Letter to Hermann Engels, November 2, 1864
|Written||11 February 1864|
First published: in Deutsche Revue, 1921 and the Deutsche Revue.
To Hermann Engels in Barmen
Manchester, 2 November 1864[edit source]
No joy with the Niersteiner. The wine arrived here with a distinct sourness to it, it does not taste at all as it did at your house, and I shall therefore have to forgo any more orders.
The money crisis, I think, is over. Now only 3 things can have any effect:
1. possible major insolvencies owing to bad news from India. Such are, however, not expected by those most deeply involved. India had its crisis in the spring, when discount was at 32% in Bombay.
2. large deliveries of cotton arriving in Liverpool, say 100,000 bales in one week, which would mean the sudden completion of a mass of loss-making contracts and consequent insolvencies. This danger also appears to be receding. The Liverpool men know how deeply they are all implicated and are being extremely tolerant towards each other. Those who cannot pay the difference lost in full are offering part of it, and a settlement is usually reached. Moreover, the deliveries arriving are moderate, and the cotton now at sea (400,000 bales from India and China) will probably come little by little, and no one will be hit very hard.
A favourable factor in both cases is that the money market is experiencing a decided lift and confidence is returning.
3. if in America Lincoln were not elected. However, his re-election is as certain as anything ever can be in America. I have no doubt that the war will be continued until the South is totally subjugated, irrespective of who becomes President, but if McClellan should be elected, at least 6 months of uncertainty would ensue, until people learned precisely what his policy was. But after the elections in the individual states, there can be no question of that happening.
The result of all this will, in my view, be as follows: the American war will continue, certainly, until late next year, and will end with bands of Southerners resorting to brigandry, as in Naples 2 years ago, in the course of which much cotton will be burnt. We shall therefore remain dependent on the same sources for our cotton as in the past year. Supplies from these are only increasing slowly. However, since consumption has become more and more limited owing to high prices, stocks of finished goods, even in the hands of the individual consumers themselves, must now be exceedingly small, and as consumption after all absolutely requires a very large quantity of cotton goods, I believe that increased demand will fully accommodate the increased supply of raw cotton, and, consequently, not only will the downward trend cease to continue, but by next summer we ought, by and large, to see a general rise.
During the money crisis the price of cotton was not determined by the state of the cotton trade but by the state of the money market in general. I believe we've got over that now, and prices will once more be determined naturally by supply and demand, and then with the healthy state of business and the absolute deficiency in stocks, and with prices lower now, I am sure we can expect business to thrive with prices as a whole rising.
There may yet be sporadic shocks, perhaps from India, perhaps from Liverpool. We may, in consequence, again find ourselves momentarily somewhat depressed, but it cannot last, nor will it be of any import, and it would assuredly be an error to speculate la baisse [on prices falling] on such evidence. Conversely, I am equally persuaded that any attempt to force prices up again rapidly would immediately be frustrated by the customers here and by the money market, too. This was already shown yesterday. Cotton has risen 3 - 3 1/2d. above its lowest point, yarns 1d., in some instances 1 1/2d. Yesterday, the spinners were demanding a further increase of approx. 1d. and business came to an immediate halt. If we succeed in forcing prices down another 1/2 penny à 1 penny in Liverpool, the spinners will be able to accept the prices being offered; otherwise, the purchasers will presumably have to pay the extra in the end, as the demand is undeniably there.
SEWINGS were still very quiet, especially seven LEAS, for which there is not a buyer to be found.
This is my opinion. We are covered for one to two months and are expecting substantial orders in a week or two.
Please pass on my regards to Emma, the little ones, Rudolf, the Blanks and the Boellings, and, if you are writing to Engelskirchen, then to mother and everyone there, too. The chicaneries arising from the fall in prices have caused me a deal of botheration.