THE COURSE OF THE CRISIS OF 1893 65 
expenses; and the depreciation in government stocks was 
another cause of concern. An ominous state of tension developed 
in London ; and money, even at 6 per cent., was now difficult to 
obtain. Many large colonial concerns, especially building and 
other contractors, were in desperate trouble ; and all the factors 
of stormy conditions were assembled in force. 
Tn November the thunderbolt fell, and from an unexpected 
quarter. The concussion was felt all over the English-speaking 
world ; and, because of the staggering blow to Australian credit 
which was the immediate sequel, some statement of the origin 
and effects of the shock is here necessary. 
The main cause of the crisis in London was the injudicious 
lending of vast amounts of British capital, especially to bor- 
rowers in the Argentine. The great financial house of Baring 
Brothers had placed more than a hundred millions sterling 
within seven years. The collapse of Argentine securities in the 
middle of 1890, and the subsequent attempt to bolster these, 
had pushed this firm into difficulties; and in November 1890 
the authorities of the Bank of England discovered that the 
Barings were on the very edge of bankruptcy with liabilities of 
over £20,000,000.1 Prompt action saved an enormous disaster. 
The Bank of England borrowed £3,000,000 in gold from the 
Bank of France, realized one and a half millions on Russian 
securities, and exercised its enormous influence to induce all 
the great banks to become guarantors for the threatened in- 
stitution. There was no suspension and no great dislocation of 
business. In fact, the country knew nothing about the crisis 
until the danger was well over. 
But the incident had a calamitous effect upon the Australian 
situation. In the first place the distrust that followed the dis- 
closure of the danger that had loomed and passed, as it were in 
a night, affected all foreign securities; but it affected more 
especially those of countries in a similar stage of development 
to that of the Argentine. The finger of suspicion, most naturally, 
swung towards Australia. Financial papers in London called 
attention, almost hysterically, to the heavy Australian in- 
debtedness : and the nervous state of the market was reflected 
1 Australian comments on the Baring crisis are to be found in the Insurance and 
Banking Record, 17 Mar. 1891, 17 Dec. 1890, 17 Jan. 1891; and in the Bankers’ 
Magazine, Dec. 1890, May 1891, and Oct. 1891. 
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