2. The envy which the more or less durable success of the Union Générale excited all around it, and the implacable hostile enterprises undertaken against it by a coalition of envious opponents. 3. The error of sustaining, at any price, the extravagant prices of the value of the shares of the society, by means of sacrifices forbidden by the customs of business and even legislation. 4. The imprudence of increasing the capital and imposing on the shareholders payments beyond their means, in the midst of such a struggle, dangerous enough as it was. It is clear that these errors have been speculated on pitilessly. Generosity does not exist in the market. Imprudence and inexperience are severely chastised there. Those who survive this have to know that hundreds are ready to swallow them up and to give them no chance. Such has been the fate of the Union Générale. Its success excited the hatred of its competitors; its faults made it their prey. Its history will remain a warning like the wild gambling of Law, of the South Sea Bubble, and the speculative spirit which led to the disasters of 1866 in England. We have seen no complete statement of the enterprises associated with the Union Générale. The operations of the Union Générale in Austria, Hungary, and Servia may be gathered from the following list of undertakings which were either entirely or for some part in its hands: Hungarian North-Eastern Railway debentures Hrastnig Coal Mines ... £ 166,667 ... 891,667 666,667 50,000 ... ... 83,333 250,000 250,000 225,000 291,667 General Deposit Bank, capital increased by... ... ... ... ... ... Montenegrin loan Hungarian Provincial Bank (newly founded) Austrian Alpine Mining Company (newly founded) 3,333,333 200,000 2,083,333 4,333,333 166,667 833,333 2,500,000 375,000 ... Mining Company Rima-Murany-Salgo-Tarjana, capital ... ... National Bank for Germany (newly founded) ... ... £250,000 250,000 88,333 ... 95,000 833,334 500,000 £19,550,000 THE FOREIGN EXCHANGES. Ar the close of January, gold in large quantities was leaving London for Paris; in February much of it was returned to London. It is explained, that in each case the condition of the exchanges between the two countries was such as to permit of the operation being conducted at a profit. Last autumn we were sending gold to America, whereas in the past few weeks a fairly substantial sum has reached us from New York, and these movements are explained in the same way. It will be well to inquire briefly into the causes which have produced these effects, so as to enable us to gauge the influences of the foreign exchanges upon the movements of the precious metals, and the methods by which such operations are conducted. There are at all times large payments to be effected between the merchants of two countries, like France and England. French woollen manufacturers have to pay English brokers for the colonial wool which they buy here. French payments have also to be made to us for coffee, coal, metal work, woollen and worsted, and other goods which their merchants purchase here. We, on the other hand, have to pay for French wines and brandy, French silks, French fashions, French beet-rootsugar, and provisions of various descriptions. Now, if English and French merchants were to remit gold in payment for all these purchases of merchandise, the imports and exports of specie involved would be between £60,000,000 and £70,000,000 annually, and that apart altogether from the enormous payments involved in the buying and selling of securities between the two countries. In 1881, however, our imports of gold from France were only £2,129,539, and our exports thereto but £1,088,945, or, together, £3,218,484; and the difference between this modest sum, and probably a movement backwards and forwards of more than £100,000,000, was due to the operation of the exchanges. With all our facilities of intercourse, it costs one penny on every sovereign to take gold from the Bank of England to remit it to Paris, and more to Lyons or Marseilles, and in this way a saving of (say) £500,000 annually is involved by remitting paper, apart altogether from the fact that the constant moving of large amounts of the precious metals would greatly disturb the money market, while inconveniencing remitters and receivers. By means of exchanges of debts, the English merchant who owes money in France pays the English merchant who is owed money from France; and the French merchant who is owed money from England is paid by the French merchant who owes money in England, and thus actual remittances are avoided. But it will be said, such payments can never correspond exactly, and differences must remain. This is true, but the exchange dealers, or go-betweens, to whom the merchants sell their bills, or from whom they buy their foreign credits, are not often called upon to remit specie for any such differences pure and simple. If England has more to pay to France than France to England, the dealers in exchange here incur a debt to the dealers in exchange in Paris, and they are consequently more desirous to take up French debts payable here than English debts payable in Paris. The effect of this is to cause them to bid a premium for bills payable by Paris, and they will give more pounds, shillings and pence for so many francs than they would otherwise. The English remitter is thus placed at some disadvantage, and the dealer in exchange will not sell him quite 25f. 22c. (par) payable in Paris for his £1 here; and if the exchange drops to 25f. 15c., a loss of d. on every sovereign is incurred, which is quite sufficient to