14 THE EARLY YEARS AND THE 
sale of land to such an extent that, of the £3,000,000 which 
represented the total assets of the New South Wales banks in 
1841, no less than £2,610,000 was composed of discounted 
bills. 
English capital had all the while been pouring in to all sorts 
of ventures, the investors being eager for the ten per cent. which 
was regarded as normal in the colonies at this time. London 
merchants, anticipating the demand, sent out large speculative 
consignments that very soon outran the needs of the community. 
This introduction of capital also had the effect of raising the 
price of stock beyond the wildest dreams of the grazier of that 
day, sheep changing hands at £2, cattle at £12, and horses at 
£70a head. As would be expected, prices of all other commodities 
rose in sympathy; and prosperity bred new factors to menace 
the industrial health of the community. Such recklessness 
was displayed in speculation of all sorts, that a crash, even 
without the intervention of any external factor, was inevitable. 
It was, in effect, setting a course for the rocks with the wheel 
lashed. 
But it was not long before the serious happenings in the 
English banking world provided the external factor. The years 
from 1836 to 1839 had been critical in the history of English 
banking. The Bank Charter Act of 1833 had led to an enormous 
increase in the number of joint-stock banks, and to a consequent 
over-issue of paper money, largely associated with the specula- 
tion in railways. The intention of the Act, i.e. to provide a 
means for regulating the note-issue of the Bank of England in 
accordance with the size of the reserves, was not fulfilled ; and 
it was to the general failure to observe the Act that the pressure 
of 1836 and the crisis of 1839 in Britain were due.? The strin- 
gency consequent upon that crisis caused a withdrawal of money 
from private enterprises, and the flow of capital to Australia 
was abruptly checked, a circumstance which immediately 
produced a marked contraction in the revenue from land sales. 
1 One aspect of the investment of capital was the establishment in Australia of 
banks working on English capital, i.e, 1825, Australia; 1832, Australasia; 1837, 
ope the last resort the difficulties of the Bank (of England) sprang from the 
movements of the trade cycle in Great Britain and the United States, the boom 
culminating in both countries in 1836-7, and being followed by the inevitable 
depression.’ —T. E. Gregory, Introduction to Documents relating to British Banking, 
p. 18. See also Silberling, British Prices and Business Cycles, p. 242.