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for the cotton speculation: and its rise and progress are wholly to be ascribed to the ignorance and cupidity of those who engaged in it. The merchants with whom it began, supposed, as we have already seen, that the supply of cotton was deficient, when it was really redundant; and The impulse to a rise being once given, and every succeeding purchaser having realized, or appearing to have the power to realize a profit, a fresh inducement appeared at every step of the advance to bring forward new buyers. These were no longer such only as were conversant with the market; many persons were induced to go out of their own line, and to embark their funds or stretch their credit, with a view to engage in what was 6 represented to them by the brokers, as a certain means of realizing a great and immediate gain.'* Now, really it does appear to us to be rather too much for those who entered into such absurd schemes, to attempt to divert the public attention from the real causes of their ruin,—their own folly and avariciousness, by endeavouring to throw the blame on the liberal measures of ministers, and the theories of the Economists! When the data on which the speculations of a merchant are founded are correct, a knowledge of the sound principles of economical science may be of most material service in enabling him to draw a just conclusion from them. But if the data on which he proceeds are wrong, or if he is unable to apply the principles of the science, so as to ascertain the connexion and sequence of causes and effects, the error lies with him and him only; and it is the merest delusion possible to attempt to shift it from himself to the science.
The pernicious effects of mercantile miscalculation and ig norance are strikingly exhibited, in the overstocking of such new markets as are occasionally opened, and in filling them with articles totally unsuited to the wants and habits of the people. Leith and several other towns have not yet recovered from the bankruptcies that followed the overloading of the Continental markets in 1814 and 1815. But the exportations consequent upon the first opening of the trade to Brazil, Buenos Ayres, and the Carracas, were, in this respect, still more extraordinary. The practical men gave, on this occasion full scope to the spirit of speculation; and carried it to an extent which we theorists would, but for the evidence of the fact, have affirmed was quite impossible. We are informed by Mr Mawe, an intelligent traveller, who was resident in Rio Janeiro at the period in question, that more Manchester goods were sent out in the course of a few weeks than had
* Mr Tooke's Considerations on the Currency, 2d Ed. p. 43.
been consumed in the twenty years preceding; and the quantity of English goods of all sorts with which the city was deluged, was so very great, that warehouses could not be provided sufficient to contain them, and that the most valuable merchandise was actually exposed for weeks on the beach to the weather, and to every sort of depredation! But it was chiefly in the selection of the articles sent to Brazil that these practical gentlemen made the most characteristic display of their peculiar talent. Elegant services of cut-glass and china were offered to persons whose most splendid drinking vessels consisted of a horn or the shell of a cocoa nut; tools were sent out having a hammer on the one side and a hatchet on the other, as if the inhabitants had had nothing more to do than to break the first stone they met with, and then cut the gold and diamonds from it; and some speculators, more knowing than the rest, and ready, we doubt not, to rail in good set terms against Mr Huskisson for indulging in visionary theories, filled a warehouse with skates for the particular use of those who had never seen ice, and who could with difficulty be brought to believe in its existence ! *
The wide-spread distress and ruin which followed these exportations, is plainly and incontestably to be ascribed to the gross and almost inconceivable ignorance of those by whom they were made. If there be one species of knowledge more essential to a merchant than another, it is that he should be acquainted with the various productions of the different commercial countries of the world, and of those which are in demand in them. And when ships are freighted, and commodities sent abroad by those who are so entirely destitute of this elementary instruction, as to send skates to Rio Janeiro, the wonder is not that they should sometimes calculate wrong, but that they should ever calculate right.
The dealers in corn are particularly apt to be betrayed into erroneous speculations. This arises partly from the extreme difficulty of obtaining correct information as to the state of the crops in an extensive country, and partly and principally from restrictions on importation. A few days rain immediately before, or during harvest, have frequently, by exciting apprehensions for the safety of the crops, occasioned a sudden rise of prices, which have again as suddenly fallen back to their former level when the weather improved. It is obvious, however, that if we enjoyed the inestimable advantage of a free corn trade, the fluctuations in question would be confined within a comparatively narrow range; for, in that
* Mawe's Travels in Brazil, .2d Ed. pp. 453-458.
case we should be able, as well to resort to foreign markets for additional supplies when our harvest proved to be deficient, as to dispose of the excess of produce on our hands in an unusually plentiful year, by exporting it to them.
