A BRIEF HISTORY OF PANICSAND THEIR PERIODICAL OCCURRENCE IN THE UNITED STATES

BY CLEMENT JUGLAR

MEMBER OF THE INSTITUTE, VICE-PRESIDENT OF LA SOCIETED'ECONOMIE POLITIQUE

THIRD EDITION

TRANSLATED AND EDITED WITH AN INTRODUCTION ANDBROUGHT DOWN FROM 1889 TO DATE

BY DECOURCY W. THOM

FORMER MEMBER OF THE BALTIMORE STOCK EXCHANGE AND OF THECONSOLIDATED EXCHANGE OF NEW YORK

TO GOLDEN DAYS

Tonight at "Blakeford, " I set down this dedication of the third editionof this book which has proved to be the pleasant companion of twovisitations--one at "Wakefield Manor, " Rappahannock County, Virginia, in1891, the other at my old home "Blakeford, " Queen Anne's County, Maryland, in 1915. The memories that entwine it there, and here minglein perfect keeping and have made of a dry study something that stirsanew within me as I consider the work accomplished, my love andremembrance of the old days, and my love and unforgettingness of theseother golden days under whose spell I have brought the book up to thepresent year. 

DECOURCY W. THOM. 

"BLAKEFORD, "

October 10, 1915. 

PREFACE TO THIRD EDITION

The second edition of this study of _Panics in the United States_brought us through the year 1891. I originated about one fourth of it. 

This third edition brings us practically up to date. Of this edition Ioriginated about one half. I hope it will prove helpful in many ways. Itrust that it will force an appreciable number of men to realize that"business" or "financial" panic is not merely fear, as some haveasserted; but is based upon the knowledge that constriction, oppression, unhappy and radical change in this, that, or the other kind of businessmust tend to drag down many others successively, just as a whole line ofbricks standing on end and a few inches apart will fall if an end one istoppled upon its next neighbor. Indeed, the major cause of "business" or"financial" panic is just reasoning upon existing conditions rather thana foolish fear of them. Over-trading and loss of nerve constitute themedium. Recent national legislation has gone far in enabling thebusiness world in the United States to prevent panics, and farther yetin providing the means to cope with them when, in spite of precautions, they shall recur. 

DEC. W. THOM. 

"BLAKEFORD, "

October 10, 1915. 

A BRIEF HISTORY OF PANICS

INTRODUCTION

COMPRISING A CONDENSATION OF THE THEORY OF PANICS, BY M. JUGLAR, RENDERED INTO ENGLISH, WITH CERTAIN ADDITIONAL MATERIAL, BY DECOURCY W. THOM. 

In this translation, made with the author's consent, my chief objectbeing to convey his entire meaning, I have unhesitatingly rendered theFrench very freely sometimes, and again very literally. Style has thussuffered for the sake of clearness and brevity, necessary to secure andretain the attention of readers of this class of books. This sameconciseness has also been imposed on our author by the inherent drynessand minuteness of his faithful inquiry into hundreds of figures, tablesshowing the condition of banks at the time of various panics, etc. , etc. , essential to his demonstration. As an extreme instance of thelatitude I have sometimes allowed myself, I cite my rendering of thetitle: "_Des Crises Commerciales et de Leur Retour Periodique enFrance, en Angleterre et aux Etats-Unis_" merely as "Panics and TheirPeriodical Occurrence in the United States": for M. Juglar himselfstates that a commercial panic is always a financial panic, as a fallingaway of the metallic reserve indicates its breaking out; and I have onlytranslated that portion dealing with the United States, deeming the restunnecessary, for this amply illustrates and proves the theorem in hand. 

To this sketch of the financial history of the United States up to 1889, when M. Juglar published his second edition, I have added a briefaccount to date, including the panic of 1890, the table headed "NationalBanks of the United States, " and some additions to the other tablesscattered through this book. 

From the prefaces to the French editions of 1860 and of 1889, and otherintroductory matter, I have condensed his theory as follows:

A Crisis or Panic may be defined as a stoppage of the rise of prices:that is to say, the period when new buyers are not to be found. It isalways accompanied by a reactionary movement in prices. 

A panic may be broadly stated as due to overtrading, which causesgeneral business to need more than the available capital, thus producinggeneral lack of credit. Its precipitating causes are broadly anythingleading to overtrading:

In the United States they may be classed as follows:

I. PANICS OF CIRCULATION, as in 1857, when the steadily increasedcirculation, which had almost doubled in nine years, had rendered itvery easy to grant excessive discounts and loans, which had thusover-stimulated business, so that the above relapse occurred; or, we mayimagine the converse case, leading to a quicker and even greaterdisaster: a sudden and proportionate shrinkage of circulation, which, ofcourse, would have fatally cut down loans and discounts, and soprecipitated general ruin. 

2. A PANIC OF CREDIT, as in 1866, when the failure of Overend, Gurney, &Co. Rendered the whole business world over cautious, and led to auniversal shrinkage of credit. [I take the liberty of adding that itseems evident to me that such a danger must soon confront us in theUnited States, unless our Silver Law is changed, because of a finallyinevitable distrust of the government's ability to keep 67-cent silverdollars on an equality with 100-cent gold dollars. ]

3. PANICS OF CAPITAL, as in 1847, when capital was so locked up ininternal improvements as to prove largely useless. 

4. GENERAL TARIFF CHANGES. To the three causes given above thetranslator adds a fourth and most important one: Any change in ourtariff laws general enough to rise to the dignity of a new tariff haswith one exception in our history precipitated a panic. This exceptionis the tariff of 1846, which was for revenue only, and introduced afterlong notice and upon a graduated scale. This had put the nation at largein such good condition that when the apparently inevitable DecennialPanic occurred in 1848 recovery from it was very speedy. 

The reason for this general effect of new tariffs is obvious. Usualprices and confidence are so disturbed that buyers either hold off, keeping their money available, or else draw unusually large amounts soas to buy stock before adverse tariff changes, thus tightening money inboth ways by interfering with its accustomed circulation. This tendencytowards contraction spreads and induces further withdrawal of deposits, thus requiring the banks to reduce their loans; and so runs on and on toincreasing discomfort and uneasiness until panic is speedily produced. The practical coincidence and significance of our tariff changes andpanics is shown by an extract below from an article written by thetranslator in October-November, 1890, predicting the recent panic whichwas hastened somewhat by the Baring collapse. [Footnote:_Inter-relations of Tariffs, Panics, and the Condition of Agriculture, as Developed in the History of the United States of America_. 

This brief sketch of our economic history in the United States seeks toshow that Protective Tariffs have always impoverished a majority of ourpeople, the Agriculturists; that agriculture has thus been made a mostunprofitable vocation throughout the States, and that this unsoundnessat the very foundation of the business of the American people has oftenforced our finances into such makeshift conditions, that under anyunusual financial strain a panic, with all its wretched accompaniments, has resulted. 

To consider this properly, we must note the well known fact that in thisland, those who live by agriculture directly, are more than one half ofour population. Their votes can cause to be made such laws as they seefit, hence, one would expect the enactment of laws to raise the price offarm products, and to lower the price of all that the farmer has to buy. But the farmers vote as the manufacturers and other active classes ofthe minority of our voters may influence; and only twice in our history, from 1789 to 1808, and from 1846 to 1860, have enough of the minorityfound their interests sufficiently identical with that of theunorganized farmer-majority to join votes, and thus secure at once theircommon end. In consequence of this coalition during these two periods, two remarkable things happened: 1st, agriculture flourished, andcomfortable living was more widely spread: 2d, panics were veryinfrequent, and the hardships and far-reaching discomforts that mustever attend adjustments to new financial conditions after disturbanceswere, of course, minimized. 

It is not fair to deduce very much from the first period of prosperityamong the farmers, 1789 to 1808, for, during this time, there were noimportant business interests unconnected with agriculture; but we maysummarize the facts that from 1789 to 1808, there was, 1st, noprotection, the average duty during this time being 5 per cent. , andthat laid for revenue only; 2d, that agriculture flourished; 3d, thatthere was not a single panic. 

"The Embargo" of 1808, followed by the Non-Intercourse Act in 1809 andthe War of 1812-15, and the war tariff, by which double duties werecharged in order to raise money for war purposes, caused us to sufferall the economic disasters flowing from tariffs ranging between absoluteprotection, and those practically prohibiting, and intensified by thesufferings inseparable from war. 

During this period agriculture, for the first time in our history, wasin a miserable condition. It is significant that for the first time too, we had a protective tariff. Though our people made heroic efforts tomake for themselves those articles formerly imported, thus starting ourmanufacturing interests, they had, of course, lost their export tradeand its profits. When the peace of 1814 came, we again began exportingour produce, and aided by the short harvests abroad, and our ownaccumulated crops, resumed the profitable business which for six yearsour farmers and our people generally had entirely lost. Our first panic, that of 1814, came as a result of our long exclusion from foreignmarkets, being followed by the stimulation given business throughresumption of our foreign trade in 1814, which was immensely heightenedby the banks issuing enormous quantities of irredeemable paper, insteadof bending all their energies to paying off the paper they had issuedduring the war. 

But worse than the suffering entailed by this panic, was the engraftingupon our economic policy of the fallacious theory made possible by theEmbargo and the Non-Intercourse Act, (which was equivalent, let meenforce it once more, to that highest protective tariff, a prohibitoryone) that _all infant manufactures must be protected, that is, guaranteed a home market_, though such home market be one where allgoods cost more to the purchaser than similar goods bought elsewhere, and this in order that the compact little band of sellers in the homemarket may make their profit. This demand for protection was made bythose who had started manufactures during the years from 1808 to the endof the war of 1815, when, as we have seen, imports were practicallyexcluded. 

In 1816 their demand met explicit assent, for, in the tariff of thatyear, duty for protection, not for revenue, was granted; and an averageof 25 per cent. Duties for six years, to be followed by an average of 20per cent. Duties, was laid upon imports. For a few years bad bread cropsin Europe, demand for our cotton, and an inflation of our currencydelayed a panic. 

But, we had started on our unreasoning course. We had tried to ignorethe laws of demand and supply, and had forgotten that it is alsoartificial to attempt preventing purchases in the cheapest, and sellingin the highest markets; and to help a few manufacturers we had put upprices for all that a large majority of our population, --theagriculturists mainly--had to buy. In a short while the demand for whatthe farmers had to sell fell away, and bills could not be met, and theirtroubles were added to those of the minority of the consumers of thecountry; the volume of business fell off, and a panic came in 1818. Theinfluences that led up to it continued until 1846, as follows: The greatfactors in producing this state of affairs were the successive tariffsof 1818, with its 25 per cent. Duty upon cottons and woollens, and itsincreased duties on all forms of manufactured iron, (the tariff of 1824which increased duties considerably), and the tariff of 1828, imposingan average of 50 per cent. Duties, and in which the protective movementreached its acme (omitting, of course, the present McKinley Bill withits 60 per cent. Average duty). In 1832, consequently, a great reactionin sentiment took place, and the "Compromise Tariff" was passed andduties were lowered. From this period, the advocacy of a high tariff inorder to protect "Infant Industries, " no longer "Infant" was largelyabandoned, and its advocacy was generally based upon the fallacy, lessobvious then than now, of securing high wages to laborers by means ofhigh import duties. This plea for high duties the laborer found to befallacious. 

They (agriculturists mainly) found that they had to pay more formanufactured goods, so that the manufacturers could still buy their rawmaterials at the advanced prices, pay themselves the accustomed orincreased profits, and then possibly pay the laborer a small advance inwages. 

The advance did not compensate for increased cost of necessaries oflife. If competition reduced the manufacturers' profit, the firstreduction of expenses was always in the laborer's pay. The recognitionof these truths brought about the further reduction of duties until1842, in which year the tariff was once more raised. It was not until1846 that we enjoyed a tariff which sought to eliminate the protectivefeatures. It is significant that a period of greater profit andstability among our business men, but especially among our farmers, wasthen inaugurated. This was the first tariff, since that of 1816, notaffected by politics. It lasted-until 1857, and the country flourishedmarvellously under it. 

From 1816, when protection was first resorted to, until today, tariffrates have been almost continually raised, mainly by votes of theagriculturists, misled by the manufacturers and politicians, influencedby the manufacturers' money. And a fact worth noting is that financialpanics have come quick and furious. They came in 1818, and in 1825-26, in 1829-30, and so on, (see page 13). Sudden changes in our tariff rateshave unvaryingly been followed by financial panics within a shortperiod. Changes to lower rates have not brought panics so quickly aschanges in the reverse direction. 

Low tariff without protective features, maintained steadily, has beencoincident with constantly increasing prosperity to the country atlarge: but most especially to the agriculturists. This is readilyunderstood, for purchases of imported and manufactured goods and alloutfit needed for the farmers' land and family can be made at low--andowing to the competition that always arises to supply a steady andnatural market--lowering prices. Moreover, the settled prices prevailingthroughout the country allow of assured calculations and precautions asto business ventures, and permit such a ratio to be established betweenexpenses and income, that at the end of the fiscal year a profit, not aloss, may be counted upon. 

This was the experience of our agriculturists during the second and lastprosperous time of our farmers, 1846-60. During that period agricultureflourished; the tariff was low and there were only two panics, that of1848, and the one of 1857, and the first (a non-protective one) shouldnot be considered as precipitated by the tariff of 1846, except thatsome few suffered briefly in readjusting themselves to the changed, (though better), condition of the new tariff. The vast majority of thenation reaped enormous benefits from the changes inaugurated. 

The panic of 1857 was caused by over-activity in trade speculation, andover-banking, and the tariff of the same year was really passed to helpavert the panic threatening. It had the contrary effect, it is believed, for it still further, of course, unsettled rates for goods, when priceswere already unstable. But the point is to be noted that in realitytariff change followed practical panic in this instance rather thanpractical panic tariff change. The high protective war tariffs, beginning in 1860, and increased for war purposes and granted largely asan offset for those internal revenue taxes laid to carry on the war, have been continued as a body ever since, as is well known, despite theinternal revenue taxes having been abolished except on whiskey andtobacco. It is equally well known that farming has grown less and lessremunerative since 1860, and that the panics of 1864, 1873, and 1884have been unfortunate culminations of almost unceasing financialdiscomfort, which has been most forcibly exemplified during the last twomonths. Even now the financial fabric is in unstable equilibrium, andthis latest monstrosity--the McKinley Bill--imposing the highest tariffwe have ever exacted--an average duty of 60 per cent. , and coming when apanic was due, bids fair to hurry us into another and a terriblefinancial panic. If it does not do so, it will be because our crops aretoo bountiful to allow it, but it will at least have made theagriculturists and all buyers of other commodities than agriculturalproduce pay more for all purchases. It will bring no more money intotheir pockets, but it must take out considerably more. The peopleappreciate this. The nation's pocket nerve has been touched. This is themeaning of the recent election, it seems to the writer. But whether theimpending danger can be averted even if a prompt, though wise and slowreversal of tariff policy can be forced by the next Congress isdoubtful, for unrest and timidity have been evoked and require time tobe allayed before easy and orderly business operations will in generalbe resumed, unless indeed bountiful crops here and demand abroad onceagain reverse the logic of the situation. 

Certain it is that our tariff laws must interfere as little as possiblewith the natural law of demand and supply in making prices, or we mustbe content to suffer from the instability that artificiality alwaysbrings with it. 

Our plain duty is to enact as speedily as possible a tariff that shallby small but continued changes cut down our protective duties andsubstitute non-protective duties until our tariff is for revenue only;for thus and thus only can the vast majority of the agriculturists buywhat they need most cheaply, and so find that to purchase necessariesdoes not cost them more than the total of their sales; and our exportsof produce, chiefly owing to agricultural prosperity, would increase, thus materially helping to build up our general business so that theother nations will have to pay us, in the gold we require forcomfortable management of our business, the growing trade balancesagainst them. 

The rough table below suggests that sudden tariff changes haveprecipitated panics, which have come quickly if the change was to higherprotective duties and somewhat slower if the change was to lowerprotective duties; that slow and well considered changes doing away withprotective duties generally have not caused disturbances; and thatagriculture has flourished in proportion as we approached tariff forrevenue only. It has for obvious reasons required about one year forfinancial trouble to be shown by decrease in value of farm produce asevinced by wheat-flour exports. 

Special conditions, such as excessive wheat corps here and deficiencyabroad or special tariff favors to flour export, may even increase theamount exported despite an otherwise untoward effect of the new tariffupon farmers. I have selected flour exports as the article bestreflecting the chief interest of the farmers, and at the same time thestate of general business for manufacturing, transportation and suchother branches as are concerned with it. 

