Page:Principles of Political Economy Vol 2.djvu/86

66 from fulfilling their engagements, and several of them consequently failed. Among these, one was mentioned, who having a capital not exceeding 1200l. which was locked up in his business, had contrived to buy 4000 chests, value above 80,000l., the loss upon which was about 16,000l.

"The other example which I have to give, is that of the operation on the corn market between 1838 and 1842. There was an instance of a person who, when he entered on his extensive speculations, was, as it appeared by the subsequent examination of his affairs, possessed of a capital not exceeding 5000l., but being successful in the outset, and favoured by circumstances in the progress of his operations, he contrived to make purchases to such an extent, that when he stopped payment his engagements were found to amount to between 500,000l. and 600,000l. Other instances might be cited of parties without any capital at all, who, by dint of mere credit, were enabled, while the aspect of the market favoured their views, to make purchases to a very great extent.

"And be it observed, that these speculations, involving enormous purchases on little or no capital, were carried on in 1839 and 1840, when the money market was in its most contracted state; or when, according to modern phraseology, there was the greatest scarcity of money."

But though the great instrument of speculative purchases is book credits, it cannot be contested that in speculative periods an increase does take place in the quantity both of bills of exchange and of bank notes. This increase, indeed, so far as bank notes are concerned, hardly ever takes place in the earliest stage of the speculations: advances from bankers (as Mr. Tooke observes) not being applied for in order to purchase, but in order to hold on without selling when the usual term of credit has expired, and the high price which was calculated on has not arrived. But the tea speculators mentioned by Mr. Tooke could not have carried their speculations beyond the three months which are the