The monetary crisis in Germany, which began about the middle
of September last, reached its climax on the 26th of that month,
when it gradually subsided; like the monetary panic in England in
1847, which first manifested itself in the last [days] of April and
gradually disappeared after the 4th of May, the day of its
culmination. Then, the sacrifices made by several leading houses
in London, for the sake of a respite during the panic, laid the
immediate foundation of the complete ruin in which they were
involved a few months later. Similar results will, ere long, be
experienced in Germany, since at the bottom of the panic there
was no scarcity of currency, but a disproportion between the
disposable capital and the vastness of the industrial, commercial
and speculative enterprises then in hand. The means by which the
panic was temporarily subdued was the enhancement of the rate
of discount by the different Government, joint-stock and private
banks; some of them raising their rate to 6, some as high as 9 per
cent. Consequent upon this enhancement of the rate of discount,
the efflux of bullion was checked, the importation of foreign
produce paralyzed, foreign capital attracted by the bait of high
interest, outstanding debts were called in, the French Crédit
Mobilier, which in the month before had paid by bills of
accommodation its installments on the German railways contracted
for by it, was forced to pay in cash, and France, in general,
obliged to discharge in specie the balance then due on account of
corn and provisions. The monetary panic in Germany thus
rebounded on France, where it at once assumed a more
threatening aspect. The Bank of France, following in the track of
the German banks, raised its rate of discount to 6 per cent, an

advance which on the 30th of September led to an application to
the Bank of England for a loan of more than a million of pounds
sterling. On the first of October, consequently, the Bank of
England raised its rate of discount to 5 per cent, without even
waiting for the usual Thursday “parlor,”’* a step without
precedent since the monetary panic of 1847. Notwithstanding this
rise of interest, bullion continued to flow from the vaults of
Threadneedle street” at the rate of £40,000 a day, while the Bank
of France was obliged to part with about 6,000,000 francs in coin
daily, the Mint issuing only 3,000,000, of which only about
120,000 francs was in silver. To counteract the action of the Bank
of France on the bullion reserve of the Bank of England, the latter
again raised its discount about a week afterward to 6 per cent for
bills of 60 days, and 7 per cent for bills of longer date; and the
Bank of France, in return for this civility, issued on the 6th of
October a new ukase,° by which it refused to discount any bills of
more than 60 days’ date, and declared that it would not advance
more than 40 per cent on funded property, and 20 per cent on
railway shares, and that it would make such advances for one
month only. In spite, however, of these measures, the Bank of
England was quite as unable to check the efflux of bullion to
France, as the Bank of France to lessen the panic at Paris, or the
drain of specie to other parts of the continent. The intensity of the
panic in France is attested by a fall from 1,680 francs (quotation of
Sept. 29) to 1,465 francs (Oct. 6) in the shares of the Crédit
Mobilier, a fall of 215 francs within eight days, from which the
utmost efforts had been unable to procure a recovery of more
than 15 francs up to the 9th of October. It is needless to say that
the public funds fell in proportion. There is hardly anything more
ludicrous than the French lamentations on the elopement of their
capital into Germany, after the magniloquent assurances we had
from Mr. Isaac Péreire, the great founder of the Crédit Mobilier,
that French capital was gifted with a peculiar cosmopolitan
character. In the midst of all this trouble, the great wizard of
France, Napoleon III., prepared his panacea. He interdicted the
press from talking of the financial crisis; he suggested by
gendarmes to the money-dealers the expediency of withdrawing
from their windows the offer of premiums on silver; and finally,
he inserted in his Moniteur, on the 7th of October, a report

4 Here: a meeting of the Board of Directors.— Ed.
6 The Bank of England is located in this street.— Ed.
© See Le Moniteur universel, No. 280, October 6, 1856.— Ed.

addressed to himself, by his own Minister of Finance, asserting
that everything was right, and that only the appreciation of things
by the people was wrong.* Unhappily, two days later, out pops the
Governor of the Bank of France with the following feature in his
monthly account:

