Capital: A Critique of Political Economy, Vol. III. The Process of Capitalist Production as a Whole
CONCERNING the hoarding of notes in times of stringency we remark, that in such cases the hoarding of precious metals is repeated, which used to be resorted to in restless times during the most primitive conditions of society. The Act of 1844 is interesting in its effects for the reason that it seeks to transform all the precious metals existing in a certain country into currency; it seeks to identify a discharge of gold with a contraction of the currency and an incoming flood of gold with an expansion of the currency. And so it happened that the experiment proved the contrary. With one sole exception, which we shall mention immediately, the quantity of the circulating notes of the Bank of England never reached the maximum, since 1844, which it was authorized to issue. And the crisis of 1857 proved, on the other hand, that this maximum does not suffice under certain circumstances. From November 13, to 30, 1857, a daily average of 488,830 pounds sterling circulated above this maximum (B. A. 1858, p. XI). The legal maximum was at that time 14,475,000 pounds sterling plus the amount of the metal reserve in the vaults of the bank.
Concerning the outgoing and incoming tide of precious metals the following remarks are made:
1) A distinction should be made between the back and forth movements of the metal within the districts which do not produce any gold and silver, and on the other hand, between the flow of gold and silver from their sources of production to the different other countries and the distribution of this additional metal among these other countries.
Before the gold mines of Russia, California and Australia exerted their influence, the supply since the beginning of the nineteenth century sufficed only to replace the wornout coins, to satisfy the demand for articles of luxury, and to promote the exports of silver to Asia.
However, the silver exports of Asia increased extraordinarily since that time, owing to the Asiatic trade with America and Europe. The silver exported from Europe was largely replaced by the additional supply of gold. In the second place, a portion of the newly imported gold was absorbed by the internal money-circulation. It is estimated that up to 1857 about 30 millions in gold were added to the internal circulation of England.*106 Furthermore, the average volume of the metal reserves in all central banks of Europe and America increased since 1844. The increase of the inland money circulation also carried with it the circumstance, that in the period of stagnation following upon the panic the bank reserves grew more rapidly than before in consequence of the larger quantity of gold coins thrown out of inland circulation and held in a state of rest. Finally the consumption of precious metals for articles of luxury increased since the discovery of new gold deposits in consequence of the growing wealth.
2) Between the countries that do not produce any gold and silver, precious metals flow back and forth; the same country continually imports some, and just as continually exports some. It is only the predominance of this movement in one direction or the other which decides whether there is in the last instance a drain or an addition, since the merely oscillating and frequently parallel movements largely neutralise one another. But for this reason, so far as this result is concerned, the continuity and the mainly parallel course of both movements is overlooked. It is always assumed that a plus in the imports or a plus in the exports of precious metals appears only as an effect and concomitant of the proportion between the imports and exports of commodities, whereas they are at the same time an expression of the proportion between the exports and imports of precious metals themselves, independent of the trade of commodities.
3) The predominance of the imports over the exports, and vice versa, is measured on the whole by the increase or decrease of the metal reserve in the central banks. To what extent this scale of measurement is more or less exact, depends, of course, primarily on the degree to which the banking business in general is centralised. For on this premise turns the question, to what extent the precious metal hoarded in the so-called national banks represents the national metal reserve at all. But assuming this to be the case, the scale of measurement is not exact, because an additional import may be absorbed under certain circumstances by the inland circulation and the growing consumption of gold and silver in the making of articles of luxury; furthermore, because without an additional import a withdrawal of gold coin for inland circulation may take place and thus the metal reserve may decrease, even without a simultaneous increase of the export.
4) An export of metals assumes the aspect of a drain, when the movement continues for a long time, so that the decrease represents the tendency of the movement and depresses the metal reserve of the bank considerably below its average level, down to about its average minimum. This minimum is in so far more or less arbitrarily fixed, as it is differently determined in every individual case by the legislation concerning the backing of notes, etc., by cash. Concerning the quantitative limits, which such a drain may reach in England, Newmarch testified before the Committee on B. A., 1857, Evidence No. 1494: "To judge by experience, it is very unlikely that the drain of metal as a result of some fluctuation in the foreign business will exceed three or four million pounds sterling."—In 1847 the lowest level of the gold reserve of the Bank of England, on October 23, showed a minus of 5,198,156 pounds sterling as compared to that of December 26, 1846, and a minus of 6,453,748 pounds sterling as compared to the highest level on August 29, 1846.
5) The functions of the metal reserve of the so-called national banks, which functions, however, do not by themselves regulate the magnitude of this reserve, for it may grow through a mere paralisation of internal commerce, are threefold: 1) It is a reserve fund for international payments, in one word a reserve fund of world money; 2) it is a reserve fund for the alternately expanding and contracting metal circulation of the inland markets; 3) it is a reserve fund for the payment of deposits and for the convertibility of notes, and this part of its function is connected with the function of the bank and has nothing to do with the functions of money as mere money. It may, therefore, also be touched by conditions, which affect every one of these three functions. As an international fund it, may be touched by the balance of payment, no matter by what causes this may be determined, and whatever may be its proportion to the balance of trade. As a reserve fund for the metal circulation of the inland market it may be touched by its expansion or contraction. The third function, that of a fund guaranteeing the convertibility of the notes, while it does not determine the independent movements of the metal reserve, has a double effect. If notes are issued, which replace the metallic money in the inland circulation (which may also consist of silver in countries where silver is a measure of value), then the second function of the reserve fund is eliminated. And a portion of the precious metal, which performed its function, will permanently wander into foreign countries. In this case no withdrawal of metallic money for inland circulation takes place, and this does away at the same time with the temporary augmentation of the metal reserve by the immobilised part of the circulating metal coin. Furthermore, if a minimum of a metal reserve must be kept under all circumstances, it affects in a peculiar way the results of a drain or an addition of gold; it affects that part of the reserve, which the bank is compelled to maintain under all circumstances, or that part, which it seeks to get rid of as useless at a certain time. If the circulation were purely metallic and the banking system concentrated, the bank would have to consider its metal reserve likewise as a security for the payment of its deposits, and a drain of metal might then cause such a panic as was witnessed in Hamburg in 1857.
6) With the exception of 1837, the real crisis broke out always after the rates of exchange had been altered, that is, as soon as the import of precious metal had increased over the export.
In 1825 the real crash came after the drain of gold had ceased. In 1839 a drain of gold took place without bringing a crash. In 1847 the drain of gold ceased in April and the crash came in October. In 1857 the drain of gold to foreign countries had ceased since the beginning of November, and the crash did not come until later in November.