 ------------------------------+---------+-------------------------------- TARIFFS, - They have all | | Condition of agriculture and | been designedly | | incidentally of general + protective | Panics. | business as suggested by export | save the one | | of wheat flour from 1790-1890. '- of 1846. +---------+-------------------------------- | | Year. Barrels. Dollars. | | 1790 724, 623 4, 591, 293 | | 1791 619, 681 3, 408, 246 | | 1792 824, 464 . . . . . . . . . | | 1793 1, 074, 639 . . . . . . . . . | | 1794 846, 010 . . . . . . . . . | | 1795 687, 369 . . . . . . . . . | | 1796 725, 194 . . . . . . . . . | | 1797 515, 633 . . . . . . . . . | | 1798 567, 558 . . . . . . . . . | | 1799 519, 265 . . . . . . . . . | | 1800 653, 056 . . . . . . . . . | | 1801 1, 102, 444 . . . . . . . . . | | 1802 1, 156, 248 . . . . . . . . . | | 1803 1, 311, 853 9, 310, 000 | | 1804 810, 008 7, 100, 000 | | 1805 777, 513 8, 325, 000 | | 1806 782, 724 6, 867, 000 | | 1807 1, 249, 819 10, 753, 000 | | 1808 263, 813 1, 936, 000 | | 1809 846, 247 5, 944, 000 | | 1810 798, 431 6, 846, 000, - Practical | | 1811 1, 445, 012 14, 662, 000 | exclusion of | |, - 1812 1, 443, 492 13, 687, 000 Say + all imports | | | 1813 1, 260, 943 13, 591, 000 1814 | through the war = | 1814 | + 1814 193, 274 1, 734, 000 '- Prohibitory Tariff. | | '- 1815 862, 739 7, 209, 000 | |, - 1816 729, 053 7, 712, 000, - Duties for six | | '- 1817 1, 479, 198 17, 751, 376 1816 + years @ 25% and | 1818 |, - 1818 1, 157, 697 11, 576, 970 '- thereafter @ 20%. | | | 1819 750, 669 6, 005, 280 | | | 1820 1, 177, 036 5, 296, 664 1818, - Duties 25% on | | | 1821 1, 056, 119 4, 298, 043 | Cotton and Woollens, | | + 1822 827, 865 5, 103, 280 + and all duties | | | 1823 756, 702 4, 962, 373 | on Manufactured | | | 1824 996, 792 5, 759, 176 '- Iron increased. | 1825-26 | | 1825 813, 906 4, 212, 127 | | | 1826 857, 820 4, 121, 466 | | '- 1827 868, 492 4, 420, 081 | |, - 1828 860, 809 4, 286, 939 1828 { Average duty of 50%. | | | 1829 837, 385 5, 793, 651 | | + 1830 1, 227, 434 6, 085, 953 | | | 1831 1, 806, 529 9, 938, 458 | | '- 1832 864, 919 4, 880, 623, - Compromise Tariff, | |, - 1833 955, 768 5, 613, 010 | gradual reduction | | | 1834 835, 352 4, 520, 781 | of duties from | | | 1835 779, 396 4, 394, 777 | 50% average until | | | 1836 505, 400 3, 572, 599 1833 + in 1842 the average | 1836-39 | + 1837 318, 719 2, 987, 269 | was 20%. But this | | | 1838 448, 161 3, 603, 299 | was levied for | | | 1839 923, 151 6, 925, 170 | Protection not | | | 1840 1, 897, 501 10, 143, 615 '- merely for Revenue. | | '- 1841 1, 515, 817 7, 759, 646 | |, - 1842 1, 283, 602 7, 375, 356 1842 {Imposed higher duties. | | + 1843 841, 474 3, 763, 073 | | | 1844 1, 438, 574 6, 759, 488 | | '- 1845 1, 195, 230 5, 398, 593 | |, - 1846 2, 289, 476 11, 668, 669, - Imposed lower | | | 1847 4, 382, 496 26, 133, 811 | duties and these | | | 1848 2, 119, 393 13, 194, 109 1846 | were not for | | | 1849 2, 108, 013 11, 280, 582 + Protection purposes, | | | 1850 1, 385, 448 7, 098, 570 | they were simply | 1848 | + 1851 2, 202, 335 10, 524, 331 '- for Revenue. | | | 1852 2, 799, 339 11, 869, 143 | | | 1853 2, 920, 918 14, 783, 394, - Reduced Tariff | | | 1854 4, 022, 386 27, 701, 444 | rates on above | | | 1855 1, 204, 540 10, 896, 908 1857 + plan because of | | '- 1856 3, 510, 626 29, 275, 148 | redundant | |, - 1857 3, 712, 053 25, 882, 316 '- prosperity. | 1857 | + 1858 3, 512, 169 19, 328, 884 | | '- 1859 2, 431, 824 14, 433, 591, - War Tariff | | | protection restored | |, - 1860 2, 611, 596 15, 448, 507 1860 + as compensation for | 1864 | '- 1861 4, 323, 756 24, 645, 849 | Internal Revenue | | '- taxes. | | | | 1862 As above. . . . . . . . . . | | 1862 4, 882, 033 27, 534, 677 1864 As above. . . . . . . . . . | | 1863 4, 390, 055 28, 366, 069 | |, - 1864 3, 557, 347 25, 588, 249 | | | 1865 2, 641, 298 27, 507, 084 | | | 1866 2, 183, 050 18, 396, 686 | | + 1867 1, 300, 106 12, 803, 775 | | | 1868 2, 076, 423 20, 887, 798 | | | 1869 2, 431, 873 18, 813, 865, - 10% reduction, but | | | 1870 3, 463, 333 21, 169, 593 | coffee and tea put | | '- 1871 3, 653, 841 24, 093, 184 1872 + on Free List and | |, - 1872 2, 514, 535 17, 955, 684 | whiskey and tobacco | 1873 | | 1873 2, 562, 086 19, 381, 664 '- taxes reduced. | | | 1874 4, 094, 094 29, 258, 094 | | | 1875 3, 973, 128 23, 712, 440 1875, - 10% reduction | | | 1876 3, 935, 512 24, 433, 470 '- above repealed. | | + 1877 3, 343, 665 21, 663, 947 | | | 1878 3, 947, 333 25, 695, 721 | | | 1879 5, 629, 714 29, 567, 713 | | | 1880 6, 011, 419 35, 333, 197, - Duties really raised | | | 1881 7, 945, 786 45, 047, 257 | on class of goods | | '- 1882 5, 915, 686 36, 375, 055 | most used, but | |, - 1883 9, 205, 664 54, 824, 459 | apparently lowered | 1884 | | 1884 9, 152, 260 51, 139, 695 1883 + the tariff, for | | | 1885 10, 648, 145 52, 146, 336 | it considerably | | + 1886 8, 179, 241 38, 443, 955 | reduced rates on | | | 1887 11, 518, 449 51, 950, 082 | many little used | | | 1888 11, 963, 574 54, 777, 710 '- classes of goods. | | '- 1889 9, 374, 803 45, 296, 485 | | 1890, - McKinley Bill | |, - 1890 12, 231, 711 57, 036, 168 '- average of 60% duty. | | '- 1891 11, 344, 304 54, 705, 616 | | 1892 15, 196, 769 75, 362, 283, - Free silver | | | and sudden | | 1893 16, 620, 339 75, 494, 347 1893 + ill-distributed | | 1894 16, 859, 533 69, 271, 770 -94 | and drastic tariff | | 1895 15, 268, 892 51, 651, 928 | reductions and | | 1896 14, 620, 864 52, 025, 217 '- insufficient revenue. | | | | 1897 14, 569, 545 55, 914, 347 1897, - | | 1898 15, 349, 943 69, 263, 718 | Tariff | | 1899 18, 485, 690 73, 093, 870 | disturbance | | 1900 18, 699, 194 67, 760, 886 | to | | 1901 18, 650, 979 69, 459, 296 | higher | | 1902 17, 759, 203 65, 661, 974 1903 | rates. | | 1903 19, 716, 203 73, 756, 404 | | | 1904 16, 699, 432 68, 894, 836 + The | | 1905 8, 826, 335 40, 176, 136 | propaganda | | 1906 13, 919, 048 59, 106, 869 1907 | for | | 1907 15, 584, 667 62, 175, 397 | keener | | 1908 13, 937, 247 64, 170, 508 | regulation | | 1909 10, 521, 161 51, 157, 366 | of | | 1910 9, 040, 987 47, 621, 467 | business. | | 1911 10, 129, 435 49, 386, 946 '- | | 1912 11, 006, 487 50, 999, 797 | | 1913, - Tariff reductions to | | 1913 11, 394, 805 53, 171, 537 | produce a revenue; | | 1914 12, 768, 073 62, 391, 503 | not on a protective | | + basis. The further | | | regulating of | | | business. | | '- The "World War. " | | ------------------------------+---------+--------------------------------]

The retarding or precipitating influence of a good or bad condition ofagriculture upon the advent of a panic is also indicated. 

The symptoms of approaching panic, generally patent to every one, arewonderful prosperity as indicated by very numerous enterprises andschemes of all sorts, by a rise in the price of all commodities, ofland, of houses, etc. , etc. , by an active request for workmen, a rise insalaries, a lowering of interest, by the gullibility of the public, by ageneral taste for speculating in order to grow rich at once, by agrowing luxury leading to excessive expenditures, a very large amount ofdiscounts and loans and bank notes [Footnote: Our recent banking historyhas proved rather an exception to this law as far as bank notes areconcerned, because of the obviously unusual cause of sudden and enormouscalling in of government bonds, the basis of bank-note issue. ] and avery small reserve in specie and legal-tender notes and poor anddecreasing deposits. 

On the other hand, the lowest point of depression following a panic isaccompanied by the converse of the symptoms just enumerated. 

Bank balance sheets reflect in cold figures the result of the aboveinfluences. Prices being high, and discounts and loans large inproportion to deposits, and having steadily increased for years, dangeris near; further, when discounts and loans are not only large inproportion to deposits, having increased steadily for years, and thensuddenly fallen off noticeably for a considerable time, only to increaseagain, danger is imminent. 

On the other hand, a steady and radical reduction of loans anddiscounts, following a panic and extending until new enterprises arevery scarce, till prices are very low, till there is wide-spreadidleness among workmen, a decrease in salaries and in interest rates, when the public is wary and speculation dead, and expenditures are cutdown as far as possible, may be taken to mean a rapid and continuedresumption of every prosperous business: but if the above process isonly partially performed, renewed trouble must result;--in other words, liquidation to really be helpful (to congested business) must bethorough. 

A study of the first of the following tables, "National Banks of theUnited States, " illustrates the above generalization. It is unnecessaryto mention that 1878, 1884, and 1890 have been the last three panicyears. But it is very necessary in studying this table, to bear in mindthat its figures are taken from the standing of the banks at the firstof the year, while the panics generally occurred later in the year: thelast two, for instance in the second and fourth quarter, respectively. The third and fourth tables will give more exact figures in thisconnection. Table Two, dealing with State Banks, is given merely toround out our banking history as told in figures. 

The increase or diminution of deposits of course reflects a confidentand successful, or a panicky and impoverishing, state of generalbusiness. 

 TABLE NO. 1. --NATIONAL BANKS OF THE UNITED STATES _________________________________________________________________________ Percentage of Difference (over or under) | between Deposits and Loans and Discounts. | ________________________________________________________________ \ | Difference between Deposits and Loans and Discounts. (Millions) | | _________________________________________________________ \ | | Percentage "Working Capital" exceeds Loans and Discounts. | | | ____________________________________________________ \ | | | Excess of Capital (Surplus, Undivided Profits, | | | | and Deposits) over Loans and Discounts. (Millions) | | | | _____________________________________________ \ | | | | | LOANS | "WORKING CAPITAL. " | | | | | | AND |__________________________| | | | | | DISCOUNTS. | Capital. | | | | | |______ \ | / ___________________| | | | | | | | | Undivided Profits | | | | | | | | | and Surplus, etc. | | | | | YEAR|MONTH. | | | / _____________| | | | | | | | | | Deposits | | | | | | | | | | / ______| | | | | | | | | | |TOTAL. | | | | | ========================================================================== | |-----------In Millions. ----------| | | | | 1863|Oct. 5| 5. 464| 7. 188|0. 128| 8. 497|15. 913|10. 347|65. 4|+3. 031|35. 6 ovr| 1864|Jan. 4|10. 666|14. 740|0. 432|19. 450|34. 622|23. 956|69. 2|+8. 784|45. 1 " | 1865|Jan. 2| 166 | 135 | 20 | 183 | 338 | 152 |47. 7|+ 17 | 9. 2 " | 1866|Jan. 1| 500 | 403 | 71 | 522 | 996 | 496 |49. 8|+ 22 | 4. 2 " | 1867|Jan. 7| 608 | 420 | 86 | 538 | 1064 | 456 |42. 8|- 50 | 8. 9 und| 1868|Jan. 6| 616 | 420 | 101 | 534 | 1055 | 439 |41. 6|- 82 |15. 3 " | 1869|Jan. 4| 644 | 419 | 116 | 568 | 1103 | 559 |46. 4|- 76 |13. 3 " | 1870|Jan. 22| 688 | 426 | 124 | 546 | 1096 | 408 |37. 2|- 142 |26 " | 1871|Mch. 18| 767 | 444 | 140 | 561 | 1145 | 378 |33. |- 206 |36. 7 " | 1872|Feb. 27| 839 | 464 | 147 | 593 | 1204 | 365 |30. 3|- 246 |41. 4 " |*1873|Feb. 28| 913 | 484 | 163 | 656 | 1303 | 390 |29. 9|- 257 |29. 1 " | 1874|Feb. 27| 897 | 490 | 173 | 595 | 1258 | 361 |28. 6|- 302 |52. 4 " | 1875|Mch. 1| 956 | 496 | 182 | 647 | 1325 | 369 |27. 8|- 309 |47. 7 " | 1876|Mch. 10| 950 | 504 | 184 | 620 | 1308 | 358 |27. 3|- 330 |53. 2 " | 1877|Jan. 20| 920 | 493 | 167 | 659 | 1319 | 399 |30. 2|- 261 |39. 6 " | 1878|Mch. 15| 854 | 473 | 165 | 602 | 1240 | 386 |31. 1|- 252 |41. 8 " | 1879|Jan. 1| 823 | 462 | 153 | 643 | 1258 | 435 |34. 5|- 180 |27. 9 " | 1880|Feb. 21| 974 | 454 | 159 | 848 | 1461 | 487 |33. 3|- 126 |14. 8 " | 1881|Mch. 11| 1073 | 458 | 176 | 933 | 1567 | 494 |31. 5|- 140 |15 " | 1882|Mch. 11| 1182 | 469 | 191 | 1036 | 1696 | 514 |30. 3|- 146 |14 " | 1883|Mch. 13| 1249 | 490 | 196 | 1004 | 1690 | 441 |26. 1|- 245 |24. 4 " |*1884|Mch. 7| 1321 | 515 | 209 | 1046 | 1770 | 449 |25. 3|- 275 |26. 2 " | 1885|Mch. 10| 1232 | 524 | 206 | 996 | 1726 | 494 |28. 6|- 236 |23. 6 " | 1886|Mch. 1| 1367 | 533 | 212 | 1152 | 1897 | 530 |27. 9|- 215 |18. 6 " | 1887|Mch. 4| 1515 | 555 | 231 | 1224 | 2010 | 495 |24. 6|- 291 |23. 7 " | 1888|Feb. 14| 1584 | 582 | 246 | 1251 | 2079 | 495 |23. 7|- 333 |26. 6 " | 1889|Feb. 26| 1704 | 596 | 269 | 1354 | 2219 | 515 |23. 1|- 350 |25. 8 " |*1890|Feb. 28| 1844 | 626 | 290 | 1479 | 2395 | 551 |22. 2|- 365 |24. 6 " | 1891|Feb. 26| 1927 | 662 | 316 | 1483 | 2461 | 534 |21. 7|- 444 |29. 8 " | 1892|Mch. 1| 2044 | 679 | 330 | 1702 | 2711 | 667 |24. 6|- 342 |20. 1 " | 1893|Mch. 6| 2159 | 688 | 348 | 1751 | 2787 | 627 |22. 6|- 408 |23. 3 " | 1894|Feb. 28| 1872 | 678 | 332 | 1586 | 2596 | 724 |27. 9|- 286 |18. " | 1895|Mch. 5| 1965 | 662 | 329 | 1667 | 2658 | 693 |26. 2|- 298 |17. 8 " | 1896|Feb. 28| 1966 | 653 | 334 | 1648 | 2635 | 669 |25. 4|- 318 |19. 2 " | 1897|Mch. 9| 1898 | 642 | 333 | 1669 | 2644 | 746 |29. |- 229 |13. 6 " | 1898|Feb. 18| 2152 | 628 | 334 | 1982 | 2944 | 792 |27. |- 170 | 8. 5 " | 1899|Feb. 4| 2299 | 608 | 332 | 2232 | 3172 | 873 |27. 6|- 67 | 3. " | 1900|Feb. 13| 2481 | 613 | 363 | 2481 | 3457 | 976 |28. 3|+ | 0. | 1901|Feb. 5| 2814 | 634 | 398 | 2753 | 3785 | 971 |25. 7|- 61 | 2. 2 " | 1902|Feb. 25| 3128 | 667 | 448 | 2982 | 4097 | 969 |23. 7|- 146 | 4. 9 " | 1903|Feb. 6| 3350 | 731 | 516 | 3159 | 4406 | 1056 |24. |- 191 | 5. 6 " | 1904|Jan. 22| 3469 | 765 | 562 | 3300 | 4627 | 1158 |25. 1|- 169 | 5. 1 " | 1905|Jan. 11| 3728 | 776 | 589 | 3612 | 4977 | 1279 |25. 1|- 116 | 3. 2 " | 1906|Jan. 29| 4071 | 814 | 635 | 4088 | 5537 | 1466 |26. 5|+ 17 | . 41 ovr| 1907|Jan. 26| 4463 | 860 | 689 | 4115 | 5664 | 1201 |21. 3|- 348 | 8. 4 und| 1908|Feb. 14| 4422 | 905 | 742 | 4105 | 5752 | 1330 |23. 2|- 317 | 7. 7 " | 1909|Feb. 5| 4840 | 927 | 772 | 4699 | 6398 | 1558 |24. 4|- 141 | 2. 9 " | 1910|Jan. 31| 5229 | 960 | 818 | 5190 | 6968 | 1739 |25. |- 39 | . 73 " | 1911|Jan. 7| 5402 | 1007 | 884 | 5113 | 7004 | 1602 |22. 9|- 289 | 5. 6 " | 1912|Feb. 20| 5810 | 1031 | 927 | 5630 | 7588 | 1778 |23. 5|- 180 | 3. 1 " | 1913|Feb. 4| 6125 | 1048 | 958 | 5985 | 7991 | 1866 |23. 4|- 140 | 2. 3 " | 1914|Jan. 13| 6175 | 1057 | 991 | 6072 | 8120 | 1945 |23. 9|- 103 | 1. 7 " | 1915|Mch. 4| 6499 | 1066 |1012 | 7148 | 9226 | 2727 |29. 6|+ 649 | 9. 9 ovr| ----+------+------+------+-----+------+------+------+----+------+--------+ NOTE:--These Figures are for the standing at the first part of the year as indicated. *Panic Years. 

 TABLE NO. 2. 

 UNITED STATES TABLE OF BALANCE SHEETS. MILLIONS OF DOLLARS. 

 ------+-----------+---------+----------+-----------+----------+---------+ | | SPECIE | DISCOUNTS| INDIVIDUAL| NUMBER | | YEAR |CIRCULATION| ON | AND | DEPOSITS | OF | CAPITAL | | | HAND | LOANS | | BANKS | | ------+-----------+---------+----------+-----------+----------+---------+ 1811 | 28 | 15 | | | 89 | 52 | 1815 *| 45 | 17 | | | 208 | 88 | 1816 *| 68 | 19 | | | 246 | 89 | 1819 | 35 | 9 | 73 | | | 72 | 1820 *| 44 | 19 | | 35 | 308 | 137 | 1830 | 61 | 22 | 200 | 55 | 330 | 145 | 1834 | 94 | | | | | | 1835 | 103 | 43 | 324 | 75 | 506 | 200 | 1836 | 140 | 40 | 365 | 83 | 704 | 231 | 1837 | 149 | 37 | 457 | 115 | 713 | 251 | | | | 525 | 127 | 788 | 290 | 1838 | 116 | 35 | 485 | 84 | 829 | 317 | 1839_*| 135 | 45 | 492 | 90 | 840 | 327 | 1840 | 106 | 33 | 462 | 75 | 901 | 358 | 1841 | 107 | 34 | 386 | 64 | 784 | 313 | 1842 | 83 | 28 | 323 | 62 | 692 | 260 | 1843 | 58 | 33 | 254 | 56 | 691 | 228 | 1844 | 75 | 49 | 264 | 84 | 696 | 210 | 1845 | 89 | 44 | 288 | 88 | 707 | 206 | 1846 | 105 | 42 | 312 | 96 | 707 | 196 | 1847 | 105 | 35 | 310 | 91 | 715 | 203 | 1848_*| 128 | 46 | 344 | 103 | 751 | 204 | 1849 | 114 | 43 | 332 | 91 | 782 | 207 | 1850 | 131 | 45 | 364 | 109 | 824 | 217 | 1851 | 155 | 48 | 413 | 128 | 879 | 227 | 1854 | 204 | 59 | 557 | 188 | 1208 | 301 | 1855 | 186 | 53 | 576 | 190 | 1307 | 332 | 1856 | 195 | 59 | 634 | 212 | 1398 | 343 | 1857_*| 214 | 58 | 684 | 230 | 1416 | 370 | 1858 | 155 | 74 | 583 | 185 | 1422 | 394 | 1859 | 193 | 104 | 657 | 259 | 1476 | 401 | 1860 | 207 | 83 | 691 | 253 | 1562 | 421 | 1861 | 202 | 87 | 696 | 257 | 1601 | 429 | 1862 | 183 | 102 | 646 | 296 | 1492 | 418 | 1863 *| 238 | 101 | 648 | 393 | 1466 | 405 | ------+-----------+---------+----------+-----------+----------+---------+ *PANIC YEARS

 TABLE NO. 3. 

