Hostname: page-component-78c5997874-94fs2 Total loading time: 0 Render date: 2024-11-19T11:16:47.324Z Has data issue: false hasContentIssue false
  • English
  • Français

The Hot Money Movement and the Private Exchange Pool Proposal of 1896*

Published online by Cambridge University Press:  03 February 2011

Matthew Simon
Matthew Simon
Affiliation:
Pace College
Get access Rights & Permissions [Opens in a new window]

Extract

A Widespread belief exists that those disequilibrating international capital flows known as “hot money movements” and the associated measures instituted to regulate transactions in foreign exchange were peculiar to the post-1914 era and especially to the epoch of the “Great Depression” that commenced after 1929. It is felt that the “relative” stability of world economic and political conditions associated with the operation of the pre-1914 gold standard precluded “hot money” transfers and obviated the need to control the foreign exchange market.1 The experience of the United States during the depression of the 1890's vitiates the accuracy of this sweeping generalization. To be sure, these phenomena were largely unrecognized before the depression of the 1930's, but they nevertheless existed. The purpose of this article is to examine one such pre-1930 hot money movement, the one that occurred during the American presidential election campaign of 1896. The nomination of William Jennings Bryan as the Democratic candidate on a free silver platform at Chicago in July 1896 gave impetus to a major disequilibrating outflow of short-term funds. This condition, in turn, led to an interesting effort to control the foreign exchange market.

Type
Articles
Information
The Journal of Economic History , Volume 20 , Issue 1 , March 1960 , pp. 31 - 50
Copyright
Copyright © The Economic History Association 1960

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1 See, for example, Einzig, PaulExchange Control (London: Macmillan & Co., 1934) p. 5.Google Scholar

2 Bloomfield, Arthur I.Capital Imports and the American Balance of Payments, 1934–1939 (Chicago: The University of Chicago Press, 1950), pp. 1–34Google Scholar; and, the same author's, Speculative and Flight Movements of Capital in Postwar International Finance (Princeton: Princeton University Press, 1954).Google Scholar

3 On the nature of hot money movements, see, besides Bloomfield's works, Kindleberger, Charles PoorInternational Short Term Capital Movements (New York: Columbia University Press, 1937), pp. 155–72Google Scholar; and Fanno, MarcoNormal and Abnormal International Transfers (Minneapolis: The University of Minnesota Press, 1939), pp. 31, 49, 61.Google Scholar

4 On the relationship of hot money movements to the origin of exchange control and stabilization funds, see Bloomfield, Capital Imports, p. 148; and Nurkse, RagnarInternational Currency Experience (Princeton: League of Nations, 1944), pp. 143–44, 162–66.Google Scholar

5 For a discussion of the international and other aspects of the four bond issues of 1894–1896, see U.S. Congress, Senate Document No. 187, 50th Congress, Second Session, Sales of Bonds (Washington, D.C.: U.S. Government Printing Office 1896)Google Scholar, Testimony taken by the Committee of Finance; Investigation of the sale of bonds during the year 1894 and 1895 and 1896 under resolution of the Senate of May 7, 1896 by the Committee of Finance; Noyes, A. D.“The Late Bond Syndicate,” The Political Science Quarterly, X (Dec. 1895), 573–602CrossRefGoogle Scholar; Barnes, James AJohn C. Carlisle, Financial Statesmen (New York: Dodd, Mead and Co. 1931), pp. 381–82Google Scholar;Simon, Matthew Cyclical Fluctuations and the International Capital Movements of the United States, 1865–1897 (New York: Columbia University, unpublished dissertation, 1955), pp. 545–72.Google Scholar

6 In 1897 a contemporary European financial observer wrote: “The year 1896 will be considered as one of the gravest in the political and financial history of the United States.” Raffalovich, ArthurLe Marche´ Financier en 1896–1897 (Paris: Libraire Guillaume et Cie., 1897), p. 91.Google Scholar

7 Burns, Ardiur F. and Mitchell, Wesley C.Measuring Business Cycles (New York: National Bureal of Economic Research, 1946), pp. 78–79.Google Scholar For a recent critical evaluation of this period, see Hoffmann, Charles“The Depression of the 1890's,” The Journal of Economic History, XVI (June 1956), 137–64.CrossRefGoogle Scholar

8 Frickey, Edwin“Bank Clearings Outside New York City, 1875–1914,” The Review of Economic Statistics, VII (Oct. 1925), 261.Google Scholar

9 Barnes, James A.“Myths of the Bryan Campaign,” Mississippi Valley Historical Review, XXXIV (Dec. 1947), 371–76.Google Scholar

10 Ibid., 395; and Barnes, James A.“The Gold Standard Democrats and The Party Conflict,” XVII, Mississippi Valley Historical Review (Dec. 1930), 437.Google Scholar

11 Commercial and Financial Chronicle, LXIII (July 4, 1896), 2–3,Google Scholar 16 and July 11, 1896, 48–49, 65; Bankers Magazine of New York, LII (Aug. 1896), 24Google Scholar; Bradstreets, XXIV (July 4, 1896), 419.Google Scholar

12 Ibid. (July 11, 1896), 434; The New York. World, July 5, 1896.

13 Ibid., July 13, 1896; The New York. Times, July 12, 1896; The New York. Evening Post, July 11, 1896; The New York Tribune, July 14–15, 1896; and Commercial and Financial Chronicle, LXIII (July 11, 1896), 48–49.Google Scholar

14 California Bankers Magazine, XIII (Aug. 1896), 271Google Scholar; Bradstreets, XXIV (July 18, 1896), 453Google Scholar; The New York Tribune, July 20, 1896; The New York World, July 22, 1896. More than 70,000 shares were taken during the period July 13-July 18.