This stands out particularly in the crisis of 1847, when the drain of gold ceased already in April, after causing a slight preliminary crisis, and the real business crisis did not come until October.
The following evidence was given before the Secret Committee of the House of Lords on Commercial Distress, 1848. This evidence was not printed until 1857 (also quoted as C. D. 1848-57).
Evidence of Tooke. In April, 1847, a stringency arose, which strictly speaking equalled a panic, but was of relatively short duration and not accompanied by any commercial failures of importance. In October the stringency was far more intensive than at any time during April, an almost unheard of number of commercial failures taking place (2196).—In April the rates of exchange, particularly with America, compelled us to export a considerable amount of gold in payment for unusually large imports; only by an extreme effort did the bank stop the drain and drive the rates higher (2197).—In October the rates of exchange favored England (2198).—The change in the rates of exchange had begun in the third week of April (3000).—They fluctuated in July and August; since the beginning of August they always favored England (3001).—The drain of gold in August arose from a demand for internal circulation.
J. Morris, Governor of the Bank of England: Although the rate of exchange favored England since August, 1847, and an import of gold had taken place in consequence, the metal reserve of the bank decreased nevertheless. "2,200,000 pounds sterling went out to the country, as a result of inland demand." (137)—This is explained on the one hand by an increased employment of laborers in railroad construction, on the other by a "desire of the bankers to possess their own gold reserve in times of crisis." (147.)
Palmer, Ex-Governor and since 1811 a Director of the Bank of England: 684. "During the entire period from the middle of April, 1847 to the day of the suspension of the Bank Act of 1844 the rates of exchange were in favor of England."
The drain of metal, which created in April, 1847, an independent money panic, was here, as always, but a precursor of the crisis and had already been turned back, when the crisis broke out. In 1839 a heavy drain of metal took place, for corn, etc., while the business was strongly depressed, but without any crisis and money panic.
7) As soon as the universal crises have spent themselves, the gold and silver, aside from an addition of new precious metals from the sources of production, distributes itself once more in such proportions as it showed in the form of the individual reserve of the various countries in a condition of equilibrium. Other circumstances remaining the same, its relative magnitude in every country will be determined by the role of that country in the world market. It flows away from the country which had more than its normal portion into some other country. These movements of outgoing and incoming metal restore merely its original distribution among the various national reserves. This redistribution, however, is brought about by the effects of different circumstances, which will be mentioned in our treatment of rates of exchange. As soon as the normal distribution is once more a fact, a stage of growth follows first, and then again a drain. [This last sentence applies, of course, only to England, as the center of the world's money market.—F.E.]
8) The drains of metal are generally a symptom of a change in the condition of foreign commerce, and this change in its turn is a premonition that conditions are approaching a crisis.*107
9) The balance of payment may favor Asia against Europe and America.*108
An import of precious metals takes place to a point of predominance in two phases. On the one hand it takes place in the first phase of a low rate of interest, which follows upon a crisis and expresses a restriction of production; and then in the second phase, in which the rate of interest rises, without, however, attaining its medium level. This is the phase, in which returns come easy, commercial profit is large, and therefore the demand for loan capital does not grow in proportion to the expansion of production. In both phases, in which loan capital is relatively abundant, the superfluous addition of capital existing in the form of gold and silver, a form in which it can primarily serve only as loan capital, must seriously affect the rate of interest and with it the tone of the whole business.
On the other hand, a drain, a continued and heavy outpour of precious metals, takes place as soon as the returns are no longer easy, the markets overstocked, and the seeming prosperity held up only by credit; in other words, as soon as a very much increased demand for loan capital exists and the rate of interest has, for this reason, reached at least its medium level. Under these circumstances, which are reflected by the drain of precious metals, the effect of the continued withdrawal of capital in a form, in which it is directly loanable money-capital, is considerably intensified. This must have a direct influence on the rate of interest. But instead of restricting the credit business, the rise of the rate of interest extends it and leads to an overstraining of all its resources. This period, therefore, precedes the crash.
Newmarch is asked, B. A. 1857, No. 1520: "The amount of the circulating bills of exchange, then, rises with the rate of interest?"—"It seems so."—1522. "In quiet, ordinary times the ledger is the actual instrument of exchange; but when difficulties arise, for instance, if the discount rate of the Bank is raised under circumstances such as I have mentioned...then the transactions resolve themselves quite of their own account into the drawing of bills; these bills are not only better suited to serve as a legal evidence of the making of some business transaction, but they are also better adapted to the purpose of making other purchases, and they are above all useful as a means of credit for taking up capital."—This is further intensified by the fact that as soon as signs of threatening conditions induce the bank to raise its rate of discount, which implies the possibility that the bank may at the same time cut down the running time of the bills to be discounted by it, the general apprehension is spread, that this will grow worse. Every one, and first of all the credit swindler, will therefore strive to discount the future and have as many means of credit as possible at his command when the critical time comes. The above-mentioned reasons, then, amount in fact to this, that it is not the mere quantity of the imported or exported precious metals which exerts its influence in this capacity but that this quantity works its effect, first, by the specific character of precious metals of being capital in the form of money, and secondly, that it works like a feather, which, added to the weight on the scales, suffice to incline the occillating balance definitely to one side, that is, it works this effect, because it arises under conditions, when a little excess decides in favor of one side or the other. Without these reasons it would be quite inexplicable, why a drain of gold amounting to about five or eight million pounds sterling, and this is the limit according to present experience, should be able to exert any considerable influence. This small minus or plus of capital, which seems insignificant even compared to the 70 million pounds in gold which circulate on an average in England, is a vanishing magnitude in a production of such volume as the English.*109
But it is just the development of the credit and banking business, which tends on the one hand to press all money-capital into the service of production (or what amounts to the same, to convert all money incomes into capital), and which on the other hand reduces the metal reserve to a minimum in a certain phase of the cycle, so that it can no longer perform the functions for which it is intended. It is the developed credit and banking system, which creates this oversensitiveness of the whole organism of the reserve below or above its average level is a relatively insignificant matter. On the other hand, even a very considerable drain of gold is relatively ineffective, unless it arises in the critical period of the industrial cycle.
In this explanation we have not considered the cases, in which a drain of gold takes place as a result of crop failures, etc. In this case the great and sudden disturbance of the equilibrium of production, whose expression this drain is, requires no further explanation of its effects. These effects are so much greater, the more such a disturbance begins in a period, in which production works under high pressure.
