THE PANIC ON THE BOURSES.
WHOEVER is angry and indignant, sensational novelists at least should be thankful to the Emperor Napoleon for the coup de the'dtre he has just executed on the political stage of Europe. Lately the taste for City business has had a very marked development among writers of the class we have named. Since the panic of 1866 our fugitive literature has abounded in pictures of financing, till we have quite an every- day acquaintance with the leading personages of the novelist's idealized City,—the insolvent aristocrats figuring as sham directors, the astute manager or secretary who does the busi- ness and finally pillages the till, the German-Jew promoter who grows a millionaire on the fat, of commissions and pots de via, the harpies of attorneys and liquidators who feast on the remains of limited companies, and the victims of all kinds and degrees who come to the City to be shorn. With the dramatic incidents of the business—the free•and-easy manner of drawing cheques for "cool" thousands and tens of thousands, the elegant luncheons in unworkmanlike business rooms, the scenes on panic days—we are also tolerably familiar. There is not much of the real City in it all, but we are not now concerned with that point. Occasionally perhaps the novelist changes the scene— the authoress of " Debenham's Vow," for instance, making the hero win his fortune by magical successes in cotton and blockade-running during the American War—but " finance " is the favourite topic, and there is even now going on in the Cornhill a story where the plot is very much a peg for de- scribing the whole art and mystery of Bubble Companies, and how fortunes are lost and won in them. Now, to novelists with this tendency to work the City, who must be dis- covering with their readers that " financing " is a little stale, the French Government, by its sudden threats of war, and the consequent panic on all the Bourses, has supplied a fresh source of excellent raw material. From the somewhat vulgar life and ways of swindling promoters, they may turn to great political events, and find equally rapid and complete means of making or marring the fortunes of their puppets, with no lack of picturesque incident to enhance the interest. They have only to time their story properly, and they have at hand the instrument of an unexpected coup which may be repre- sented as from real life, and command all the interest of a City subject. The broad facts are that in a moment of profound calm, an event of little direct consequence to the rest of Europe—the election of a Sovereign for a fourth or fifth-rate European state which has the smallest possible in- fluence on the march of affairs—is treated as a grave insult offered by the Government of the elected Prince to the Govern- ment of another great power, and without an instant's delay is made the foundation of an ultimatum. Whether we look at its suddenness or its intrinsic insignificance in propor- tion to the results, there could not be a more dramatic occa- sion for the commotion on the Bourses which we suppose the novelist to have in view ; while the commotion itself is on the largest scale, involving a total fall in values of upwards of a hundred millions sterling within a period of six days. This is quite equal to a finance panic as a foundation for a great game at the Bourse such as the novelist is fond of, and it is far more striking, because a credit panic is heralded by an unhealthy activity and mutterings of a storm, and here the surprise is complete. It will be said there have been political panics before when war became imminent, but not since the First Napoleon returned from Elba has there been any break in the peaceful sky approaching this in suddenness. The New Year's speech of 1859 was followed by four months' negotiation ; the war of 1866 was equally preceded by tedious diplomacy, in which the Auxerre speech was only one of many incidents ; again, the Luxemburg squabble in 1867, when the Prussians, and not the French, were the detectors of the supposed intrigue, was brought to a crisis in a comparatively gradual manner ; it has been reserved for France to set the precedent of finding a cause of quarrel one day, and sending an ultimatum the next,—producing of neces- sity the dramatic incidents which last week has witnessed. The material is thus wholly new, and a positive godsend to the novelists with City propensities, to whom we venture to re- commend it.
The actual panic, again, has been one of the most consider- able on record. It has hardly equalled in intensity the Credit panics, which are much more sweeping in their range, because ordinary trade is violently affected, whereas in the present affair there was hardly time afforded for trade to feel the full force of the shock. We are not sure, moreover, but that dates in 1848, and during the coup d'elat in 1851, and in the quarrels of 1859, 1866, and 1867, could be specified when fluctuations took place almost as violent as those which have now been witnessed. In the spring of 1859, at least, on the mere faith. of a sudden false report of a Russo-French alliance against. England, there was a panic far beyond the recent one in intensity, when Consols went down 7 per cent..—from 95 to. 881,—in a few days, and the very foundations of confidence seemed to be removed. To compare it only with the most recent panic of all—the New York gold panic of last year,. when the Gold Exchange was shut up, and business was. suspended for a week—it would obviously be absurd to classify what happened last week in the very highest rank of panics. But it only missed attaining the first rank. To use the somewhat bold language of the money articles, there were two days — Friday week and last Monday, if we may not also add Thursday—when Stocks. and Shares were " flung about " on the Exchange, unable- to find purchasers, when sellers were in sheer despair of their property, and when the close of business hours left large and shouting crowds in front of the Exchange. And nothing could exceed the violence of the fluctuations. li- the alarm was sudden, so were the reports of the removal of the cause of the alarm, and the renewal of the- French demands. One afternoon everybody was buying, and next forenoon everybody was selling, the principal foreign stocks moving up or down from five to ten points in the course- of a few hours. In French rentes alone the extreme fluctua- tion in four days was about 7 per cent, and in " Turks," Spanish, and Italian much more. If we compare in each case- the extremes of fluctuation, the difference in the value of stocks would be more than the loss we have already stated,. which only reckons the fall established on one of the quieter days, a week after the outbreak. Not only could one speculative- battle be lost or won, but the events furnish occasion for- successive defeats and victories. The scenes on 'Change, again, are now among the common-places of literature ; but we are not sure that a really clever novelist, taking care to. witness an actual affair, could not give this one an air of realism. in which many of the sketches now current are sadly deficient. There is one point that would be susceptible of novel treat- ment. Novelists very seldom conceive what Stock-Exchange. speculation is, appointing fortunes to be made or lost in a. single stock or company, and exaggerating the gain of a single- transaction. The practical difficulties in the way of so gain- ing are enormous, but a panic like what we have had, when- everything goes down, supplies a hint from which to fabricate- a proper " book " for the hero who is expected to divine all_ the mysteries of the business.
