298 A HISTORY OF THE COLONY OP VICTORIA 



cent, above the current rates for deposits. For by this time the 

 rage for buying land and building houses for the accommodation of 

 four times the existing population had fairly set in, and every fresh 

 deposit received for a year went at once into a form of investment 

 that, as the event proved, took from ten to fifteen years to realise, 

 too often even then with a substantial loss. It was the keenness 

 of this competition that made it difficult for the regular banks to 

 adhere strictly to the conservative rules of their trade. They had 

 as a rule refused to have anything to do with speculative operators 

 for the rise, and now they saw their deposits being transferred to 

 institutions that used them specially for the encouragement of such 

 business. Meanwhile, the inflowing capital was starting no new 

 industries, developing no latent resources from which the banks 

 might look for legitimate borrowing customers. The market began 

 to be flooded with bills of exchange arising out of land transactions, 

 soon exceeding in amount all the genuine commercial paper in the 

 colony. Many of them bore the names of leading and responsible 

 citizens, others the endorsements of reputedly substantial guarantee 

 companies. Gradually but surely much of this paper got into the 

 bill cases of the banks, and it was when they sought finality in these 

 obligations that the debacle began to manifest itself. 



Having outlined the sources of much of this borrowed capital, 

 it is desirable to show the evils which resulted from the rapid 

 creation of such a mass of credit-making institutions. The building 

 societies claim the first consideration, not so much on account of 

 the actual loss they entailed as upon the ground that they repre- 

 sented the perversion of a principle undoubtedly good in itself, into 

 a system that was mainly responsible for the disastrous inflation of 

 the eighties. Building societies on the sound terminating principle 

 had been greatly favoured in the colony from its earliest days. The 

 thrifty had used them with advantage to secure their own homes, 

 and the foundations of many fortunes were laid by the early colonists 

 through their aid. So long as they confined their operations to 

 receiving and relending the subscriptions of members, they formed 

 a co-operative fellowship alike creditable and beneficial, invariably 

 winding up with all-round satisfaction. But when the terminating 

 societies began to be generally superseded by those on a permanent 