We have also left out of consideration the function of the metal reserve as a security for the convertibility of the bank notes and as the cardinal point of the credit system. The central bank is the pivot of the credit system. And the metal reserve in its turn is the pivot of the bank.*110
The transition from the credit system to the monetary system is necessary, as I have already shown in Volume I, chapter III, under the head of "Means of Payment." That the greatest sacrifices of real wealth are necessary, in order to maintain the metallic basis in a critical moment, has been admitted by both Tooke and Loyd-Overstone. The controversy turns merely around a plus or minus, and around the more or less rational treatment of the inevitable.*111 A certain quantity of metal, insignificant compared with the total production, is admitted to be the pivotal point of the system. Hence its beautiful theoretical dualism, aside from the appalling demonstration of this character in its capacity as the pivotal point of crises. So long as enlightened bourgeois economy treats of "Capital" in its official capacity, it looks down upon gold and silver with the greatest disdain, considering them as the most immaterial and useless forms of wealth. But as soon as it treats of the banking system, everything is reversed, and gold and silver become capital par excellence, for whose preservation every other form of capital and labor is to be sacrificed. But how are gold and silver distinguished from other forms of wealth? Not by the magnitude of their value, for this is determined by the quantity of labor materialised in them; but by the fact that they represent independent incarnations, expressions of the social character of wealth. [The wealth of society exists only as the wealth of private individuals, who are its owners. It shows its social capacity only in the fact that these individuals exchange the qualitatively different use-values mutually for the satisfaction of their wants. Under the capitalist production they can do so only by means of money. Thus the wealth of the individual is realised as a social wealth only by means of money. In money, in this thing, the social nature of this wealth is incarnated.—F. E.] This social existence assumes the aspect of a world beyond, of a thing, matter, commodity, by the side of and outside of the real elements of social wealth. So long as production is in a state of flux, this is forgotten. Credit, likewise, in its capacity as a social form of wealth, crowds money out and usurps its place. It is the faith in the social character of production, which gives to the money-form of products the aspect of something disappearing and ideal. But as soon as credit is shaken—and this phase always appears of necessity in the cycles of modern industry—all the real wealth is to be actually and suddenly transformed into money, into gold and silver, a crazy demand, which, however, necessarily grows out of the system itself. And all the gold and silver, which is supposed to satisfy these enormous demands, amounts to a few millions in the cellars of the Bank.*112
In the effects of the gold drains, then, the fact that production as a social process is not subject to social control is strikingly emphasized by the existence of the social form of wealth outside out of it as a separate thing. The capitalist system of production, it is true, shares this with former systems of production, so far as they rest on the trade with commodities and private exchange. But only in it does this become apparent in the most striking and grotesque form of the most absurd contradiction and nonsense, because, in the first place, production for the direct use of the producers is most completely abolished under the capitalist system, so that wealth exists only as a social process expressed by the interrelations of production and circulation; and in the second place, because capitalist production forever strives to overcome this metallic barrier, the material and phantastic barrier of wealth and its movements, in proportion as the credit system develops, but forever breaks its head on this same barrier.
In the crisis the demand is made, that all bills of exchange, securities, and commodities shall be simultaneously convertible into bank money, and this whole bank money consists of gold.
[The barometer for the international movement of the money metals is the rate of exchange. If England has more payments to make to Germany than Germany to England, the price of marks, expressed in sterling, rises in London, and the price of sterling, expressed in marks, falls in Hamburg and Berlin. If this overbalance of monetary obligations of England toward Germany is not equalised, for instance, by over purchases of Germany in England, the sterling price for marks on bills of exchange on Germany must rise to a point, where it will pay to send metal (gold coin or bullion) from England to Germany in payment of obligations, instead of sending bills of exchange. This is the typical course of things.
How this raising of the rate of interest affects the rates of exchange, is shown by the following testimony before the Committee of the Lower House concerning bank legislation in 1857 (quoted as B. A., or B. C., 1857.)
John Stuart Mill: 2176. "When the business has become difficult...a considerable fall in the price of securities takes place...foreigners order the buying of railroad shares here in England, or English owners of foreign railroad shares sell them to foreign countries...to that extent the transfer of gold is avoided."—2182. "A large and rich class of bankers and dealers in securities, by whom the equalisation of the rate of interest and the equalisation of the commercial barometric pressure between the different countries is generally accomplished...is always on the lookout for the purchase of securities, which promise a rise in price...the proper place to buy them will be the country which sends gold abroad."—2183. "These investments of capital took place to a large extent in 1847, enough to reduce the drain of gold."
J. G. Hubbard, Ex-Governor, and since 1838 a Director of the Bank of England: 2545. "There are a large number of European securities...which have a European circulation in all the various money markets, and these papers, as soon as they fall by one or two per cent. in one market, are at once brought up in order to be transferred to markets, where their value has still maintained itself."—2565. "Are not foreign countries considerably in debt to merchants in England?"—..."Very considerably."—2566. "The collection of these debts might, therefore, suffice by itself to explain a very large accumulation of capital in England?"—"In the year 1847 our position was finally restored by our drawing a line through so and so many millions, which America and Russia formerly owed to England." [England owed these same countries at the same time "so and so many millions" for corn and did not forget to "draw a line" also through the greater portion of these by the bankruptcy of the English debtors. See the report on Bank Acts, 1857, in chapter XXX of this work.]—2572. "In 1847 the rate of exchange between England and Petersburg stood very high. When the government letter was issued, which authorized the Bank of England to issue bank notes without adhering to the legally prescribed limit of 14 millions [beyond the gold reserve], the condition was that the discount should be kept at 8%. At that moment, and at that rate of discount, it was a profitable business to have gold shipped from Petersburg to London and to lend it out after its arrival at 8% until the three months' bills of exchange should become due, which had been drawn against the sold gold."—2573. "In all operations with gold many points must be taken into consideration; it depends on the rate of exchange and on the rate of interest, at which money may be invested until the bills drawn against it become due."
