who supplied their wants, in this case the European producers of articles of luxurious consumption; and so on in ever widening circles, the influence being less as the distance was greater. At every step it might be accumulated and serve to transfer capital into investments, such as mills, factories, and railroads, every one of which felt the stimulus of a rise in prices promising gain. The rise in prices became marked in 1853. In the first years of the sixth decade the harvests in England were good and the rate of discount low. Then followed the Crimean war and a bad crop in 1853, the result of which was a speculation here in wheat, and extensive railroad building in the West.
The market report in August, 1852, was: "Capital is accumulating rapidly in the large cities and is met by a large demand in behalf of various improvements, public and private, and for business purposes. Enterprise is now under full headway. Every portion of the country is teeming with new undertakings requiring a heavy outlay of capital and labor, and indicating rapid strides in wealth and prosperity."[1]
The amount of American stocks held in Europe was estimated in that year at $261 millions.[2] This investment of European capital increased very rapidly during the following years.
The railroad construction in the Ohio States was checked for a time by the Schuyler frauds which were discovered in July, 1854. The president of the New York and New Haven Railroad was likewise transfer agent, whereby he was enabled to issue spurious stock to the amount of $2 millions. The genuine stock was only three millions, and the total cost of the road only about five. Frauds were also discovered in the Harlem and Vermont Central, consisting likewise in over-issues. These occurrences were well calculated to produce a panic in railroad shares, and to restrict the new enterprises which relied on an active demand for their shares.
The financial troubles of the summer of 1854 were spoken of as the most serious since 1837. "The abstraction of capital to a large extent for the construction of long lines of railroad in Ohio, Indiana, Illinois and other States has hampered this market for a year past. Such has been the pressing demand for capital for these new concerns that railroad paper has been amongst the heaviest in the market. Some companies have paid as high as one and a half or two per cent. per month for a series of months, and that too on large sums."[3] A very great reduction in bank circulation took place, especially in the Ohio States, Kentucky, Maryland and South Carolina.[4]
In the United States the money market and share market were feverish and unsettled from the panic of 1854 until that of 1857. There is no real interval between the two.
It does not appear that there was any bank inflation on the new gold. From 1855 to 1856 the circulation decreased as well as the deposits, while
