376 A HISTORY OF THE COLONY OF VICTORIA 



perilously near starvation had not the despised squatter found in 

 them a good market for his mutton. 



Every pick, shovel and pannican, every bale of canvas, blankets 

 and slop-clothing that could be ransacked from the country stores 

 in New South Wales, Tasmania or South Australia, had been 

 drawn into the Melbourne vortex for transformation into gold, yet 

 daily the would-be purchaser had to be sent away empty. The 

 publicans and shopkeepers, elate with their enormous profits, and 

 confident of an ever-increasing army of consumers, sent forth their 

 orders for replenishment without limitation. Many of the owners of 

 well-established shops, scorning the intervention of the warehouse- 

 men, through whose medium they had previously dealt, sent their 

 orders direct to England, where, on the reputation of the colony's 

 growing wealth and progress, they found themselves commanding 

 unlimited credit. The banks soon acquired the control of the gold 

 shipments, and by negotiating drafts against them, at 10 per cent, 

 discount, realised that exchange was the most profitable and important 

 part of their business. Their coffers were gorged with money, for 

 during the year 1852 the deposits rose from 820,000 to 4,330,000, 

 and the notes in circulation from 180,000 to 1,320,000. For the 

 millions thus poured in to them they had no profitable use, no local 

 discounts, and very scant demand for accommodation. Naturally 

 they refused to allow any interest on deposits which involved 

 responsibility without any compensating advantages. But it was 

 necessary to earn profits somehow, and by force of circumstances 

 they gradually merged into their business the functions of the indent 

 merchant, and established credits for hundreds of thousands of 

 pounds for their customers whose prospects looked so promising. 

 The wholesale warehousemen in their turn plied their English agents 

 with orders, based on a bare market and great expectations. This 

 combined, and yet competitive, action would alone have ensured 

 a glut, and depreciated values in the course of a year, for it must 

 be remembered that, in the absence of a regular mail service, some- 

 thing like nine months elapsed between the despatch of an order 

 and the delivery of the goods. 



An even more serious factor in bringing about the collapse was, 

 however, already beginning to work at the other end of the line. 