The following points are important, partly because they show that England must take refuge to other countries, when its rate of exchange with Asia is unfavorable. These are countries, whose imports from Asia are paid by way of England. On the other part they are important, because Mr. Wilson makes once more the silly attempt here, to identify the effect of an export of precious metal on the rates of exchange with the effect of an export of capital in general upon these rates; the export being in either case not for the purpose of paying or buying, but of investing capital. In the first place it goes without saying, that whether so and so many millions of pounds sterling are sent to India in precious metals or railroad rails, in order to be invested in railroads there, these are merely two different forms of transferring the same amount of capital to another country. And this is a form of transfer, which does not enter into accounts of the ordinary mercantile businesses, and for which the exporting country expects no other returns than later on the annual revenue from the income of these railroads. If this export is made in the form of precious metal, it will exert a direct influence upon the money market and with it upon the rate of interest of the country exporting this precious metal, at least under the previously outlined conditions, if not necessarily under all circumstances, since precious metal is directly loanable money-capital and the basis of the entire money-system. This export also affects directly the rate of exchange. For precious metal is exported only for the reason and to the extent that the bills of exchange, say, on India, which are offered in the London money market, do not suffice for the making of these extra payments. In other words, there is a demand for Indian bills of exchange which exceeds their supply, and so the rates turn for a time against England, not because it is in debt to India, but because it has to send extraordinary sums to India. In the long run such a shipment of precious metal to India must have the effect of increasing the Indian demand for British goods, because it indirectly increases the consuming power of India for European goods. But if the capital is shipped in the shape of rails, etc., it cannot have any influence on the rates of exchange, since India has no return payment to make for it. For the same reason this need not have any influence on the money market. Wilson seeks to establish the fact of such an influence by declaring that such an extra expenditure will bring about an extra demand for money accommodation and will thus influence the rate of interest. This may be the case; but to maintain that it must take place under all circumstances is totally wrong. No matter whether the rails are shipped and laid on English or Indian soil, they represent nothing else but a definite expansion of English production in a definite sphere. To contend that an expansion of production, even to a large volume, cannot take place without driving the rate of interest higher, is absurd. The money accommodation may grow, that is, the amount of business transacted by operations of credit; but these operations may increase also while the rate of interest remains unchanged. This was actually the case during the railroad mania in England during the forties. The rate of interest did not rise. And it is evident, that, so far as actual capital, in this case commodities, are concerned, the effect on the money market will be just the same, whether these commodities are intended for foreign countries or for inland consumption. A difference could be discovered only in the case that the investment of capital on the part of England in foreign countries would have a restraining influence upon its commercial exports, that is, exports for which payment must be made in return, or to the extent that these investments of capital are general symptoms indicating the overstraining of credit and the beginning of swindling operations.
In the following Wilson asks questions and Newmarch answers them.
1786. "You said before, with reference to the silver demand for Eastern Asia, that in your opinion the rates of exchange with India are in favor of England, in spite of the considerable wealth of metal continually sent to Eastern Asia; have you any reasons for this?"—" To be sure....I find that the actual value of the exports of the United Kingdom to India amounted to 7,420,000 pounds sterling in 1851; to this must be added the amount of the bills of exchange of the India House, that is, the funds which the East Indian Company draws from India for the payment of its own expenses. These drafts amounted in that year to 3,200,000 pounds sterling; so that the total exports of the United Kingdom to India amounted to 10,620,000 pounds sterling. In 1855 the actual value of the exports of commodities had risen to 10,350,000 pounds sterling; the drafts of the India House were 3,700,000 pounds sterling; the total exports therefore 14,050,000 pounds sterling. For 1851, I believe, we have no means of ascertaining the actual value of the imports of commodities from India to England; but we have for 1854 and 1855. In 1855 the entire actual value of these imports of commodities from India to England was 12,670,000 pounds sterling and this sum, compared to the 14,050,000 pounds sterling, leaves a balance in favor of England, in the direct commerce between the two countries, amounting to 1,380,000 pounds sterling."
Thereupon Wilson remarks that the rates of exchange are also touched by the indirect commerce. For instance, the exports from India to Australia and North America are covered by drafts on London, and therefore affect the rate of exchange quite in the same way as though the commodities had gone directly from India to England. Furthermore, when India and China are taken together, the balance is against England, since China has continually heavy payments to make to India for opium, and England has to make payment to China, and the amounts go by this circuitous route to India. (1787, 1788.)
1789. Wilson asks now, whether the effect on the rates of exchange will not be the same, no matter whether the capital goes out in the form of iron rails or locomotives, or in the form of metal coin. Newmarch gives the correct answer: The 12 million pounds sterling, which have been sent during the last years to India for railroad construction served to buy an annual income, which India has to pay at regular terms to England. So far as any immediate effect on the precious metal market is concerned, the investment of 12 million pounds sterling can exert any influence only to the extent that metal had to be sent out for an actual investment in money.
1797. Weguelin asks: "If no returns are made for these rails, how can it be said that they affect the rate of exchange?"—"I do not believe that that portion of the expenditure, which is sent abroad in the form of commodities, affects the stand of the rates of exchange...the stand of the rates between two countries is, one may say exclusively, affected by the quantity of the obligations or bills of exchange offered in opposition to them in another country; that is the rational theory of the rate of exchange. As for the shipment of those 12 millions, they were in the first place subscribed here; now, if the business were such, that these entire 12 millions would be deposited in cash in Calcutta, Bombay and Madras...this sudden demand would strongly affect the price of silver, just as would be the case if the East India Company were to announce tomorrow, that it would increase its drafts from 3 millions to 12 millions. But one-half of these 12 millions is invested...in the purchase of commodities in England...iron rails and lumber and other materials...it is an investment of English capital, in England itself, for a certain kind of commodities to be shipped to India, and that ends the matter."—1798. Weguelin: "But the production of these commodities of iron and wood required for the railroads produces a heavy consumption of foreign commodities, and this could affect the rate of interest, could it not?"—"Assuredly."
Wilson thinks now, that iron largely represents labor, and that the wages paid for this labor largely represent imported goods (1799), and then he asks further:
1801. "But speaking quite generally: If the commodities, which have been produced by means of the consumption of these imported commodities, are sent out in such a way, that we do not receive any returns for them, either in products or otherwise, would not that have the effect of making the rates of exchange unfavorable for us?"—"This principle is exactly what happened in England during the time of the great railway enterprises . For three or four years in succession you invested 30 million pounds sterling in railroads and almost the whole in wages. You have maintained during three years in the construction of railroads, locomotives, cars, stations, a greater number of people than in all factory districts together. These people...expended their wages in the purchase of tea, sugar, liquor and other foreign commodities; these commodities must be imported; but it is certain that during the time that this great investment was being made, the rates of exchange between England and other countries were not materially disturbed. No drain of precious metal took place, on the contrary, rather an addition."
