No. 77.
Mr. Partridge to Mr. Fish.
Rio de Janeiro, May 22, 1875. (Received June 24.)
Sir: The financial crisis here for the last three months has culminated in the suspension of two banks, (Nacional, and Maua & Co.,) and the threatened stoppage of others.
The clamor raised has induced the government to ask of the chambers [Page 114] permission to issue $13,000,000 in interest-bearing notes of 100 milreis each, at four, eight, and twelve months, (at 5½ per cent.,) as a loan to the banks on deposit of national bonds. This will be allowed, and it is hoped will relieve the pressure.
This alleged scarcity of money is simply the result of wild speculations, and inflation of prices, stocks, &c., for the last three years, and of the large loans, by banks, on such shares, as security.
On some of these, then selling at 480 (now worth, say, 180,) 400 milreis per share were loaned, from deposits payable on demand. A run being made for repayment, these banks could not respond.
Besides this cause, new undertakings, railroads, &c., have put money into the pockets of the laboring class, which there retains it, having no confidence in the banks.
So that there is really a deficiency in the currency, but only to those who bought shares at high prices, and not any redundancy or excess of currency for the needs of the country.
The amount of paper money in circulation is about $98,250,000, of which about $81,000,000 is in government notes, (of 1 to 1,000 milreis,) and about $18,000,000 in notes of the Bank of Brazil, all irredeemable in fact.
As this money cannot be exported like gold and silver, it must remain and seek use and employment here; so that its bulk cannot be lessened, and it is now worth par, (27 pence to the milreis,) in gold.
It is hard to believe that a paper currency of nearly $99,000,000 is insufficient for the internal exchange of Brazil, but it is probable that with the inflated prices, caused by a former redundancy, that amount may have become insufficient, when, as now, it is not concentrated or available as bank deposits, but is held or hoarded by the people.
I have, &c.,