put the English buyer in France at a disadvantage, and the French buyer in England at an advantage. There is thus always a tendency towards equilibrium in these payments, without the exchanges actually moving to what is called the "gold point." If, however, the London dealers in exchange find that they are increasing their indebtedness to Paris to a serious extent, it may be supposed that they will soon be compelled to place the English remitter at a further disadvantage still; and when once the exchange is down to a point when the dealers will only give 25 f. 124c. for £1, it must be remembered that a point has been reached when it actually pays better to buy gold from the Bank of England and pay the cost of carriage to Paris (where we can get 25f. 224c. for it) than to buy exchange. This, however, depends very much upon. circumstances; for it may often occur for months together that London may be millions and millions in debt to Paris, or Paris in debt to London, and that no gold passes. What far more rapidly acts upon the foreign exchanges than any adverse balance of trade is the value of money at the respective centres. If money is cheaper in Paris than in London, it will pay a dealer in exchange who owes money in Paris to borrow it there, and by accommodating his English customers at (say) par of the exchange (25f. 224c.) perform the operation of borrowing in a cheap market and lend in a dear one. This is often found to be so exceedingly profitable, that though London might be in debt to Paris the exchange might actually stand above par, so eager are the dealers in exchange to be placed in possession of funds in London. The reverse of this was the case in January, when the crisis in France drove up the value of money at that centre to a point which was in no wise measured by the official rate quoted at the Bank of France. There were no trade debts of importance being incurred, yet almost in a day the exchange fell from 25f. 19c. to 25f. 111c., so eager were dealers in exchange to be placed in command of funds in Paris and a rapid outflow of gold was the immediate result. At the same time, money was easy at three per cent. in New York; and though it costs considerably more to transmit gold from thence than from London, yet when our bank rate was put up to six per cent., and money outside was in demand at seven per cent., the New York sterling exchange, operated upon in the same manner, soon ran up to the gold-moving point, and gold came. But a fortnight after the crash in France, and the settlement had been got through, French markets became glutted with money. Money had been called from London, Berlin, Madrid, and elsewhere, and because for the time being we would not absorb French paper, securities had been remitted to us in large quantities. The result was, that where credit was undoubted, loans were offered in Paris upon terms considerably under London rates. The haute banque which conduct the principal exchange operations were able to discount their paper in Paris as low as three and one-eighth per cent.,while here five and a quarter per cent. was still the charge. The result can be foreseen. The dealers in exchange were eager to absorb bills in the dearest market and to borrow in Paris to enable them to do so. They bid 25f. 20c., then 25f. 25c., then 25f. 30c., in exchange for the English sovereign; and then they sent back much of the gold they had previously had of us. This soon put down the market rates here, and enabled many people to repay the Bank of England the loans previously obtained at seven per cent. Consequently, it is the rule, that where the exchange falls to a gold-moving point it is attributable to wide differences in the rates for money between two corresponding centres, and not to any adverse balance of trade, which always acts slowly, and moves gold only in exceptional cases. But, it may be pointed out, the large shipments of gold made to New York in 1879, 1880 and 1881 were due in a great measure to an adverse balance of trade. It is true that Europe was largely in debt to America for produce during those three years, and an exceptional state of affairs was thus created; but at the same time, those shipments of gold were largely due to the state of the respective money markets in those years. Here and in Paris, after January, 1879, for more than two years and a half, the bank rate never rose above three and a half per cent., and for the greater part of the time was one per cent. below that point. In America, on the other hand, from the date of the return to specie payments, speculation and inflation became chronic; and it was remarked on many occasions that it was only where there was pressure for money in New York that shipments of gold were made. When the New York associated banks were minus the legal amount of their reserves, and money was in demand at six per cent., plus a daily commission, then was the time when gold went from London and Paris to New York. Finally, there is another matter which affects the foreign exchanges, and that is credit. If credit in a monetary centre is not good, money will not go there in exchange for bills-only in exchange for recognised securities. Then there is the question of national credit to be considered involved in depreciated paper currencies-a matter which complicates the foreign exchanges very materially. We will take another opportunity of dealing with this question of credit upon the foreign exchanges; and, in the meantime, the following list marks the variations in the leading gold exchanges since the commencement of this year. |