 UNITED STATES TABLE OF BALANCE SHEETS OF THE NATIONAL BANKS--QUARTERLY STATEMENT. MILLIONS OF DOLLARS. 

 ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| | | | | | | | | | 1865 | 66| 4| 72| 166| 183|1500 |393 |20 | 2nd Q| | | | | | | | | 3rd "| |18 |189 | | | | | | 4th "|171 | | |487 | | | | | 1866 | | | | |500 | | | | 2nd "| 213|19 |187 |500 | | | | | 3rd "| | | | | 522|1644 |415 |71 | 4th "|280 | | | | | | | | 1867 | | |205 |603 |564 | | | | 2nd "| | 9| | |558 | | | | 3rd "| | | | | 512|1642 |420 |86 | 4th "|293 | | 92| | | | | | 1868 | |20 |114 |609 | 532|1643 |420 |101 | 2nd "| | | 84| | | | | | 3rd "| | | | | | | | | 4th "|295 | | | | | | | | 1869 | |29 | | | |1617 |426 |116 | 2nd "| | | |657 |580 | | | | 3rd "| | | 80| | | | | | 4th "| |48 | | | | | | | 1870 | | | |686 |574 | | | | 2nd "| | | |688 | 511|1648 |430 |124 | 3rd "| | 18| 94 79| |546 | | | | 4th "|296 | | | | 501| | | | 1871 | | | |725 | | | | | 2nd "| | |122 | | | | | | 3rd "| | 13| 93| | |1790 |458 |140 | 4th "|318 | | 97 | | | | | | 1872 | | | |831 |611 | | | | 2nd "| | |122 | | | | | | 3rd "| | 10| | | |1940 |479 |147 | 4th "|336 | | | |620 | | | | 1873 *| | | | | | | | | 2nd "| | 16|10 97|885 |656 | | | | 3rd "|339 | 19| | |622 616|1976 |491 |153 | 4th "|341 |33 | 92|944 | | | | | 1874 | | |103 | | | | | | 2nd "| | 21| | 836| 540| | | | 3rd "| | | 80|897 | 595|2027 |493 |173 | 4th "| 331| | |955 |682 | | | | 1875 | | | | |695 | | | | 2nd "| | 8| |984 | |2087 |504 |182 | 3rd "| | | | | 618| | | | 4th "| 314| | 70| | | | | | ------+-------+-------+-------+-------+---------+-------+-------+-------+ *PANIC YEARS

 MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| | | | | | | | | | 1876 | | | | | |2089 |499 |184 | 2nd Q| | 21| | | 612| | | | 3rd "| | | | | | | | | 4th "| 291|32 |90 | | | | | | 1877 | |49 | 66| 929| | | | | 2nd "| 290| | | |659 |2080 |479 | | 3rd "| | 21| | | | | |167 | 4th "| | | 66| | | | | | 1878 | |54 | | | | | | | 2nd "| | 29| | 881| 604| | | | 3rd "| | | | |625 |2053 |466 |165 | 4th "|303 | | | | | | | | 1879 | |41 | 54| 826| 588| | | | 2nd "| | | | 814| |2048 |454 |153 | 3rd "| | | | | | | | | 4th "|321 |79 | 54|933 |765 | | | | 1880 | | | | | | | | | 2nd "| |86 | | | | | | | 3rd "| |109 |64 |974 | |2090 |457 |159 | 4th "| 317| 105| |1040 | | | | | 1881 | | | 52| |1000 | | | | 2nd "| 298|128 | | | 932|2132 |463 | | 3rd "| | | | | | | |176 | 4th "|323 | | | | | | | | 1882 | | 109| |1100 |1100 1000|2268 |483 | | 2nd "| |112 | | | | | | | 3rd "| | 102| |1200 |1122 | | |191 | 4th "|315 | |68 | | | | | | 1883 | | | | | | | | | 2nd "| | 97| | | | | | | 3rd "| 304|115 | | | | | | | 4th "| | | | | 1000|2501 |509 |196 | 1884 *| | |80 |1300 |1100 | | | | 2nd "| |109 | 75| | |2664 |524 | | 3rd "| 289|128 |77 |1306 | | | |209 | 4th "| |167 | | 1200|1000 975| | | | 1885 | | | | | | | | | 2nd "| |177 |79 | | | | | | 3rd "| | | 69| 1200| |2714 |527 |206 | 4th "| 268| | | |1100 | | | | 1886 | |171 | 62| | | | | | 2nd "| | 149| |1470 |1152 |2852 |548 | | 3rd "| | | | |1172 | | |212 | 4th "| 202| | | | | | | | 1887 | |171 |79 | | |3049 |578 | | 2nd "| | | 73|1587 |1285 | | |231 | 3rd "| | | | | | | | | 4th "| 164| 159| | | | | | | 1888 | | 172|83 | | | | | | 2nd "| |178 | | | | | | | 3rd "| | | | | |3120 |588 | | 4th "| 151|182 | | | | | |246 | 1889 | | | 81|1684 |1350 | | | | 2nd "| | |97 | | |3170 |596 |269 | 3rd "| | | | | | | | | 4th "| 126| 164| | | | | | | 1890 *| |171 | 84|1811 |1436 | | | | 2nd "| | | | | |3383 |626 |290 | 3rd "| |178 | | | | | | | 4th "| 123|190 | | | | | | | 1891 | | | 82|1932 |1521 | | | | 2nd "| | | | | 1483|3601 |662 |316 | 3rd "| 123|199 | | |1575 | | | | 4th "| | |100 |1962 |1525 | | | | ------+-------+-------+-------+-------+---------+-------+-------+-------+ *PANIC YEARS

 MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| 1892 | | | | | | | | | 1st Q|141 |230 |99 |2044 |1702 |3711 |678 |330 | 2nd "| |239 | |2171 |1769 | | | | 3rd "| | |113 | | | | | | 4th "|145 | 209| | | |3784 |689 |353 | 1893 | | | | | | | | | 1st "| 149| | 90|2161 |1751 |3830 |688 |352 | 2nd "| | 186| | | | | | | 3rd "| 182| | | 1843| | | | | 4th "| |251 |131 | | 1451| | | | 1894 | | | | | | | | | 1st "|174 |259 |146 | 1872| |3777 |678 | | 2nd "| | | | | | | | | 3rd "| 189| | |2007 |1728 | | | | 4th "| | 218| 119| | | | |339 | 1895 | | | | | | | | | 1st "| 169|220 | | 1965| |3728 |662 | | 2nd "| | | | | | | | | 3rd "| | | | |1736 | | | | 4th "|185 | 196| 93|2059 | | | |340 | 1896 | | | | | | | | | 1st "| 187| 196| |1982 |1687 |3699 |653 | | 2nd "| | |118 | | | | | | 3rd "| | | | | | | | | 4th "|210 | | 110| 1893| 1597| | |342 | 1897 | | | | | | | | | 1st "|202 | 233| | | 1669|3634 |642 | | 2nd "| | |126 | | | | | | 3rd "| | | | | | | | | 4th "| 193|252 | 107|2100 |1916 | | |341 | 1898 | | | | | | | | | 1st "| 184| 271|120 | | |3594 |628 | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | | 110|2214 |2225 | | |340 | 1899 | | | | | | | | | 1st "| |371 |116 | | | |608 | | 2nd "| 199| | | | | | | | 3rd "| | | | | | | | | 4th "| | 314| 101|2496 |2522 |3602 | |363 | 1900 | | | | | | | | | 1st "| 204| 339| 122| | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | |145 |2706 |2623 |3942 |632 |403 | 1901 | | | | | | | | | 1st "| 309|399 | | | | | | | 2nd "| | | | | | | | | 3rd "| | |164 | | | | | | 4th "| | 369| 151|3038 |2964 |4291 |665 |448 | 1902 | | | | | | | | | 1st "| 309| | | | | | | | 2nd "| 309| |164 | | | | | | 3rd "| | | | | | | | | 4th "| | 366| 141|3303 |3209 |4666 |714 |516 | 1903 | | | | | | | | | 1st "| 335| | | | | | | | 2nd "| | |163 | |3200 | | | | 3rd "| | | | | | | | | 4th "| | 378| 142|3481 | |5118 |758 |564 | ------+-------+-------+-------+-------+---------+-------+-------+-------+

 MILLIONS OF DOLLARS. ------+-------+-------+-------+-------+---------+-------+-------+-------+ | |SPECIE | | DIS- | INDIVI- |NUMBER | |SURPLUS| |CIRCU- | ON | LEGAL | COUNTS| DUAL | OF | |AND UN-| YEAR |LATION | HAND |TENDERS| AND | DEPOSITS| BANKS |CAPITAL|DIVIDED| | | | | LOANS | | | |PROFITS| ------+-------+-------+-------+-------+---------+-------+-------+-------+ |MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN|MAX MIN| 1904 | | | | | | | | | 1st Q| 380| 453| | | | | | | 2nd "| | | | | | | | | 3rd "| | |169 | | | | | | 4th "| |504 | |3772 |3707 |5477 |776 |594 | 1905 | | | | | | | | | 1st "| 424| |178 | | | | | | 2nd "| | | 157| | | | | | 3rd "| |495 | | | | | | | 4th "| | 460| |4016 |3889 |5833 |808 |632 | 1906 | | | | | | | | | 1st "| 498|492 |175 | | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| | 459| 152|4366 |4289 |6199 |847 |687 | 1907 | | | | | | | | | 1st "| | |173 | | | | | | 2nd "| 543| | | | | | | | 3rd "| | | | | | | | | 4th "| |531 | 151|4678 |4819 |6625 |901 |749 | 1908 | | | | | | | | | 1st "| | | | | | | | | 2nd "| | |192 | | | | | | 3rd "| | | | | | | | | 4th "| 599|680 | |4840 |4720 |6865 |921 |779 | 1909 | | | | | | | | | 1st "| | |198 | | | | | | 2nd "| 615| | | | | | | | 3rd "| | | | | | | | | 4th "| |694 | 176|5148 |5120 |7006 |953 |825 | 1910 | | | | | | | | | 1st "| 667| | | | | | | | 2nd "| | | | | | | | | 3rd "| | | | | | | | | 4th "| |672 | 169|5467 |5304 |7204 |1004 |894 | 1911 | | | | | | | | | 1st "| 680| | 168| | | | | | 2nd "| | | | | | | | | 3rd "| | |185 | | | | | | 4th "| |761 | |5663 |5536 |7328 |1026 |930 | 1912 | | | | | | | | | 1st "| 704| | | | | | | | 2nd "| |769 |188 | | | | | | 3rd "| | | | | | | | | 4th "| | | |6058 |5944 |7420 |1046 |969 | 1913 | | | | | | | | | 1st "| 717|749 | | | | | | | 2nd "| | |189 | | | | | | 3rd "| | | | | | | | | 4th "| | | |6260 |6051 |7509 |1059 |1007 | 1914 | | | | | | | | | 1st "| 720| |201 | | | | | | 2nd "| |792 | |6357 |6111 |7493 |1057 |1003 | 3rd "|1018 | 746| | | | | | | 4th "| 848| 534| 128| | |7581 |1065 |1007 | 1915 | | | | | | | | | 1st "| 746| 591| 127|6499 |6348 |7599 |1066 |1012 | ------+-------+-------+-------+-------+---------+-------+-------+-------+

The adage "buy cheap and sell dear, " or its practical equivalent--soscary and imitative are investors--_Buy during the last of a sellingmovement and sell during the last of a buying movement_, resolvesitself, we venture to repeat, into: _Buy when the decline caused by apanic has produced such liquidation that discounts and loans, aftersteady and long-continued diminution, either become stationary for aperiod or else increase progressively coincident with a steady increasein available funds; and sell for converse reasons_. 

These conclusions are also reached by our author through analyses of theFinancial History of England, France, Prussia, Austria, etc. These Iomit as unnecessarily wearisome to the reader since I give that of ourown country. However, I will here quote the following: "What must benoted is the reiteration and sequence of the same points _(faits)_under varying circumstances, at all times, in all countries and underall governments, " and also this table showing all the panics and theirpractical coincidence in the past eighty-five years, in France, England, and the United States. 

 France England United States 1804 1803 1810 1810 1813-14 1815 1814 1818 1818 1818 1825 1825 1826 1830 1830 1829-31 1836-39 1836-39 1837-39 1847 1847 1848 1857 1857 1857 1864 1864-66 1864 1873 1873 1882 1882 1884 (a 1889-90 (a 1890-91 1890-91 p 1894 p 1894 1893-94 p 1897 p 1897 1897 r 1903 r 19O3 1903 o 1907 o 1907 1907 x 1913 x 1913 1913 i i m m a a t t e e l l y) y)

Truly these thirteen panics in the three countries have been practicallysimultaneous and one common cause must have originated them. The onlycause common to all was overtrading to such an extent that neithercredit nor money were to be had, so that a forced liquidation or panicinevitably ensued. 

The above table effectually does away with the theory that new tariffsare directly productive of panics. For most certainly new tariffs didnot occur in England, France, and the United States just before orduring all the panic years enumerated, and yet, practicallysimultaneously in free-trade England, high-protection France, andsometimes low-tariff, sometimes high-protection United States havepanics occurred for eighty years. 

But, as I have shown in a note attached to this Introduction, a newtariff or a general change of duties is apt to precipitate a panic, onaccount of the unsettling of business, and that the consequent shakingof credit adds its quota to the forces finally culminating in a paniccannot be doubted. As a matter of history with us, substantially newtariffs have always happened to be the immediate forerunners of a panic, and this I believe to be true in the case of other countries. 

Why is this? Is it not because the people instinctively turn totinkering at and changing their chief tax--the tariff--whenever they asa whole need financial relief; and have we not shown that such relief isneeded almost every ten years, when the overtrading, inseparable fromthe development of all thriving communities has made the call for creditimpossible to grant?

A new tariff may defer, or hurry, or, occurring simultaneously, willintensify a panic, but it may not hope to avert one when due: yet if itschanges be very gradual, fixed and long predicted, and of a nature tobring about or confirm a judicious tariff for revenue only, they willmaterially help to put business on so firm and sound a basis thatrecovery from the inevitable, and approximately decennial panics, willbe wonderfully expedited. Thus a new tariff is a quite accurateforewarning of a panic, and is also to no inconsiderable extent acontributory cause. (See foot-note on page 5, _seq. , Interrelations ofPanics, Tariffs, and the Condition of Agriculture_, etc. ; andespecially what is said of the panic of 1848, on page 10. )

M. Juglar has fully analyzed the three phases of our business life intoProsperity, Panic, and Liquidation, which three constitute themselvesinto the business cycle, that for forty years past (that is, since thepresent Bank of England Act, and practically since that of the Lawgoverning the Bank of France, both of which then increased the requiredspecie reserve) has been of about ten years. These ten years may beapportioned roughly as follows: say, Prosperity for five to seven years;Panic a few months to a few years, [Footnote: The panic after 1873 isthe only one I know extending to anything like the length it attained. This may be ascribed to the immense development and consequentspeculation, and to the inflation of the currency coming after theperiod about the Civil War. ] and Liquidation about a few years. 

I have already pointed out the signs of prosperity, of panic, and ofliquidation, but in view of existing conditions perhaps it may be wellto restate here the quite familiar fact that the completion ofliquidation that precedes the beginning of another period of prosperityis characterized by lack of business, steady prices, and a marked growthin available banking funds. 

[The various tables spread through this pamphlet are fully explained bytheir headings and the text. ]

In conclusion I wish to express my thanks for the courtesy M. Juglarhas extended me, and to state my appreciation of the motives, painstaking patience, and undoubted originality he has shown inexplaining and executing so faithfully and with such genius a mostlaborious and yet spirited work. It is only justice that such anachievement should have been awarded a prize by the French Institute(Academy of Moral and Political Sciences) and have gained for M. Juglarthe Vice-Presidency of the "Society for the Study of Political Economy. "

DeCourcy W. Thom. 

Wakefield Manor. 

A HISTORY OF PANICS IN THE UNITED STATESCONSIDERED WITH SPECIAL REFERENCE TO AMERICAN BANKS. 

The English Colonies soon after their settlement issued paper money. The first was Massachusetts, which issued it even before herindependence, in 1690, to obtain funds in order to besiege Quebec. 

This example was followed to such an extent that it caused a markedspeculation in favor of hard money, varying according to the quantity ofnotes in circulation. In 1745, after a successful campaign againstLouisburg and the taking of that fortress, two million pounds of papermoney were issued, which step decreased its value. When liquidationoccurred these paper pounds were not worth 10 per cent. Of their facevalue. 

The War of Independence obliged Congress to issue three million of paperdollars. This amount increased to $160, 000, 000, so that Congressdeclared, in 1779, that it would not issue more than $200, 000, 000. Notwithstanding this guaranty, notwithstanding the forced and legalrating conferred by this enactment, notwithstanding the war spirit, itdepreciated; and in 1779 it was necessary to decree that, disregardingits normal value, it should be taken at its face. In 1780 it was nolonger taken for customs dues. In 1781 it had no rating and was not eventaken at 1 per cent. Of its face value. 

Between 1776 and 1780 the issue of paper money increased to $359, 000, 000. 

BANK OF NORTH AMERICA. --In 1781 Mr. Morris, Treasurer, persuadedCongress to form a bank (the Bank of North America) with a capital of$10, 000, 000, of which $400, 000 should be turned over to help thenational finances. The capital was too insignificant and the course ofpolitics too unpropitious to accomplish this end. However, the exampleencouraged the States to take up their paper money. Upon the adoption ofthe United States Constitution the issuing of paper money ceased, andgold and silver were the only means of circulation. Thence arose greatembarrassment for the Bank of North America, which, hampered by itsloans to the Government, increased its note circulation to an enormousproportion. The ebb of paper through every channel finally aroused thepublic fears, and people refused the notes. Every one struggled toobtain metallic money, hence it became impossible to borrow, andbankruptcy followed. Such was the, excitement that the Philadelphians asa body demanded and obtained from the Assembly of Representatives awithdrawal of the charter; but the Bank, relying upon Congress, continued until March 17, 1787; succeeded even in extending its charterfourteen years; and later obtained a second extension, limited, however, to Pennsylvania. 

