THE PRICE OF MONEY IN ENGLAND.

Lyttelton Times, Volume XXII, Issue 1321, 22 November 1864, Page 2

THE PRICE OF MONEY IN ENGLAND.

(From the Argus, Nov. 5.)

It Is now nearly three months aso sin, ~ Wn , attention in our leading columns to soin C(1 circumstances in connexion with the llfc J\ (: " rif) us of gold. Founding our remarks upon m , Sup, ' lie ' article in the Manchester Guardian \,oiT, nt that whatever the effects of the " n' ew J,m have been in raising the prices of commodit"" 8111 influence upon the rates of interest and ( ij s ,. ( ' s, v its been precisely the reverse of what had i,,., '"" 1 . a,i pated. In other words, we showed that the Jj ntlci * gold as a loanable commodity had hewiVi . instead of dimished by the Australian and nian supplies. The minimum rate of discount * Bank of England was proved, on the" author?f„ « trustworthy statistics, to have maintained " t higher average in the seven years subsi-quf-ut u ? gold discoveries than in the peven years irnrnw], preceding them ; and periods of financial tir J, y instead of decreasing in number and nrh><<, were shown to have actually increased in from and severity during the very time when (mln!^ 7 quantities of the precious metals were comir.,, T pouring into the market. " Udll y It appears, by our latest advices from home t u the anomalous circumstances to which we reform? 1 • our former remarks still continue in or». r; ,ij f m Throughout the month of August tlm the London discount market was so great as to mserious apprehensions even in the best-informed"^ 6 cles of the City. During the nine months from V vember, 1863, to July, 1864, no less thnn fifteen changes took place in the Hank rate of discount, earh of them being a change of one per cent ; and o nl v on one occasion has the rate fallen bel>w five ,Z cent. FromHhe sth to the 19th of May. the rate stood as high as nine per cent. It was' then m dually reduced to six per cent.; but this rate proving ineffectual in checking exportation abroad, a riar- to seven per cent, was not long in following. ' iiutVven this measure, though sufficient to stop the efflux of the precious metals, still failed to attract the of bullion so greatly needed by the Bank. Accordingly a further augmentation to eight per cent, wag determined upon early in August, and at this fi L , ure the discount business of the Bank of England continued to be transacted down to the time when our Suez telegram was dispatched.

The causes of this extreme dearness of money. as stated by the best authorities at home, are identical with those pointed out by us in our former article, aggravated by further circumstances of a merely temporary character. The London Economist tells its readers, in so many words, that they are endeavouring to carry on an augmented trade upon a diminished basis of bullion. While the former is increasing very largely and rapidly, the supplies of the latter are decreasing considerably. Comparing the trade of the United Kingdom during the first six months of 1864 with that of the same period of 1862, we find that the value of the exports had increased by upwards of £20,000,000, or more than 30 per cent., and the imports by £22.000.000, or an increase of 40 per cent. Again, taking the month of January, 1862, and comparing it with the month of June, 1864, we find that the combined imports and exports were valued at £16,604,000 in the former period, and £36.371,000 in the latter, or an increase of nearly 120 per cent. But while the trade of England has been thus enormously expanding, her store 3 of available cash have been diminishing. The coin and bullion in the coffers of the Bank of England amounted, on the Ist January. 1862, to £15,961,439. On the 27th of July, 1864. with the demands of a trade much more than doubled in extent to satisfy, they stood at £12,996,685, or a diminution of 18 per cent. There are, however, other causes of disturbance almost as important as the one to which we have just alluded. In the first place, the large profits reaped by traders of late has had the effect of stimulating speculation to a most unusual extent, and of creating also a considerable amount of over-trading. An immense number of new companies have been set on foot, and all of them have probably succeeded in obtaining a certain amount of support. In the last letter of our London correspondent,* there is a list of no less than thirty-one new undertakings of the most miscellaneous character, requiring an aggregate capital of nearly £20,000,000. Then we are informed that there has been an undue extension recently of the lending business of the mother country. It, is hinted that some of the new finance companies which have lately started into existence are not quite so particular about the biiis they accept as they should be, and that a great deal of good money has been advanced upon very questionable paper. Again, a much larger amount of »»pi»ol i« absorbed at present in the cotton trade than formerly. This is the result, of course, of the enormously increased price of the raw material It is obvious that a much larger amount of floating capital would be "required to deal with tar(i million bales of cotton at two shillings a pound, than with four million bales at sixpence, and though these figures do not represent the actual situation of the cotton trade at present, as compared with former times, they afford an approximate idea of its position. Finally, we have the whole of these causes— the unusual development of speculative enterprise?, the undue inflation of credit, the enlarged demand for money in loans for foreign countries, and the greatly increased capital required iu the cotton trade —all pressing upon the monetary resources of the country at a season of the year when an unusual demand for money is invariably experienced for harvest and travelling purposes. It is hardly to be wondered at, therefore, that alarm should have been felt in the city, and that a further rise in the rate of discount should have been deemed not improbable. . But the main truth in connexion with this subject, which stands out with startling prominence above all the rest, is the fact, that any scarcity of bul.ion whatever should be felt at the present time, nothing could more completely revolutionize the theories respecting the effect of the new supplies of gold in vogue some ten years ago than this single circumstance. For nearly a decade and a half a continuous stream of the precious metals has been poured into the markets of Europe; yet at the end of that perio we find the rates of discount-higher than e*er, an the stocks of bullion held by the great natu j!" l _ banking establishments becoming gradually snia and smaller. Even economical circumstances, tormerly considered favourable, seem to have lost o late their customary good effect. In England, year following a good harvest has general!) found a period of plentiful and cheap nioiu\\. u • though the harvest- of 1863 was a splendid one ana [ the country must have saved at least twenty 'J ll 10 - sterling in the price of bread and the pure! foreign corn, the dearness of money was, as we 'i seen, occasioning so much uneasiness circles at home as must cause us to look torw with more than ordinary interest for the lntelngei l nbw on its way. Of course, we all understaiu. their larger and more coriiprehensive real reasons for this unwonted scarcity ot bu .j • and we know that some of them, at lea»t—.i» expansion of our trade and commerce, for —are circumstances to congratulate oursehes up<rather than to deplore; but still it is difficult * 0 l -' )1 . preliend the immediate causes of such a t:U f things as that described by the Economic," £500,000 more or less of available bullion a rise of one or two per cent iu the Bank ra c discount.