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A Perfect Mania #2: External Price Signals - Wool

A PERFECT MANIA

External Price Signals - Wool

1. THE WORLD ECONOMY

1.1 The expansion in sheep numbers in the seven years after Governor Bourke's Squatting Act of 1836 (by 1843 there were 3,022,000 sheep running in the 'Waste Lands' outside the Nineteen Counties of the Colony of New South Wales) occurred despite strong price signals to the contrary from the Yorkshire woollen mills.

1.2 The Panic of 1837
<en.wikipedia.org/wiki/Panic_of_1837>

"In 1836, directors of the Bank of England noticed that the Bank's money reserves had declined precipitously in recent years...To compensate, the directors indicated they would gradually raise interest rates from 3 to 5 per cent...Raising interest rates, according to the law of supply and demand was supposed to attract specie [gold and silver] since money generally flows where it will generate the greatest return...The result was that as the Bank of England raised interest rates, major banks in the United States were forced to d…

A Perfect Mania #1: Livestock Price Bubble 1837-1844

A PERFECT MANIA

Livestock Price Bubble 1837-1844

1. MARKET INTELLIGENCE

1.1 
There was something slightly discordant between what squatters in the Port Phillip District thought was happening in the livestock market and their own personal experience of it -- between their impressions of fluctuating supply and demand and the actual prices they paid for their sheep and cattle in the early settlement period. The following two examples are from Captain John Hepburn (Smeaton) and William 'Big' Clarke (Dowling Forest, Pyrenees), who both wrote in response to Lieutenant-Governor La Trobe's request for information in 1853 (more than a decade after the events they were asked to recall).

1.2 Captain Hepburn
Bride & Sayers, 1983, Letters From Victorian Pioneers, Currey O'Neil, Melbourne, pp. 65-6 (italics added)

"On my arrival in Sydney [Hepburn was actually returning to Sydney from Port Phillip having been a party in the first overlanding of cattle to the new settlement in late…