MONETARY AND COMMERCIAL REVIEW OF 1866.

Southland Times, Issue 639, 4 March 1867, Page 2

MONETARY AND COMMERCIAL REVIEW OF 1866.

: (" Home News/' January 2, 1867.) The reaction in financial affairs from the extraordinary expansion and activity which, distinguished the preceding year or two was severely felt in that just closed, and has moreover extended deeply and disastrously into commercial affairs, tinging the whole current of business with a degree of adversity and languor if not of absolute gloom, for a much longer period than had even been anticipated from the wide extent and influence of the financial collapse. Indeed it cannot be told what difficulties the utter prostra- „ tion of credit hasjbrought upon the whole body of ourtraders ; howmerchantsandreputed capitalists have- been compelled to dispose of securities at almost any price ; how families have been beggared andfortunesruined ; how bank managers and directors threatened, or more than threatened, with a run have been obliged to look smilingly upon a state of affairs that at any moment might take such a turn as to cause the establishment they conducted to close its doors ; how they were bound both from policy and good will to grant more than ordinary accommodation to their customers, although the drain upon their resources was most severely felt. The most significant report is in brief to mention the downfall of Overend, G-urney, and Co. ; the collapse of the 'London, Chatham, and Dover Railway; the etoppage of the Agra and Masterman's Bank j the virtual suspension of the Bank Charter Act ; and in these are indicated the countless iailures and the compulsory windings-up, 20 in a day, of limited liability companies. The year commenced with quiet markets and the minimum rate of discount 7 per cent., which, in consequence of the export of gold on account of Foreign Loans and other purposes, was within a few days advanced to 8 per cent., and at the same time such a general apprehension of still higher terms prevailed as greatly to deter mercantile operations. The expectation of a further advance in discpunts was not, however, at that time realised, . the Btrain upon the resources of the Bank did not increase, on the contrary, an easier state of the jmarket ensued, and on the 22nd of February the minimum was reduced to 7 per cent,, and again on^ the, 15th of March to 6 per cent. Any facility for business which might hence have ensued was, however, greatly counteracted by the increasing probability of war on the Continent, ■which restricted export orders for many articles, tbus also causing some depression in prices,

Throughout the months of March and April much agitation and alarm prevailed trade* the complications of impending war on the Continent, the consequent contraction of orders for produce, while the anxiety to effect sales increased, and the pressure to dispose of share3 in financial and other public compainies foreshadowed the great and extraordinary crisis which subsequently ensued. The expansion of trade ordinarily experienced in the Bpring, did not therefore arise, and towards the close of April the political and financial events became less and less propitious for commerce. Reports of a more warlike character were daily received from the Continent, pressure on the resources of the Bank became more decided, with consequently strong apprehensions of dearer money, which were confirmed on the 3rd of May by the minimum being raised to 7 per cent., the weekly return showing an increase of no less than two millions in the. amount discounted, the, reserve of notes at the same time decreasing a million and the amount of specie half a million. The accommodation thus afforded, however, availed little in checking the financial difficulties then actually existing, but not generally known. A period of the utmost agitation and alarm immediately followed this attempted alleviation. The demand for discounts became so extensive, that ' without waiting for the usual court day, the Bank Directors on the Bth advanced the rate to 8 per cent., which still failing to arrest the progress of the financial difficulties, was further advanced on the 11th to 9 per cent., when the extreme apprehensions felt through financial and banking circles had in one week added 10 millions to the amount discounted, of which, however, quite one-half was proved, by the addition of five millions to the private deposit', to have been sought as a measure of precaution. This extraordinary pressure on the resources of the Bank having on the enening of that day been represented to the G-overnment, the latter authorised the Bank to issue notes beyond the legal amount, provided the minimum rate of discount was maintained at not less than 10 per cent., which was accordingly declared to be the charge o* the following day. The financial disorders appear, however, to have been too deeply rooted to be at once in any important degree alleviated by the adoption of this last resource. The demand for discounts not only kept up, but still further augmented, until at the end of May the total amount was £33,447*463, and the reserve of notes was reduced to the very low point of £415,410, being the greatest depression of the year, and therefore preventing actual recourse to the permission to exceed the legal issue. The increase in this item was, however, so slow that a reduction in the rate of discount from the extreme rate of 10 per cent., which would have been tantamount to an abandonment of the privilege of over issue, was not considered prudent for a lengthened period. Although from time to time expected this event did not take place until the 16th August, when after the continuation of this burden for above a quarter of the year the terms were reduced to 8 per cent., and with subsequent rapid and great augmentations in the resources of the Bank wj»s further early diminished down to 4 per cent, on the 4th of November, and again on Dec. 20, when the stock of specie had reached £18,815,714, and other reserves also had attained a high amount, it was diminished to 31 per cent., on which Consols advanced to S9£ ex dividend, the lowest point of the year being 84f on the 11th May the quotation at the close reaching 90|. During the long perion in which discount ranged at 10 per cent., many financial establishments, including several banks, suffered such pressure as to compel suspension, although some have since been able to resume business. At the same time buyers of produce were induced to operate in the markets as restrictedly as possible, preferring to diminish their stocks and liabilities. And as from the same motive importers were desirous to sell, prices for most articles had a continually declining tendency. And when in June actual hostilities on the Continent were commenced, a considerable depression took place in articles mainly dependent on export orders, and only a few, such as Spelter, Hemp, and Tallow, manifested an upward tendency. This especial and additional cause of depression was not, however, of lonsr duration, and beiore the end of July the probability of an early peace induced increased orders for goods suited to the German markets, and holders, under the expectation that when a reduction in discounts should take place the demand for goods would greatly expand, confidently looked forward to an improved state of trade. In August, when the first decline occurred and further reductions were impending, a more active and buoyant state of markets promptly ensued, but the improvement being as readily met by the majority of holders of goods the expected advance ia prices in few instances took place. Nor has there at any latter period, even with the reduction in discounts to 4 and 3£ per cent., been a recurrence of that general mercantile briskness which most years have witnessed. Many articles have at times severally attracted attention and prices have for a brief interval advanced, but instances of large and sustained improvement are rare and attributable to exceptional causes, and not to the revival of commercial and monetary confidence, which individual cases of calamity from time to time even to almost the close have seriously retarded. As evidence of the great inroad on the previous course of Indian trade which, has been effected by the monetary disturbances in that country and in this, it may be observed that whereas at this lime last year there were 38 ships on the way from Bombay to Great Britain, 70 from Calcutta, %) from Madras, and 15 from Ceylon, being about the numbers usually afloat at this period, there are now only 12 coming from Bombay, 60 from Calcutta, 8 from Madras, and 14 from Ceylon, or a total of 94 against 163 ships. From China there are 42 vessels now afloat for the United Kingdon against 66 last year, from Manilla 10 against 8, from Penang 7 against 6, and from Singapore 10 against 13 at this time last year. From these less liberal shipments it will probably follow that should deliveries keep up to their usual amount, as appears most probable, stocks of various articles will be diminished while prices may thereby become more remunerative. On the other hand, the accumulation of produce in India may have some effect on. prices there, so that the anomaly so frequently seen of a higher scale of prices in the country of production than at the place of consumption may be reversed, and trade resumes the more natural and healthful condition. ■ The tone of business generally at the close of the year is more cheerful than for a long time past, and although much discretion and even caution will undoubtedly be exercised in the immediate future, the cheapness of money must tend to a state of commercial affairs favorably contrasting with that prevailing during a large portion of the past season.