CAUSES OF THE RECENT DISTRESSES—?CONDUCT OF THE BANKS—?MANIA FOR SPECULATION—?LONG-?ACCOUNT SYSTEM—?BAD SEASONS.

I will now proceed to offer a few remarks on the causes of the late terrible distresses in New South Wales, and on what I consider as the best means of preventing the recurrence of such lamentable scenes.

The three main causes of those distresses were, undoubtedly:—

While I look upon these three as the primary and principal causes of by far the greater part of the suffering the Colony has recently undergone, I must specify another, though certainly a secondary cause; namely, two successive bad seasons. This last cause is, I am aware, by many persons, regarded as the chief source of all their distresses and losses; but I think I can shew that those parties are wrong in this opinion, which springs from their anxiety to frame an excuse for their very imprudent speculations.

In the first place, then, I accuse the Banks of harsh and illiberal conduct; and I will state my reasons for this charge.

When I arrived in Sydney in 1836, the Banks, without exception, but more particularly the Commercial Bank (then under the management of a would-be shrewd Aberdonian), were doing every thing in their power to induce parties to open accounts with them. Bills for discount were eagerly sought after, and little attention was paid to the respectability of the names of either drawer or endorser. Cash-advances were publicly advertised by the Commercial Bank. Parties, to my certain knowledge, were stopped in the street by the Aberdonian just alluded to, who solicited their business with a very bland smile. In short, no stone was left unturned by these money-seekers to add to their half-yearly dividends. This system went on till the latter end of 1839. I need scarcely say, that this unbecoming and greedy canvassing for business, tempted many an unwary merchant and settler to venture beyond his depth, and ultimately led to ruin and a prison. The amount of money represented by absolutely valueless paper at this time, is quite beyond calculation. Renewals were a matter of course. Cash payments, even in part, were the reverse of common. Bank-directors overdrew their accounts with perfect impunity to a large amount; and the whole Colony seemed intoxicated with the fond notion that the Banks would never fail them, and that, in those fountains, they would at all times find a never-ending supply of "the needful." In the midst of this mad career, the day of reckoning came suddenly upon them. The Banks took the alarm: they began to think they had allowed the kite-flying system to go too far; and they commenced a system of unparalleled harshness and oppression towards their gulls. Cash advances were not merely stopped, but those previously made were called in. Renewals would no longer be accepted, even for half or a quarter of the amount due; and the unfortunate "kite-flier" was, in hundreds of cases, ruined by the very men who had in the most unprincipled manner led him into the mire, and then left him.

The Banks now took up a position the very opposite of that hitherto occupied by them; and, instead of trusting everybody, put no faith in any one. This conduct ultimately recoiled upon themselves; their shares fell in value; some of them became bankrupt, while the others had a hard struggle to avoid that catastrophe; and the public lost all confidence in banks and bankers. The worst part of the tale remains to be told; namely, that many widows and orphans, whose all was invested in bank shares, were utterly ruined and reduced to destitution by the failures alluded to.

I come now to the second main cause of Australian distress, viz. the speculation-mania that took possession of the entire population of this fine Colony. No one who did not witness the effects of this mania, can imagine to what an extent it was carried. Scarcely a day passed without one or more public auctions of stock of all descriptions; and not a sale took place, that was not crowded with eager purchasers. Many large stock-holders took advantage of the high prices obtained at those sales, to sell off, in the delusive hope that they would in this way be enabled to retire from active life, and perhaps to return to their native country. The terms offered at those public sales, were such as to induce many persons who never even dreamed of sheep or cattle farming, to enter the market and purchase to a large extent. These terms were, in general, something like the following:—

