CHAPTER VI 
THE COURSE OF THE CRISIS OF 1893 
‘To bring on a sudden crisis it but needs that some considerable creditor should 
sonclude that the present earning capacity of the debtor no longer warrants the 
capitalization upon which his collateral is appraised. When this happens liquida- 
tion begins and the depression arrives.’ —WESLEY MITCHELL, Business Cycles. 
Foreign loans are, with few exceptions, an unmitigated curse. Usually they arrive 
in Victoria in the very class of commodities that excite to waste and extravagance, 
aegativing the likelihood of profitable investment.’—JInsurance and Banking Record, 
20 Nov. 1893. 
The banking crisis was not a sudden crash, but an agony, lasting in its acute 
stage about sixteen weeks; and the economic sickness which preceded it extended 
over several years,’ —CoaHLAN, Labour and Industry in Australia. 
This dramatic reaction from the prosperity and inflation of the previous years 
orought in its train a long catalogue of frauds, embezzlements, and breaches of 
srust, not to speak of damage to reputations.’ —Insurance and Banking Record, 
16 Apr. 1893. 
AND now we enter upon that period of recession and final crisis 
that was to shake the Australian economic organization to its 
foundations ; and, by the lessons burnt into the minds of bankers 
and business men, of traders and tradesmen, to shape the 
financial policy of the continent till the outbreak of the Great 
War.l It marksin a definite and drastic fashion the end of a phase 
of riotous living and unsound banking, a phase made possible 
by the great productiveness of British factories during the cen- 
bury and induced by those conditions of Australian development 
which seemed to offer a tempting field for the investment of 
surplus capital.? The social and economic effects of the disaster 
reacted upon every phase of Australian life and industry ; and, 
while the results upon welfare and development were most serious, 
it brought a very valuable and steadying influence to Austra- 
lian affairs. More especially is this true for Victoria, the colony 
around which the greatest fury of the financial storm raged; 
but, although the following pages are devoted almost wholly to 
the course of events in the Victorian theatre, the economic life 
of every Australian community was similarly affected. So 
outstandingly is this the classic instance of business crisis for 
Australia that a sketch of the final stages of the collapse cannot 
be omitted. 
* For a good summary of the causes of the crisis see Turner, p. 292. 
} Paper by Nathaniel Cork, Council of Inst. of Bankers, 1893.