Period from 1850–1862.

The outlook in 1850, with abundant emigration, a new empire arising on the Pacific, the prospect of becoming the granary as well as the cotton-field of the world, ship-building increasing year by year, and no cloud of war or political disturbance visible, was very flattering. The only hindrances to a speedy realization of these golden dreams were want of capital and want of technical and scientific training. Railroad building at the West must, in the nature of things, outstrip the settlement of the region. It is the chief form in which capital is applied to the settlement of the country, but evidently it is a case in which the returns from the investment cannot be immediate, and in every such case in which the supply goes ahead of the demand there is especial need of care, foresight, and judgment.

For the supply of capital there was recourse naturally to the older countries. The injury done to American credit in 1837–40 had hardly yet been healed, but in 1854 it was estimated by the Secretary of the Treasury, on reports called for by him, that there were 200,000,000 dollars worth of State, railway, and other bonds and bank-stock held abroad. In 1857 the amount of English capital invested here was estimated at 400,000,000. While naturally turning to the older countries for supplies of capital, there has always been a certain prejudice here against foreign investors. Our “foreign indebtedness” has been a cause of serious and sincere anxiety to many, but the more we can borrow, so long as we know how to invest it productively, the better, and our credit—our power to borrow abroad—is the possession which it is most essential for us to preserve intact.