COMMERCIAL CHRONICLE AND REVIEW.

REVIEW OF THE AFFAIRS OF THE BANK OF ENGLAND, FROM 1697 TO THE PRESENT TIME-IMPORTANT PERIOD IN FINANCIAL AND COMMERCIAL HISTORY-PROSPECT OF A CRISIS IN ENGLAND -ITS BEARING UPON THE COMMERCE OF THE UNITED STATES-INCOME OF THE PUBLIC WORKS OF PENNSYLVANIA AND NEW YORK-DEBTS OF ILLINOIS, INDIANA, ETC.-THE TRUSTEES OF THE BONDHOLDERS-WABASH AND ERIE CANAL STOCK-PRICES OF STATE STOCKS IN NEW YORK, FIRST WEEK IN EACH MONTH-OPERATION OF THE NEW FINANCIAL SYSTEM IN MEXICO, ETC.

THE year 1847 will be remembered as one of the most important in financial and commercial history. The course of commerce, which, in former centuries, had comparatively a steady flow, has, since the declaration of American independence, been visited by frequently recurring revulsions; each succeeding one of more intensity than those which preceded it. The Bank of England stood one hundred years, up to 1797; and in that time its solvency was twice jeopardized. In 1697, soon after its incorporation, a general re-coinage of the money of the realm caused such a demand for coin, that the bank suspended; and in 1797, (just one hundred years,) the events of the French war caused it again to suspend. In the course of that century, insolvency had been once imminent. That was caused by the rebellion of 1745, and the advance of the Pretender to Derby, which produced a panic; and the institution, to gain time, paid out sixpences for notes. The current of business, throughout the eighteenth century, seemed to run regularly. England commanded most of the trade of the world; her shipping carried most of the goods; and prices in England were such as to afford large and almost certain profits to the merchant. Time was not much of an object, as prices did not fluctuate materially;—if a cargo arrived a month or two sooner or later, the result was nearly the same. Great Britain, with less than half its present inhabitants, raised a surplus of grains, and its colonies were tributary to its wealth. It had little rivalry among the degraded nations of Europe; while the influx of the precious metals from America continually enhanced the supply of currency, and gradually raised prices. In all this, there was nothing to disturb commerce, or throw it out of its usual channels; and war after war was declared, waged, and concluded, without commerce being in consequence much disturbed. With the independence of the United States, a new era commenced. A rival. commercial power sprang into existence, followed by the great struggle of France for constitutional government. The aristocracy of England entered into that struggle, apparently determined to sink or swim with legitimate governments. It staked its existence on the restoration of the Bourbon race to the throne of France, and is now about to reap the bitter fruits of that iniquitous conduct. The Bank of England, in February, 1797, was drained of specie to a sum less than £1,000,000. On the 21st of that month, Bosanquet and Thornton, a director and governor of the bank, waited on Mr. Pitt, and asked to be "restrained from paying specie." He advised sending Goldschmidt to Amsterdam to buy gold, and was told that it was too late. On Saturday, the bank held out until the usual hours, and closed its doors, exhausted and broken. On Sunday, an order in council was signed, ordering the institution to pay no more specie, for "great state reasons." On Monday,

the order in council appeared on the door of the bank, with a notice that payment would be resumed in fifty-three days-it took place in twenty-two years. Messrs. Pitt, Bosanquet, and Thornton, solemnly asseverated that the bank was "able and willing to pay," but that it was "restrained," for great state reasons. The government agents then procured a meeting of merchants to declare that they would receive the dishonored notes in payment, as usual. Parliament then passed a law to exempt from arrest any person who tendered bank-notes for a debt, leaving the creditor to recover gold by a suit at law. Soon after, it declared severe punishment to any one who sold sovereigns for more than 20s. each, in paper. It then abolished suits to recover gold; then made it death to utter forged notes, and two hundred and seven persons were hanged for this constructive offence. All this did not prevent the notes from falling to a discount of 41 per cent, and the government contracted £600,000,000 of debt, at £100 stock for £50 money, taking pay in this depreciated paper. In 1819, a bill passed ("Peel's bill") to resume in 1822, and it was carried into effect. The effect of this was to more than double the actual value of stocks, and one of the wildest of speculations took place, resulting in a revulsion which brought the bank to the verge of insolvency, and (as Mr. Huskisson expressed it) "the country to within twenty-four hours of a state of barter; or, in other words, to a total subversion of all credits." The discovery of a box of £1 notes turned the tide. The fortunes of Great Britain hung upon a paltry box of printed paper, long before thrown in the cellar as worthless. Political agitation, in 1832, on the reform bill, again involved the ruin of the bank. A drain of £2,000,000 per day was stopped only by the resignation of the Duke of Wellington. In all this time, the consumption of food in Great Britain had been gradually exceeding the home supplies; and the speculations of 1835-6, which had acted adversely upon exchanges, exposed the bank to the difficulties which scantiness of harvests began to inflict upon England with increasing severity. The result was another virtual suspension in the fall of 1839, saved only by a loan of money from the Bank of France. From 1839 down to 1846, the harvests of England were good, though no longer sufficient to feed the British islands without aid from abroad; yet economy and industry had combined to cause capital to accumulate in England.

