The immediate effects of this measure can be most briefly shown by the following reference made a few days afterwards by an authority in such matters:—“As soon as the correspondence between the Bank of England and the Government was made public, a rise of nearly two and a half per cent, immediately ensued. Consols on Saturday left off at 80 3/4 to 7/8, and on Monday 83 1/2 5/8. Several fluctuations, however, occurred in the course of the day; and a fall of one per cent, on the announcement by the Bank broker of the truth of the correspondence alluded to above, excited much surprise. On Tuesday, the market was very unsettled, operations being nearly confined to Consols. The opening quotation was 83 5/8, and the highest quotation 84 3/8, with numerous fluctuations. A tendency to reaction was visible on Wednesday; the first price was 83 1/4 for money, which declined to 82 3/8, but afterwards rallied to 82 1/2-3/4, at which price they closed. On Thursday, there was scarcely any fluctuation until towards the close of business. The news of a banking failure in the West of England caused a fall of nearly 1/2 per cent.; and, at closing, 82 1/4 for Money, to 82 3/8 to 1/2 for Time, were the current quotations. Exchequer Bills have considerably fluctuated during the week; about 20s. dis. for large bills is the closing quotation. Bank Stock has rather improved, but India Bonds continue very much depressed, quoting about 30s. dis.”
The prevailing feeling among political economists was unfavourable to the measure; and there were many effects attending upon it which vindicated their judgment. In the provinces banks gave way, and mercantile houses of eminence were closed; a general apprehension among the more skilful financiers was entertained that no ultimate benefit, but considerable ultimate injury, would ensue. The judgment of this class of persons may be best combed in the following review of the event:—“On this resolve being generally circulated, nothing could exceed the agitation that prevailed. Everywhere it became the engrossing subject of conversation; and, while many who were favourable to the ‘expansion’ objected to the high rate of interest, others, more experienced, remembering 1825 and 1836, with all the train of evils that resulted upon the withdrawal of the notes then issued, loudly expressed their disapprobation of this invasion of the most valuable clause in the Bank charter bill. Its mere relaxation, it was observed, robs the measure, at once and for ever, of the powerful check to over-trading that a knowledge that, under no circumstances whatever, a relaxation would be resorted to, was calculated to produce. The immediate effect in Liverpool has been to raise the value of cotton one per cent. This is a direct hindrance to manufacturing, and Manchester, Leeds, &c., consequently suffer. It is remarked at Liverpool that eight per cent., although high, is nothing in comparison with being obliged to sell. It follows, therefore, that, when sold, all the charges incident to withholding must be paid by the purchaser, and ultimately by the consumer. From Manchester, advices have been received of the failure of Messrs. Fairbridge and Mr. Robert Gardner (the latter is greatly regretted); from Leeds, of a firm it would be premature to mention. In the meantime, money in London is rather dearer than cheaper. Discount houses, and the joint-stock banks, are taking money repayable at short dates at six percent., five having hitherto been the current rate. Good bills will not be done under eight per cent., and second-rate at scarcely any price. The Directors of the Bank of England at present have not been subject to any great demands since Monday; the difficulty of offering good security being at once an obstacle to firms partially insolvent. At present, it is almost premature to judge, but doubts are entertained whether the benefits resulting, even for the present, from the ‘relaxation,’ will at all balance the baleful effects anticipated.”
The government did not expect that such opinions would be entertained by so large and influential a portion of the public, and were desirous to retrace their steps as soon as they could do so with a good grace, for before a month had passed measures were taken to that effect. The following letter was addressed by the cabinet to the governors of the Bank:—
“Her majesty’s government have watched with the deepest interest the gradual revival of confidence in the commercial classes of the country. They have the satisfaction of believing that the course adopted by the Bank of England on their recommendation, has contributed to produce this result, whilst it has led to no infringement of the law. It appears, from the accounts which you have transmitted to us, that the reserve of the Bank of England has been for some time steadily increasing, and now amounts to £5,000,000. This increase has in great measure arisen from the return of notes and coin from the country. The bullion exceeds £10,000,000, and the state of the exchange promises a further influx of the precious metals. The knowledge of these facts by the public is calculated to inspire still further confidence. In these circumstances it appears to her majesty’s government that the purpose which they had in view in the letter which we addressed to you on the 25th October has been fully answered, and that it is unnecessary to continue that letter any longer in force.”
The harvest of 1847 was such as to restore confidence in some degree, and from that and other causes, especially the cessation of all speculative undertakings, money became easier. The government, however, claimed credit for their plan, which, in the opinion of so many qualified to judge, did more harm in some directions than it did good in others. If the number and magnitude of the different commercial failures were to be taken into account, there appeared as much necessity for the government measure when it was withdrawn, as when, twenty-eight days before, it was introduced. The following were announced to the end of November:—
IN GLASGOW. Liabilities. Campbell of May......................... £600,000 A. and J. Bournie...................... 200,000
IN LIVERPOOL. Ashburner ............................ 30,000 Napier of Camlachie..................... 40,000
IN NEWCASTLE. Carrand Co.............................. 70,000
IN MANCHESTER. David Ainsworth ..................... 30,000
IN BLACKBURN. Roget and Co............................. 76,000