The difficulty experienced in the manufacture of money led Mr. Hamilton, Secretary of the Treasury, to propose to Congress in 1790 the foundingof a National Bank. After some doubts as to the power of Congress, itwas authorized. It began operations in 1794, under the title of "Bank ofthe United States, " with a capital of ten millions, eight millions beingsubscribed by private individuals, and two millions by the Government. Two millions of the first sum were to be paid in metallic money, and sixmillions in 6 per cent. State bonds; the charter was to run till March4, 1811. It seemed to be a good thing for the public and thestockholders, for during twenty-one years it paid an average of 8 percent. Dividends. In 1819 the question of renewing its privileges cameup, the situation being as follows:

 ASSETS. LIABILITIES. 6 per cent. Paper $ 2, 230, 000 Capital Stock $10, 000, 000 Loans and Discounts 15, 000, 000 Deposits 8, 500, 000 Cash 10, 000, 000 Circulation 4, 500, 000

The profits from the Bank, the prosperous state of the country, and theincrease of productions led people to think that the issuing of papermoney caused it all; seduced by this alluring theory the "Farmers' Bank"was founded in Lancaster in 1810, with a capital of $300, 000. Othersfollowed; such was the mania that the Pennsylvania Legislature wasforced to forbid every corporation to issue notes. Despite thispreventive message the excitement rose so high that companies, formed tobuild harbors and canals, also put notes into circulation; in this waythe law was eluded. 

From 1782 to 1812 the capital of the banks rose to $77, 258, 000; upon the1st of January, 1811, there were already eighty-eight banks inexistence. Until the declaration of war (June, 1812), the issuing ofnotes was always made with the intention of redeeming them, but theover-issue soon became general, and depreciation followed. Theperiodical demands for dollar-pieces for the East Indian and Chinesetrade were warnings of the over-speculations on the part of thosecompanies whose members were not personally liable. Traders, who throughtheir notes or their deposits had a right to credit with the banks, didnot hesitate to ask for $100, 000, whereas, formerly they would havehesitated to ask for $1, 000. The war put a stop to the exportation ofprecious metals, which, in the ordinary course of things, limits theissue and circulation of paper. The upshot of this was to redouble thenote issue, each one believing its only duty was to get the largestamount into circulation. Loans, and enormous sums of money, weredistributed above all reason among individuals and among the States. Theincrease of dividends and the ease of obtaining them extended the spiritof speculation in certain districts, and especially among those whoowned land. The remarkable results shown by the Bank of Lancaster, the"Farmers' Bank, " which, by means of an extraordinary issue of notes, hadyielded as much as 12 per cent. And piled up in capital twice the amountof its stock, caused it to be no longer thought of as a bank intended toassist trade with available capital, but as a mint destined to coinmoney for all owning nothing at all. Led by this error, laborers, shopkeepers, manufacturers, and merchants betook themselves to quittingactive occupations to indulge in golden dreams. Fear alone restrainedsome stockholders connected with the non-authorized companies, and ledthem to seek for a legal incorporation. 

In Pennsylvania, during the session of 1812, an act was passedauthorizing twenty-five banks, with a capital of $9, 000, 000. TheExecutive nevertheless refused to ratify it, and returned it with somevery well-deserved comments. In a second debate the first resolution wasrescinded by a vote of 40 to 38. In the following session theproposition was renewed with more vigor, and forty-one banks with acapital of $17, 000, 000 were authorized by a large majority; therepresentations of the Executive proved useless, and they immediatelyentered upon their duties with an insufficient capital. 

To discount their own stock was a soon-discovered method. They thusincreased the amount of notes, which depreciated in comparison with hardmoney, and dissipated on all hands the hope of exchanging with it. 

In the absence of a demand from abroad for hard money, the demand camefrom within our own borders. 

The laws of New England, which were very severe upon the banks, hadplaced a penalty of 12 per cent. Upon the annual interest payments ofthose persons who did not pay their notes. The natural result was adifference of value between New England and Pennsylvania, which measuredthe depreciation caused by paper in the latter district. As remittanceson New England could only be made in hard money, the equilibrium of thebanks was disturbed; they were not able to respond to the demands forredemption, and a suspension of payments by the banks of the UnitedStates, except those of New England, took place in August and September, 1814. 

THE PANIC OF 1814. --An agreement took place at Philadelphia between thebank and the chief houses allied with it to resume payments at the endof the war. 

Unhappily, the public did not demand the accomplishment of this promiseat the time fixed, and the banks, led on by the thirst of gain, issuedan unprecedented amount of bank notes. The general approbation broughtabout a still further increase in their number: the bank notes of theBank of Philadelphia were at a discount of 80 per cent. ; the others at75 per cent, and 50 per cent. , and metallic money disappeared to such anextent that paper had to be used to replace copper coin. Thedepreciation of fiat money raised the price of everything; thissuperficial occurrence was looked upon as a real increase, and gave riseto all the consequences that a general inflation of value could produce. This mistake on the subject of artificial wealth made landed proprietorsdesire unusual proceeds. The villager, deceived by a demand surpassinghis ordinary profits, extended his credit and filled his stores with thehighest-priced goods; and importations, having no other proportion tothe real needs than the wishes of the retailers, soon glutted themarket. Every one wished to speculate, and every one eagerly ran updebts. Such was the abundance of paper money that the banks were alarmedlest they could not always find an investment for what theymanufactured. It thus happened that it was proposed to lend money oncollateral, while the greatest efforts to bring about its redemptionwere being made. This state of things lasted till the end of 1815, whenit was recognized that the paper circulation had not enriched thecommunity, but that metallic money had enhanced. 

The intelligent portion of the nation comprehended that even where theestimated value of property had been highest, the true welfare ofsociety had diminished. They learned too late the baleful effects ofthis circulation of paper money; the greater part of the States andcities had nothing to show for it. 

A new class of speculators then appeared, trying to pass these worthlessbank notes: forgers of paper money became more active. In the midst ofthis disorder a National Bank, which should afford a solid basis for thepaper circulation, was considered. Influenced by these difficulties, andin hopes of remedying them, the Secretary of the Treasury proposed toCongress, in September, 1814, a few days after suspension, to found anational bank, in order to re-establish metallic circulation, an endwhich the State banks had failed to accomplish. 

This project, which lent the national credit to the capital of the bank, was antagonized by a good many members who exaggerated its consequences;at the same time that they took more or less important sums in banknotes, or borrowed from the banks upon the nation's guaranty, in orderto re-establish the public credit and to obtain means for prolonging thewar. 

CAUSES OF THE PANIC OF 18l4. --The bank directors laid the blame upon theblockade of the ports, which, interfering with, indeed even preventing, the export of products, occasioned the outflow of the metals. Thenational loans to carry on the war also had their influence. From thebeginning of hostilities until 1814 they increased to $52, 848, 000, distributed as follows: Eastern States, $13, 920, 000; New York, Pennsylvania, Maryland, and District of Columbia, $27, 792, 000; Southernand Western States, $11, 186, 000. 

Nearly all of this was advanced by the cities of New York, Philadelphia, and Baltimore. The banks made advances beyond their resources, augmenting their circulation in consequence. [Footnote: The cause of thecrisis, according to the Committee of the Senate, was the abuse of thebanking system; the great number and bad administration of the banks;and their speculations designed to advance their stock, and todistribute usurious dividends. When the Bank of the United States sawthe danger that menaced it, it reduced its discounts and circulation. The circulation of the country banks fell from $5, 000, 000 to $1, 300, 000, and the total circulation from $10, 000, 000 to $3, 000, 000. 

 Increase and Decrease Circulation in Pennsylvania. 

 City Banks. Country. Total. 1814 . . . . . . . . $3, 300, 000 $1, 900, 000 $5, 200, 000 1815 . . . . . . . . 4, 800, 000 5, 300, 000 10, 100, 000 1816 . . . . . . . . 3, 400, 000 4, 700, 000 8, 100, 000 1817 . . . . . . . . 2, 300, 000 3, 800, 000 6, 100, 000 1818 . . . . . . . . 1, 900, 000 3, 000, 000 4, 900, 000 1819 . . . . . . . . 1, 600, 000 1, 300, 000 2, 900, 000

 Number of Banks. Capital. Circulation. Specie. 1811 . . . 88 $52, 000 00 $28, 000 00 $15, 000 00 1815 . . . 208 82, 000 00 45, 000 00 17, 000 00 1816 . . . 246 89, 000 00 68, 000 00 19, 000 00]

From the 1st of January, 1811, to the 1st of January, 1815, one hundredand twenty new banks were registered, thus raising their capital to morethan $80, 000, 000; this increase took place during a war that entirelydid away with foreign trade. The expenses of the war declared againstGreat Britain in June, 1812, were defrayed by notes issued by the banksof the various States. Six million dollars were obtained from them in1812, in the following year, 1813, twenty million, and then fifteenmillion in exchange for twelve million of Federal stock, issued at theprice of $125 face for every $100 paid in. Until January 1, 1814, inorder to avoid taxation, Treasury bonds were issued in addition to whatwas contributed by the banks. 

 In 1812 . . . . . . . . . . . . . . . . . . . . . $3, 000, 000 " 1813 . . . . . . . . . . . . . . . . . . . . . 6, 000, 000 " 1814 . . . . . . . . . . . . . . . . . . . . . 8, 000, 000

Up to this time no account of their administration had been rendered, but now Mr. Bland, a Maryland representative, called attention to thefact that all their operations seemed veiled from the public. Unfortunately we have been unable to find a statement of the discounts. 

The suspension of specie payments differed with the corresponding stateof affairs in England, inasmuch as it was not general, and, since eachState was independent, the depreciation varied. It became very difficultto circulate paper, and the Government was again obliged to issueTreasury bonds, bearing 6 per cent. Interest. In February, 1815, peacehaving been proclaimed, it was hoped that the banks would resume speciepayments. There was no sign of it. The re-establishment of peace merelymade some of the legal regulations seem less pressing upon the banks. 

In the middle of May, 1815, the first English vessel arrived, andbusiness became very active again. In May, June, and July it might havebeen said "This is the golden age of commerce. " Discounts of unsecuredpaper were easy, and it was not an unusual occurrence to have notes of$60, 000 offered. 

The banks had authorized a suspension of specie payment in order toforce the issue of bank notes, and to stimulate trade, although Mr. Carey pretends that no over-trading had taken place. He blames them forhaving restricted their loans in October and November, thus producing adecline in prices; and the necessity of cutting down credits came about, according to him, from the speculations in National securities. 

Six Philadelphia banks with a capital of $10, 000, 000 held $3, 000, 000 inGovernment stock. 

On the 15th of February, 1815, when scarcely through with all thisconfusion, an effort was made to re-establish for the second time aUnited States Bank. It was authorized on the 10th of April, 1816, theAct permitting the formation of a Company, with a capital of$35, 000, 000, divided into 350, 000 shares of $100 each, of which theGovernment took 70, 000 shares and the public 180, 000 shares. These lastwere payable in $7, 000, 000 of gold or silver, of the United States ofNorth America, and $21, 000, 000 in like money, or, in the funded debt ofthe United States either in the 6 per cent. Consolidated Debt at par, the 3 per cent. At 65, or the 7 per cent. At 106-1/2 per cent. ; uponsubscription $30 was payable, of which at least $5 had to be in gold orsilver; in six months after, $35, of which $10 had to be in metal, andtwelve months after the same amount was to be paid in the same manner. The directors were authorized to sell shares every year to the amount of$2, 000, 000, after having offered them at the current price to theSecretary of the Treasury for fourteen days. The Government reserved theright to redeem the debt at the subscription price. 

The charter, made out in the name of the president, ran until March 3, 1836. There were twenty-five directors of the concern, five of whom wereappointed by the President of the United States with the consent of theSenate, and not more than three by the State; the stockholders chose theothers. 

The corporation could not accept any inconvertible property, or anyfarm-mortgage, unless for its immediate use, either as security for anexisting debt, or to wipe out a credit. 

It had no right to contract any debt greater than $35, 000, 000, more thanits deposits, unless by special act; the directors were made responsiblefor every violation, and could be sued by each creditor. They could onlydeal in gold and silver exchange, and not in other country securitieswhich could not be realized upon at once. The Bank could purchase nopublic debt nor exceed 6 per cent. Interest on its discounts and loans. It could lend no more than $500, 000, to the United States, $50, 000, toeach State, and nothing to foreigners. It could give no bill of exchangegreater than $5, 000; bank notes less than $100 were to be payable ondemand, and greater sums were not allowed to run longer than sixty days. Two settlements were to take place every year. 

Branches were to be established upon demand of legislative authorities, wherever 2, 000 shares of stock were subscribed for. 

There were to be no bank notes less than $5. 00, and every bill ofexchange, or bill payable at sight, was to be receivable by the publicTreasury. 

The duty of the Bank was especially to pay out and receive the publicmoney, without profit or loss. It was to serve as agent for every Statecontracting a loan; the cash belonging to the United States was to bedeposited at the Bank whenever the Secretary of the Treasury did notdispose of it otherwise, in which case he was to notify Congress. 

Neither the Directory nor Congress could suspend payment of the banknotes, discounts, or deposits: such refusal carried a right to 12 percent. Interest. In exchange for this charter the Bank was to give$1, 000, 000, to the Government in three instalments. 

The charter was exclusive during its life, excepting in the District ofColumbia, where banks might be authorized, provided their capital didnot exceed $6, 000, 000. The Bank did not open at once, for it sent anagent to Europe to look up bullion. Between July, 1817, and December, 1818, it thus procured $7, 311, 750, at an expense of $525, 000. On the20th of February, 1817, it was decided that, excepting gold and silverand Treasury notes, no notes would be received at the GovernmentTreasuries, save such as were payable to the banks in hard money. Notwithstanding this discrimination the Banks decided not to resumespecie payment until the 1st of July, 1817. 

In the meantime an immense speculation had taken place in its stock, which was compromising for the Bank and for the credit of its Directory, because several of its Directors appointed by the Government took partin it. For example, it became customary to loan a very large amount ofmoney on the Bank's own stock, as much as $125 on each share of $100. Thus more than the purchase price was loaned upon them: in furnishingthe means of paying for them by credit, speculation was aroused, and onthe 1st of September, 1817, the market price advanced to $156. 50, atwhich rate it continued until December, 1818, when it fell to $110. 

At last the public perceived that the excessive issue depreciated thebank-note circulation, and that a greater shrinkage was imminent. 

An office for the payment of bank dividends was opened in Europe, so asto increase the price of the stock and the speculation in it throughthis facility, rather than for the permanent benefit of the institution. Let us note here the short-sightedness of the Directors, who thoughtthey would stem the depreciation of their means of payment by persuadingall the banks to declare what was not true, that the bank notes wereworth par. 

On the 21st of February, still aiming at the same end, they announcedthe resumption of specie payment. The State Banks, remembering theembarrassment of the public, which for two years had paid an exchange of6 per cent. , persuaded themselves that few people would dare to ask forlarge sums. They hoped to come to an understanding and to cause theacceptance of a promise to pay upon a designated day. 

We say "a promise to pay, " for this was not a serious proposition, inasmuch as foreign money and that of the United States had enjoyed ahigher market value for a long time. 

The depreciation of the bank notes might result just as well, from thefear of the public's enforcing its rights, as from a refusal of thebanks to make good their promises. This understanding was not, properlyspeaking, a resumption of specie payment, but rather a kind of humbug. 

In January the banks of New York, Philadelphia, Baltimore, Richmond, andNorfolk decided to resume specie payment on the 20th of February, provided the balance showing against them was not demanded by the Bankof the United States before discounts became $2, 000, 000, at New York, asmuch in Philadelphia, and $1, 500, 000 in Baltimore; and these conditionswere accepted. 

The discount line of the Bank of the United States was thus greatlyincreased; it grew from $3, 000, 000 on the 27th of February to$20, 000, 000 on the 30th of April; to $25, 000, 000 on July 29th, and to$33, 000, 000 on the 31st of October. The Bank imported much metallicmoney, redeemed its notes and those of its branches without distinction;the notes of its Eastern and Southern branches were returned as soon asthose of the North had paid them, and they were newly issued;consequently eighteen months after this practice began the cash boxes ofthe North were drained of their capital, the length of discount wasreduced, and 5 per cent. Was charged for sixty days. On April 1, 1819, only $126, 000, cash remained on hand, on the 12th only $7l, 000, remained, $196, 000, was owed to the city banks. 

Scarcely had the Directors of the National Bank succeeded in replacingthe paper issued but not redeemed by their bank-note circulation, beingfully aware from their own experience that the circulation could onlyreach a limited amount, than they inundated the market with it, and in afew months all reductions vanished. In this way the market price shortlyresumed its former quotation, and all the difficulties reappeared. Thisimprudent management necessarily threw one portion of the public intodebt, from which it had saved itself; and the other portion into thevortex which it had avoided. The critical moment was delayed somewhat, but the day of reckoning was near. 

THE PANIC OF 1818. --The Bank at last discovered that it had passed thebounds of safety through its issues, and that it was at the mercy of itscreditors. It saw firstly, on October 21, 1818, the payment of part ofthe State of Louisiana's foreign debt withdraw large sums, and thenChinese, Indian, and other goods reach fancy prices because of thedepreciation of the circulating medium. All these influences produced ademand for specie payment which the Bank as a public one was obliged tomeet, under penalty of 12 per cent. Interest, and without power to availitself of the same accounts as the State banks. 

From this moment it thought fixedly of its safety and of how to reduceits notes; this reduction obliged the other banks to imitate it, and anew crisis shook trade in the end of October, 1818. During one year theNational Bank furnished from its cash boxes more than $7, 000, 000, andthe others more than $3, 000, 000. 

The State banks naturally followed the same policy in their connection, and their circulation became reduced as follows:

 On November 1, 1816, to . . . . . . . . . . . . $4, 756, 000 " " " 1817, " . . . . . . . . . . . . 3, 782, 000 " " " 1818, " . . . . . . . . . . . . 3, 011, 000 " " " 1819, " . . . . . . . . . . . . 1, 318, 000

It will give a faint idea of the excessive issue to state that the onlydifficulty was the impossibility of examination by the President andCashier, and of their jointly signing the notes, which was madeobligatory by the regulations; hence they asked power from Congress togrant this right to the Presidents and Cashiers of the Branch Banks. This facility was refused, but Congress granted a Vice-President and aVice-Cashier to sign. With these issues and a simple capital of$2, 000, 000, the Bank discounted as much as $43, 000, 000, during one year, in addition to $11, 000, 000, to $12, 000, 000, loaned upon publicsecurities. 