2. There is nothing, however, that tends so much to encourage miscalculation, and improvident speculation, on the part both of producers and of merchants, as sudden fluctuations in the supply and value of money. The supply of money cannot be increased without a corresponding increase taking place in prices. And if the addition made to the cirsulation be greater than can be permanently kept up, all who have entered into engagements in the belief that the rise of prices will continue, are necessarily involved in difficulties when they give way, in consequence of the reduction of the currency to its proper quantity. The miscalculation of particular classes of producers, or merchants, affects themselves only, or at most exerts but a comparatively slight influence over the rest of the community; but a revulsion occasioned by a sudden change in the quantity and value of money, affects every individual, and is always productive of the most pernicious results.
It has been disputed whether the late crisis in our commer eial and money system, was occasioned by mercantile miscalculation or over-trading, or by the over-issue of paper. But it does not seem difficult to discover that it was partly a consequence of both causes, though, as we conceive, principally of the latter. The cotton speculation, founded as it was on false conclusions with respect to the crops in America, might have taken place though the currency had been wholly metallic. But had such been the case, the rise of price would certainly have been confined within comparatively reasonable bounds. Those who embark most readily and eagerly in speculative_adventures, are not, generally speaking, of the class of rich and old established merchants. They consist principally of those who have but recently entered into business, and who are tempted, by the chance of speedily making a fortune, to engage in such hazardous transactions. And while any unusual facility in obtaining discounts must act as an additional and powerful motive to such persons to speculate; it is at the same time obvious, that the rise of prices consequent upon the additions made to the currency, will not only lead them to believe that their anticipations are to be realized, but will induce even the most considerate to withhold their produce from market, in the expectation of a further advance.
The source of the speculating mania of 1824 and 1825, has been ascribed to a supposed redundancy of capital. But this
is a radical mistake. The capital of the country was not in any degree more redundant in 1825 than it is at this moment. By the act passed in 1819 for the resumption of cash payments by the Bank of England, it was fixed that the circulation of one pound notes should cease and determine on the 1st January 1826; and in consequence of the measures adopted by the bankers, in the view of preparing for this arrangement, and of the heavy fall in the price of corn occasioned by the abundant harvests of 1820, 1821, and 1822, which caused a great deal of agricultural distress, the circulation of country bank notes was very greatly diminished, and the currency became so deficient that the exchanges were all greatly in our favour. But it is evident, had the Act of 1819 not been interfered with, that this state of things would speedily have rectified itself, either by means of additional issues of Bank of England paper, or by the issue of coin. In consequence, however, of the representations made by the agriculturists of their distressed condition, arising, as they affirmed, principally from a deficient supply of money, that part of the Act of 1819, which provided for the suppression of the small note circulation, was repealed in 1822, and a new act was passed, enabling one pound notes to be circulated till the 1st of January 1833. By itself, this Act could not have had any considerable effect either one way or another; but it was combined with other measures which gave it a powerful influ. ence. The currency being at the time depressed below its proper level, it was plainly in the power of the bankers to increase its quantity up to the level of incipient redundancy: And it was farther plain, that if they chose to reduce the interest previously charged by them upon discounts or loans, they might equally reduce the common and average rate of interest on all loans, during the period they were issuing the additional quantity of currency. When, indeed, they had filled the circulation up to its proper level, or to the point when their paper would begin to be returned upon them for gold, the influence of the rate at which they discounted on the common market rate of interest, must, though there had been no revulsion, have necessarily ceased; for their inability to make additional loans would have caused the rate of interest to be again determined, as it is in all ordinary cases, by the rate at which those who had real capitals were willing to lend, and those who had good security, to borrow.
The following Table shows the extraordinary fluctuations that have taken place in the number of country bank-notes afloat since 1805.
An Account of the Number of Country Bank Notes, of all denomi nations, stamped in each Year, ending Oct. 10, from 1804 to 1825 inclusive, with the per Centage of increase and decrease, comparing each Year with the Year preceding, together with an estimate of the total amount of such notes in circulation, according to Mr Sedgwick's Tables, in each Year, from 1804 to 1825 inclusive, with the per Centage of increase and decrease, comparing each Year with the Year preceding. (See Mushet's Tract p. 215.)
* In 1809 the duty on 17. notes was increased from 3d. to 4d. and may account for the great increase in this year, the notes bearing a 3d. stamp being no longer issuable.