1802. Wilson insists that with a settled balance of trade and par rates between England and India the extra shipment of iron and locomotives "must affect the rate of exchange." Newmarch cannot see it that way, so long as the rails are sent out as an investment of capital and India has no payment to make for them in one form or another; he adds: "I agree with the principle that no country can in the long run have an unfavorable rate of exchange with all countries, with whom it deals; an unfavorable rate of exchange with one country necessarily produces a favorable one with another."—Wilson retorts with this triviality: 1803. "But would not a transfer of capital be the same, whether the capital were sent in this form or that?"—"So far as an indebtedness is concerned, yes."—1804. "Then, whether you send out precious metal or commodities, the effect of railroad construction in India on the market of capital here would be the same and would increase the value of capital just as though the whole had been sent out in precious metal?"
If the prices of iron did not rise, it was certainly a proof that the "value" of the "capital" contained in the rails had not been increased. What is wanted is the value of money-capital, of the rate of interest. Wilson would like to identify money-capital with capital in general. The simple fact is, primarily, that 12 millions for Indian railroads are subscribed in England. This is a matter which has nothing directly to do with the rates of exchange, and the destination of the 12 millions is also immaterial for the money market. If the money market is in good condition, it need not produce any effect at all on it, just as the English railroad subscriptions in 1844 and 1845 left the money market untouched. If the money market is already somewhat difficult, then the rate of interest might indeed be affected by it, but certainly only in an upward direction, and this would have a favorable effect for England on the rates of exchange according to Wilson's theory, that is, it would work against the tendency to export precious metal; if not to India, then to some other country. Mr. Wilson jumps from one thing to another. In question 1802 the rates of exchange are supposed to be affected, in question 1804 the "value of capital," two very different things. The rate of interest may affect the rates of exchange, and the rates may affect the rate of interest, but the rate of interest may be stable while the rates of exchange fluctuate, and the rates of exchange may be stable while the rate of interest fluctuates. Wilson cannot understand, that the mere form, in which capital is shipped abroad, should make such a difference in the effect, that is, that the difference in the form of capital should have such an effect, not to mention its money form, which runs very much counter to the enlightened economy. Newmarch answers Wilson's question onesidedly inasmuch as he does not point out that he has jumped so suddenly and without reason from the rate of exchange to the rate of interest. Newmarch answers question 1804 uncertainly and doubtfully: "No doubt, if 12 millions are to be raised, it is immaterial, so far as the general rate of interest is concerned, whether these 12 millions are to be sent out in precious metals or in materials. I believe, however" [a fine transition, this however, when he intends to say the exact opposite] "that this is not quite immaterial" [it is immaterial, but, however, it is not material] "because in the one case the six million pounds sterling would return immediately; in the other case they would not return so quickly. Therefore it would make some" [what definiteness!] "difference, whether the six millions were invested here at home or sent entirely abroad." What does he mean by saying that the six millions would return immediately? To the extent that the six million pounds sterling have been spent in England, they exist in rails, locomotives, etc., which are shipped to India, whence they do not return, and their value returns very slowly through a sinking fund, whereas six millions in precious metals may return very quickly in their natural form. To the extent that six millions have been spent in wages, they have been consumed; but the money, in which they were paid, circulates in the country the same as ever or forms a reserve. The same is true of the profits of the producers of iron rails and of that portion of the six millions which makes good their constant capital. This ambiguous phrase of the return of values is used by Newmarch only in order to avoid saying directly: The money has remained in the country, and so far as it serves as loanable money-capital the difference for the money-market (aside from the possibility that the circulation might have swallowed more hard cash) is only this, that it is spent for the account of A instead of B. An investment of this kind, where the capital is transferred to other countries in commodities, not in precious metals, cannot affect the rate of exchange, unless the production of these exported commodities requires an extra-import of other foreign commodities, and this, at any rate, does not affect the rate of exchange with the country in which the exported capital is invested. This production is not intended to settle for this extra import. The same takes place in every export on credit, no matter whether it be intended for investment as capital or for ordinary purposes of commerce. Besides, such an extra import may also cause a reaction in the way of an extra demand for English goods, for instance, on the part of the colonies or of the United States.
Before that Newmarch said that owing to the drafts of the East India Company the exports from England to India were larger than the imports. Sir Charles Wood cross-examines him on this score. This excess of the English exports to India over the imports from India is actually due to imports from India, for which England does not pay any equivalent. The drafts of the East India Company (now of the British government) resolve themselves into a tribute levied on India. For instance, in 1855 the imports from India to England amounted to 12,670,000 pounds sterling; the English exports to India amounted to 10,350,000 pounds sterling; balance in India's favor 2,250,000 pounds sterling. "If the matter were exhausted with this, then these 2,250,000 pounds sterling would have to be remitted to India in some form. But then come the invitations from the India House. The India House announces that it is in a position to issue drafts on the different presidencies in India to the amount of 3,250,000 pounds sterling. [This amount was levied for the London expenses of the East India Company and for the dividends due to the stockholders.] And this liquidates not merely the balance of 2,250,000 pounds sterling, which arose in a business way, but gives besides a surplus of one million." (1917.)