In order to carry on its operations, it exchanged in Europe a portion ofits funded debt for gold and silver, and bought specie in the WestIndies. From July, 1817, to July, 1818, it imported $6, 000, 000, ofspecie, at an expense of $500, 000, but the excessive issue of paperdrained away the cash more rapidly than the Bank could import it. In theface of this hopeless struggle, in July, 1818, it entirely changed itscourse and reduced its discounts, and 10 per cent. Premium was then paidfor cash, and the reduction of nearly $5, 000, 000, in the discount linein three months only had a disastrous effect, while at the same timethey would only receive for redemption the notes issued by each BranchBank: hence general embarrassment arose, and as the Bank of the UnitedStates was withdrawing cash from the local banks, Congress wished toforbid the exportation of gold and silver. The committee appointed onthe 30th of November, 1818, to examine the affairs of the Bank concludedthat it had violated its charter:

1. In buying $2, 000, 000, of the Public Debt. 

2. In not requiring from the purchasers of its stock the payment of thesecond and third instalments in cash, and in the Public Debt of theUnited States. 

3. In paying dividends to purchasers of its stock who had not entirelypaid up. 

4. In allowing voting by proxy to a greater extent than the charterpermitted. 

Upon receipt of the report the Governor fled, and the shares fell to$93. In 1818 the speculation was so wild that no one failed on accountof a smaller sum than $100, 000. A drawing-room that had cost $40, 000, and a bankrupt's wine-cellar estimated to have cost $7, 000, were citedas instances of the general prodigality. The Senatorial Committee ofInquiry declared that the panic imposed ruinous losses upon landedproperty, which had fallen from a quarter to even a half of its value. In consequence forced sales, bankruptcies, scarcity of money, and astoppage of work occurred. House-rents fell from $1, 200, to $450; theFederal stock alone held its own at 103 to 104. 

On the 13th of December, 1819, a Committee of the House ofRepresentatives reported that the panic extended from the greatest tothe smallest capitalists. It concluded by demanding the intervention ofthe legislative power to restrain the corporation, which, spreading itsbranches throughout the Union had inundated it with nearly $100, 000, 000, of new circulating medium. Those who unfortunately owed money lost allthe fruit of long work, and skilled laborers were obliged to exchangethe shelter of their old homes for the inhospitable western forests. Forced sales of provisions, merchandise, and implements were made, greatly below their purchase price. Many families were obliged to limittheir most necessary wants. Money and credit were so scarce that itbecame impossible to obtain a loan upon lands with the securest titles;work ceased with its pay, and the most skilful workman was brought tomisery; trade restricted itself to the narrowest wants of life;machinery and manufactories lay idle; the debtor's prison overflowed;the courts of justice were not able to look after their cases, and thewealthiest families could hardly obtain enough money for their dailywants. 

The Committee appointed by the Senate of Pennsylvania reported on the29th of January, 1820, that, to prevent a bad administration of thebanks, it was necessary:

1. To forbid them to issue more than half of their capital in notes. 

2. To divide with the State all dividends in excess of 6 per cent. 

3. Excepting the president, that no director should be re-appointeduntil after an interval of three years. 

4. To submit to the State's inspection the bank's business and books. 

From this period excessive profits and losses ceased on the part of theAmerican banks. The change of directory of the National Bank, calledforth by the unfortunate experience of 1818, was the beginning of a veryfortunate epoch. As was always the case, business affairs resumed theirusual course when liquidation ceased. Among the various causes assignedfor the panic, the increase of import duties had to be pointed out, andthe decrease of the Public Debt which was reduced between 1817 and 1818more than $80, 000, 000. It was impossible to turn any portion of thepublic deposits in proper time either into Federal stock or such otherforms of value as its creditors might demand, without staking orbreaking down any respectable institution whatever. But these seem to beonly secondary causes. 

Panic of 1825 to 1826. --In 1824 in Pennsylvania there was a new rage forbanks, and in 1825 there was a repetition of the marvellous days of1815. American banking bubbles have always been exactly similar to theEnglish South Sea bubble, and to Law's bank in France. In July, after anadvance dating from 1819, there was a reaction, a panic, andliquidation. Here we cannot point out any of the causes which we haveindicated above; the growth of trade and the exaggeration of discountsufficiently explain the difficulties of the situation. 

In Pennsylvania in 1824 a bill was passed re-establishing the chartersof all the banks which had failed in 1814. In New York they thought ofbanks alone; companies with a capital of $52, 000, 000 were formed. Readymoney had never been so abundant, if we can judge of it by the amount ofsubscriptions and the great speculations in stocks. 

Three millions were subscribed to the "New Jersey Protection Company" inone day. But in July, when the decline on the London market wasreported, the want of hard money forced itself into notice. Exchange onEngland rose from 5 per cent. To 10 per cent. ; the discount on NewOrleans notes, from 3 per cent. Became 50 per cent. , and on the 4th ofDecember it had fallen back to 4 per cent. What fluctuation! Whatdisasters!

Mr. Biddle, the President of the United States Stock Bank, said that thecrisis of 1825 was the most severe that England had ever experienced, superinduced as it was by the wild American speculation in cottons andmines. Cotton cloth fell from 18 to 13 cents per yard; and out of 4, 000weavers employed in Philadelphia in 1825 not more than 1, 000 remained. The reaction of liquidation was experienced in 1826, and from 1827 moneywas abundant. 

EMBARRASSMENT OF THE LOCAL BANKS IN 1828 TO 1829. --Is it necessary tomention these embarrassments? The trouble of 1828 affected only thelocal banks and not at a11 those of the United States. The chief causewas the Bank of the United States' increase of circulation from August, 1822, to August, 1828. From $5, 400, 000 it had become $13, 000, 000 withoutadding anything to the circulation, merely displacing an equal amount oflocal bank notes through drafts of branches that it put intocirculation. These branch banks' drafts were in form of bank notes, signed by the chief employees of the branches, drawn, it might be, oneach other or on the main bank. A great issue of paper was thus broughtabout; without this roundabout method it would have been impossible tohave forced the issue of the notes from the mere physical inability ofthe president and cashier to sign so large a number. Congress had alwaysrefused to delegate this power to any other persons; in consequence ofthis practice the inevitable result occurred in 1828, as might have beenforeseen, and a conflict between notes of the Bank of the United Statesand that of the local banks occurred. 

These drafts circulated everywhere; the branch banks received them ondeposit, but did not redeem them: hence it was necessary to guardagainst panic by keeping hold of cash. This course increased the issueof the Bank of the United States, and of the local banks whichdiscounted the paper of the central bank as if it were so much cash. Thelocal banks, then, whose paper did not widely circulate, exchanged theirbank notes for drafts, thus reducing the amount of circulation of thefirst, increasing that of the central bank, and hence that of the totalissue of its bank notes; the local banks continued to exchange theirpaper with its narrow and limited circulation for drafts of this latter, which passed everywhere. 

There occurred, then, in 1828 and 1829 an accidental and very briefscarcity of cash, whose cause we have just indicated; but since thesecond half of the year difficulties arising from metallic circulationhad disappeared. 

PANIC OF 183l. --The course of business, having scarcely suffered astoppage, continued until 1831, and not till then did The Bank, beingthe agent of the Treasury and having $11, 600, 000 on deposit, would havebeen forced to become a borrower in order to pay out the $2, 700, 000demanded from it. However, its request was granted. 

Jackson soon learned with surprise that, business being more impededthan ever, the President had despatched an agent to England to contractwith the Barings a loan of $6, 000, 000. Seeing the Bank to be insolventhe resolved not to renew its charter. The Bank tried to hide itsinsolvency by the most foolish land speculations, which had alreadycaused such great disaster in 1818 and 1820. The issue of bank notes hadgiven fresh spirit to speculation. These bank notes were received by theNational Treasury and returned to the Bank on deposit, which againloaned them to pay for land upon security of the land sold, with theresult that the credit granted the Nation was merely fictitious. 

In 1832, Congress having voted for the extension of the Bank's charter, President Jackson refused to ratify it on account especially of certainchanges, it sought to introduce. "Why, " said he, "grant a capital of$35, 000, 000 when the first company only had $11, 000, 000?"

But though the Bank's charter could not be arranged, the law of July 10, 1832, dealing with the regulation of banks, prescribed that "a report"upon their exact condition should be submitted to Congress every year. 

In 1833 General Jackson ordered the withdrawal of the Governmentdeposits from the Bank. The law required that the reasons for thewithdrawal of the deposits should be given, and the secretary, Mr. Duane, refused to give them, saying the Bank was not insolvent. He wasdismissed and replaced by a more amenable secretary. The deposits werewithdrawn and placed in different State Banks, The Bank of the UnitedStates was obliged to limit its discounts and loans, thus causingtrouble; however, the President wished at any loss to establish ametallic circulation. 

President Adams favored small paper notes of 25 to 10 cents, to theextent of $1, 000, 000. From 1831 to 1837, $3, 400, 000 twenty-five centnotes, $5, 187, 000 ten-cent notes, and $9, 771, 000 five-cent notes wereissued. To prevent an abuse of this it was necessary to resume ametallic circulation immediately. In 1833 the amount of small notesissued had already reached $37, 000, 000; in 1837 it became $73, 000, 000;it even exceeded these figures; it was this circulation of small papernotes that had to be made smaller than $120, 000, 000

Notwithstanding these frequent panics the national prosperity and theincrease of wealth were unquestionable and astonished all observers. 

From 1817 to 1834 the national expenses diminished from $39, 000, 000 to$24, 000, 000, decreasing even to $14, 000, 000 in 1835, while the incomegrew to $37, 000, 000. 

From 1826 to 1836 the condition of business, despite the panic of 1831, grew easier. Industries, agriculture, and commerce were prosperous andevery enterprise was successful. Both in New Orleans and in New Yorkthere was much building, and more than 1508 houses were erected betweenJanuary 1 and September 1, 1836. This general prosperity carried with itthe seeds of trouble. 

The rapid increase of the National revenue gave birth to the belief thatcapital had increased in the same proportion. This superabundance ofincome produced temporarily by the inflation in business was recklesslythrown away. People speculated in land, projected a hundred railroads, canals, mines, and every sort of scheme, which would have absorbed$300, 000, 000 if carried out. 

The national capital being insufficient, loans were made in England andHolland, where the rate of interest being more moderate stimulated thepassion for enterprises. Finally, in order to stop the flow of Englishcapital to America, the Bank of England raised the rate of interest;this brought people to their senses. They saw the impossibility ofcarrying out a third of their schemes. Cotton fell, and panic seized thepublic. 

Since 1818 a period of flow and ebb in trade had been seen every five orsix years, but this stoppage was much more serious. The lack of readymoney and capital destroyed confidence. Money was not to be had upon anycollateral; and the banks stopped discounting. The people lacked bread, the streets were deserted, the theatres empty; social observances werein abeyance, there were no more concerts, and the whole social round wasstopped. 

The Bank of the United States used various expedients to temporarilymoderate the crisis until the very moment that it burst all the moreviolently in 1839, and brought about a new and radical reform. 

From the time that the separation of the Bank of the United States fromthe Government and the cessation of its operations as the National Bankwas brought about, the quotation on bank notes considerably decreased, as well for those payable at sight as for the deferred notes payable intwelve months. The President sent an agent to London to raise money uponthe bank shares. 

Fearing that General Jackson would not establish a new bank, and by wayof counterpoise, one hundred banks were created with a capital of morethan $125, 000, 000; issues of bank stock were not to exceed three timesthe amount of the capital, but this provision was not observed; theissue was without regulation and without limits, and during an inflationin prices of the necessaries of life which had doubled in value, andwhich had turned the people's attention to agriculture. The price ofland had for some time advanced tenfold, and the advance in cottoncaused the Southern planters to abandon indigo and rice. 

Imports in 1836 exceeded the exports by $50, 000, 000, which had to bepaid in gold or silver. This outflow of metal created a great void. 

The advance in the discount rate in the Bank of England under suchcircumstances came like a thunder-clap, and the distended bladder burst. Banks suspended payment, and bank notes lost from 10 to 20 per cent. Exchange on France and England rose to 22 per cent. , all metaldisappeared from circulation, and a thousand failures took place. TheEnglish export houses lost from L5, 000, 000 to L6, 000, 000 sterling;values fell from maximum to minimum. The losses in America were evengreater; cotton fell to nothing. At the worst of the panic people turnedto the Bank of the United States, and its President, being examined asto the means of remedying the trouble, stated that it was above allnecessary to maintain the credit of the Bank of England in stead and inplace of private credit, which had disappeared. He proposed to payeverything in bank paper on Paris, London, and Amsterdam. 

When the panic came the Bank was very much shaken. At the beginning ofApril, 1837, the New York banks suspended payments because demands forhard money for export played the chief role; the other banks suspendedin their turn, promising to resume with them. 

The Bank of the United States, suspended also, Mr. Biddle, thePresident, asserting that it would have continued to pay were it not forthe injury done by New York. This was false, for the New York banksshortly after resumed payment, hoping they would be imitated, but theother banks refused to do so. Mr. Biddle wished, in the first place, toawait the result of the harvest. To uphold the Bank, he tried to bringabout exchanges, both with banks and general business, not only inAmerica but in Europe, in order to establish a unity of interests whichwould sustain him and conceal his real condition. In this he wassuccessful to a certain degree, for in 1840 in his balance sheet$53, 000, 000 of paper of the different States was shown up. He wishedabove all to secure the monopoly of the sale of cotton: a senselessspeculation hitherto unexampled, [Footnote: A similar episode hasoccurred in our time in the speculation in metals by the "Comptoird'Escompte. "] the like of which may never be seen again. 

Whilst the Bank came to the relief of New York business through itsexchange and its deferred notes, Biddle posed as the great cotton agent, on condition that the Bank's agents should be consigned to at Havre andLiverpool. In their embarrassment this proposition was accepted by theplanters. Cotton was thus accumulated in those two places. This monopolyadvanced the price, and vast sums were realized, which enabled him toenlarge the scope of his business. In 1837 he was enabled by this meansto draw on London for L3, 000, 000 sterling; the difference between 5 to 6per cent. Interest and discount at 2 per cent. Produced a very handsomeprofit. The cotton merchants prospered as well as the exchange agent, and Mr. Biddle paid the planters in bank notes which the Bank couldfurnish without limit, while he received in Europe hard money for thecotton; this aroused opposition. 

In the second half of 1837 he established in Missouri, Arkansas, Alabama, Georgia, and Louisiana a number of new banks, to make advancesto the planters, and to sell their products for them in Europe. Theystarted with very slight capital, they observed no rules in issuingpaper, their bank notes fell 30 per cent. In 1838, and the planterswould not take them. 

The Bank of the United States, fearing lest foreign capitalists shouldtake advantage of the difficulties of the planters by buying thiscotton, cheapened on account of the encumbrances upon the districtproducing it, resolved to come to the rescue of the Southern banks, andto join them in their operations by purchasing their shares and theirlong-time paper, having two years to run. It thus put $100, 000, 000 intothe business, and in 1838 it had loaned them upon their cotton crops notless than $20, 000, 000 at 7 per cent. Payable in three years. 

It had bought the bank shares at 28 per cent. Below par; through its helpthey had risen again to par; and then it threw them upon the Londonmarket, which absorbed them. In order to explain the immense creditenjoyed in Europe by the United States and their banks, we must observethat the extinguishment of the National obligations through surpluscrops threw a false light upon the credit of the States, as well asparticularly upon that of the corporation. For many years Americaninvestments had been sought for above all others in London, and asnothing happened during the first year to destroy that confidence, theamount thus employed increased from $150, 000, 000 to $200, 000, 000 in1840. In Pennsylvania $16, 000, 000 of European money was used in the Bankof the United States, and $40, 000, 000 in those of the different States, all of which was payable in two or three years. 

Mr. Biddle had succeeded in sustaining the different States with theNational credit. He knew how to utilize the credit of American goods inEurope, and drew from the London market an immense sum against exchangelong-time paper and paper payable in America. The Bank's paper fell from4 to 6 per cent. , and it was in such demand that the Bank of Englandtook it at 2 to 3 per cent. Discount. But finally the market had allthat it could take. The attention of merchants was attracted to Mr. Biddle's gigantic speculations, who paid paper in America and collectedhard money in London. Business interests complained about thecontraction in the market. The Bank's stock of cotton increasedsteadily, and between June and July it rose from fifty-eight to ninetymillion bales. 

This speculation had already yielded $15, 000, 000 profit, but the marketwas overloaded, and quotations could not keep up. The planters had madea great deal by the advance in cotton, but the paper money remitted themlost from 15 to 25 per cent. A panic was approaching. The cotton crop, amounting to 400, 000 bales, was one fifth less than was expected; theyawaited an advance in price, but the contrary occurred. The high priceshad brought out all the stored cotton; the factories had reduced theirwork. Nevertheless bale after bale was forwarded to Liverpool and toHavre. The sale in this last port in February and March, 1839, havingproduced a loss, they continued to store it. As soon as Mr. Biddle wasaware of this stoppage he sought to hide the difficulty by extending hisbusiness. He proposed to start a new bank in New York (the other hadheadquarters in Philadelphia) with a capital of $50, 000, 000. He oncemore issued long-time paper, and bought with American paper canals, rail-roads, and shares which he threw upon the English market. Thislasted until the long-time paper lost 18 per cent. In America, and untilAmerican exchange and investments were no longer received on theContinent. 

The Parisian house of Hottinguer like its other agents, sold littleuntil the first of July, and when it saw that the effort to monopolizecotton could not succeed, fearing to continue this gigantic operation, it declared that it employed too much capital. In the midst of all this, some new bills of exchange reached Paris without consignment ofcorresponding value; and the house of Hottinguer protested. 

Hope of Amsterdam discontinued his connection. The London agent calledupon the Bank of England for help, which was granted upon the guarantyof certain firms of that place and a deposit of good American paper. 

Rothschild accepted the refused bills of exchange, after having foundout that a sum of L400, 000 would suffice for Mr. Biddle's agent; theseL400, 000 offered as a guaranty consisted of Government stock, and ofshares in railroads, canals, and banks. This agreement was not given outfreely, which still further increased the feeling of distrust. A crisisin which $150, 000, 000 of European capital were destined to be engulfedwas rapidly approaching. 

BREAKING OUT OF THE PANIC OF 1839. --The English papers had alreadywarned the people to be distrustful. The _Times_ said it wasimpossible to have any confidence in the Bank as long as it would notresume specie payments. Mr. Biddle defended himself through papers paidfor the purpose, finally in the Augsburg Gazette, while he waited forthe soap bubble to burst. His retained defenders claimed that the150, 000 bales of cotton sent to Europe had not been sold, but receivedon commission. Advances in paper had been made which in the month ofAugust, 1839, were to be paid in notes by the Southern banks, for a newgrant made to the Bank by the State of Pennsylvania permitted it to buythe shares of other banks, and by this means to gain their management;their notes lost 20 to 50 per cent. As compared with the Northern banks. 