I have seen tens of thousands of sheep and cattle sold in this way, many of the buyers being men who had never even seen one of the animals they were bidding for, and who knew literally nothing about the management of flocks and herds; being tempted to make the purchase by the long credit given. But, strange to say, many old settlers were led, with their eyes open, into extensive purchases at most exorbitant rates, thinking that nothing could check the career of splendid prosperity upon which the Colony was then supposed to have entered. How dearly those parties have paid for their folly, the world generally, and their creditors in particular, well know. Besides the numerous public sales of stock all over the Colony, and the large amount of property that changed hands on those occasions, many important private sales took place about the same time. There was not a sheep, cow, or horse in the Colony, too old or too bad to find a purchaser! Any thing would sell, provided only that time was given to find the money. Nothing could exceed the madness of the people, buying, selling, and exchanging accommodation-paper from end to end of the land. Then came the land-jobbers, a set of sharks who did great harm. It was a common practice with those jobbers, or rather robbers, to apply to the Surveyor-General's department, to have lots of land put up for sale, which they were aware that certain landed proprietors could never allow to fall into the hands of strangers, and then to go to the party whose estate the sale of the land in question would injure, and demand a bribe to stop their bidding against him. If this quietus was refused, these scamps would attend the sale, and bid the land up to some exorbitant price, knowing that their victim must be the buyer. Land once advertised by Government must be put up to auction; and the jobber's victim was obliged either to purchase, or to run the risk of having a stranger sit down as the proprietor of a few hundred acres in the midst of his thousands. Another class of scamps used to attend land-sales, who would conspire to keep down the prices of lots they wanted, by not bidding against each other, and by playing various other tricks, to the detriment of the revenue. The Attorney-General got hold of half a dozen of those gentry in 1839, and prosecuted them for conspiracy. He obtained a verdict of guilty against them, but assented to their petition for a new trial. Again they were convicted, and they were fined a hundred pounds each; the Court telling them, that the penalty would have been much heavier, had not the judge taken into consideration their humble petition for mercy, and the heavy expenses they had incurred in standing two trials.

This system of selling by auction and by private sale, large herds of cattle and flocks of sheep at high prices, went on till some of the twelve-month's paper became due. Cash not being then forthcoming, renewals were asked for in many instances, which somewhat damped the ardour of speculation; but the wild career did not receive any very serious check, till the two-years' paper began to come into play. Very little cash could be got from the drawers, who were, in many cases, obliged to bring a large portion of their stock to the hammer, in order to meet their acceptances for thirty per cent, of the purchase money. This alarmed people. The price of stock began to fall; and, long before the three-years' paper became due, ewes that had cost the buyers 3l. per head, could be got for 7s. 6d.

Thus, many a poor fellow, after labouring hard for three years to keep his flocks and their increase together, had to part with the whole, and still had not enough wherewith to satisfy his original creditors. Hundreds of instances of this kind might be specified, did I feel at liberty to publish names.

As to the operation of the third main cause of the distress, the system that obtained, of giving long credit to purchasers of stock, the evils arising from this practice have been partly exposed in the foregoing remarks; but I will proceed to point out a few other evil consequences, as they occur to me. To begin with one that more than once came under my own notice; many persons of property, trusting to the long prices obtainable for stock of every description when sold on credit, and forgetting that there was absolutely no cash price at the time, deemed themselves much richer men than they were in reality. Giving to their overseers the charge of their country residences, they took and furnished houses in Sydney for their families, set up their carriages, and commenced a style of living far beyond their means. This fact (the want of cash) came upon them the moment the first half-year's bills for rent, household supplies, &c., became due: these proved to the deluded settler, that, though he had flocks and herds, he had no money, nor could any be got, except at a sacrifice. To a man, they had to sell off and return to their estates, where dire necessity has since compelled them to remain, and where, I hope, renewed prosperity and common sense will induce them to stay.

Another evil caused by the long-credit system, was its inducing many persons to purchase stock for the purpose of raising money upon it. This practice was carried to a ruinous extent, and caused immense distress in this way. A hundred head of cattle might be parted with to day, by a needy settler, say, at 3l. per head, six months' credit; the seller took the buyer's note of hand for the purchase money, 300l., which was immediately taken to the bank, and discounted; and the settler returned to his farm, satisfied that he had made a good sale of his beasts. The buyer, having no use for the cattle, re-sold them, taking the second buyer's note for the money, which, like that of the first, went at once to the bank. This transaction was frequently repeated six or eight times, before the cattle found a bon fide purchaser; and it was no uncommon thing, to find paper in the market to the amount of 1800l. or 2000l., the only representative for which was the hundred head of cattle originally sold by the settler; the whole of the parties concerned being, with the exception of the first seller and the last buyer, mere men of straw. When the six months expired, not a single bill of the six or eight negotiated, was taken up, excepting, perhaps, the last one: all the others had to be renewed; and it was the forcing the payment of such bills, that ruined so many people, and ultimately shook the credit of every bank in Australia.