1922. Wood: "Then the effect of these drafts of the India House is not to increase the exports to India, but to reduce them to that extent?" [He means to say to reduce the necessity of covering the imports from India by exports to India to the same amount.] Mr. Newmarch explains this by saying that the British export for these 3,700,000 pounds sterling a "good government" to India (1925). Wood, knowing very well the kind of "good government" exported to India by the British, having been Minister to India, replies correctly and ironically: 1926. "Then the exports, which, as you say, are caused by the India House drafts, are exports of good government, and not of commodities."—Since England exports a good deal "in this way" in the shape of "good government" and for investment of capital in foreign countries, things which are quite independent of the ordinary run of business, tributes which consist either in payment for "good government" or in revenues from capital invested in the colonies or elsewhere, tributes for which it does not have to pay any equivalent, it is evident, that the rates of exchange are not affected, when England simply consumes these tributes without making any exports in return for them. Hence it is also evident that the rates of exchange are not affected, when it reinvests these tributes, not in England, but productively or unproductively in foreign countries; for instance, when it sends ammunition to the Crimea with them. Moreover, to the extent that the imports from abroad pass into the revenue of England—of course, they must first have been paid, either in the form of tributes for which no equivalent return is made, or by exchanging things for these tributes before they have been paid, or by the ordinary course of commerce—England can either consume them or reinvest them as capital. Neither the one nor the other thing touches the rates of exchange, and this is what Wilson overlooks. Whether a domestic or a foreign product forms a part of the revenue—and this last case requires merely an exchange of domestic for foreign products—the consumption of this revenue, be it productive or unproductive, alters nothing in the rates of exchange, even though it may alter the scale of production. The following remarks should be judged by the foregoing explanation:
1934. Wood asks Newmarch, how the shipment of war supplies to the Crimea would affect the rates of exchange with Turkey. Newmarch replies: "I do not see, that the mere shipment of war supplies would necessarily affect the rates of exchange, but the shipment of precious metals would surely affect these rates." In this case he distinguishes capital in the form of money from capital in other forms. But now Wilson asks:
1935. "If you promote an export on a large scale of some article for which no corresponding import takes place, you do not pay the foreign debts, which you have contracted by your imports, and for this reason you must affect the rates of exchange by these transactions, since the foreign debts are not paid, because your export has no corresponding import.—This is true of countries in general." [Mr. Wilson forgets, that there are very considerable imports into England, for which no corresponding exports have ever taken place, except in the form of "good government" or of formerly exported capital for investment; at any rate imports which do not pass into the regular commercial movement. But these imports are again exchanged, for instance, for American products, and the fact that American goods are exported without any corresponding imports does not alter the fact that the value of these imports may be consumed without any equivalent return abroad; they have been received without being balanced by any corresponding exports, and may also be used up without entering into the balance of trade. On the other hand, if these imports have already been paid by you, for instance, by credit given to foreign countries, then no debt is contracted through this, and the question has nothing to do with the international balance; it resolves itself into productive and unproductive expenditures, no matter whether the products so used are domestic or foreign.]
This lecture of Wilson's amounts to saying that every export without a corresponding import is at the same time an import without a corresponding export, because foreign, hence imported, commodities enter into the production of the exported article. The assumption is that every export of this kind is based on some unpaid import, or creates it, resulting in a debt to a foreign country. This is wrong, even aside from the two following circumstances. 1) England receives imports free of charge, for which it pays no equivalent, such as a portion of its Indian imports. It may exchange these for American imports, and may export the latter without any imports to counterbalance them; but at any rate, so far as this value is concerned, it has only exported something that did not cost it anything. 2) England may have paid for imports, for instance American imports, which form additional capital; if it consumes these unproductively, for instance, using them as war materials, this does not constitute any debt towards America and does not affect the rates of exchange with America. Newmarch contradicts himself in numbers 1934 and 1935, and Wood calls his attention to this, in number 1938: "If no portion of the commodities employed in the manufacture of articles, which we export without receiving any returns [war materials], comes from the country into which these articles are sent, how does that touch the rate of exchange with that country? Suppose that commerce with Turkey is in the ordinary condition of equilibrium; how is the rate of exchange between us and Turkey affected by the export of war materials to the Crimea?"—Here Newmarch loses his equanimity; he forgets that he has answered the same simple question correctly in No. 1934, and says: "We have, it seems to me, exhausted the practical question, and we are now getting into a very high region of metaphysical discussion."
[Wilson has still another version of his claim, that the rate of exchange is affected by every transfer of capital from one country to another, no matter whether this takes place in the form of precious metals or of commodities. Wilson knows, of course, that the rate of exchange is affected by the rate of interest, particularly by the relation of the rates of interest current in any two countries whose rates of exchange are under discussion. If he can now demonstrate that any surplus of capital, and in the first place commodities of all kinds, including precious metals, contribute their share to influencing the rate of interest, then he makes a step nearer to his goal; a transfer of any considerable portion of this capital to some other country must then change the rate of interest in both countries, in opposite directions, and this must alter in a secondary way the rate of exchange between both countries.—F. E.]
He says, then, in the "Economist," 1847, page 475, which he edited at that time:
1) "It is evident, that such a surplus of capital, indicated by large supplies of all kinds, including precious metals, must lead necessarily, not only to lower prices of commodities in general, but to a lower rate of interest for the use of capital."
Our comment on sentence No. I, is that a strong addition to the precious metals may be made while production is simultaneously contracted, which is always the case in the period after a crisis. In the subsequent phase precious metals may come in from countries that produce above all precious metals; the imports of other commodities are generally balanced by the exports during this period. In these two phases the rate of interest is low and rises but slowly; we have already explained the reason for this. This low rate of interest may be explained everywhere without any influence of any "Large supplies of any kind." And how is this influence to take place? The low price of cotton, for instance, renders possible the high profits of the spinners, etc. Now why is the rate of interest low? Surely not, because the profit, which may be made on borrowed capital, is high. But simply and solely, because under existing conditions the demand for loan capital does not grow in proportion to this profit; in other words, because loan capital has a different movement than industrial capital. What the "Economist" wants to prove is exactly the reverse, namely that the movements of loan capital are identical with those of industrial capital.
Comment on sentence No. 2). If we reduce the absurd assumption of a stock for two years ahead to a point where it begins to take on some meaning, it signifies that the markets are overstocked. This would cause a falling of prices. Less would have to be paid for a bale of cotton. This would by no means justify the conclusion, that the money which is to be used for the payment of this cotton, is more easily borrowed. For this depends on the condition of the money market. If money can be borrowed more easily, it can be so only because the commercial credit is in such shape, that it has to make less use of bank credit than ordinarily. The commodities overcrowding the market are means of subsistence or means of production. The low price of both increases in this case the profit of the industrial capitalist. Why should these low prices depress the rate of interest, unless it be through the contrast (not the identity) between the abundance of industrial capital and the scarcity of the demand for loan capital? The circumstances are such, that the merchant and the industrial capitalist can more easily give credit to one another; owing to this facilitation of commercial credit, neither the industrial nor the merchant need much bank credit; hence the rate of interest can be low. This low rate of interest has nothing to do with the increase of precious metals, although both of them may run parallel to each other and the same causes, which bring about the low prices of articles of import, may also produce a surplus of precious metals. If the import market were really overcrowded, it would prove a decrease of the demand for imported articles, and this would be inexplicable at low prices, unless it be attributed to a contraction of industrial production at home; but this, again, would be inexplicable, so long as there is an over importation at low prices. All these absurdities are brought forward for the purpose of proving that a fall of prices is identical with a fall of interest. Both things may, indeed, exist side by side. But if they do, it will be an expression of the opposite directions, in which the movement of industrial capital and of loan capital takes place. It will not be an expression of their identity.
