"April 14, 1866, Vol. 2, No. 42," Commercial and Financial Chronicle (April 14, 1866). https://fraser.stlouisfed.org/title/1339/item/558137, accessed on March 25, 2025.

Title: April 14, 1866, Vol. 2, No. 42

Date: April 14, 1866
PREVIOUS | NEXT
Page 1
image-container-0
image-container-1 THE CHRONICLE. [April 14, 1866. & . authorized have been all allotted under the act of 3d March, 1865. But this measure allows one-half of the three hun¬ dred millions to be distributed according to the representative population. and the other half according to capital and re- ipources. It is obvious, therefore, that by no reasonable con¬ struction of the law can any of the States be deprived of their equitable share of national banks and bank notes. If any inequitable distribution has been made, it has been done without the authority of the law, and the surplus notes so issued should be withdrawn that they may be distributed . where they are wanted. Mr. Sherman’s resolution on this subject will be found elsewhere. It has been referred to the Finance Committee of the Senate and will no doubt elicit considerable discussion and may finally result in the applica¬ tion of the proper remedy. The only remaining Congressional topic which we have space to notice is the question of taxation, which was yester¬ day referred to in the House by Mr. Morrill. It is much to be regretted that questions of such vast moment should have been so long deferred. At a late period of the session, espe¬ cially when cholera is supposed to be approaching, we much fear that, as has happened informer sessions, the tax measures will be pushed through their several stfgps and will become laws, without that thorough preliminary exhaustive examina¬ tion both by individual members and by tne public, which is one of the best safeguards against mischievous tax legis¬ lation. Next week it is supposed the country will know more definitely than at present the precise nature of the chief fiscal changes which are to be proposed by the Committee for the adoption of Congress. THE AUSTRO-PRUSSIAN SITUATION AND AMERICAN SECURITIES The latest European advices represent the relations between Austria and Prussia as closely bordering upon open hostili- ti£h. Neither side appeared disposed to yield, and both par¬ ties had gone to the extent of making preparation for military operations; Prussia having even issued an imperial circular to the German States inquiring to what extent the King might rely upon their co-operation, in event ot the dispute drifting into actual war. In the higher business circles of Berlin and Vienna, a strong hope is cherished that war will be avoidedL he view being entertained that both parties are playing a high political game with no purpose of ultimately resorting to the arbitrament of arms; and the same opinion is very generally held among German bankers and importers in this city. It would, however, be unsafe to trust implicitly to opinions liable to be largely influenced by interested hopes; and it is evidently the part of prudence for all interested, financially or commercially, in the affairs of Germany, to look fairly at the possible results to American finance of a war between the two parties. 4 Of the large amount of United States bonds held in Europe, probably not less than $200,000,000 are distributed through¬ out Germany. How would this immense aggregate of secu¬ rities be affected by the outbreak of hostilities ?r The first result of war in any country, and under any circumstances, is to disturb confidence, contract commerce, and thereby pro-. duce a depreciation of home securities generally. Capital is withdrawn from manufactures and foreign enterprises, and the wonted earnings of commerce, instead of being employed in reproduction, are invested in real estate, or in some form of security least liable to depreciation from the condition of public affairs. Amid this general quiescence of capital, the government generally comes into the market as a large borrower, and by adapting its offers to the prevailing esti¬ mate of the public credit, borrows a portiOn of the capital thus taken out of employment. Such would undoubtedly be the case in the event of war between these countries. But would American securities held there necessarily suf¬ fer ? The decline in home securities would naturally induce many holders to sell them and invest the proceeds in some form of security the value of which is independent of do¬ mestic disturbances. During the wars of France, a larger amount of French capital sought investment in the United States than at any other period; and soon after the outbreak of hostilities in the Southern States, large amounts of capi tal were sent to Europe for supposed safer employment, facts showing the tendency of capital to seek foreign investments pending a condition of war. Should the occurring of war between Austria and Prussia call forth this usual tendency, the capitalists of Germany seeking a sound and stable se¬ curity into which they may change their investment have at hand just what they desire, in the Five-twenty bonds. Hith¬ erto, they have shown a remarkable confidence in our se¬ curities. They have taken them in preference to the bonds of their own governments; which, even in times of peace, have been driven to negotiate their loans in London or Paris. It would be difficult to conceive why, in the prospect of a de¬ structive war, they should sell our. securities to invest in those of their own governments. It is true that, in time of war, there is always a el ass whose financial judgment is in¬ fluenced by their political zeal; and it is quite probable that some German capitalists may be induced even to sell out Five twenties and take up national securities; nor is it im¬ possible that some bankers, from motives of loyalty or po¬ litical advantage, may use their influence to induce others to take that course. But the cases in which,citizens deliberate¬ ly make a sacrifice of capital in order to lend to their gov¬ ernment are the rare exceptions ; the first instinct with nine- tenths of the people being to insure safety for their means during the war. The tendency of recent events in the Uni¬ ted States is in favor of increased confidence in our securi¬ ties abroad. The premiun^on gold has materially declined ; a bill has passed Congress authorizing the funding of the short term obligations of the government and the adoption of measures looking to a resumption of specie payments; and the general legislation at Washington has been calculated to inspire confidence abroad in the stability of the govern¬ ment. In view of these considerations, it is not easily seen why Five-twenties should be less esteemed, in comparison with competing securities in Germany, than they have been hitherto. The fact that United States bonds have not, as in all former cases, risen in Europe correspondingly with the decline in the gold premium certainly shows that hitherto the effect of the political situation has been unfavorable to the price. Up to this stage in events, however, we have seen nothing more than that indiscriminate failure of confidence which always attends a grave crisis; the financial results proper to a condi¬ tion of war not having been developed. It is, however, a significant fact that the decline in Five-twenties has been nominal, compared with what has occurred upon many kinds of Government securities, especially upon bank stock. It is not a matter of surprise that, within the past week? about one million of Five-twenty bonds should have been returned from Europe. The decline in the gold premium has produced 'an important difference between the value of the bonds in London and at New York. Estimating the bonds at 70 in London, the price of gold at 126, and of Exchange at 107£, Five-twenties could be placed here at 97f, which is over 6 per cent below the price current on this market. Unless this broad difference should be reduced, either through an advance in the premium on gold, or a rise in. the price of bonds abroad, the exportation of Five-twenties to this side must continue upon an important scale ; for it is not to be supposed that the price of the bonds
image-container-2
image-container-3
image-container-4
image-container-5
image-container-6
image-container-7
image-container-8
image-container-9
image-container-10
image-container-11
image-container-12
image-container-13
image-container-14
image-container-15
image-container-16
image-container-17
image-container-18
image-container-19
image-container-20
image-container-21
image-container-22
image-container-23
image-container-24
image-container-25
image-container-26
image-container-27
image-container-28
image-container-29
image-container-30
image-container-31
About
Date: April 14, 1866
Part Of:
Collections within FRASER contain historical language, content, and descriptions that reflect the time period within which they were created and the views of their creators. Certain collections contain objectionable content—for example, discriminatory or biased language used to refer to racial, ethnic, and cultural groups.
Rights
Metadata
Metadata (XML)
Metadata (JSON)
IIIF Presentation Manifest
View IIIF Manifest (JSON)