Through his profit upon the difference of the notes, and through thepayment for the cotton in paper, and through the sale of bullionexchange, Mr. Biddle had made five to six million dollars, which lay athis command in London. 

The protection of his bills of exchange made a great impression inEngland; the rebound was felt in America, where the panic, moderated in1837 through the intervention of the Bank, burst forth with renewed furyin 1839, and brought about the complete liquidation of thatestablishment. 

At the same time the English market was very much pressed, for, according to a notice of the Chamber of Commerce, the number of thatyear's bankruptcies was greater than usual. From June 11, 1838 to June, 1839, there were 306 bankruptcies in London, and 781 in the"provinces, "--in all, 1, 087. At Manchester there were 82, at Birmingham54, at Liverpool 44, at Leeds 33. The London Exchange was flooded withunsalable paper, an occurrence which had also taken place on a smallerscale in 1837. 

Such was the interruption of business that interest for money rose to 20per cent. , and the discount rate for the best paper to 15 or 18 per cent. 

The various States in the Union had contracted debts with inconceivableease, and interest payments were provided for by new loans. PresidentJackson declared it necessary to make a loan in order to pay interestmoneys. It was deemed inexpedient to impose new taxes to provide for thecost of the public works. Great was the embarrassment in America, and asno more money came from England, it was necessary for the Americans tolook for it in their own country. 

Business circles were flooded with long-time paper running at a discountof one half of 1 per cent. A month. Discount rose to 25 per cent. Thepanic was so great that all confidence was destroyed. The Bank of theUnited States, in order to maintain its credit, paid its depreciatedlong-time paper. 

The struggle between the Bank and its opponents, led by President VanBuren, re-commenced. These last declared that the Bank had erred incirculating the $4, 000, 000 of notes of the old bank, which should havebeen retired coincidently with the charter; and the Senate forbade theircirculation. 

The Government claimed large sums from the Bank, the statement of whichshowed close to $4, 000, 000; and, as it could not secure this amount inmoney, it was decided to issue $10, 000, 000 of Treasury bonds. The Bankparty wished to push the Government into bankruptcy, in order to induceit to turn to them for help, and, through the issue of "circularspecie, " oblige it to adopt a system of paper money. 

A bill was brought forward with this view. Biddle, who wished toincrease the circulation, said he could resume specie payments, and thusforced his shares to rise; but the rejoicing of the Bank party was soondisturbed by the fact that collectors of taxes were forbidden to receiveany bank note for less than $20, which was not redeemable in hard money. 

After a struggle of eight years the separation became complete, and theadministration of National finances was withdrawn from the Bank. 

In 1836, a law was passed providing that upon the expiration of itscharter, the National funds should be again deposited with it, as soonas the Bank resumed specie payment. Upon the suspension in 1837, theGovernment was forced to abate the law, in order to protect the specie, and imposed on its financial and postal agents some of the duties of theTreasury. In 1840, the management of the public Treasury constituted aseparate and distinct department. Such was the liquidation following thepanic, that Congress granted the Bank three months in which it musteither resume specie payment or liquidate. To conform to this decree theState of Pennsylvania fixed the resumption of specie payments by itsbanks, for January 15, 1841. The shares of the Bank, which had yieldedno dividend in 1839, and offered a similar outlook for the first half of1840, fell to $61. They had been quoted as high as $1, 500. Generalliquidation and a loss of 50 per cent. Was inevitable. This occurred in1841. Thus ceased for a time the bank mania in the United States. 

We will recall here Buchanan's opinion about the Bank: "If the Bank ofthe United States, after ceasing to be a national bank, and obtaining anew charter in Pennsylvania, had restrained itself to legitimatebanking, had used its resources to regulate the rate of home exchange, and had done everything to hasten the resumption of specie payments, itwould have resurrected the National Bank. 

"But this is no longer possible; it has defied Congress, violated thelaws, and is mixed up in politics. The people have recognized theviciousness of its administration; the President, Mr. Biddle, hasconcluded the work Jackson began. "

Tables indicating the banks which suspended during the panic: In 1814, 90; in 1830, 165; in 1837, 618; in 1839, 959. The last panic, from 1837to 1839, produced, according to some pretty accurate reports of 1841, 33, 000 failures, involving a loss of $440, 000, 000. 

PANIC OF 1848. --The entire discounts, which had risen to $525, 000, 000 in1837, fell to $485, 000, 000 in 1838, only to rise again to $492, 000, 000in 1839, and the real liquidation of the panic occurred only then. Discounts fell at once to $462, 000, 000, then $386, 000, 000; the abundanceof capital, and the low price at which it was offered, cleared out bankpaper until it was reduced from $525, 000, 000 to $254, 000, 000 in 1843. [Footnote: We have not the outside figures, the maximum or minimum. ]

The metallic reserve increased from $37, 000, 000 to $49, 000, 000 (1844);the circulation was reduced from $149, 000, 000 to $58, 000, 000. 

The number of banks in 1840, from 901 fell to 691 in 1843, and thecapital itself from $350, 000, 000 in 1840 was reduced to $200, 000, 000 in1845 and to even $196, 000, 000 in 1846. 

All these figures clearly indicate liquidation. The market, freed fromits exchange, was enabled to permit affairs to resume their ordinarycourse. 

In fact an upward movement was taking place. Discounts rose from$264, 000, 000 to $344, 000, 006 in 1848. 

Banks increased from 691 in 1843 to 751 in 1848, and their capital grewfrom $196, 000, 000 in 1846 to $207, 000, 000. The paper circulation rosefrom $58, 000, 000 to $128, 000, 000 in 1848. Deposits from $62, 000, 000reached $103, 000, 000 in 1848. The metallic reserve alone fell from$49, 000, 000 in 1844 to $35, 000, 000 in 1848. 

The consequences of the European panic were felt in America, but withoutcausing much trouble. The liquidation of the panic of 1839 was barelyover, and was still too recent to have permitted sufficient extension ofbusiness. 

Embarrassments were slight and brief; discounts, nevertheless, fell from$344, 000, 000 to $332, 000, 000. 

The store of bullion, in spite of the surplus and the favorable balanceproduced by the export of grain to Europe, fell from $49, 000, 000 to$35, 000, 000; with the following year the forward movement recommenced. 

PANIC IN 1857. --The stoppage in 1848 was very brief. Discounts roseregularly from $332, 000, 000 to $364, 000, 000, $413, 000, 000, $557, 000, 000, $576, 000, 000, $634, 000, 000, and finally $684, 000, 000 in 1857. Theprogression was irresistible. The circulation rose from $114, 000, 000 to$214, 000, 000. The banks increased at such a rate that, from 707 in 1846, with a capital of $196, 000, 000, there were in 1857 1416, whose capitalhad risen to $370, 000, 000, --a very inferior figure, in comparison tothe number of banks, to that of 1840, when 901 banks only had a capitalof $358, 000, 000. 

The metallic reserve, from $35, 000, 000 in 1847, easily reached$59, 000, 000 in 1856: but it was in proportion neither with the numberof the banks nor their discounts and circulation; and, after all, thisis only a moderate sum. We have not the extreme maximum or minimum, andthe suspension of specie payments took place notwithstanding the amountof cash on hand, which was greater in 1857 than in 1856. 

Deposits accumulated from $91, 000, 000 to $230, 000, 000; they rose totheir greatest height in the very year of the crisis; nevertheless, they could not be drawn out. 

During the Eastern war the prosperity of the United States had been sogreat that the clearing-houses established in New York in 1853, and inBoston in 1855, offered only a slight opposition to the excessive issue:at least, in 1837 the Congressional report stated the cash on hand was$6, 500, 00--that is to say, $1. 00 in metal to each $6, 00 in paper. 

In 1857 cash on hand was $14, 300, 000, or $1. 00 in hard money for each$8. 00 in paper. 

The banks had attracted deposits by high interest, and loaned the moneyto wild speculators. On the 22d of August, 1857, the amount of loans hadbecome almost $12, 000, 000, counting together metal, notes, and deposits. 

From December, 1856, to June, 1857, they had shown great strength. Discounts had risen from $183, 000, 000 to $190, 000, 000 in June; cash onhand had risen from $11, 000, 000 to $14, 000, 000. The only evidence ofweakness, so to speak, was that the withdrawal of deposits had risen from$94, 000, 000 to $104, 000, 000, while the circulation diminished $1, 000, 000. 

In June "the position of the Bank ought not to have caused any fear, tothe most far-sighted, " says the report of the Committee of Inquiry. 

Foreign exchange was favorable, and it is known that is the bankers'guide. June, July, and August were tranquil, except for a slightdisturbance in business experienced by the country bankers through theconstantly increasing amount of notes presented for redemption, andamong the city bankers by requests for discount. 

The collapse of the "Ohio Life, " which had the best New York connection, was the first muttering of the storm, and was soon followed by thesuspension of the Mechanics' Banking Association, one of the oldestbanks in the country. The suspension of the Pennsylvania and Marylandbanks followed. Public confidence remained unshaken--it relied upon thecirculating medium. 

Only one bank went to protest, and that on September 4th, on a $250demand. Another protest followed on the 12th, a third on the 15th, both for insignificant amounts. Demands in the way of withdrawalamounted to almost nothing, and there was nothing like a panic. 

The deposits at the savings banks were a little less, but this did notcontinue. Only at the close of September was the demand by the countrybanks for payment upon the Metropolitan American Exchange Bank forpayment greater than it had ever been. 

On the 13th of October, with exchange at par, an abundant harvest, witha premium of 1/4 to 1/2 per cent. On metal, the banks suspended speciepayment, but resumed it on the 11th of December. The most criticalperiod lasted about a month. The first step towards resumption ofpayments was made after the resolution adopted by the Committee ofLiquidation to call upon the country banks to redeem the notes of theMetropolitan Bank, paying an allowance of 1/4 of 1 per cent. Interest, running from the 20th of November. 

At this time the city bankers held, in bills issued and in signed parcelsof $5, 000 each, about $7, 000, 000 due by the country banks. They were thusenabled to accomplish the payment of their notes at the rate of 20 percent. A month by the 1st of January, 1858. The same favor of repayingtheir notes at the rate of 6 per cent. Was granted to the city banks. 

We need not inquire if, having granted this delay, the banks provedtheir liberality. The abundant harvest also assisted liquidation. 

From 1853 to 1857 the metallic reserve fell to $7, 000, 000, depositsrose to $99, 000, 000, and discounts and loans to $122, 000, 000. 

 BANKS OF NEW YORK. 

 Proportion of Metallic Reserve. Deposits. Discounts, the Metallic Advances. Reserve to Deposits. 

 1854 . . . $15, 000, 000 $ 58, 000, 000 $ 80, 000, 000 26% 1855 . . . 9, 900, 000 85, 000, 000 101, 000, 000 11% 1856 . . . 10, 000, 000 100, 000, 000 112, 000, 000 10% 1857 . . . 7, 000, 000 99, 000, 000 122, 600, 000 7%

The reduction of the metallic reserve, increase of deposits and ofdiscounts and of advances, are here clearly indicated. 

From 1853 to 1857 the bank circulation hardly varied $100, 000, indicating that the demand for hard money came from abroad and from theinterior. The circulation was not the cause of the suspension, --at leastsuch was the opinion expressed by the superintendent of the New Yorkbanks in his report. 

In 1856 twenty-five companies were started, and three bankers openedbusiness with a capital of $7, 500, 000, of which $7, 200, 000, was paid in. 

In 1857 there were only five of these banks and three bankers having acapital of $6, 000, 000, of which only $4, 000, 000 were paid in. Thecollateral deposited by the banks represented $2, 500, 000 in 1856, onwhich credit of $2, 000, 000 in notes was granted. 

In 1857 the same collateral did not exceed $560, 000 estimated value, onwhich a credit of $383, 000 in paper was granted. 

At the height of the crisis failures were so numerous that a generalsuspension of payments, and, in consequence, a stoppage of business wasdreaded. This suspension, in place of being general, turned out to bemerely partial; it occurred at a juncture when it might well be fearedthat it would lead on to the very greatest disasters, but, far fromharming, it helped the market. The banks had suspended payment upon acommon understanding among themselves and with business circles. Thecritical moment having passed, tranquillity reappeared as soon as thecourse determined on was known. 

If suspension of payment hurts the credit of a bank, it does notnecessarily lead to the depreciation of its bank notes. 

There are a good many proofs of this: in 1796, when the Bank of Englandsuspended, its bank notes did not depreciate; and if this state ofthings did not last, the blame must be laid upon the excessive issue. And in France, in 1848 as well as in 1871, the Bank of France suspendedwithout the depreciation of its bank notes becoming very noticeable. So, in New York, bank notes passed at 2 or 3 per cent. Loss at this crisis. 

The crisis disappeared with the end of the year, and resumption ofpayments took place between New York and Hamburg, with the return ofspecie and a rate of 4 per cent. 

It was the same in France and England. A more serious panic and a morerapid recovery had never been seen. The rigidness and not the severityof the pressure that had to be exercised shows the condition ofbusiness. There had been most blamable practices employed; but themarket as a whole was sound, and had faced the storm. 

Only four banks had suspended, three of which were shaky before thepanic, and the fourth had already resumed payments. 

At no other period could one have obtained such an amount of credit upona simple paper circulation; fictitious paper was the source of all thewrecks. To get it into circulation the most varied contrivances wereresorted to, and fraud itself was not wanting; the signatures evenbecame fictitious, their owners could not be found. Shams anddiscriminations under all forms, designed to permit speculation withoutcapital, without exchange of goods, without real transactions betweenthe drawer and the acceptor of the bill of exchange, were rife. 

In his message, President Buchanan ascribed the crisis to the vicioussystem of the fiduciary circulation, and to the extravagant creditsgranted by the banks, although he was aware that Congress had no powerto curb these excesses. When there is too much paper, when the publichas created an endless chain of bank notes, representing no real value, it is enough that the first ring break for the whole gear, thus nolonger held together, to fall to pieces. If we mark the situation of theNew York banks before and during the panic--that is to say, in 1852 andin 1857, we will ascertain as follows:

 June, 1851. June, 1856. June, 1857. 

 Capital . . . . . . . . . . . . $59, 700, 000 $92, 300, 000 $107, 500, 000 Circulation . . . . . . . . 27, 900, 000 30, 700, 000 27, 100, 000 Deposits . . . . . . . . . . . 65, 600, 000 96, 200, 000 84, 500, 000 Paper discounted . . . 127, 000, 000 174, 100, 000 170, 800, 000 Cash on hand . . . . . . . 13, 300, 000 18, 500, 000 14, 300, 000

This table demonstrates that two items show a great increase: capitalincreased $47, 000, 000 and paper discounted $43, 000, 000; while, in faceof an increase of $1, 000, 000 of specie on hand, the note circulationdecreased $800, 000. 

Far from finding a mistake, we find a proof of the Directors' prudence. If there was an error in the issuing of paper, it was not on the side ofthe banks; it was the public itself that was chiefly in fault. 

We find the causes of the panic in the issues of railway obligations andshares, which had chiefly been placed in European markets, and whosegross amount was estimated at L1, 000, 000. The speculation in land andrailroads had been carried on either with borrowed money or by opencredits, and by accommodation notes, back of which there was no secondparty. 

The mistake of the banks was in trying to conduct their whole businessby their note circulation and to concentrate their capital in the bankoffices, and meanwhile, as they refused to loan to the stockholders ofthe banks, discounts in New York fell off $10, 000, 000. Finally thecapital could not be entrusted to the disposal of the banks and it wasnecessary to compel them to make a deposit of $100, 000 for eachassociation, and $50, 000 for each banker. 

Such were the final advices given by the inspector-general of the banksof New York at the close of his report, dealing with how to prevent therecurrence of panics. To have confidence in their efficacy, it wasnecessary to forget the past and its lessons. 

The reforms already made and those still asked for in the bank systemcould yield no remedy for those abuses lying beyond legislative action. The American newspapers did not hesitate to demand them, well aware thatthey would produce no effect; however, they congratulated themselveswith having drawn away from effete Europe one million sterling nowrealized upon the soil of the United States without any equivalent givenfor it to the foreign lenders. 

PANIC OF 1864. --The crisis of 1864 was mixed up in the United Stateswith the War of Secession; it was a political crisis, and is notproperly to be considered here. 

PANIC OF 1873. --During the last two months of 1872 the American markethad been very much embarrassed; the lowest rate of discount was 7 percent. , and in December it was quoted at even 1/32 of 1 per cent. Or aquarter of 1 per cent. A day!

The year 1873 was anxiously awaited in hope of better times. In themiddle of January, 1873 the rate of interest declined a little to 6 or 7per cent. , but soon the rate of 1/32 of 1 per cent. Per day reappearedand continued until the month of May. 

In the first days of April the market was in full panic; it grewsteadier in the first week of May, and in the month following. Itrelapsed on September 1st, and requests for accommodation redoubleduntil the sharpest moment of the panic. On that day there were no quotedrates; money could not be had at any price: some few loans were made at1-1/2 per cent. Per day. 

This panic broke forth on September 18th, through the failure of JayCooke, after a miserable year, during which money was constantly soughtfor and was held at very high prices in all branches of business. As tothe loans for building railroads, they followed one another so rapidlythat, from the month of October, 1871, to the month of May, 1873, theycould not be placed at a lower rate than 7 per cent. Bankers succumbedbeneath the burden of their unsalable issues. This was a gravemisfortune for the railroads. In the single year 1873 there wereconstructed 4, 190 miles of railroad in the United States, which, at$29, 000 per mile, represented the enormous sum of $121, 000, 000, and inthe last five years $1, 700, 000, 000. 

The commercial situation was not so bad, and the number of failures didnot reach the proportion that might have been feared. 

After the failure of Jay Cooke came those of Fiske & Hatch, of the UnionTrust Company, of the National Trust Company, and of the National Bankof the Commonwealth. On the 20th of September, for the first time, theStock Exchange in New York City was closed for ten days, during whichlegal-tender notes were at a premium of 1/4 per cent. To 3 per cent. Above certified cheques. 

On the 18th there was a run on the deposits. Withdrawals continued onthe 19th and 20th, especially by the country banks, and the banks'correspondents. No security could be realized upon; and in order torelieve the situation the Secretary of the Treasury bought $13, 500, 000of National 5-20 bonds, stating that he could do no more. 

The New York Stock Exchange was reopened September 30th, without anynotable occurrence; but everything was very low. Several othersuspensions occurred--for instance, that of Sprague, Claflin, & Co. 

The rate of discount being 9 per cent. , a panic was feared in London. The banks passed the most critical period on October 14th; out of$32, 278, 000 legal-tender dollars at the beginning of the panic, only$5, 800, 000 remained on hand. Not until the middle of November did thedecline stop and a slight advance take place. Throughout the panic thebank reserves were much below the legal requirement of 25 per cent; fromthe 13th to the 30th of September they fell to 24. 44 and 23. 55 per cent. 