Comment on sentence No. 3). Why money interest should be low, when commodities exist in abundance, is hard to understand, even after the foregoing remarks. If commodities are cheap, then I need, say, only 1,000 pounds sterling instead of 2,000 pounds sterling for a definite quantity which I may want to buy. But perhaps I might invest 2,000 pounds sterling nevertheless, and thus buy twice the quantity which I could have bought formerly. In this way I expand my business by advancing the same capital, which I may have to borrow. I buy 2,000 pounds sterling's worth of commodities, the same as before. My demand on the money market therefore remains the same, even though my demand on the commodity-market rises with the fall of the prices of commodities. But if this demand for commodities should decrease, that is, if production should not expand with the fall of the prices of commodities, a thing contrary to all laws of the "Economist," then the demand for loanable money-capital would be decreasing, although the profit would be increasing. But this increasing profit would create a demand for loan capital. For the rest, the low stand of the prices of commodities may be due to three causes. First, to a lack of demand. In that case the rate of interest is low, because production is paralyzed, not because commodities are cheap, since this cheapness is but an expression of that paralysis. In the second place, it may be due to a supply which is excessive compared to the demand. This may be the result of an overcrowding of markets, etc., which may lead to a crisis, and may go hand in hand with a high rate of interest during a crisis; or it may be the result of a fall in the value of commodities, so that the same demand may be satisfied at lower prices. Why should the rate of interest fall in the last case? Because the profits increase? If this should be due to the fact that less money-capital is required for the purpose of obtaining the same productive or commodity-capital, it would merely prove that profit and interest stand in an inverse proportion to one another. Certainly this general statement of the "Economist" is wrong. Low money prices of commodities and a low rate of interest do not necessarily go together. Otherwise the rate of interest would be lowest in the poorest countries, in which the money prices of commodities are lowest, and highest in the richest countries, in which the money prices of products of agriculture are highest. In a general way the "Economist" admits: If the value of money falls, it exerts no influence on the rate of interest. 100 pounds sterling bring 105 pounds sterling the same as ever. If the 100 pounds sterling are worth less, so are the 105 pounds sterling or the 5 pounds interest. This relation is not affected by the appreciation or depreciation of the original sum. Considered as a value, a definite quantity of commodities is equal to a definite sum of money. If this value rises, it is equal to a larger sum of money; the reverse takes place when it falls. If the value is 2,000, then 5% of it is 100; if it is 1,000, then 5% of it is 50. This does not alter anything in the rate of interest. The rational part of this matter is merely that a greater pecuniary accommodation is required, when it takes 2,000 pounds sterling to buy the same quantity of commodities, which may be bought for 1,000 pounds sterling at some other time. But this shows at this point merely that profit and interest are inversely proportionate to one another. For profit rises with the cheapness of the elements of constant and variable capital, whereas interest falls. But the reverse may also take place, and does often take place. For instance, cotton may be cheap, because no demand exists for yarn and fabrics; and cotton may be relatively dear, because a large profit in the cotton industry creates a great demand for it. On the other hand the profits of the industrials may be high, just because the price of cotton is low. That list of Hubbard's proves that the rate of interest and the prices of commodities pass through mutually independent movements, whereas the movements of the rate of interest adapt themselves closely to those of the metal reserve and the rates of exchange.
Says the "Economist": "If, therefore, commodities are superabundant, then the money interest must be low." It is just the reverse which takes place during crises; the commodities are superabundant, not convertible into money, and therefore the rate of interest is high; in another phase of the cycle the demand for commodities is large, hence returns are easy, while prices of commodities are rising at the same time, and the rate of interest is low on account of the easy returns. "If they [the commodities] are scarce, it must be high." Once more the opposite is true in times of depression after a crisis. Commodities are scarce, absolutely speaking, not merely with reference to the demand; and the rate of interest is low.
Comment on sentence No. 4). It is pretty evident that an owner of commodities, provided he can sell them at all, will get rid of them at a lower price when the market is overcrowded than he will when there is a prospect of a rapid exhaustion of the existing supply. But why the rate of interest should fall on that account is not so clear.
If the market is overcrowded with imported commodities, the rate of interest may rise as a result of an increased demand for loan capital on the part of their owners, who may wish to escape the necessity of throwing their commodities on the market. On the other hand, the rate of interest may fall, because the fluidity of commercial credit may keep the demand for bank credit relatively low.
The "Economist" mentions the rapid effect on the rates of exchange in 1847, as a consequence of the raising of the rate of interest and other circumstances exerting a pressure on the money market. But it should not be forgotten, that the gold continued to be drained off until the end of April, in spite of the turn in the rates of exchange; a change did not take place in this until the beginning of May.
On January 1, 1847, the metal reserve of the Bank was 15,066,691 pounds sterling; the rate of interest 3½%; rates of exchange for three months on Paris 25.75; on Hamburg 13.10; on Amsterdam 12.3¼. On March 5th the metal reserve had dwindled to 11,595,535 pounds sterling; the discount had risen to 4%; the rate of exchange fell to 25.67½ for Paris; 13.9¼ for Hamburg; 12.2½ for Amsterdam. The drain of gold continued. See the following table:
In spite of the change in the rates at the end of March the drain of gold continued for another full month, probably to the United States.
"We see here" [says the "Economist," 1847, p. 984], "how rapidly and strikingly the raising of the rate of interest exerted its effect, together with the subsequent money panic, in correcting an unfavorable rate of exchange and turning the tide of gold, so that it flowed once more into England. This effect was produced quite independently of the balance of payment. A higher rate of interest produced a lower price of securities, of English as well as foreign ones, and caused large purchases of them for foreign accounts. This increased the sum of the bills of exchange drawn by way of England, while on the other hand, at the high rate of interest, the difficulty of obtaining money was so great, that the demand for these bills of exchange fell, while their sum rose. It was for the same reason that orders for foreign goods were annulled and the investment of English capital in foreign securities realised and the money taken to England for investment. For instance, we read in the "Rio de Janeiro Prices Current" of May 10: "The rate of exchange" [on England] "has experienced a new setback, caused mainly by a pressure on the market for remittances for the realisations on considerable purchases of [Brazilian] government bonds for English account." English capital, which had been invested in foreign countries in various securities, when the rate of interest was very low here, was thus taken back when the rate of interest had risen.