Capital available to purposes of business, consists of commodities almost altogether; and these commodities are more or less abundant as the productions of national industry exceed the general consumption. When the agriculturists succeed in raising as much food as will supply all the inhabitants, there is no occasion for importing any. If raw materials are at the same time abundant, the production of goods will be great and cheap. The quantities exported will be large, and the returns proportionate, both in the shape of specie and foreign and colonial produce. At the end of such a year," capital” will be abundant; the stocks of food in granaries good; warehouses well supplied with goods and produce; the circulation full, and the stock of specie in bank ample. In such a state of affairs, money will be very abundant, and interest low; capital of all kinds will be easily commanded on credits. This was nearly the case in Great Britain, in the beginning of 1846. The combined events of that disastrous year have swept away her capital, and she evinces approaching exhaustion. When capital began to accumulate in England after the disasters of 1839, the means of investment presented a problem; and the rate of interest ran down to VOL. XVII. NO. I.

6

1 a 14 per cent per annum. Of the twenty-eight foreign loans contracted during the speculations of 1825, sixteen had never paid interest. Even the States of America had failed to pay, and foreign credit was at a discount. Of the infinite variety of joint stock companies then projected, railroads had alone presented any degree of success, and they had been very profitable. Hence, these became the basis of new operations, that have been carried to an inordinate extent. The capital authorized to be invested there has exceeded £100,000,000 sterling, and in 1846 near 500,000 persons were employed in their construction. The effect of this employment of so large a population (double that employed in the cotton trade) in the new business of constructing roads, was, to promote the consumption of an extraordinary quantity of commodities. Those persons were withdrawn from other employments, where their labor was directed to the production of commodities or exchangeable values, and in the prosecution of which their wages were small, and the quantity of commodities they consumed moderate. The high wages paid them by railroads enabled them to enjoy more extensively both imported and domestic articles, and the consumption of food and produce was at a greater rate per head than ever, while the production was less. An amount of floating capital equal to £30,000,000, was put into railroads, and the stocks of commodities diminished to that extent. The failure of the Irish crops, and partially those of England, diminished capital by £30,000,000 more. The scarcity of raw materials (sheeps' wool and cotton, chiefly,) took £10,000,000 more from capital in merchandise, and the year 1846 closed with a diminution of £70,000,000 in England's cash capital. The year 1847 opened with an aggravation of all those causes, promoting a still further diminution of capital. The railroad calls for this year are already £30,000,000, and the works in full operation. Of 1,100 mills in Lancashire, 750 are working short time, and stopped. Of 223,000 hands, 23,000 are thrown out of employ, and 100,000 earn diminished wages. The consumption of cotton has sunk from 32,000 bales to 20,000 per week, and Ireland presents little prospect of raising her own food this year. With the fact of very low stocks of goods and produce, there exists the prospect of diminished exports, and the certainty of very large requirements of foreign food, estimated at over £30,000,000. This is to be procured by the disbursement of the remaining capital which exists in specie-£9,000,000 in bank, and £30,000,000 estimated in circulation. This is an appalling situation, more particularly when France is better situated only from the fact that her stock of specie is larger. In this state of affairs, it is no wonder that Parliament exhibits such consternation among statesmen, and the firmest lose apparently their balance. When such men as Lord Ashburton hint at the expediency of prohibiting the export of corn, the British government must surely be at its "wits' end.”

Should the next harvest be abundant and early, and the railroad expenditure cease, the crisis may pass ; but the hope of that is small. It has been proposed, in one quarter, as the only means of meeting the emergency, to allow the bank to issue £1 notes to the extent of £30,000,000, with the view that they may pass rapidly into circulation, and, by supplanting gold, send it into the bank to be made available in the purchase of corn. Did credit remain so far unshaken as to render this operation practicable, it is at best but a temporary expedient. Should the present state of affairs extend over another year, when the gold shall have been extracted from circulation, and spent, where, then, will be the necessary capital? A stoppage of the bank is felt to be the ruin of the paper system; and it is not

to be disguised that a large party look forward to the event as a blessing, inasmuch as, through it, the whole debt will be repudiated. This repudiation has for thirty years been advocated, under four forms :

1st. Prompt and entire repudiation, and reduction of taxes to one-fifth. 2d. Alteration of the standard-making two sovereigns into one.

3d. A repeal of "Peel's bill," or a return to inconvertible paper money.

4th. The above plan of issuing £1 notes, which is a modification of the third proposition.

The late William Cobbett predicted, in 1815, repudiation, as the inevitable result of a long general peace; and all the opponents of "Peel's bill" based their enmity to it on the ground that, by it, the stockholders were enriched at the expense of the nation; and, certainly, it has had that effect-although, between it and repudiation, there was no alternative.

