CHAPTER V.

MONEY PANICS.

THERE are three kinds of Money-Panic.

1. Panic arising from a drain of Gold from the Bank of England.

2. From a contraction of Credit.

3. From the combined results of the contraction of Credit, and the diminished amount of Bullion in the Bank of England.

These Money-Panics have been more frequent since the Bank Act of 1844, than before.

Of these occurrences the following have been the most serious, and are said to have arisen from the following causes :

1793 and 1797. These panics arose from the drain of Gold sent Abroad, for subsidies and loans to our Allies. These Gold Panics were partially relieved by the advance of Exchequer Bills, on the deposit of merchandise, but ultimately by the Restriction Act of 1797, making the Bank of England Notes, in effect, a legal tender. This Act continued in force until Sir

Robert Peel's Bill in 1819, enacting a return to Cash Payments.

The effect of the suspension of Cash payments on the public funds and on the stock of the Bank of England is expressive of the sense of the country on that measure.

The price of the funds in the month of March, 1792, was as follows:

Three per Cent. Consols.

Four per Cents..

Five per Cents.

Bank Stock

On the 6th of April, 1797, about a month after the Bank of England had suspended payments in cash, the price of the funds was as follows:

Three per Cent. Consols.
Four per Cents. .

Five per Cents.

Bank Stock .

4722

60

These facts seem to furnish a conclusive answer to the advocates for inconvertible Bank paper.

1810. This Panic arose from over-trading in produce and excess of Exports, when the Bank of England raised its Discounts from 13 millions in 1808, to 20 millions in 1810, an increase of 53.8 per cent. This was a Credit Panic, as the Bank of England then had the power of issuing an unlimited amount of inconvertible notes.

1815. This Panic arose from the inflation of mercantile Credit, and vast speculations in Cotton and other produce, when eighty Banks suspended payment. This was a Credit Panic, as the Bank of England still continued to issue inconvertible notes.

1822. This Panic was caused by the Bank of England reducing its Discounts from 15 millions to 3 millions, in order to secure the convertibility of the Bank-Note; and by the contraction of Bank of England and Country BankNotes from 48 millions in 1818, to 26 millions in 1822. This was a Gold Panic, lowering the price of the British Funds, the stocks of goods held by the mercantile and trading interests, and agricultural products, to the extent, as estimated, of 200 millions; and, allowing that only one-fifth part of such investments was forced on the markets during the Panic, it may be assumed that, the total loss, including the failure of Banks and Mercantile Houses, the partial closing of Mills, and non-employment of workmen, was not less than £30,000,000.

1826. This Panic arose from excessive (i. e. unprofitable) speculations in foreign Mines, in Cotton and other products, called, over-trading, but really, unsuccessful trading; also from the increased issue of Notes, which gradually rose

from 33 millions, in 1823, to 41

1826, an increase of 22.3 per cent.

millions in

This Panic is estimated to have lowered the prices of funded and other property, the stock of goods held by the mercantile and trading interests, to the extent of 300 millions, and the assumed loss by the different parties is estimated at 45 millions. During this Panic the Gold in the Bank of England was reduced below a million, and the Credit of the Bank was saved only by the issue of about 2 millions of £1 Bank of England notes accidentally found in the Bank.

1832. This Panic lowered the price of Public Securities and other property, to the extent, as estimated, of 100 millions, causing a loss to the trading and other interests, estimated at 15 millions.

1836-37. These Panics, called the American Panics, originated with and were chiefly confined to Mercantile Houses, connected with the United States. The loss was estimated by the Manchester Chamber of Commerce, for that City alone, at 40 millions.

The amount of Gold in the Bank of England had decreased to such an extent that its credit was maintained only by a loan of 2 millions from the Bank of France.

1847. This Panic, which was caused by a

bad harvest, and great speculations in Corn and Railways, was brought to a crisis by the surplus purchases of Corn by the French Government being sent to this Country in the months of June and July, to the extent of about 70,000 quarters, which were weekly forced upon the market by the Messrs. Rothschild, at prices much below the current rates. For several successive weeks there was, in consequence, a fall of Ss. or 10s. a quarter, finally reducing prices from 968. to 56s. Such a fall as this in the value of Wheat brought to a state of bankruptcy a large number of Houses connected with the trade in Corn, and this was followed by many other Houses engaged in general trade, which brought on a Money Panic. The amount of Gold and Silver Coin and Bullion in the Bank of England was reduced, on the 23rd October, to £7,865,445, and the Bank reserve of notes to £1,547,000; and the Credit of the Bank was saved only by the Government authorizing an addition to its issue of 2 millions of notes.

This Panic is estimated to have lowered the price of funded and other properties 400 millions, and the loss to the funded and other interests is estimated at 60 millions.

1857. This Panic arose from a Money-Panic in America, which brought down a great number