arisen out of them, nor the great revulsion of credit and the commercial failures which followed the turn of markets. The fact is, that in this case, as in 1808-9, and 1816-17, and in a recent and memorable instance in which the spirit of speculation had been, in the first instance, excited by a view of the reduction of stocks below the estimated rate of consumption, an exaggerated opinion of an increased rate of consumption and of a limitation of supply, induced engagements for purchases abroad, with a view to importations on a greatly enlarged scale; and the high prices, which could only be justified by their effect in eking out small stocks on the spot by a reduced rate of consumption, were extended to the forthcoming supplies, which were increased in quantity by those very prices which reduced the consumption.

Not only was this exaggeration of demand, compared with the supply, at high prices, the cause of increased importations, but it also operated temporarily in inducing increased exports. The reduced stocks of raw materials in this country, and the speculations thereupon, would, in most cases, be attended, in the first instance, with improved markets abroad for the manufactured goods into which those raw materials extend; and the improved markets abroad would give an impulse both to orders from thence, and to speculative shipments thither, beyond what would be found to be eventually carried off by consumption at the advanced prices. The transactions hence arising, and the engagements consequent upon them, might be, as, in fact, they were, entered into to a vast extent, long before any effect of them could be felt in the exchanges, or in the rate of interest, or in prices, or in the state of credit.

SECTION 4.- Speculations in Foreign Loans and in Shares in 1824 and 1825.

The speculations in foreign loans and in shares, which constituted so large a part in the general excitement which prevailed in 1824 and 1825, had, in their origin and progress, preceded, and, in point of extravagance, outrun those which have here been noticed as having taken place in the markets for goods. Various loans to the continental states of Europe had been negotiated in this country between 1817 and 1823; and all of these (with the exception of one to the Spanish government under the Cortes, which proved very ruinous to the subscribers) turned out eventually to be on a solid footing, the stipulated dividends being regularly paid. The stocks created by those loans participated only with our own government securities in the fluctuations incidental to all funded property whose estimation was not impaired by any apprehension of breach of faith or inability on the part of the government to pay the dividends.

*

The fall in the rate of interest in this country had contributed to render all those investments in foreign stocks, with the exception of the Spanish, highly beneficial to the subscribers, and thus attracted attention and afforded inducements to that description of investment, which, accordingly, was

* The fall in the rate of interest is exemplified in the following comparative statement of the prices of the 3 per cent. consols (exclusive of the accruing dividend), and of the premium on exchequer bills : —

entered into on a large scale. But the continued fall in the rate of interest had a further and more marked effect in determining capital to investment in foreign funds.*

The five per cents had, towards the close of 1822, been reduced to a four per cent. stock; and, early in 1824, the old four per cents were reduced to a three and a half per cent. stock. These financial operations were strictly in accordance with the conditions on which the loans were originally contracted, and the government would not have been justified in withholding from the public the benefit of that mode of reduction of charge for the public debt. But, by the individuals whose income was thus reduced, it was felt as a case of hardship; and those among them, more especially, whose mode of living was likely to be affected by such reduction, would naturally be more disposed than they otherwise would have been to resort to modes of investment attended with increased hazard, in return for the prospect of a much larger interest than that afforded by the funds of this country. It was a restlessness of feeling of this kind, combined with the facilities of the money market, or, in other words, with the fall in the general rate of interest, and with the too highly-coloured accounts of the resources and good faith of the states of South America, which gave occasion to the projects for loans to those states, and, at the same time, enabled the contractors to fill their lists. A considerable impulse to those projects, and to the eagerness with which they were entered into by the public, was given by the steps announced on the part of the government of this country, as preliminary to the formal recognition of the independence of the South American

In the summer of 1822 the Bank reduced its rate of discount from 5 to 4 per cent.

states. Specious statements were held forth of the great resources and capabilities of revenue of those states; and assurances were held out, and believed, of the good faith and the power of the several governments to raise and appropriate the sums requisite for the payment of the dividends. The most sanguine expectations were entertained of the unbounded resources of those states, now that, being relieved from the trammels of the old Spanish government, those resources were about to be developed by a free commercial intercourse with this country.

The most flaming accounts were at the same time brought before the public of the productiveness of some of the principal mines of Mexico and South America, which had been temporarily abandoned during the civil wars in those countries, and which required, as was supposed, only the application of British capital and skill to render them more productive than ever.

In the early part of 1824, a very great variety of other projects were launched, all more or less favoured by the state of the money market. Of the several insurance companies which were started about this time, the Alliance British and Foreign Assurance Company, which had been brought out under the auspices of the late Mr. Rothschild, created the most sensation. No sooner had the prospectus been issued, than the shares rose to a very high premium.

The high premiums to which this and some of the earlier projects, whether for loans, for mining, insurance, or other joint stock companies, reached, served as incentives for the formation of new ones; and, provided the names of the directors were at all known, the subscriptions tendered were greatly beyond the amount which was professedly required.*

*The following extract from the Annual Register for 1824 gives a very detailed and correct account of the state of things

It is particularly worthy of remark, that this state of things existed in the early part of 1824, because it will have an important bearing on the question, which will be separately examined, how far the

of that year, arising out of the disposition, on the part of the public, to enter into new schemes for the employment of capital:

"The abundance of capital led to the formation of numerous joint-stock companies, directed, some of them, towards schemes of internal industry; others of them, towards speculations in distant countries. The mines of Mexico was a phrase which suggested to every imagination unbounded wealth; and these companies, the Real del Monte Association, the United Mexican, and the Anglo-Mexican, were formed for the purpose of extracting wealth from their bowels by English capital, machinery, and skill. Similar companies were formed, in the course of the year, for working the mines of Chili, of Brazil, of Peru, and of the provinces of the Rio de la Plata, and for prosecuting the pearl fishery on the coast of Columbia. So great was the rage for speculation, that, in the course of a very few weeks, in the early part of the year, the following undertakings, among others, were brought forward in London, and found subscriptions courting their acceptanceThe Alliance Fire and Life Insurance Company, with a capital of four millions;- The Palladium Fire and Life Insurance Company, with a capital of two millions;- The British Annuity Company, whose capital was three millions; The Metropolitan Investment Company, with a capital of one million; The Thames and Isis Navigation Company, with a capital of one hundred and twenty thousand pounds; An Ale Brewery Association, with a capital of two hundred thousand pounds; - A Company for obtaining from Government a Grant of a Million of Acres of Land in New South Wales, and for improving the Growth of Wool;- An Association for the cutting a Canal across the Isthmus of Darien ;- A Company for Navigating the Thames and Isis by Steam; - A New Dock Company, for Coals only. Many of the companies which were thus set on foot, were able, or conceived that they were able, to prosecute their objects effectually without deriving any sanction or special powers from the legislature. Others of them, and particularly such as were to have their sphere of operation at home, found it prudent or necessary to apply for private acts of parliament; so that, in the month of March, there were upwards of thirty bills before the House of Commons, for the purpose of giving legal existence to different companies of this kind. In all these speculations, only a small instalment, seldom exceeding 5 per cent., was paid at first; so that a very moderate rise on the prices of the shares produced a large profit on the