The credit system also led many mercantile men into speculations which they never would have entered into under a wholesome system of trade. From these many serious losses resulted, which have led to ruinous failures. Any man with a hundred pounds in his pocket, could get credit for a thousand; and numbers of adventurers of all descriptions, taking advantage of the times, opened stylish shops well-filled with goods bought on credit, carried on a flourishing trade till within a few days of their bills falling due, and then decamped, leaving their unfortunate and silly creditors to get paid from the wreck of the stock left in the shop. I knew an auctioneer who played this nefarious trick, leaving his creditors minus the enormous sum of 70,000l. He did not, however, long retain his ill-gotten wealth: how he got rid of it, I do not know; but I found him two years ago in Singapore, where he kept a small grog-shop, and lived in great wretchedness; and I have since met with him knocking about the streets of Macao, a disgrace to his country in a foreign settlement. The credit system ruined two thirds of the respectable auctioneers in Sydney, and upset the Australian Auction Company, absorbing every shilling of its paid-up capital.

In addition to the evils inflicted on this Colony by these main causes, great losses were sustained by settlers through their becoming shippers of their own wool. At the time I speak of, wool was worth, in Sydney, from 2s. 1d. to 2s. 2d. per pound, and, in England, some 6d. or 8d. more. These high rates would not satisfy some settlers, who foolishly took an advance upon their clips, letting them go home on their own account, and at the risk of the agents of the parties who advanced the money in Sydney. In the meantime, wool fell in the English markets to 1s. and 15d. per pound. The nett proceeds of the shipment did not nearly cover the advance made; and the hapless shipper, already in debt to his agent for supplies, and without a penny of cash at his command, was called upon to make good the difference, which he was unable to do. His agent, pressed by others, must press him; his flocks are brought to the hammer, and sold at the now ruinous current prices; and he becomes a bankrupt. Dozens of cases like this, occurred during the late wretched times.

I come now to the consideration of the bad seasons of 1838-39 and 1839-40. While I maintain that they were far from being the sole, or even the chief cause of distress, I allow that they added to it very materially. To shew that they were not the sole cause, I may mention, that, among my own personal friends in the Colony, not one who avoided speculation and putting his name on paper, has failed; while those who followed the stream have sunk, every one of them. During those years, every thing the unfortunate grazier had to sell, was cheap beyond all precedent; while every article he was compelled to purchase, was very dear. Tea, owing to the China war, rose from 5l. to 15l. per half-pecul chest of hyson skin. Flour of the very coarsest description could not be had under from 30l. to 35l. per ton of two thousand pounds weight,—a colonial cheat, calling two thousand pounds a ton! Sugar and other necessaries were equally high; and many a poor settler who had never refused his hard-worked servants their tea, sugar, and tobacco, was compelled to stop those indulgences.To the working-classes in Sydney and other towns, the bad seasons were ruinous. Provisions were so dear, that many a father of a family found his earnings far from sufficient to provide food for his wife and children. Building was almost entirely put a stop to; and thus, hundreds of industrious men were thrown out of employment. To so serious an extent did this distress reach, that Government was called upon to afford pecuniary relief to the starving poor; a circumstance altogether unprecedented in Australian history.

So low had these evils sunk the Colony and all its inhabitants, that failures of merchants and settlers continued to be of almost daily occurrence up to the end of the year 1843. No one durst push his neighbour for payment of debt: were such a thing attempted, an immediate surrender of his affairs to the official trustee of the Insolvent Court, was the consequence. Several of the first and oldest merchants in the Colony have sunk under the long-continued pressure; and, at the date of the last accounts, more failures were looked for. These, however, were expected as the result of old causes, not of new or recent transactions.

Upon the whole, I am disposed to think, that Australia has seen its darkest day, and that things are likely soon to improve, if, indeed, they have not already mended. The price of stock was looking up; and ewes that had actually been sold as low as 9d. each, were worth 7s. 6d. Men of capital lately arrived from England with ready money, had commenced purchasing land and stock; and their operations had given an impetus to affairs in general, that could not fail to be beneficial.