I met Clarendon at dinner this evening, when he told me that affairs were in a bad state in the City, and that Lewis had received very unsatisfactory accounts, so that it is not clear that the Government letter is producing the good which at first seemed to be following from it. There is a good deal of uneasiness in the financial and commercial world and no confidence. The very prudence of the trading community in arresting the course of production is becoming a source of distress, for already vast numbers of people are out of employment, or working short time with reduced wages. The prices of everything are falling, consumption will be diminished, and the revenue must be diminished likewise, while our expenses cannot but be increased by the war. A general cry is getting up for making India pay for the expense of this Indian war, which, even supposing it to be just and reasonable, will make the ultimate settlement of the Indian question more difficult, and a measure little calculated to reconcile the native population to our rule. Then, as if we had not embarrassments enough on our hands, America is going to add to them, for President Buchanan, who hates England with a mortal antipathy, threatens to repudiate the Clayton-Bulwer Treaty upon the pretence that we have not abided by its conditions, and if he proposes to the Senate to declare it null and void, the Senate will do so at his bidding. This would be a flagrant violation of good faith, and of the obligations by which all civilized nations consider themselves bound. If this event happens, it will place us in a very perplexing dilemma, especially after Palmerston's absurd bravado and confident boastings of our power, for we are not in a condition to enable us to take a highline corresponding with that lofty language, and we shall have to eat humble pie and submit to the affront. Hitherto all other nations and governments have behaved to us as well and as respectfully as we could desire, and far more than we deserve; but if America bullies us in one instance, and we are found pocketing the affront, it is by no means improbable that other governments will begin to take advantage of our weakness, and adopt towards us a conduct injurious to our interests or a tone galling to our pride.[1] Footnote 1: [These apprehensions were unfounded. Mr. Buchanan did not seek to abrogate the Clayton-Bulwer Treaty with reference to the eventual construction of a passage through the Isthmus of Central America, and the neutral character of that undertaking, which is now said to be in progress by the Canal of Panama, has remained unchanged to the present time.]