The following Table will exhibit some of the most prominent among the Instances of Fluctuation from the Summer

SECTION 6.-Recoil of Markets for Loans and Shares after the Spring of 1825.

The recoil from speculations in loans and shares so entered into, and from premiums so extravagantly run up, as they had been in the spring of 1825, was inevitable. The process by which the fall took place is simple and obvious: -As regarded the schemes, a more accurate appreciation of a greater outlay, and of smaller returns, than had been before anticipated; and a limitation of the demand for investment in them, to such persons only as could afford to depend upon remote contingencies for an income, where any income was to be expected: above all, a general deficiency of means among the subscribers to pay up the succeeding instalments, as they had relied for the most part upon a continued rise, to enable them to realise a profit before another instalment should be called for, or upon the same facility as had before existed, of raising money for the purpose at a low rate of interest; and, as applied to foreign loans, the absence of security for some of them, and the rise of the rate of interest in this country, which had the same depressing effect upon all of them. It is to be considered that the greater part of the transfers of the original shares in the foreign loans, and in the new schemes, while the payments on them were light, and while confidence was still entire, were carried on by a medium engendered in a great degree by those very transactions; and that the profits realised or anticipated by the successive shareholders, afforded a fund of additional credit, as well as of nominal capital, with which they might and did appear as purchasers of other objects of exchange. But as new loans and schemes were successively brought forward on grounds more or less specious, all tending to the additional absorption of capital,

while the increasing calls, with the high premium payable on the former loans and schemes, were beginning to press upon the shareholders, the weakest, in the first instance, would endeavour to realise without any longer finding ready buyers. A pause naturally ensued: and, under such circumstances, a pause is generally fatal to projects that do not proceed on solid grounds.

As regarded the majority of the loans and schemes here alluded to, it was soon discovered, that while the calls for payments were immediate and pressing, the prospect of returns was become more remote and uncertain; doubts too began soon to arise as to there being sufficient security for any income. Accordingly, after the greatest elevation in January and February, 1825, there was a pause in the first instance, then a slight decline, and, after a few weeks, namely, in the May and June following, a rapid decline.

The South American loans entailed a loss of nearly the whole of the sums subscribed, there having been no dividends beyond a small part retained and paid back under the name of dividends. And the Mexican and South American mining subscriptions, with only one or two exceptions, proved to be a total loss of the capital paid. Of the other schemes, some few, which were undertaken on fair and solid grounds, survived; but a large proportion were abandoned, at a sacrifice of the greater part, if not the whole, of the deposits and first payments. The losses thus sustained were severely felt in the fortunes of individuals unconnected with trade; but they likewise entered largely into the causes of the banking and commercial failures which followed.

SECTION 7.- Commercial Discredit and Pressure on the Money Market following the Spring of

1825.

From the combined effects of the great fall which thus took place in the markets for goods, and in the value of shares in the various loans and schemes, there was a rapid transition, from unbounded credit and confidence to general discredit and distrust.

In a pamphlet of mine on the currency, in January, 1826, a description was given, while the impression was fresh, of some of the phenomena of the state of credit at that time. Referring to the contraction of the circulation, in consequence of the failures of country banks, the following remarks occurred:

"The issues of many of these banks had been greatly extended, without any adequate reserve of available funds to meet such sudden demands as it is of the very essence of the principles of banking to contemplate and provide for. It appears, by the disclosures arising out of the late disastrous and unprecedentedly numerous failures, that several of the banks had been, for some time before, insolvent, and had been kept afloat merely by the confidence of their customers, and the facilities of the money market, which had accompanied the increase of the Bank of England issues during the high prices. The first breath of suspicion, and the smallest reduction of their accustomed accommodation, were sufficient to sweep away this description of circulation of paper. It has been discovered, moreover, that several of the country banks, which were solvent, as far as related to the power of eventually liquidating their engagements *, had not been con

* The number of those that were eventually found to be solvent, proved to be in a larger proportion than was supposed when the above was written.

ducted on correct banking principles, having a very inadequate reserve in an available and immediately convertible form.

66 Some, too, of the London banks had carried on an extensive business with very insufficient available resources, and were, therefore, liable to be run upon on the occurrence of any general discredit. One of the most considerable of these (the house of Pole and Co.), after struggling through difficulties for upwards of a week, stopped payment early in December (1825). The notoriety of these difficulties in the first instance, and the eventual failure, diminished the resources of the country connexions of this firm; and such of them as had not independent, ample, and immediately convertible funds, were under the necessity of suspending their payments; thus adding to the alarm which was already prevalent. The consternation now became general, not only among the holders of local notes, but among depositors, as well in the metropolis as in the country. There was, in consequence, a severe run upon several of the London bankers, of whom three or four, besides the one before alluded to, suspended their payments. The panic was then at its height; nearly seventy banks, in town and country, suspended their payments in the course of the single month of December last (1825). Bank of England notes and gold were almost the only medium which would then be accepted in payment throughout the country; but

Sir M. W. Ridley said in the House of Commons, 3d June, 1828, that "in 1825 and 1826 there were 770 country bankers, and of these sixty-three had stopped payment. Out of the sixty-three, twenty-three had subsequently resumed their payments, and paid 20s. in the pound; and of the remainder, thirty-one were making arrangements for the payment of their debts, and there was a great hope that every farthing would be paid. The country bankers who had failed in 1826, had paid, on an average, 17s. 6d. in the pound."