15 See the tabulation in the Commercial Yearbook, A statistical annual relating to the Commerce, industries, agriculture, banking etc. of the United States and foreign countries. (New York; The Journal of Commerce and Commercial Bulletin, 1897), pp. 452–53.Google Scholar

16 The New York. Tribune, July 14, 1896.

17 Ibid., July 15, 1896.

18 Bankers’ Magazine of New York, LII (Aug. 7, 1896), 53.Google Scholar

19 The Economist, LIV (Aug. 1, 1896), 1005–06.Google Scholar

20 The New York, Tribune, July 16, 1896.

21 The Herald, July 20, 1896.

22 The Commercial and Financial Chronicle, LXIII (July 18, 1896), 93;Google ScholarThe Journal of Commerce, July 18, 1896; The New York. Evening Post, July 24, 1896; The New York. Journal, July 15, 1896.

23 Bradstreets, XXIV (July 18, 1896), 459.Google Scholar

24 Ibid., July 25, 1896, p. 466; The New York Journal, July 15,1896.

25 TheJournal of Commerce, July 17, 1896.

26 The New York Tribune, July 26, 1896.

27 The New York Times, July 21, 1896; The Journal of Commerce, July 21, 1896; The New York Evening Post, July 25, 1896.

28 Ibid., July 15, 1896; The New York Tribune, July 16, 1896.

29 The New York. Journal, July 27, 1896.

30 For date on the movements of the price of sight bills, which exhibited parallel trends, see Financial Review, 1897, p. 45; for additional statistics on sterling exchange rates, see Andrews, A. Piatt, Statistics of the United States, 1867–1909 (Washington, D.C.: United States Government Printing Office, 1911), p. 195Google Scholar; and New York State Chamber of Commerce, Annual Report, 1896–1897, pp. 236–37.Google Scholar

31 It is interesting that Taussig erred when he asserted that Treasury reserve remained above $100,000,000 in the summer of 1896. See Taussig, Frank W.“The United States Treasury in 1894–1896,” Quarterly Journal of Economics, XIII (Jan. 1899), 206.Google Scholar

32 Financial Review, 1897, p. 8Google Scholar; The New York Evening Post, July 20, 1896; The New York Tribune, July 16, 18, and 22, 1896. Some of this gold was obtained to satisfy the requirements of Russia.

33 The Commercial Yearbook, II (1897), 295.Google Scholar Total net exports of gold for July, 1896 from the United States was $10,263,450, a sum significantly higher than the outflow for the comparable period in each of the succeeding four years. See U.S. Department of Commerce and Labor, Bureau of Statistics,“Monthly Summary of Commerce and Finance” (Washington, D.C.: Government Printing Office, 1911), pp. 1069–70.Google Scholar

34 Sir Palgrave, R. H. Ingliss, Hirst, F. W.Breslauer, B.Franz, RobertAupetit, Albert and Fevre, M.Statistics for Great Britain, Germany and France 1867–1909 (Washington, D.C.: United States Government Printing Office, 1911), p. 50.Google Scholar

35 California Bankers Magazine, XIII (July 1896), 50.Google Scholar

36 Andrews, Satisfies, pp. 201, 315.

37 Ibid., p. 125.

38 The New York Tribune, July 22, 1896.

39 Morgan's statement to the press on July 20, 1896 indicated his confidence in the government's ability to sell bonds. See The New York. Journal, July 21, 1896; The New York. World, July 21, 1896; The New York. Evening Post, July 21, 1896. On July 16, 1896, Secretary of the Treasury John Carlisle had written to President Cleveland that he had sent Assistant Secretary Curtis to New York to warn the financiers of “the great importance of preventing a condition that would necessitate a bond issue or even cause an agitation of that subject.” See Curtis Manuscripts, VII; and James A Barnes, “The Gold Democrats,” 422. The Chicago and Populist platforms explicidy denounced sales of bonds to syndicates to preserve gold monometallism. See The Commercial Yearbook, II (1897), 232–33Google Scholar, 235. The ardent populists felt it would win millions of votes for the silver cause. See Rocky Mountain News, July 16, 22, 23, and 25, 1896; and The Cleveland Plain Dealer, July 25, 1896.

40 Financial Review, 1897, p. 8Google Scholar; The New York Tribune, July 21, 1896; The New York Evening Post. July 21, 1896.