The New York Clearing House in September adopted a measure whichpermitted dealings to continue. It authorized the banks to deposit thebills on hand, or the other securities they had accepted, in exchangefor which they issued certificates of deposit bearing 7 per cent. Innotes of $5, 000 to $10, 000 to the extent of 70 per cent. Of the securitydeposited. Thus $26, 565, 000 of them were put into circulation. 

Furthermore, they made a common fund of the legal tenders belonging tothe Associated Banks for mutual aid and protection. The suspension ofpayment took place first in New York and then extended to the largecities of the Union; it lasted forty days, until the 1st of November;this measure was looked upon as having prevented the greatest disasters. 

The table setting forth the situation, compared with the balance sheetsof the Associated Banks of New York on January 1st, April 1st, July 1st, September 1st, and October 1st of the years 1870, 1871, 1872, and 1873, shows us the following changes: discounts had fluctuated from$250, 000, 000 in January, 1870, to $309, 000, 000 in September, 1871; theyhad become reduced to $278, 000, 000 in September, 1873, on the eve of thepanic, and from the month of September, liquidation of the panic havingbegun, they were reduced to $250, 000, 000. Deposits from $179, 000, 000 inJanuary, 1870, rose to $248, 000, 000 in July, 1871, with $296, 000, 000 ofbills discounted, and once more reached $198, 000, 000 in September, 1873, with $278, 000, 000 of discounts and $195, 000, 000 in December. 

Even at the most critical moment of the panic they continued larger thanthe usual average of the preceding years. 

The metallic reserves played too feeble a role to have caused failure;they had varied from $34, 000, 000 in June, 1870, to $9, 000, 000 inSeptember, 1871, $18, 000, 000 in September, 1873, and $23, 000, 000 inDecember, 1873. 

The circulation varied still less: from $34, 000, 000 in January, 1876, itdecreased to $27, 000, 000 in July, 1872, and remained at the same figureduring the year 1873, if we can judge of this by the balance sheetrendered on the first day of each quarter. In each case there is noopportunity for us to charge an excessive issue. 

According to the statement of the Comptroller of the Currency, paperdiscounted decreased between the 12th of September and the 1st ofNovember from $199, 000, 000 to $169, 000, 000. 

To sum up, the circulation had fluctuated very little; deposits from$99, 000, 000 had increased to $167, 000, 000 between the 12th and 20th ofSeptember, at the most critical period; and when suspension wasuniversal, they had declined to $89, 000, 000. After the breaking out onthe 18th of October, and since then from the 22d of November, they hadrisen to $138, 000, 000. 

The metallic reserve, after a brief revival from $14, 000, 000 to$18, 000, 000 between the 12th and 20th of September, had fallen back to$10, 000, 000, only to rise to $14, 000, 000 in November. 

In the midst of these difficulties, the securities of the various Statesheld up. Since the first months of 1873, the demands of the Englishmarket caused an upward movement in them; in September it was impossibleto make a loan, without using them as collateral. In order to help themarket somewhat, the Treasury bought about $13, 000, 000 of Nationalsecurities on the Stock Exchange, but, lacking resources, that was theonly effort it could make. The German Government invested quite a largesum in the new five per cents. , so that the advance in public securitieslasted through the whole year: the market rate for 5-20's advanced from91 per cent. In April to 96 per cent. In October, in the midst of themarket's panic. 

The $15, 000, 000 of indemnity awarded by the Geneva Court of Arbitration, and paid by England for having admitted privateers into her ports, wasput into 5-2O's. Apart from this strength in the public securities, therailway obligations, especially those upon new roads, were very muchdepressed; they could no longer be placed, ninety new companies havingstopped paying their coupons, whilst those of the old lines held theirquotations. 

Great speculators, Vanderbilt at the head, formed syndicates, embracingseveral companies, and made prices as suited their plans. The death ofMr. Clarke in June dealt the first blow to this combination, and thefailure of George Bird Grinnell brought about its dissolution. 

The liquidation of this tremendous concern kept down prices for a longtime. 

The price of gold, still quoted at 112-1/2 per cent. In January, 1873, rose to 119-1/2 per cent. In April, superinduced by speculation, for atthe height of the panic it declined to 106 on the 6th of November. It is true that at that time all doubtful accounts were liquidated, and demands for gold had disappeared; if we were to rely upon the exportfigures only, we would find them less than in the preceding years. 

Exchange rates were much more depressed; from 109. 45, representing par, they fell to 107. 25 for the best 60-day paper. This paper was muchsought after by speculators, who, when discounting it, procured bondsauthorizing them to transfer the titles unless payment was made promptlyat maturity. Prices fell so low that it was often impossible tonegotiate paper at any price. The activity reigning at the beginning ofthe year showed itself in the Exchange movement; the excess of importsover exports rose in the first months to $100, 000, 000, whilst in thepreceding year it did not exceed $62, 000, 000; prices ruling in theAmerican market attracted goods from all quarters. 

PANIC OF 1884. --The panic which burst upon the United States in 1884 wasthe last thunder-clap of the commercial tempest which had reigned sincethe month of January, 1882. Public opinion already recalled thedecennial period which separated the existing panic from that of 1873. The acute period was of short duration; the crash occurred on May 14th, and the decline of values had touched bottom by the end of June. Fromthe 9th of June the people began to steady up, they felt the groundfirmer under their feet. The situation gave evidence of great strength;and, notwithstanding the dearness of money, and an enormous fall inprices, there were only a few failures, and at the close of the yearequilibrium was re-established, although the liability of the losses hadrisen to $240, 000, 000. These losses, it is true, were almost entirelyborne by financiers and speculators, rather than by manufacturers andtraders. 

The month of May, 1884, concludes the prosperous period which followedthe crisis of 1873. During this period the most gigantic speculations inrailroads occurred; the zenith of the movement was in 1880, and as earlyas 1881 a retrograde movement began, only to end in the disasters inquestion. The decline in prices had been steady for three years; theyhad sunk little by little under the influence of a ruinous competition, caused by the number of new lines and the lowering of rates, but aboveall through the manipulations by the managers on a scale unexampleduntil now. In connection with the disasters of May, 1884, the names ofcertain speculators who misused other people's money, such as Ward, ofGrant & Ward; Fish, President of the Marine Bank; and John C. Eno, ofthe Second National Bank, will long be remembered. General Grant, whowas a silent partner in Ward's concern, was an innocent sufferer, bothin fortune and reputation. 

The Marine Bank suspended on the 5th of May, and in the following weekthe Metropolitan drew down in its train a large number of bankers andhouses of the second order. The confusion was then at its height. Owingto the very delicate mechanism of the credit circulation, the banks andthe clearing house were the first attacked and the most shaken, but theyimmediately formed themselves into a syndicate to resist the storm whichwas upsetting all about them. As cheques were no longer paid, settlements no longer took place, and the credit circulation wassuspended; this stoppage was liable to induce the greatest consequences, hence it was necessary to be very circumspect. Here it was not possibleto suspend the law, as in England the Act of 1844 was suspended, permitting an excess of the official limit for the note issue, but thebanks could have been empowered to demand authority to change theproportion enacted by the law creating National Banks. They had norecourse to any of these violations of the Statutes, which prove onlytoo often under such circumstances that regulation by law is impossible;they satisfied themselves, without having the public powers intervene, with issuing clearing-house certificates, that is to say, promises, which they were bound to accept as cheques in settling up the operationsof each day. It was through this help that the Metropolitan Bank wasenabled to resume payments on the 15th of May, the evening of the dayfollowing its suspension. The Second National Bank was a loser throughthe acts of its President, Mr. John C. Eno, but his father and theDirectors hastened to make good the deficit. At this moment theexcitement was intense, deposits were withdrawn, and 1 per cent. A daywas paid, and even more, to obtain ready money or credit; under theinfluence of numerous sales of securities, exchange fell rapidly, metallic money was secured in London even, to be hurried to New York. Never could purchases be made under better auspices. Above all is thistrue when we observe that the condition of companies was much betterknown than in 1873. The year 1883 had been disturbed by numerousfailures. There had been no crash, but prices, far from advancing, hadheld their own with difficulty. On the eve of the breaking out of thepanic there was complaint about the accumulation of goods in thewarehouses, and of the difficulty of making exports. No scheme workedout, despite a very high protective tariff, and people were askingthemselves what was its effect under the influence of unfavorableexchanges. Gold flowed away from the country, and cash on hand decreasedeach day. 

On the 1st of January, 1884, the New York & New England Railroad wasplaced in the hands of a receiver by order of the court. The same thinghappened on the 12th of January to the North River Company. In February, March, and April many houses exhibited their balance sheets. The fall inprices grew accentuated not only on the Stock Exchange, but in allmarkets. The discomfort increased until the 6th of May, the day on whichoccurred the failure of the National Marine Bank, whose President wasassociated with the house of Grant and Ward, which went down shortlyafterwards with a liability of $17, 000, 000. This financial disaster madea great stir. Anxiety spread everywhere, when on the 13th of May thePresident of the Second National Bank of New York was also forced tosuspend payment with a liability of $3, 000, 000; this was the final blowto credit. Every operation was suspended, all exchange becameimpossible; not securities but money was lacking. At one time the panicwas such that the rate of discount and loans rose to 4 per cent. A day!

Although the panic was general, it was rather a panic of securities inthe chief places of the United States, especially in New York. 

One no longer knew on whom to count to provide ready money. Offeringswere made on the Stock Exchange where there were no bidders, and themarket disappeared in the midst of a panic which paralyzed every one. 

This melancholy state of things was still further aggravated on the 14thof May by the failure of Donnel, Lawson, & Simpson and Hatch & Foote. OnMay 15th it was the turn of the Savings Banks of New York, of Piske &Hatch, and of many others. It was impossible to obtain any credit fromthe banks, and all securities were unsalable, unless at ruinous rates. Reduced to such an extremity, it was necessary to adopt some course tohelp the market and avoid suspension of payments. 

The certified checks issued by the banks did not answer, and it wasnecessary to have recourse to a new means of settlement. The members ofthe clearing house emerged from their usual passive role to interveneand to do a novel thing: they issued certificates that they accepted inthe name of the most embarrassed institutions whose fall they wished toavert, in order to prevent the failure of others. Then, as everybody wasmaking default, the Secretary of the Treasury in his turn wished to aidthe common effort to sustain the credit of the situation, and, in orderto accomplish this by the most regular methods, he pledged himself toprepay the debt, whose term was close at hand. 

Despite these last helps it was easily seen how great must be thedisorder, to induce recourse to such methods. Never had they beenemployed until now, which is proof enough of the enormity of thesituation, whose equilibrium, had been disturbed since 1887, the year inwhich high prices in everything had been reached on the Stock Exchange. 

To still further increase the joint responsibility of the members of theclearing house, it was agreed that a committee should be charged withreceiving as collateral bills and securities in exchange for whichcertificates of deposit bearing 3 per cent. Were issued at the rate of75 per cent. Of the amounts deposited. This agreement being adopted, away to re-open the National Metropolitan Bank was sought. A selectionmade from its collection of bills showed the securities it could pledgefor clearing-house certificates; and, its circulation being thusre-established, it was enabled on May 15th to take part in settlements. 

Upon the announcement of a syndicate composed of the banks and theclearing house, things settled down; the general distrust diminished;there was the necessity and wish to realize, but funds were lacking. 

The rise in the discount rate attracted foreign capital little bylittle, and exchange grew easier. With the help of the syndicate thecredit circulation became re-established, and the rate of discountdeclined to 5 per cent. For commercial needs money was always to be hadat 4-1/2 per cent. And at 5 per cent. When at the Stock Exchange it wasnecessary to pay 4 per cent. Per day!

The panic was terrible from the 3d to the 10th of May; for two days noone wished to part with his money; it was impossible to borrow on anycollateral, at any price whatever. Hence came a decline in the publicsecurities, which fell below the low prices of 1873. 

The public complained that it could not have foreseen the panic, becausethe loss of gold had been concealed by the oft-repeated assurance thatthere was a reserve of $600, 000, 000 in Washington. 

Similar situations in 1857 and in 1873 were recalled, and it wasremarked that like troubles had not occurred until after a long periodof high prices, when capital was scarce and the rate of interest high, whereas this was far from being the case at this period. 

It was nevertheless notorious that the decline in prices began two yearsback, that the advance in prices had been stopped by the breaking out ofthe panic of 1882 in Europe, at Paris, and that since that moment priceshad begun to decline, less rapidly, however, than in Europe, because theshock had then merely disturbed a market which had not yet recoveredfrom the panic of 1873, from which, in consequence of theFranco-Prussian war, France had escaped. The mine not being sufficientlycharged in the United States the explosion had not recurred. Speculation, unable to restore a new impulse to the rise in prices, wasnevertheless able to hold its own, until May, 1884, when the delayedexplosion finally occurred, covering the market with ruins and bringingabout a liquidation with its accustomed train, a great and lengthydecline of prices. 

We may here note similar delays in the breaking out of panics, in theperiod of 1837, 1839, 1864-1866 in France and in England. Even aninvolved state of affairs may be hidden by certain conditions, and thesituation, although itself exposed to the same excessive speculation, may witness the breaking out of the panic which has been delayed for acertain time, only to occur simultaneously with the beginning of adecline of prices, and when it is thought that danger has been escaped. 

As in Brussels and in the United States in 1837-1839 and in England in1864-1866, large houses and powerful institutions of credit hadmaintained a whole scaffolding of speculation which was already out ofplumb, but still able to stand upright through the general effect of theparts which connected them, and in this unstable equilibrium it sufficedfor a single one to detach itself in order to overthrow the wholeedifice at a juncture at which it was hoped it would continue to standand even grow stronger. Does not this prove that after these epochs ofexpansion and activity characterizing prosperous periods (and there isno prosperous period without a rise in prices) a stoppage is necessary, a panic allowing a period of rest to permit the liquidation oftransactions employed in helping to make a series of exchanges at highprices, and to allow the capital and savings of countries which had beentoo rapidly scattered and exhausted to reconstruct themselves duringthese years of tranquillity and of slackening business?

Confidence had already returned in New York despite the steady demandsof the country bankers upon their correspondents, which pulled down thereserve below the legal limit; nevertheless in the midst of all thefailures there was no suspension of specie payments. 

The crisis of 1884, according to the Comptroller of the Currency, hadbeen less foreseen than the crisis of 1873, and this notwithstanding itwas sufficient to observe the number of enterprises and schemes flung asa prey to speculation, in order to foresee that financial troubles anddisasters to the country must result. 

The continuation of payments in gold, the low prices, and the outlookfor a fine harvest gave courage, preserved the remaining confidence, andalready allowed a speedy resumption of business to be anticipated. 

The panic, although spreading over the whole Union, raged especially inNew York. Without wishing to expatiate upon its primary causes, theComptroller of the Treasury could not help remarking that it had shownitself under the same circumstances as recently as in 1873; above allthere were issues for new enterprises; the speculation had rushed totake them up at a premium, and people now asked their true value. 

At this juncture railroad earnings, instead of increasing, showedweakness, and suffered a slight reaction; the solvency of housesinterested began to be doubted; new loans were refused them, andimmediately the artificially constructed edifice gave way. 

To advance prices on the Stock Exchange, the banks had made immenseloans on the shares and obligations of the new railway issues, and assoon as quotations, artificially maintained at the rates to which theyhad been carried, began to drop, everything became unsalable. Until thisoccurrence, led on and fascinated by the rise in prices, every one hadbought; hardly was the advance arrested when every one reversed theiroperations at the same time. The bankers had loaned not only theircapital but in addition a part of their clients' deposits; brokers hadencouraged a speculation which brought them business; and thus it wasthat all hands had flung themselves upon a path that could only lead toruin. 

The Comptroller of the Currency remarks with pride that, in the midst ofthe general upheaval and numerous failures of honorable houses, only twoNational Banks were involved: one of them failed, the other suspendedpayment. 

The amount of liability of the banks and bankers of New York whosuccumbed during the month of May was estimated at $32, 000, 000, whereasthat of the only National Bank which shared their fate did not exceed$4, 000, 000, the bank which suspended not having occasioned any loss. 

Unhappily the year did not pass without its being necessary to mentionnew misfortunes: eleven National Banks failed, and it is a fact thatamong the banks and private bankers more than a hundred were counted inthe list. 

Despite the close watch bestowed upon the banks it was surprising touncover all the tricks to which the National Marine Bank of New York wasgiven over, and, which until now had escaped the official examiners. 

It suspended payment on May 6th, and the same day it was debited with$555, 000; the books had been erased and overcharged for the benefit ofone client alone to the amount of $766, 000. He was a debtor to theamount of $2, 400, 000, six times the Bank's capital, and a portion ofthis debt was under a good many names of subordinate clerks. This sameclient had three open accounts, one as administrator, then a generalaccount, and a special account. The whole thing was fictitious; theschemers sought to conceal irregularities, and had thus imposed on theexaminers and on the Directors themselves. 

The certificates issued by the clearing house, when credit had entirelydisappeared, rendered a great service and sustained a great number ofhouses in equilibrium, which without this assistance must havesuccumbed. They were granted especially to the banks belonging to theAssociation, in order to make their daily settlements. 

During the crisis of 1873 the same means had been resorted to, but toolate; the panic was already at its height and the commotion general, sothat nothing could re-establish confidence. This was not the case in1884: the rapidity and decision with which the Associated Banks tooksteps gradually re-established confidence throughout the country. Themaximum of issue did not exceed $24, 900, 000, of which $7, 000, 000 werefor the National Metropolitan Bank; from the 10th of June balances atthe clearing house were paid in legal money. Commercial paper, which forthe most part was the collateral for these certificates, had alreadybeen redeemed. The Metropolitan National Bank alone requested time toliquidate. 

The issue of these certificates was very rapid: $3, 800, 000 on the 15thday of May, $6, 800, 000 on the 16th, $6, 700, 000 on the 17th, or more than$17, 000, 000 in these first three days; then on the 19th, 20th, and 22d, $1, 500, 000, and that was all. The remainder of the amount was given indriblets. Payments, although slower, were made from the 1st of July tothe 1st of August. 

Let us now run over these occurrences: in 1873 instead of $24, 900, 000 incertificates $26, 565, 000 had been issued; $22, 000, 000, had been issuedbetween the 22d and the 29th of September, the redemptions took placefrom the 3d of November to the 31st of December. 

In both cases the same amount, so to speak, had been sufficient toanswer for all needs. If so small a difference sufficed to save adisordered market, people could not understand why panics could not beprovided against. It was necessary to remember that this assistance wasonly felt when the decline of prices had already re-established anexchange of goods, bringing about the liquidation of housesunfortunately involved. 