Oct.> Sept.
Cash in hand ........ccee cece ceeee eee 77,062,910 113,126,401
Cash in branches ................0600e 89,407,036 122,676,090
Bills discounted .........cccccecee cece 271,955,426 221,308,498
Bills at branch banks ................ 239,623,602 217,829,320
Prem. on gold and silver ......... 2,128,594 1,496,313

In other words, during one month the cash on hand had
diminished by 69,332,545 francs, discounts of bills had increased
by 72,441,210 francs; while the premium on the purchase of gold
and silver exceeds the figures for September by 632,281 francs.
Unhappily, also, it is the fact that hoarding of the precious metals
is now going on to an unprecedented degree among the French;
and that the rumors of a suspension of cash payments at the Bank
are daily gaining ground. The intervention of Napoleon proves to
be about as efficient on the money market as his intervention in
the inundated districts on the waters of the Loire.'”°

The present crisis in Europe is complicated by the fact that a
drain of bullion—the common harbinger of commercial disasters—is interwoven with a depreciation of gold, as compared with
silver. Independently of every other commercial and industrial
agency, this depreciation could not but induce those countries,
where there exists a double standard of value, and where both
gold and silver must be received in payment according to
proportions prescribed by law, but declared to be false by
economical facts, to export their silver to those markets where
gold is the standard of value, and where the official price of silver
does not swerve from its market price. This being the relative
position of England and France, silver must naturally flow from
France to England, and gold from England to France, till the
silver currency of the latter is replaced by a gold currency. On the

a P. Magne, “Rapport a l’Empereur”, Le Moniteur universel, No. 281, October 7,
1856.— Ed. :

b “Situation de la Banque de France et de ses succursales au jeudi 9 octobre
1856”, Le Moniteur universel, No. 284, October 10, 1856.— Ed.

© “Situation de la Banque de France et de ses succursales au jeudi 11 septembre
1856”, Le Moniteur universel, No. 256, September 12, 1856.— Ed.

one hand, it is clear that such a substitution for the usual medium
of exchange must be attended by temporary difficulties, but that
these difficulties can be met, either by making gold the standard,
and putting silver out of circulation, as has been done, or by
demonetizing gold and making silver the only standard, as was
done in Holland in 1851, and more recently in Belgium. On the
other hand, it is evident that if there were no other agency at
work except a depreciation of gold compared with silver, the
general drain of silver from all Europe and America would have
counteracted and paralyzed itself, because the suddenly setting
free and taking out of circulation of such a mass of silver without
any particular reservoir to supply it, must have lowered its price in
comparison with gold, the market price of any commodity being
determined temporarily by the proportion between supply and
demand, and only in an average of years by the cost of
production. The demonetization of gold in the Dutch and Belgian
banks could exercise but a very slight influence on the value of
silver, as it had been the principal means of exchange in those
countries, and therefore the change was of a legal rather than an

economical character. It may be admitted, however, that.these_

changes have opened a small market for the supply of silver, and
thus in a slight degree alleviated the embarrassment. |
Within the last four or five months the specie in the Austrian
National Bank has, it is true, increased from $20,000,000 to
$43,000,000, the whole of which, Austria not having yet returned
to cash payments, is hoarded in the Bank vaults. The principal
part of this increase of $23,000,000 has been drawn from Paris
and Germany for railways bought by the Crédit Mobilier. This is
certainly one of the causes which explain the recent drain of silver,
but it would be erroneous to look upon this circumstance as in any
large degree accounting for the late phenomena in the money

market. It must not be forgotten that from 1848 to. 1855, one.

hundred and five millions of gold have been thrown into the
money markets of the world by the production of California and
Australia,’° exclusive of the yield of Russia and the other old
established. sources of supply. Of these one hundred and five
millions the more sanguine free-traders suppose that fifty-two
millions have been required for the modern increase of commerce,

whether as currency, as bank reserves, as bullion for the settling of |
balances and the correction of exchanges between different,

countries, or as articles of luxury. Of the other fifty-three millions
they suppose, and we think them rather below the mark, that they
have merely replaced a similar amount of silver formerly in use in