41 Ibid., July 22, 1896; and The New York Herald, July 23, 1896.

42 The New York. World, July 22, 1896.

43 The most complete account of the meeting can be found in The New York. Tribune, July 23, 1896. Among those attending besides Morgan, were Ernst Thalmann of Ladenberg, Thalmann & Co. F. M. Thierot and J. Walter Wood of L. Von Hoffmann and Co. George Grossman of W. H. Grossman and Bros., E. Mayer of Lazard Freres, Jacob Schiff of Kuhn, Loeb and Co., Pilny Fisk of Harvey Fisk and Sons, William Solomon of Speyer & Co., and Joan A. McCall, President of New York Company.

44 Ibid..

45 Ibid..

46 The New York Times, July 23, 1896.

47 Ibid., July 24, 1896.

48 The New York. Tribune, July 23, 1896.

49 Curtis Manuscripts, VII.

50 Manuscripts of Grover Cleveland (Library of Congress, Washington), CCCXLI.

51 Bradstreets, XXI (July 25, 1896), 476Google Scholar; Commercial and Financial Chronicle, LXIII (July 25, 1896), 131.Google Scholar

52 The New York. Tribune, July 24, 1896.

53 The New York Evening Post, July 27, 1896; Bradstreets,XXV (Aug. 1, 1896), 491Google Scholar. The agreements were signed by all parties on July 30. See Commercial and Financial Chronicle, XLI1I (Aug. I, 1896), 170.Google Scholar

54 The Journal of Commerce, July 28, 1896; The New York. Journal, July 27, 1896. The New York Herald, July 27, 1896 defended the secrecy while The Rocky Mountain News July 28, 1896 was critical.

55 The New York Tribune, July 23, 1896

56 Ibid., July 24, 1896.

57 The Journal of Commerce, July 28, 1896; The New York Evening Post, July 23, 29, 1896; and Bradstreets, XXI (Aug. 1, 1896), 491.Google Scholar

58 Noyes, A. D., Thirty Years of American Finance (New York: G. P. Putnam & Sons, 1898), p. 248Google Scholar; and The New York. Tribune, July 23, 1896.

59 Ibid.; and The New York. Journal, July 23, 1896.

60 Ibid.; It estimated $175,000,000 would be exported. See The New York. Tribune, July 23, 24, 1896.

61 The New York. World, July 23, 1896.

62 The New York. Times, July 24, 1896; The New York Evening Post, July 23, 1896.

63 The New York Tribune, July 23, 1896.

64 Ibid.; Bradstreets, XXI (Aug. 1, 1896), 49.Google Scholar

65 The New York Journal, July 25, 27, 1896; The Journal of Commerce July 27, 1896; The New York Herald, July 27, 1896.

66 The New York Tribune, July 30, 1896.

67 The Journal of Commerce, July 30, 1896.

68 Bradstreets, XXI (Aug. 1, 1896), 482–83Google Scholar; and The Statist, XXXVIII (Aug. 29, 1896), 338.Google Scholar

69 The New York. Journal, July 31, 1896.

70 Ibid., July 24, 1896; Commercial & Financial Chronicle, LIII (July 25, 1896), 131Google Scholar; The New York Times, July 24, 1896.

71 Ibid.

72 The New York. World, July 26, 1896.

73 Commercial and Financial Chronicle, LXIII (Aug. 1, 1896), 170Google Scholar and Aug. 8, 1896, 208, 217; Economist LIV (Aug. 8, 1896), 1027Google Scholar and (Aug. 15, 1896), 1055; Journal of Commerce, Aug. 3, 1896 and Aug. 8, 1896; The New York. Tribune, Aug. 3, 1896 and Aug. 10, 1896.

74 The New York. Herald, July 27, 1896. It is interesting to observe that the contemporary supporters of the gold standard regarded the exchange pool proposal as a temporary and artificial device, which was required as a “result of a scare.” See Commercial and Financial Chronicle, LXIII (Aug. 1, 1896), 168.Google Scholar The following statement of the Economist illustrates the skepticism concerning the probable durability of the pool prevailing in gold standard circles; “Of course these measures can only prove temporily effective, for a prolonged manipulation of the exchange market is a practical impossibility.” See The Economist, LIV (July 25, 1896), 957.Google Scholar

75 The New York World, July 26, 1896; and The New York Journal, July 31, 1896.

76 Commercial and Financial Chronicle, LXIII (Aug. 1, 1896), 179, 190Google Scholar, and Aug. 29, 1896, 284, 285; and Bradstreets, XXIV (Aug. 1, 1896), 492Google Scholar and (Aug. 8, 1896), 502.

77 The Journal of Commerce, Aug. 28, 1896.

78 The action of the bankers was regarded as the decisive factor in restoring confidence by high government officials. See the letter of Assistant Secretary of Treasury William Curtis to Assistant Secretary of Agriculture Dabney, Charles W., dated October 14, 1896, in Curtis Manuscripts, VIII.Google Scholar