26 PROSPERITY AND CRISIS AFTER
motion was the adverse state of the exchange with Europe due
to the excessive imports. The banking companies had long
realized the power that possession of large gold supplies had
over the rate of exchange, but the fierce competition in gold-
buying had, by now, forced on the extension of banking branches
and facilities beyond all reason. The wonderful opportunities
for banking profits formerly existing had now vanished. But
through this very competition the miner was at last able to get
full value for his gold. Storekeepers, contrary to their earlier
experience, now found that the miner could call the tune and
name the dance. Dealers everywhere were compelled to lower
prices ; and also, since a drought was beginning to affect washing
operations, they were now forced to extend credit. These events
compelled a corresponding change of attitude on the part of the
merchant and banker. The high-handed and cavalier methods
of banking and finance of the ‘gold rush’ were now gone for
good.1
Other causes, too, were working to call the bankers to account.
The excessive imports of the last few years had generated sus-
picion in the minds of the English merchants, who were now
becoming concerned over the fate of their speculative shipments.
Pressure was brought to bear by both the London and ‘Colonial’
banks in Australia upon the speculators to whom they had been
willing to lend such a short time ago.? Many of these so-called mer-
chants were but financial adventurers devoid of capital ; and, when
the pressure was applied, bankruptcies followed one another in
quick succession. The usual phases of business depression then
occurred in rapid sequence—stagnation in building and en-
gineering, restriction of bank credit, contracted trade, falling
prices, particularly of imported commodities, and widespread
admitted of beingimported ; and, whatisespecially to benoted, among the things thus
imported were many which she could have produced herself at far less cost.’ —
Leading Principles, p. 312.
1 Gains made by the banks in buying gold, issuing notes,and ordinary banking
tempted others into the field and three new companies began business as bankers
at this time, i.e. Australian Joint Stock, London Chartered, and the English,
Scottish and Australian. The effect of the competition thus engendered was most
marked. Accommodation was more readily obtained, discount rates on local bills
reduced, interest was paid on deposits, and mortgages increased rapidly. (Coghlan,
p. 855.)
? By 18556 there were five joint-stock banks with head-quarters in London,
i. o. Australasia, E. 8. & A., London Chartered, South Australian Banking Co., and
the Union.