| London. 13 November, 1868.
My dear Sir,
A visit from the Continent has prevented me from answering
your letter, d.d. Nov. 9
, earlier.
1) As to the
Russian Loan
I alluded to in
my former letter
, I am
not aware that it has ever been denied. I shall try to find its exact date in
the
Money Market
Review
which, at the time, published an
article
on it.
I may remark
en passant
that the Russian
G
o
v
ernmen
t has of late badly managed its operations on the
French, Dutch, and English
moneymarkets.
Under increasing financial pressure, it has overdone the thing, and thereby
raised suspicion. As to its loans being
Railway Loans
,
this
is
a pretext and
is not
a pretext. Russia wants to quickly
develop an arterial system of railways for purposes of military concentration
and facility of military movements. At the same time, the money raised for this
purpose,
is continuously spent for another.
2) I did never assert that the Russian Gvt. could prevent the Brit. Gvt. from
suspending
Peel’s
Act
. What I affirm is that, under certain conjunctures of the Money
Market, the Russ. Gvt. might take the Bank unawares notwithstanding the will and
the power of the Brit. Gvt. to come to her rescue.
You are aware that on
May 11, 1866
, the Banking Reserve
lost more than 4 Mill. L. St., and was thus reduced to 3 Mill. (The sum was
actually much less since
all the Reserves of the
Branches
of the
B
ank
o
f
E
ngland
were included in these 3 mill.) It was only
in the evening of that day that
Gladstone
was waited upon by the delegates of the principal London Banks. At this
conference the Deputy Governor of the B. o. E. affected to not admit that there
was any necessity for the suspension of the Act, until courtly reminded by one
of the Joint Stock B
an
k directors present that “they could draw a
couple of
cheqt
cheques
to
morrow-morning, 
| which would compel the B. o. E. to
close its doors. Gladstone mildly interposed: “But you
will
not do so.”
If the Russ. Gvt. on the 11. May
had ½ mill. had
had had ½ mill.
lodged in the
London and Westminster
Bank
, and another half million with another great London Bk—this
roundabout way of
deposing
money in the
Bk of England
would have still better served its purpose than
a
direct deposit in the B. o. E.—the
wi
sudden
withdrawal of that million would no longer have depended upon the
will
of the Joint Stock Banks.
It is notorious that, during the Panic, an organized conspiracy of
Bears
was deliberately seizing
upon, and exaggerating, every symptom of distress, Now, if our supposed Greek
firm had at 2 o’clock forced
the
two
great
Joint Stock Banks to suddently withdraw a
million of Notes from the
B. o. E.
, and
simultaneously, through the agency of a few Bears, alarmed the Stock Exchange by
spreading this news, the Banking D
e
p
a
r
tment must have
stopped payment within an hour. It was admitted at the time by the
Economist
and the
Money Market Review
that, if
a few
great Joint Stock Bks had been forced, by the
impatience of their own depositors, into large and sudden withdrawals of money,
all
the
other Banks would have had no alternative
left
but to “run” for their deposits on the B. o. E.
The difficulty, in such a case, for the
B. o.
E.
to come to a timely understanding with the Government, and
obtain at a moment’s notice its relieving letter, may be judged from the avowal
of the
Governor of the B. o. E.
that they had to act at an hour when the
Chancellor of the Exchequer
was probably still in the arms of
Morpheus. On
May 19
(1866) the
Money Market Review
stated:
“If the leading members of the Government had been out
of the way, as is sometimes the case
when Parliament
is not sitting
, the
B. o.
Engld
would have stopped payment. It certainly seems
strange that the commerce of a great commercial nation should be
paralysed because a Minister or two might 
| not be at their posts;
but the law, as it stands, may entail a catastrophe so momentous, for a
cause so insignificant.”
The 1866 Crisis exceptionally took place in the spring;
not
commercial panics
usually
occur in
autumn
, when Parliament is not sitting.
The
B. o. E.
asked for Government
intervention on Friday (11 May) evening only, instead of on Thursday evening,
because, to some extent, it was able to calculate the limits of the pressure to
be met during the interval of one day. All such calculation becomes impossible
from the moment political intrigue enters the field.
3) I have not yet touched upon a most important point,—the influence which, in
the case supposed, a paper like the
Times
would be able to exercise in bringing
about the catastrophe. As it was,
the
Times
played strange tricks during the crisis of
1866
.
Since the beginning of 1866
, it
had,
day after day, and week after week, sounded the alarm trombone.
On the evening of the 10
th
May
(day of
Overend
’s failure), it seemed frightened by the
Panic, urged deputations from leading banks to
press at
once upon
Government,
warns
the Government etc.
Friday night (11 May) Act suspended.
Saturday Morning (12 May)
Times
declares that “the suspension was
not
necessary.
The
Panic would have subsided of itself.
”
Monday Morning—13 May
Times
says: “To suppose that the panic could have subsided
of itself …
would have been tantamount to waiting for a
miracle.
” “The concession of the
Chancellor
of the Exchequer
came not an hour too early
.”
Article
of
25
May
:
Article full of deliberately false
representations
and grossly exaggerating representations of the
affairs in the City, with the transparent view to “write up” the Panic and set
it again
a
going.
In another article,
Times
rails at the “
distressed
”
London bankers “
begging
” assistance from the
B. o. E.
(that is to say, asking for
their own deposits
).
1
st
August
,
on
occasion of Mr.
Watkin
’s motion
for a Royal Commission 
| of Inquiry into the
B
an
kact
of 1844 etc,
Times
declares
all inquiry useless, and the Act perfect
.
2
nd
August
, it says, in a
leading Article: “The fortunate possessors of capital and credit, whether in
Threadneedlestreet
or Lombardstreet, sit aloof and administer their power upon
purely selfish principles. When money is abundant, they underbid one another,
and the
Bank of Engld
lends at 2%, thereby encouraging speculation. When the
evil tree begins to bear its evil fruit … then the
Bank of England trafficks upon the fatal
excesses it has provoked, and enacts 10% from its own victims. The other
moneylenders do the same, but it is the Bank that sets the
example.
As a public institution it
realizes the questionable maxim that private vices are public
victims
benefits
… Certainly, there is something invidious in being the chief example of
a trade the profit of which is founded upon misfortune”.
and
so forth.
Yours sincerely
Karl Marx