It is always a question how panic and depreciation arise,— a point which would be of some concern for our imaginary novelist, and is, at any rate, of immediate interest. Some- times the explanation is not difficult to give. Any one can tell why bubble companies collapse together when one of them is pricked. The true marvel as respects them is the credulity by which they ever floated at all. But a political panic- does not show on the surface the same reason for the sudden, depreciation of property. Why should people so hurry to sell not merely the stocks of the countries which hostilities threaten, directly or indirectly, but English and American Government and railway stocks, and every description of miscellaneous- security ? Is it all nervousness, or something more It. is, in fact, sometimes explained that there is no real depreciation We are told that it is only speculators who have been caught• making bets, and not real sellers or buyers, who are troubled. The mass of the property concerned does not change in value.. But this explanation will not hold. However Stock-Exchange speculation may go, it is inextricably mixed up with real tran- sactions, and the quotations mark changes which affect alike- speculative and non-speculative sales. And the difficulty of com- prehending how so much property changes value so greatly ands Bo quickly is very easily got over. It is because the property is. in so exceptionally good a form for transference. Stocks and shares represent a mass of invisible property passing from hand to hand as easily as jewels or any other kind of valuable" and portable property, but bearing interest, and far more safe from fire and robbery than almost any kind of movables, which are usually not to be compared with stocks and shares for ease of transference. The consequence of this excellence is that there is constant buying and selling, and continual fluctuations as buying or selling predominates ; which fluctua- tions, again, must needs be great, with very slight changes in the competition of buyers or sellers. The Stock Exchange, in fact, is a place for illustrating in large characters the supply-
and-demand theory, where the practice and the theory do very nearly correspond, self-interest having almost perfect play. Now, a political panic necessarily swells the supply. The Stocks of the Governments concerned are likely to be of less value, because the Governments are likely to borrow, and therefore people sell,—an obvious cause of depreciation ; but in addition to this, people in business, merchants, and bankers, wish to have money in hand for eventualities, and on this account also there is an accumulation of sellers of all stocks at a difficult time. The miscellaneous necessities of realizing will apply to every kind of stock or share, as well as to those of the countries concerned ; and because sellers predominate throughout the market there is a general fall. Speculation, again, though it usually acts as a buffer in the fluctuation of prices, will here at first aggravate the tendency to depreciation through the natural rush to discount the real fluctuation. Apart, then, from the general loss of nerve, which must have some influence, a political panic causes a real fall in the value of an immense mass of property, not merely a paper fall. Masses of so-called panic-stricken sellers cannot help themselves, so that the loss in their experience is actually realized, but all who are interested in the property are deprived of the previous facilities for its use. They become unwilling " speculators for the rise," and it is seldom that the loss is fully recovered for weeks, though the disturbance may pass quickly away. We shall draw one moral only from what we have written. We have got a glimpse at least of one side of the evil which the alarm of last week has caused. If only a few speculators were hurt, it would not matter so much ; but the depreciation really means a sudden loss of capital to hun- dreds and thousands,—in many cases, absolute ruin, the depreciation occurring not merely on a man's working capital, but on all the property of which he is the nominal owner. Even when much actual loss may be avoided, the temporary strain in business is not to be lightly spoken of. To lose one's margin suddenly, to be brought to a standstill in cherished schemes, to miss opportunities which may not recur,—are all miseries of no small magnitude, by which the communities concerned are made poorer. In short, though there is little destruction of capital by a panic like this week's, the change in value and the sudden transferences are nearly as mischievous. That even the alarm of instant war can be so injurious is another reason for deprecating the military regime of Europe, under which instant war is always a possibility. The expense of bloated armaments, the conscription, and the constant timidity of trade have been long-felt calamities, but the evil of sudden alarms is no small addition to the burden.
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