Welsh Journals

The corn dealers had engaged in heavy forward purchasing as the prices were rising, but in doing so they had under-rated greatly the elasticity of supply. Large arrivals from America and Europe at the end of July and early August, together with the prospect of a good domestic harvest, caused a sharp fall in prices. There was a severe loss of confidence in the corn traders, and especially in those of London and Liverpool who were considered to have been speculating wildly. During August 1847, according to the Bankers' Magazine, 'a very large quantity of corn paper drawn by American houses on this country [was] refused acceptance'. Large-scale suspension of payment began at Stockton-on-Tees and then spread to London, for a time mainly affecting corn firms (of which eight failed in August) but in September involving not only corn houses but also other firms in various centres which had granted credit to them. The total gross amount of the liabilities which could not be met in the period from 7 August to 15 September was given by the Bankers' Magazine as between £ 7 millions and £ 8 millions, roughly distributed as follows: London, £ 5 millions; Glasgow, £ 900,000; Ireland, £ 610,000; Liverpool, £ 480,000; Stockton-on-Tees, £ 130,000. (No figure is given for Bristol or for south Wales.) It emerged that a number of the failed firms had been engaged in various forms of over-trading, ranging from highly speculative, albeit quite honest, activities on the basis of renewed short-term credit, to highly reprehensible transactions involving misrepresentation and fictitious dealings. Some of the collapsed firms were said to have been insolvent for upwards of four years. As the crisis developed, the Bank of England continued to discount bills at moderately high rates, and it provided quarterly advances on favourable terms. It supplemented these facilities by making eighteen loans, amounting to £ 3,205,000 of 'extraordinary aid', between 15 September and 15 November. The Bank, however, on 1 October announced a sharp increase in its rate of discount (at Threadneedle Street and at its Branch Banks), and also the cessation of ordinary advances on securities. These measures arose from the contraction of the reserve of the Banking Department-the 'Proportion'- to dangerous levels, and they appear to have contributed to a worsening of the crisis, which moved to its climax as the insolvencies spread from commercial houses to the banks, especially to those of Liverpool (including the Royal Bank and the North and South Wales Bank). The Court of Directors of the Bank of England were confident that the inflow of gold induced by high interest rates would reduce the demand for cash, but it was the intervention of the