292 A HISTORY OF THE COLONY OF VICTORIA 



It was a common belief in Melbourne that the fall from the 

 inflated prices which had for some time ruled in the real estate 

 market and on the Stock Exchange was manifested with dramatic 

 suddenness towards the close of the Exhibition year. Indeed, in 

 the vernacular of the streets and the columns of the daily papers 

 the " land boom of 1888 " and the "collapse of the boom in 1888 " 

 are phrases continually recurring for years afterwards. As a 

 matter of fact, the seeds of the so-called boom were sown in the 

 really prosperous years of 1884-85. It had grown with amazing 

 rapidity under favourable financial conditions, and by 1888 had 

 really got beyond the control of its originators. But the universally 

 expressed opinion that it " burst " in 1888 is hardly correct, seeing 

 that land was sold in Collins Street two years later at the highest 

 price ever paid. It is true that the first severe shock to the infla- 

 tion of credit was experienced in that year by the insolvency in 

 rapid succession of three notorious land speculators, whose aggre- 

 gate liabilities were returned at over 1,100,000. The revelation 

 of unsoundness which the schedules of these insolvents displayed 

 produced an immediate effect. The associated banks raised their 

 deposit rates from 4 per cent, to 5 per cent., and let it be generally 

 known that they were not prepared to make any further advances 

 on real estate. Had they been able to command the market, a 

 speedy liquidation of all speculative operations in land must have 

 ensued, and in such case the wreckage, though it might have 

 depleted some reserve funds, would have been transient and com- 

 paratively harmless. Unfortunately, a door remained open. The 

 newly established land banks, building societies, and hybrid finance 

 and investment companies took themselves off to London, opened 

 offices or appointed agents throughout Great Britain, and raked in 

 many millions sterling to keep the ball rolling until " better times " 

 for selling should arrive. 



It is necessary to go back some years to trace the origin of a 

 condition of affairs which culminated in such widespread disaster. 

 They may be summarised under the heads of 



1. Eeckless and quite unwarranted borrowing. 



2. The undue multiplication of credit-making institutions. 



3. An unprecedented outbreak of the gambling spirit and the 



