The Baring Crisis, 1890

In the quarter - century between the Overend - Gurney collapse and the Baring crisis the world had begun to turn a critical, and at times censorious, eye upon the centripetal tendencies of finance. The absence of panic made the opportunity for contemplation. Beyond the “pressures” of 1873 and 1878 there were no untoward incidents on the scale once decennially familiar. The unwonted experience even compelled us to find a new word, which should describe a heavy fall in prices, unaccompanied, as of yore, by crisis or panic. The term was found in “slump,” which makes its recognised appearance in City parlance about 1888. ¹ Unoccupied with any immediate perils of recurring crises the economists produced a flood of literature. They issued 1768 publications on the monetary question between 1871 and 1891. Simultaneously the importance of the banking function became yearly more conspicuous. Banking, said Mr. H. G. Turner, of the Commercial Bank of Australia, ² voicing truths to which the age was rapidly awakening, “is an occupation that will ever play a prominent part in the welfare or otherwise of the community. Its importance is as yet but dimly apprehended, its latent possibilities are scarcely dreamed of; and to you, the rising generation, will be entrusted the solution of financial problems which will only be achieved by diligent study and wise conference and co-operation.” The “latent possibilities” had, indeed, just received dramatic illustration. In 1885, Egypt was drawing nigh to bankruptcy. 522This calamity was averted by monthly advances from the House of Rothschild with no legal security, but merely on the strength of a private note from the them Secretary of State for Foreign Affairs (Lord Granville). Later, the firm obtained its reward when a loan for £9,000,000 was negotiated and issued. Yet the profit derived from the latter transaction was nothing more than the merited compensation to the firm which, with unfailing public spirit, had accepted the risks then attendant upon international politics affecting Egypt. The great coup whereby the British Government became possessed of 176,602 shares in the Suez Canal had occurred in 1875, four years before the death of Baron Lionel. Then the Government authorised Messrs. Rothschild to purchase those shares from the Khedive at a price of £4,080,000, the money being voted by Parliament in the following year. The Bank of England itself would have advanced the £4,000,000 for the purchase of these shares, but for the statutory prohibition of the advance of money to the Government without the authority of Parliament, which had disquieted the directors in the days of Pitt. ¹