The Commercial and Financial Situation

London, September 24. Public opinion at the moment is occupied almost as much with the commercial and financial situation, not only in Great Britain but especially in France, as with the war in the Crimea. As we know, the Bank of France has raised its discount on government bonds and similar securities to 5 per cent, while it discounts commercial bills of exchange at 4 per cent. The directors of the French bank, worried by the flow of precious metal from its vaults, had already decided to increase the discount for commercial bills of exchange to 5 per cent as well when the Minister of Finance[a] intervened directly and forbade them to carry out this operation. The concern of the government is naturally to maintain the appearance of an easy money market and overflowing credit for as long as possible and to keep the shopkeeping world in a good mood.

The Manchester Examiner has stated that

"The drain during the last two years on the wealth of France has been enormous. [...] But, in two years, the Government of Louis Napoleon has spent £200,000,000—the municipality of Paris has lavished vast sums of borrowed money on the adornment of his capital—projects requiring great wealth have been formed, at the instigation and under the patronage of the Government—the Crédit Mobilier[370] alone has been the parent of no less than half a dozen great companies, each of which has had its shares puffed up to an enormous premium—the capital of these companies has yet to be paid up, and an immense mass of every sort of share paper is passing from hand to hand without any reference to the reckoning day. The financial state of the Government, the purely speculative character of much of that enterprise, the present position of the French money market, and the burden of another indifferent harvest both on the people and the Bourse, all points to chances of disaster which may prove as embarrassing to the war in the East[b] as to the internal peace and prosperity of France herself."[c]

With regard to the grain market the above-quoted newspaper comments in particular:

"There can be no doubt that both France and England will be large importers of grain; and the orders which have already been sent out to the Danube from this country will [...] cause extensive shipments of grain to be made from the United States in place of gold to Europe. Last year's was the best harvest ever known in this country, and yet we imported, from August, 1854, to August, 1855, 2,335,000 quarters of wheat, and 1,588,892 cwts. of flour, and the average price, nevertheless, of the whole year was above 70s. [...] During the coming year [...] we shall require much larger imports [...] to prevent prices rising very considerably. Where supplies are to be obtained if not from North America? [...] The crops in Northern Germany also are a failure, [...] and the United States even are shipping flour to the Baltic, whence we have been accustomed to import no inconsiderable portion of wheat in times of need. Austria, it has been announced by the Government, has average crops, but it is doubtful whether she will have any surplus for export, and throughout Southern Italy a serious scarcity is felt, which cannot, as heretofore, be relieved by imports from the [...] ports in the Black Sea."

Thus in demand for grain France will not only have to compete with England but also with a large part of the European continent. Nothing shows how distasteful this situation is for its Government better than the half consolatory, half didactic article in the Moniteur.[d]

As for the numerous new joint-stock companies in France which are mentioned by the Manchester Examiner, a work recently published in Paris, Opérations de Bourse[e], shows that in one branch alone—that of the joint-stock banks—their numbers have increased six-fold in Paris alone since the February Revolution. Before 1848 only two were in existence; now there are twelve of these banks in Paris, namely the Banque de France, the Caisse Commerciale, the Comptoir d'Escompte, a commandite bank under the firm of Lediheur and Co., the Crédit Foncier de France, the Martinique Bank, the Banque de Guadeloupe, the Banque de l'île de la Réunion, the Bank of Algiers, the Crédit mobilier, the Société Générale du crédit maritime, the Caisse et journal des chemins de fer, the Comptoir central, the Crédit industriel and the Banque de Sénégal. The paid-up capital of these banks amounts only to 151,230,000 francs and their total bank capital only to 252,480,000 francs, or about £10,000,000, which does not equal the capital of the Bank of England alone.

"...The large superstructure which is built by the credit system on this small foundation", writes the London Economist, a journal which supports the Government, "is anything but satisfactory. Against the capital of the Bank of France, 91,250,000f, are issued notes to the amount of 542,589,300f, or six times the amount. [...] The Crédit mobilier [...] is empowered to issue bonds to ten times the amount of its capital. The Crédit Foncier de France [...] whose nominal capital is 30,000,000f has issued bonds to the amount of 200,000,000f. We may anticipate, therefore, that a panic, or a depreciation of this mass of obligations, would cause in Paris and France very considerable distress...."[f]

Notes

[370] The Société générale du Crédit mobilier was a big French joint-stock bank founded by the Péreire brothers in 1852. It was closely associated with Napoleon III's government and under the latter's protection engaged in large-scale speculation. It went bankrupt in 1867 and was liquidated in 1871.