America and France—ten millions in America, and forty-three
millions in France. The manner in which this displacement has
worked itself out, may be seen from the Official Customs Returns
of the movement of gold and silver in France during the year
[QA: garble stripped 2026-06-23]

Gold Imported in 1855. Silver Imported in 1855.
TN GOES: 20st x adetoaiaste £11,045,268 ING Ote cies Rinses £1,717,459
COM sire Ricieveienes 4,306,887 COIN ss sicivsteatechetectisionde 3,121,250
MORAL accasecomigusereets £15,352,155 PoOtal etiversenacsss £4,838,709
Gold Exported in 1855. Silver Exported in 1855.
TApOts satiate tious £203,544 TN SOUS sacsccervecoidenetianss £3,067 ,229
Gln gidaiias Beldivves 6,306,060 COA sissaveaticks ew stachanes 9,783,345
DO) sctuisrecleteas £6,509,604 VOtal a sssesaiesh a £12,850,574

Balance gold imp’ed £8,842,551 Balance silver exp’d £8,011,865

Nobody, then, can pretend that the setting free of so large an
amount of silver (fifty-three millions sterling) is accounted for
either by the displacement in the currency of France and America,
or by the hoarding of the Bank of Austria, or both together. It has
been justly asserted that silver, not being threatened, like gold,
with a diminution in value, the Italian and Levant traders were
giving it a marked preference over other coin; that the Arabs have
received and hoarded large quantities of it; and lastly, that the
French corn-dealers, in payment for their purchases in the Black
Sea and the Sea of Azof, preferred to abstract silver from France,
where it maintains its antiquated relation to gold, instead of gold,
which has changed its relation to silver in the south of Russia.
Taking all these causes of the drain of silver together, we cannot
estimate the amount abstracted by them at more than fifteen or
sixteen millions sterling. The abstraction of silver by the Oriental
war” is most absurdly alleged by the economical writers in the
English Press as another special reason of this drain, though they
have included it in the general estimate of the fifty-two millions of
gold absorbed by the increased requirements of modern commerce. They cannot, of course, put on the shoulders of silver what
they have already put on the shoulders of gold. There is, then,

4 The Economist, No. 683, September 27, 1856, “Foreign Correspondence”.—
Ed.
b The Crimean war, 1853-56.— Ed.

p22 Karl Marx

besides all these special influences, some greater agency at work by
which the drain of silver is accounted for, and this is the trade to
China and India, which, curiously enough, also formed the
leading feature in the great crisis of 1847. We shall return to this
subject, as it is important to study the economical forerunners of
the impending crisis in Europe.

This much our readers will understand, that whatever may be
the temporary cause of the monetary panic, and the drain of
bullion which appears as its immediate occasion, all the elements
of commercial and industrial revulsion were ripe in Europe, and
aggravated in .France by the failure of the silk crop, by the
shortcomings of the vintage, by the enormous imports of grain
necessitated by the partial failure of the harvest of 1855 and the
inundations of 1856, and lastly by the scarcity of dwelling houses
produced in Paris by the economical contrivances of Mr. Bonaparte. For us, the mere perusal of the financial manifesto of
M. Magne, which we published on Saturday," seems sufficient to
justify the suspicion that in spite of the second Congress of
Paris '°’ now assembling, and in spite of the Naples question,’” the
third Napoleon would have good reason to congratulate himself if
the year 1857 came upon France with no worse auspices than, a
decade earlier, attended the year 1847.

Written on about October 14, 1856 Reproduced from the New-York

leading article; reprinted in the New-York

Weekly Tribune, No. 791, November 8,

1856 under the ttle “The Coming

Crash”

4 Pp. Magne, “Rapport a ’Empereur”, Le Moniteur universel, No. 281, October 7,
1856. Published in the New-York Daily Tribune, No. 4842, October 25, 1856. This
part of the sentence belongs to the NYDT editors.— Ed.