Karl Marx

The Financial Panic

From the English.

>["New-York Daily Tribune" No. 5634 of 12 May 1859]

London, 29 April 1859

Yesterday was settling day for foreign state securities and shares. The panic on the Stock Exchange, which had begun on 23 April, thereby reached a kind of climax. Since last Monday no fewer than 28 members of the Stock Exchange have declared their insolvency, 18 of them on the 28th inst. The sums involved—in one case £100,000—far exceed the usual average of such “executions.” The simultaneous raising of the discount rate by the Bank directors from 2½ per cent, as fixed on 9 December 1858, to 3½ per cent—a rise necessitated by the outflow of gold bullion in consequence of the purchase of silver for shipment to India—also contributed somewhat to increasing the unease.

Three per cent consols, quoted at 96¼ on 2 April, had fallen on 28 April to 89 and for some hours even to 88¼. Russian 4½ per cent state securities, quoted at 100 on 2 April, fell on the 28th to 87. In the same period Sardinian state securities sank from 81 to 65, while the Turkish six per cent loan suffered a fall from 93½ to 57 and rose again to 61 a few hours later. Austrian five per cent state securities were quoted as low as 49. The principal causes that produced this enormous depreciation of domestic and foreign loans, which was accompanied by a similar fall in railway shares, especially those of the Italian railways, were the news of the invasion of Sardinia by the Austrians, of the entry of a French army into Piedmont, and of the offensive and defensive treaties concluded between France, Russia, and Denmark. It is true that the telegraph transmitted during the day a denial by the

“Constitutionnel” of the offensive and defensive treaty between France and Russia. But although the Stock Exchange is undoubtedly quite credulous and optimistic, this time it ventured to doubt the trustworthiness of semi-official French declarations. It could not yet forget that the “Moniteur” had, scarcely a week before, had the effrontery to deny that France was arming or intended to arm. Besides, while denying the treaty, the French oracle admitted that an “agreement” had been reached between the Eastern and the Western autocrat, which made the denial at best a piece of sophistry. At the same time as the British stockjobbers went bankrupt, the Russian loan of £12,000,000, which Lombard Street would have laid hold of had it not been for Austria’s sudden resolve, fell through. Mr. Simpson, who writes the financial articles for the London “Times”, makes the following curious remarks on the bursting of this loan bubble:

“One of the points that merit particular remark under the existing state of things is that the public has escaped the proposed loan to Russia. Although the designs of that power have been very transparent ever since the premature termination of the Crimean war, Russia, from the influence of our ‘Ally’, and from the subsequent meeting of the Emperors at Stuttgart, felt confident that no warnings, except such as were perfectly incontrovertible, would suffice to prevent her from obtaining any sum she wanted, provided a house of standing was ready to conduct the transactions. Accordingly, the most buoyant feeling and the greatest confidence were expressed by all the interested parties when the plan of raising £12,000,000 was brought out a month or two ago. ‘English capitalists must make up their minds!’ ‘They would be allowed but a very small share!’ ‘In Berlin and elsewhere people were prepared to purchase the shares at a price one or two per cent above what was expected on the London market.’ Under these circumstances there was little hope that any word of caution would be heeded. It is true that neither Messrs. Baring nor Rothschild, who are generally so eager to compete with each other in these matters, manifested any willingness to engage in it. There were also reports of a mysterious concentration of 100,000 Russian troops in Georgia. It was also told that the Russian ambassador in Vienna <Balabin> had openly declared that the Emperor Napoleon was quite right in demanding a revision of the treaties of 1815; and finally one might suppose that the recent schemes for annulling the Treaty of Paris in regard to the Danubian Principalities, the Mediterranean voyage of the Grand Duke Constantine, and the underhand steps with which Lord Cowley’s peace mission was counteracted

would rouse certain misgivings. Yet nothing can influence an optimistic Englishman who wants to invest his money and has fixed his eye on something he regards as a loan yielding him 5 per cent, and whose contempt for prophets of misfortune is boundless. Hence the hopes of the contractors remained undiminished, and indeed one or two days before the promulgation of the Austrian ultimatum, final consultations were held to prepare everything for bringing out this proposal at any moment. It was calculated that the whole affair would prove a great success as soon as the next reassuring assurances of the French ‘Moniteur’ arrived, supporting those already given, that France had not armed and did not intend to arm. However, Austria’s ‘criminal’ step, which did not wait until its opponents had gained all they needed, spoilt the whole plan, and the £12,000,000 will now most probably have to stay at home.”

In Paris the panic on the money market and the resulting suspensions of payment naturally left the London excitement far in the rear, but Louis-Napoléon, who had just had a new loan of 500,000,000 francs voted to himself by his lackeys in the Corps législatif, had strictly forbidden the newspapers to take any notice whatever of these disagreeable incidents. Nevertheless we can arrive at a proper estimate of the present state of things by examining the following table, which I have taken from the official quotations.

| | 24 March | | 7 April | | 28 April | |
|---------------------------|:--------:|--------|:-------:|--------|:--------:|--------|
| | frs. | cts. | frs. | cts. | frs. | cts. |
| Three per cents 20 95 00 |
| Shares of the Bank of France | 2,865 2,840 2,500
| Crédit mobilier 00 50 | 530-542
| Orléans | 1,368 1,257 1,150
| Nord 00 00 00 |
| Est 00 50 00 |
| Méditerranée 00 00 00 |
| Sud 00 75 50 |
| Ouest 00 50 00 |
| Genève 00 00 00 |
| Autrichien 00 25 25 |
| Victor Emmanuel 00 00 00 |
| Lombardo-Vénitien 50 50 00 |

The sentiment of the English monied men is at present heated by an inordinate exasperation with the British Government, which they accuse of having made itself ridiculous in diplomatic Europe and, what means much more, of having misled the commercial world by its obstinate blindness and incomprehension. In fact, Lord Derby allowed himself, for the whole duration of the sham negotiations, to be made the plaything of France and Russia. But not content with the incessant blunders of the past, on the arrival of the news of the Austrian ultimatum he fell into the same trap again, branding this step as “criminal” at the Mansion House banquet and still not perceiving anything of the Russo-French treaty. His last offer of mediation, which Austria could not refuse, was merely an electioneering trick, the result of which could be nothing other than to give Napoléon a further forty-eight hours for the concentration of his troops and to paralyse the unavoidable operations of the Austrians. Such is the diplomatic acumen of that proud aristocracy which presumes to oppose the popular Reform Bill because by it the management of foreign affairs might possibly be wrested from the capable hands of hereditary statesmen. In conclusion, let me remark that the insurrections in Tuscany and the Duchies were precisely what Austria needed to have a pretext for occupying those territories.