On the Crises of 1837, 1847, and 18^7 33 



In England in 1834-35, loans to Spain and Portugal started 

 an outward movement of gold which, however, as pointed out 

 before, was reversed as a result of the slight panic in 1835. The 

 only other financial operations on a large scale previous to the 

 crisis were those in the United States. 



During the crisis, however, England resorted to some large 

 credit operations m order to tide over temporary monetary dififi- 

 culties. Hard pressed on account of the drain of gold to the 

 United States, Belgium, and other countries, she attempted to 

 dispose of a considerable quantity of public securities. In the 

 latter part of 1838 she succeeded in selling £760,000 of these 

 securities and at the same time drew upon Paris for £600,000 in 

 bills of exchange. Again, from July, 1839, ^'^ April, 1840, Bar- 

 ing Brothers entered upon negotiations with several Parisian 

 bankers to draw bills of exchange to the extent of £2,000,000. 

 By the same operation £900,000 more were procured at Ham- 

 burg.^ Immediately following these credit operations the crisis 

 passed over and gold began to return. 



The question now naturally arises as to whether or not it was 

 necessary for England to allow all her gold to escape until she 

 was forced to ask for assistance abroad. An explanation may be 

 found, perhaps, in a study of bank rates. In both years 1836 

 and 1839, when gold was being exported, she did not raise the 

 rate of discount until the reserves had suffered severe losses, and 

 then only gradually, and not sufficiently to operate quickly. 

 Now the balance of trade was favorable to England, and the only 

 cause for exports of gold, unless securities more than offset the 

 excess of exports, nutst have been the dift'erence in rates of in- 

 terest. Hence the only logical course for England to pursue was 

 to raise her bank rate sufficiently to offset this difference. This 

 she did not do, and many authorities, especially Juglar, criticise 

 this course of action severely. Nevertheless, it might be 

 well to consider here the plight of the United States had England 

 been able to retain her gold. Still, from the national rather than 

 the international point of view, it would no doubt have been 

 policy for England to have raised her rate sooner than she did. 



^Juglar, Les Crises Commerciales, 348. 



175 