India alone has to pay 5 millions in tribute for "good government," interest and dividends of British capital, etc., not counting the sums sent home annually by officials as savings of their salaries, or by English merchants as a part of their profit in order to be invested in England. Every British colony has to make large remittances continually for the same reason. Most of the banks in Australia, West India, Canada, have been founded with English capital, and the dividends are payable in England. In the same way England owns many foreign securities, European, North and South American, on which it draws interest. In addition to this it is interested in foreign railroads, canals, mines, etc., with the corresponding dividends. Remittance on all these items is made almost exclusively in products, in excess of the amount of the English exports. What goes to foreign countries from England to owners of English securities and to be consumed by Englishmen abroad, is a vanishing quantity in comparison.
The question, so far as it concerns the balance of trade and the rates of exchange, is "at every given moment a question of time. As a rule...England gives large credits on its exports, while its imports are paid in cash. In certain moments this difference of habit has considerable influence on the rates of exchange. At a time when our exports increase very considerably, as in 1850, there must take place a continual expansion in the investment of British capital...in this way remittances of 1850 may be made against goods exported in 1849. But if the exports of 1850 exceed those of 1849 by more than 9 millions, the practical effect must be that more money is sent abroad, to this amount, than returned in the same year. And in this way an effect is produced on the rates of exchange and the rate of interest. But as soon as business is depressed by a crisis, and our exports are greatly reduced, the remittances due for large exports of former years considerably exceed the value of our imports; consequently the rates turn in our favor, capital rapidly accumulates in the home country, and the rate of interest falls." (Economist, January 11, 1851.)
The foreign rates of exchange may be altered:
1) In consequence of a momentary balance of payment, no matter to what cause this may be due, whether it be a purely mercantile one, or the investment of capital abroad, or government expenditures, wars, etc., so far as cash payments are made to foreign countries.
The parity of the rate of exchange is for one pound sterling: on Paris 25.20 francs; Hamburg 13 marks banko 10.5 shillings;*113 Amsterdam 11 florins 97 centimes. In proportion as the rate of exchange on Paris exceeds 25.20 francs, it becomes more favorable to the English debtor of France, or the buyer of French commodities. In either case he needs less pounds sterling in order to accomplish his purpose.—In more remote countries, where precious metals are not easily obtained, when bills of exchange are scarce and insufficient for the remittances to be made to England, the natural effect is a raising of the prices of such products as are generally shipped to England, a greater demand arising for them, in order to send them to England in place of bills of exchange; this is often the case in India.
An unfavorable rate of exchange, or even a drain of gold, may take place, when there is a great abundance of gold in England, a low rate of interest, and a high price of securities.
In the course of 1848 England received large quantities of silver from India, since good bills of exchange were rare and mediocre ones were not easily accepted, in consequence of the crisis of 1847 and the great lack of credit in the Indian business. All this silver, when hardly arrived, quickly found its way to the continent, where the revolution caused a formation of hoards at all points. The same silver largely made the trip back to India in 1850, since the stand of the rates of exchange made this profitable.
The monetary system is essentially Catholic, the credit system essentially Protestant. "The Scotch hate gold." In the form of paper the monetary existence of commodities has only a social life. It is Faith that makes blessed. Faith in money-value as the imminent spirit of commodities, faith in the prevailing mode of production and its predestined order, faith in the individual agents of production as mere personifications of selfexpanding capital. But the credit system does not emancipate itself from the basis of the monetary system any more than Protestantism emancipates itself from the foundations of Catholicism.
Notes for this chapter
What effect this had on the money market, is shown by the following testimony of Newmarch: 1509. "Toward the close of 1853 considerable apprehension was felt by the public; in September the Bank of England raised its discount three times in succession...in the first days of October...a considerable degree of anxiety and alarm showed itself among the public. These apprehensions and this restlessness were largely alleviated before the end of November, and were almost wholly removed by the arrival of five millions in precious metal from Australia. The same thing was repeated in the fall of 1854, when almost six millions in precious metals arrived in October and November. And in the fall of 1855, a time of excitement and restlessness, the same thing was repeated on the arrival of about eight millions in precious metals during the months of September, October and November. At the end of 1856 we find the same thing takes place. In short, I could very well appeal to the experience of nearly every member of this committee as to whether we have not become accustomed to see a natural and complete remedy for a financial stringency in the arrival of a gold ship."
According to Newmarch, a drain of gold to foreign countries may arise from three causes: 1) from purely commercial conditions, that is, if the imports have exceeded the exports, as was the case during the time from 1836 to 1844, and again in 1847, principally a heavy import of corn; 2) from a desire to secure the means for the investment of English capital in foreign countries, as in 1857 for railroads in India; and 3) from a necessity of making definite expenditures in foreign countries, as in 1853 and 1854 for purposes of war in the Orient.
1918. Newmarch. "If you take India and China together, if you take into account the transactions between India and Australia, and the still more important ones between China and the United States, and in these instances the business is a three-cornered one and the equilibration takes place through our intervention...then it is correct that the balance of trade was not only against England, but also against France and the United States."—(B. A., 1857.)
See, for instance, the ridiculous answer of Weguelin, who says that five millions of drained gold is so much capital less, and who attempts to explain in this way certain phenomena, which do not appear when the actual industrial capital is infinitely more raised or depressed in price, expanded or contracted. On the other hand, it is just as ridiculous to attempt to explain these phenomena directly as symptoms of an expansion or contraction of the mass of real capital (that is, the material elements of capital).
Newmarch, B. A., 1857, No. 1364: "The metal reserve in the Bank of England is in fact...the central reserve or the central metal board, on the basis of which the entire business of the country is carried on. It is so to say the cardinal point, around which the entire business of the country has to turn; all other banks in the country consider the Bank of England as the central treasury, or the reservoir, from which they have to draw their reserves of hard cash; and the effect of the foreign rates of exchange falls always precisely upon this treasury and this reservoir."
"Practically, therefore, both Tooke and Loyd would meet an excessive demand for gold by a premature limitation of credits by raising the rate of interest and reducing advances of capital. Only Loyd causes by his illusion inconvenient and even dangerous [legal] limitations and rules." (Economist, 1847, p. 1417.)
"You quite agree that there is no other way to modify the demand for gold than by raising the rate of interest?"—Chapman, associate member of the great bill brokers' firm of Overend Gurney & Co.: "That is my opinion. If our gold falls to a certain point, the best we can do is to ring the alarm bell at once an to say: We are on the decline, and whoever sends gold abroad, must do so at his own peril."—B. A. 1857, Evidence No. 5057.
Old style German money, now discarded.—TRANSLATOR.
Part V, Chapter XXXVI.
End of Notes
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