of Discount in the nine principal markets of Europe during each of the ten years, 1855-64, as given by M. Maurice Aubry, in his work, "Lee Banques d'JEmission et d'Escompte."—(Paris, 1864).

Wβ see in this table the great steadiness of the rate of discount at Frankfort, Berlin and Leipzig, and also at Amsterdam, as compared with London and Paris. To recur to the influence exercised by the Bank of TSngland in 186"4:—It" Kas been very obvious to careful observers that the action of the Uant especially at the more critical periods, was immensely aided by the operation of the rule adopted by the. directors in 1858 to the effect that the Bank would not (except at the usual quarterly periods m anticipation of the dividends) make advances to bill brokers. The effect of that rule in "1863 was to compel the discount houses to provide amply for their own engagements independently of the Bank of England, and to leave the Bank with the disposal of its own resources J for the accommodation of the merchants resorting to it direct. In other words, the alteration of the Bank rate told immediately on every part, of the money market, and upon no class more powerfully than upon the discount establishments. Another alteration also introduced about 1858 into the practice of Lombard street operated beneficially last year. Prior to 1858 it was the custom, not only among the London butalso among the country bankers, to deposit large amount* with fhe bill brokers at "call," —thatis* repayable strictly at any time, but virtually assumed by the borrowers to be held somewhat indefinitely. For the last few years this practice, has, in many important instances, been so modified, that the loans are made repayable at specified dates, the dates of course being more or less distant, as may suit the convenience of the parties. The effect of the change,' Jibwevejr, has been to remove or greatly reduce an element of uncertainty, and a cause,'therefore, of miscalculation. • ' (2b be continued in our next.) /

2 , 3 4 5 6 7 J § i 5-g, P '• it •3 ! 2= ■" 3 SI §3 I, ■a! a? J 5 a 3 mo. i 3 mo. date. J date. 60 days' sight. 6 mo. sight per oz. cent. d. d. Per cent Jan. 2.. 16.. Feb. 6.. 20.. Mar. 5.. 19.. 25.72J ; 13.8, .75 .7: .85 ; .8; • .80 i .h, .72? I .a; .70 j .8 : 165 167 172 173 174 176 26 26 27 26* 2G§ 61* C2 62f en 61 7 a 7 c 6 April 2.. 16.. May 7.. 21.. Jane 4.. 18.. i 377 181 192 193 iwi 211 26| 26 m 25 61| 6l| 61 60} 6l| 6l| 6 7 9 8 7 6 July 2.. 16.. Aug. 13.. 20.. Sept. 3.. 17.. .mi .71 .50 ! .8 .90 i .11^ .75 I .9| ■firi I 4 .62} .9 .65 ' .9 .65 j .8f .75 j .10* • 67i i '.9i .80 i .10 231 260 280 280 273 21J 24 24| 24 614 61J CI Cli 6l| 6l| 6 G 8 8 9 9 Oct. 7.. 21.. Nov. 4.. IS.. Dec. 8.. 22.. .83 ! .10 .85 .lOi .65 I .9} .57 i .fii 233 209 227 263 210 260 25* 25| 25 eoj 9 » 9 8 7 6 61 61J 61

a o *a a o f I S 5 a Yeai*s. 1864 1863 1862 iper cent. 6.98 4.24 3.80 percent. 6-44 4.63 3.56 percent. 3.60 I 3.35 3.06 i percent. 4.38 3.33 3.13 1861 I860 1859 1858 5.26 4.17 2.73 3.23 5.54 3.63 I 3.46 3.70 } 3.20 2.49 3.47 3.56 2.44 1.98 2.15 1.91 1857 1856 1855 6.55 6.08 4.88 6.13 5.55 4.43 ; 4.67 i 4.29 3.44 6.30 5.22 3.25 Average. I 4.. 4.54 3.50 3.41 § a .9 1 f Oβ § Years. "S 1-3 1864 1863 1862 per ct. ! 4.85 3.62 3.73 iper ctJ 4.74 4.08 4.00 [per ctJ 5.05 4.35 4.00 per ct. 7.70 5.6S 5.06 i per ct. 7.60 5.83 5.72 1861 1860 1859 1853 3.07 3.00 3.00 3.75 4.00 4.00 4.20 4.30 4.00 4.00 4.80 4.62 6.31 i 4.57 4.50 5.29 6.00 5.00 5.00 5.00 1857 1856 1855 4.94 4.28 3.20 5.76 4.94 4.08 6.35 5.05 4.91 6.74 6.00 6.00 5 21 6.00 6.00 Average ... 3.63 4.37 4.70 6.57 5.53