Were the United States connected with Europe, as in former years, by outstanding credits, ruin would have been inevitable; but at present the distress of Europe grows out of the transfer of her floating capital hither, under the imperative demands of hunger. Up to the next harvest, at least, must the purchases of England be large; and, the prospect is, mostly for specie. Lord Brougham stated, in Parliament, that mills, with large orders from the United States for goods, were compelled to shut up shop and discharge hands for want of money to pay them. The orders from the United States, for goods, were unusually large, and sent out early; but how far circumstances, such as those alluded to, will prevent their fulfilment, is a question. In usual years, it is the case, that, in seasons of distress, goods are sent in large quantities on which to raise money. Inasmuch, however, as that the imports of raw materials into England were small, the manufacture less than usual, and stocks light, this may not be carried on to so great an extent as expected. Neither do American stocks come here for sale, notwithstanding their great rise here; on the other hand, they seem to increase in favor on the other side. Three per cent consols, in four months, fell 10 per cent a fall by no means participated in by American securities in London; on the other hand, the fearful nature of the approaching crisis seemed rather to make them rise in favor as consols sank in price. It is not to be disguised that, in face of the growing opposition to the existing debt, the government has been obliged to add £8,000,000 to it for the relief of distressed Ireland. The loan was taken at 874, and has since fallen below that. It was also the case that the exchequer bills were at a discount, and £9,000,000 fell due May 21, leaving the Chancellor one of three alternatives: 1. To pay off; 2. To raise the interest; 3. To fund the whole. The first was impossible, the second inexpedient, and the third was adopted; but although the interest was raised to 4 per cent per annum, the bills did not rise over par, and the ultimate necessity of funding them, adding £17,000,000, including the Irish debt, to the national burden in a single year, in face of the hazards of a return to irredeemable paper, is apprehended. In such a state of affairs, the debts of those American States which are reaping the benefits of England's distress, are not to be sacrificed at low rates. Indeed, the measures adopted by Michigan, Indiana, and Illinois, in regard to their debts, in connection with their public works, added to the general prosperity of the agricultural interests, are rapidly restoring credit. As an indication of the benefits which States derive from the movements of produce, we

annex a table of the income of the public works of Pennsylvania and New York:

Pennsylvania, November to June 1st.....

New York, opening of navigation to June 1st......

Total.........

598,760

110,937

709,697 $998,643 $1,338,059 $339,415 The tolls for New York canals, 1846, were for forty-six days, and in 1847, thirty-one days only. The taxes of Pennsylvania have been barely sufficient to meet the $2,000,000 interest she owes annually. The large revenue of the present year will amply make up the deficit, and afford something to return relief notes. The Ohio, Indiana, and Michigan tolls, show similar results. The works of the last-mentioned State, have, however, passed into the hands of private companies, in exchange for the State's liabilities. The general prosperity will insure the payment of the necessary taxes to discharge the acknowledged debt. The revenues of the Ohio works are such as to swell the amount applicable to the interest, and make the payment more easy. The State of Illinois will soon be in a state of good credit, through the operation of her great canal. It will be remembered by our readers, that the canal was put in the hands of three trustees, for the benefit of the bondholders, who subscribed $1,600,000 to put it in working order; this new loan to be paid out of the proceeds of the canal lands, to be sold on the completion of the works. At the same time, a small tax was laid to pay a portion on all the debt pro rata, except certain Stebbins and M'Alister bonds, on which the State had to pay more than the amount received. Under this law, two trustees, Mr. David Leavitt and Captain Swift, were appointed on behalf of the bondholders, and General Fry, by the State. The two first-named gentlemen voted $5,000 per annum each, to the trustees, as salaries. General Fry, deeming this exorbitant, refused to receive more than $2,500. Mr. Leavitt, President of the American Exchange Bank, in New York, received the subscribed funds, which sometimes amounted to $500,000 on hand, and on which no interest was allowed until one of the bondholders suggested the importance of requiring it, when Mr. Leavitt allowed 3 per cent. The work went on very slowly, and very much to the dissatisfaction of the people of Illinois, in consequence of the continual absence of Messrs. Leavitt and Swift, the one attending to other business in Washington, and the other in New York. General Fry was replaced by Colonel Charles G. Oakely, one of the commissioners to whom Illinois and the bondholders were mainly indebted for the passage of the law. New vigor was at once imparted to the work, and an effort made to procure a change of trustees in order to get in those who would be on the spot, and attend to the business. The matter was not attended to in season, however, and instead of the canal being in operation in July, that both Illinois and the bondholders might have the advantage of the great rise in breadstuffs, and England and Ireland the benefit of Illinois produce, in the hour of their distress, the work will not be done until fall, nor available until spring, a difference of a whole year. This is peculiarly unfortunate, inasmuch as that, at such a season of agricultural prosperity, and abundance of money, the choice canal lands of Illinois would sell well to discharge the loan of $1,600,000; a sum that would doubtless be exceedingly acceptable to the London houses at this moment of pressure. The great mistake was, in giving high salaries to non-resident trustees.