From the month of June, owing to the bank balances or the rate ofexchange, the tranquillity and steadiness which had becomere-established grew daily; after the storm of the first few days no newdisasters had occurred except the failures of Mathew and of Morgan. 

The position of the market grew firmer and the clearing house reducedits loan certificates, which now replaced the former excessive issues ofbank notes. From $24, 000, 000 they had already decreased to $18, 000, 000;of this amount $6, 000, 000 were taken by banks as a last resource, andthere then remained only $12, 000, 000 in circulation. These $6, 000, 000had served to sustain the shaken banks, and it is pleasant to state thatoutside of these requirements the amount needed was no larger. 

Failures had ceased in the great centres, but they continued in theinterior of the country; the shock, like a great wave, took a certaintime to overrun the various States. 

SUCCESSION OF PANICS IN THE UNITED STATES STUDIED THROUGH THE BALANCESOF THE BANKS. --Following the historical summary of panics in the UnitedStates it will be useful to have a general table, so as to glance at thevery rare documents which permit us to follow the working of the Banksthrough their balance sheets. We know their organization, and we takeupon ourselves to state results flowing from it. 

It strikes us at once that abuses and panics have constantly occurred. Can we note a difference in the frequency and gravity of the casualties, according to whether we observe them working under the former or the new(the National Bank) system, inaugurated during the War of the Secessionin 1864, when the machinery for the issue of bank notes was insufficientfor the new requirements?

Without lingering over the regulations before and after 1864, let usconsider the differences we may ascertain by examining the balancesheets. Unfortunately, the exactness of our observation is lessened onaccount of the very diversity of the field it covers. 

In the case of the banks of the United States we have had to contentourselves with the returns that the Comptroller of the Currency gives inhis annual report on a stated day during the months of February, May, June, October, and December, beginning with the year 1865. Before thatperiod we had only the yearly situation of the banks of the differentStates upon one given day; we are better informed on the second period;however, basing our conclusions upon the few balance sheets we possess, we ascertain the same series of development and increase. Although thereare lapses, still, from another point of view, the table will be morecomplete, because it embraces all the banks of the United States. Onsuch an extended field, it is true, we risk seeing great discrepanciesdisappear and lose themselves in the magnitude of the amounts whosemovements we follow. In order better to grasp them, we have put beforeus the returns of the banks of the United States, together with those ofthe Associated Banks of New York City; we may thus recognize and followthe share played by each of them. 

During the first period of the State Banks (1811-1864), the increase inthe number of the banks was continuous, except for two stoppages, in1841 and in 1862; in 1841, during the liquidation of the panic of 1839, and in 1862 at the beginning of the War of Secession; the crisis of 1857did not interrupt the movement. 

The capital of the banks had followed the same changes. From $52, 000, 000in 1811 to $368, 000, 000 in 1840, a reduction to $196, 000, 000 in 1846, and finally the last maximum reached in 1861, $429, 000, 000, at thebreaking out of the war. In 1864 a new organization of the banks underthe name of "National Banks" presented to the State Banks, withoutsuppressing them, a state of affairs destined to cause theirliquidation, which, in fact, practically occurred. 

As in England and France, the amount of discounts, as the balance sheetsgive it to us, rose each year during the prosperous period. 

Thus from 1830 to 1839 it reached $492, 000, 000 from $200, 000, 000, todecline again to $254, 000, 000 at the end of the liquidation in 1843. 

In the following period the same rising movement from $254, 000, 000 to$344, 000, 000 was reproduced in 1848. The panic in Europe burst forth in1847; it resounded very slightly in the United States in 1848, as itssubsequent liquidation in 1849 indicates, which only reduced the localdiscounts to $332, 000, 000. 

A new period of prosperity followed the preceding events; the growingmovement re-appeared, and from $332, 000, 000 carried the amount of thediscounts to $684, 000, 000 between 1849 and 1857. The panic broke outsimultaneously throughout the whole world; but notwithstanding thewrecks it caused, such was the saving already, so healthy was thegeneral situation of business, that, after having thrown out a littlescum, the current of affairs resumed its course until 1861, anddiscounts had already reached the amount of $696, 000, 000. This amount isgreater than that we have noted in 1857, but at that time (whilst themovement continued in Europe up to 1864), despite the shock it receivedby the declaration of war here, there was complete stoppage until theend of the struggle; we have here come across a political panic, not abusiness one. Peace re-established, the movement resumed its courseunder new conditions and with a reorganization of the banks under thename of "National Banks. " A change was due, but, as everything was madeready, it was speedy. The first balance sheet of the National Banksdates from 1864. The amount of discounts had already exceeded the sum of$100, 000, 000 in 1865, and grew to $500, 000, 000 in 1866. Once started themovement took its own course:

 1865 . . . . . . $166, 000, 000 1870 . . . . . . $725, 000, 000 1866 . . . . . . . 500, 000, 000 1871 . . . . . . . 831, 000, 000 1867 . . . . . . . 609, 000, 000 1872 . . . . . . . 885, 000, 000 1868 . . . . . . . 657, 000, 000 1873 . . . . . . . 944, 000, 000 1869 . . . . . . . 686, 000, 000

The yearly progression was interrupted as in Europe, and the explosionoccurred at the same time. The rise in prices stopped, and incipientliquidation became apparent at the end of the year, and reduced theamount of paper on hand to $846, 000, 000, but, instead of lasting, as inEurope, a movement of revival, analogous to that which had followed thepanic of 1864 in England, occurred. The amount of discounts rose from$856, 000, 000 to $984, 000, 000 in 1875, and then, and then only, the realretrograde movement showed itself as in Europe, and reduced the amountof the discounts to $814, 000, 000 in 1879, simultaneously with themovement in France and in England, when prices had reached the lowestquotations, and when a resumption of business was about to occur. In aword, affairs resumed their course; from the end of the year the amountof paper discounted rose to $933, 000, 000, and the steady advance as setforth in table No. 3 continued each year, until it reached$1, 300, 000, 000 in 1884. The panic had burst forth in Europe in 1882, andthe agitation, so lively was its impulse, lasted during eighteen months;but, as we have stated, the rise in prices ceased in 1882. 

Starting from this time, a reaction appeared. The paper on hand loweredto $1, 200, 000, 000 in 1885. This liquidation was scarcely noticeable, because we cover the whole Union, and there is always an upward movementin the new portions of it which have not yet taken part in businessmovements. If we note what occurred in the Associated Banks of New York, the very place where the greatest amount of business is carried on, thedepression of the amount of paper on hand is most noticeable after theinflation observed at the height of the panic, while the decrease thatwe point out showed itself more slowly with the slackening of business. Thus, in the last period, the greatest amount of paper appears onhand--at the close of 1881, $350, 000, 000, and the minimum in December, 1884, the very year the panic had burst forth, and when, during thefirst months, the sum of $351, 000, 000 reappeared once more; except for amillion, exactly the same amount there was in 1881. 

This maximum amount was only an accident, under the influence ofpressing needs at the time of the difficulty, for since 1881 the yearlyreduction of the maximum and minimum amounts ensued. This tendency hadoccurred suddenly, and disappeared likewise; the resumption dating from1885, a year sooner than in Europe. 

The discounts of the New York Banks, which had been reduced to$287, 000, 000, rose immediately upon the opening of the new period ofprosperity, and a growing activity carried them to $408, 000, 000 in 1889;after a few more fortunate years we come to the end of the period ofprosperity and high prices. 

We gather the following about discounts from the balance sheets of theAssociated Banks of New York. If we cast our eyes over the balancesheets of the National Banks of the Union, we must note a falling off of$100, 000, 000 in the paper discounted, that is, from $1, 300, 000, 000 to$1, 200, 000, 000 (1884-1885). After this short period of stoppage, clearlyindicating the necessity for liquidation, discounts resumed their steadyexpansion, and rose to $1, 470, 000, 000 in 1886, to $1, 587, 000, 000 in1887, and finally to $1, 684, 000, 000 in 1888, when we were in the midstof a period of development and consequently of high prices and ofprosperity; and the same is true in France and England. 

The study of a single section of the balance sheets, that of discountsand loans, has allowed us to follow the periods of prosperity, of panic, and of liquidation. When we next consider the other sections, we findthe confirmation of our anticipations. Among these sections, in theorder of importance, we notice first, public deposits in the form ofrunning accounts; they constitute the reverse of the loans anddiscounts, whose total is immediately credited to the banks' clients, and the increase of paper on hand also follows. From 1865 to 1873 thesteady increase was uninterrupted, viz. , from $183, 000, 000 to$656, 000, 000; the maximum amount shows itself in the first quarter of1873, eight months before the maximum of discounts and loans; in 1888they ran down to $622, 000, 000; there is, say, a difference of$300, 000, 000 between the two totals, and this difference is the same, weobserve, as that between the highest and the lowest of the two sections, as we notice it in the same year, during the liquidation of the panic of1873. [Footnote: See table of balance sheets of the Banks of the UnitedStates. ]

In the last period the progression is the same; from $598, 000, 000 theamount of deposits advanced to $1, 350, 000, 000, whilst discounts andloans reached $1, 684, 000, 000; that is to say, there was still adifference of $334, 000, 000. The relationship of the two sections wasmuch more marked than in France and in England, where the amountscarried in accounts current vary more. 

In the United States we then experienced a market based on credit, which, through discounts or loans by the banks, had reached the amountof the accounts current, and was about to call the clearing house intoaction to settle debts everywhere. 

The office of the circulation of bank notes, subsequent to the severeregulations enacted in 1863 for the organization of National Banks, hadvaried in the last two periods that we are studying. From 1863 to 1873, after the war troubles, in proportion as greenbacks were withdrawn, thebank notes issued by the National Banks not only took their place, butreplaced those of the State Banks, whose position the National Banks hadtaken. 

We observe them rise firstly from $66, 000, 000 to $341, 000, 000(1865-1873) at the sharpest period of the panic. We might even chargethem with causing it, if the disproportion alone of the two sums, $341, 000, 000 bank notes compared with $944, 000, 000 of bills discounted, did not at once repel this theory. It is only necessary to glance atthis idea to see its falsity. 

The maximum circulation of bank notes has here coincided with the panic, a thing which had not happened either in France or in England for a longtime, and instead of presenting its highest figure during theliquidation of the panic of 1873, it shows us its lowest figure, $290, 000, 000 in 1877. Far indeed from increasing at this time ashappened in Europe, the amount of bank notes in circulation decreased bymeans of the ebbs of metallic cash into the coffers of the banks: inreality the cause was lacking here; the ebb of specie was hardly felt atall. 

With $4, 000, 000 in 1865, the reserve was poorly provided, increasing to$48, 000, 000 in 1870. At the end of the bursting forth of the panic of1873 it became reduced to $10, 000, 000, at the worst of the panic to$16, 000, 000; then, under the influence of a slight whirl, it rose to$33, 000, 000 in 1874, without reaching the highest figure of thepreceding period, but soon the flow reappeared and reduced this metallicreserve to $8, 000, 000 in 1875. It was not until after this depressionthat the true ebb reappeared, when the circulation of bank notes was atits lowest figure ($290, 000, 000). 

Whilst the $8, 000, 000 specie reserve grew successively to $54, 000, 000, $79, 000, 000; $109, 000, 000, and finally to $128, 000, 000 in 1878, 1879, 1880, and 1881; that is to say, upon the approach of the panic, thecirculation also expanded from $290, 000, 000 to its highest figure$323, 000, 000 in 1882, the year of the European crash and of the stoppageof the rise of prices in the United States. As to the minimum amount ofthe specie reserve, it is to be noted in 1883, between the criticalyears 1882 and 1884. 

Metallic reserves are too small in the United States for theirfluctuations to exhibit the same regular course they offer us in Europe;the least need exhausts them, and the smallest payments fill them tooverflowing. The panic soon brought about a default in payment and aneed of metallic money to re-establish equilibrium, but this remedy, ifit does precede panics, sometimes precedes them by a year, as we haveobserved in 1883, and the same irregularity is apparent whether weobserve the banks of the whole United States, or the Associated Banks ofthe City of New York. 

After the panic of 1882-1884, the ebb of specie into the coffers of theNational Banks of the United States and of the Associated Banks of NewYork resumed its usual course, and raised its level in the case of theNational Banks from $97, 000, 000 to $177, 000, 000 between 1883 and 1885, and even to $181, 000, 000 in 1888. This ebb occurred both in England andFrance at the same time, proving that cash reserves do not increase tothe detriment of each other; it is a flood of specie or of bar-goldrendered easily available, through the conclusion of the decline ofprices and the slackening of business, extending to the whole world, andin which each one partakes in proportion to its wealth, and above all inproportion to its credit circulation, and of the perfection of thesettlements by means of clearing houses. 

This regular course in the metallic reserves is no longer to be noted inthe circulation of bank notes; instead of increasing and of entering itsexchanges during the return of specie into the coffers of the banks, they again took part in the paper-money reserves. From $323, 000, 000 in1882 we see the circulation of bank notes decrease each year little bylittle until it is reduced to $151, 000, 000 in 1888; and this remarkablefact confronts us in the face of an unheard of expansion of business, almost 50 per cent. Greater than in 1873; and of a twofold simultaneousreappearance of $84, 000, 000 specie and of $172, 000, 000 bank notes. Whatthen is the role of specie and of bank notes in the course of businessin the United States? Much inferior to that which it plays in Europe inthe absence of the machinery of a clearing house embracing the wholecountry, instead of being limited to some large cities. 

The multiplicity of banks has strikingly helped the economic progressof the United States. From 1, 500 National Banks in 1865 with a capitalof $393, 000, 000, the number rapidly rose to 2, 089 in 1876. 

The panic of 1873 did not hinder the movement; however, during itsliquidation, the number shrank to 2, 048, only to rapidly advance to2, 500 by the close of 1882, and 2, 664 in 1884, and this movement did noteven suffer a slackening as in 1873 during the liquidation of itscrisis; it continued steadily, and we enumerate 3, 120 banks in 1888. 

The increase is a third more than in 1876, but it is far from being thusin the case of the capital, which only rose from $504, 000, 000 to$588, 000, 000--that is, only 16 per cent. The small banks in the newcentres of population are the factor, then, which annually increases thenumber. 

THE CONDITION OF BUSINESS IN 1888-92. --[Footnote: The facts I state inthis _resume_ are based upon statistics printed in the _Commercialand Financial Chronicle_. --DEC. W. THOM. ]--The year 1888 was fairlyprosperous despite a Presidential election, but securities were heavy, depression was general, and some few stocks shrank amazingly. Excessiveissue of new railroad securities and disastrous competition betweencertain of the Southwestern roads were without prudence. Money was easy, bank-note circulation continued to decrease till it was only $151, 000, 000, and legal tenders to $81, 000, 000, but specie reserve rose to $181, 000, 000, the banking capital to $592, 000, 000 plus, the exports to $1, 350, 000, 000, and discounts and loans rose to $1, 684, 000, 000. 

The sharp speculations in wheat and the formation of the French coppercorner caused a certain fluctuation in general business. Large crops, excepting wheat; a flourishing cotton manufacture, a decline inproduction of petroleum by agreement, a 6 per cent. Decline in pig-ironproduction, a very heavy one in Bessemer iron, and a very small exporttrade as compared with imports occurred. But in the year 1889, theexport movement, consisting largely of cotton, was very great, being thegreatest since 1880, and near the maximum, and compared favorably withthe immense imports induced by the new tariff of 1890. In fact, the year1889 surpassed all its predecessors in the volume of trade movements;the bank clearings showing an increase of 13 per cent. Over 1888. Thecotton, corn, and oats crops were the largest ever raised, and the wheatcrop was almost the largest. But cotton brought fair prices, and cottonmanufactures and production of iron were also considerably ahead of anyprevious year, while petroleum played an important part at good prices. Railroad earnings showed a wonderful recovery from 1888, and manyreports gave the largest figures ever recorded. 

During this year many consolidations and a number of foreclosuresoccurred. Railroad building fell to 5, 000 miles compared to 7, 000 in1888. In general business, manufacturing and trade were extremelyactive, yielding plenty of work, good wages, and fair profits. 

But the wool crop and its manufacture, a decline in the anthracite coalproduction, farm-mortgage pressure in the middle West, and low rates forcorn and oats were untoward circumstances. Speculation on the generalexchange was small, indicating a growing congestion, as was proved bythe low bank reserves, especially in the last quarter of the year; butthere was a heavy absorption of investment securities. 

Gold, to the amount of $37, 000, 000, was exported in the first sixmonths. A small amount of it returned before 1890. Failures exceededthose of 1888 by 203 in number and about 20 per cent. In money. Thewoollen trade contributed much of this showing. 

Importations surpassed all previous years, while exports exceeded themby nearly $20, 000, 000, and the net export of gold amounted to nearly$40, 000, 000. Money was easy during the first quarter, and then for aweek a 10 per cent. Rate occurred. 

Thereafter, excepting the usual July 1st hardening, easy rates prevailedtill August. Stiffening and fluctuating rates ensued till 30 to 40 percent. In exceptional cases had been reached in December. 

During the year, bank circulation declined to $126, 000, 000. Speciereserve sank to $164, 000, 000 and rose to $171, 000, 000 with the ending ofthe year; legal tenders to $84, 000, 000, and the number of banks rose to3, 326; their capital to $617, 000, 000; their deposits to $1, 436, 000, 000, and their discounts and loans to $1, 817, 000, 000, and surplus andundivided profits to $269, 000, 000. 

Unused deposits, capital, surplus, and undivided profits were growingvery small in comparison with loans and discounts at the end of the year. 

The banks had to work closely, and the demands of the South and West forcurrency were severely felt. 

PANIC OF 1890. --In this condition the year 1890 opened, and, with evergrowing pressure for bank accommodation, displayed great activitythroughout all departments of trade and transportation, with anunequalled volume of transactions. 

But it was as impossible to grant to the overtrading the moneyneeded, --though the Secretary of the Treasury, in seventy days, threw amillion a day into the market by buying Government Bonds, --as it hadbeen for the "Gentleman's Agreement" of 1888--that of the chief railroadpresidents--to maintain rates, to permanently sustain prices of railroadsecurities against an oversupply of them; however, both delayed theinevitable. 

The debates on the silver question in Congress, leading to hopes ofcheap money, and the higher prices due to this temporary and delusivestimulus; the large gross railroad earnings, demand for structural iron;the Buenos Ayres crisis, leading London to ship us large amounts of oursecurities; our small wheat, oats, and corn crops, and large cottoncrop; the tariff discussion, ending with the McKinley Bill on October6th, and the low bank reserves and money pressure beginning in Augustand lasting pretty steadily till December, and an immense shrinking ofsecurities, were the chief features of the year; and failures beginningwith that of Decker, Howell, & Co. , in New York, on November 11th, andreaching a climax with the embarrassment of Baring Brothers [Footnote:Meanwhile Messrs. Charles M. Whitney & Co. , David Richmond, J. C. Walcott & Co. , Mills, Roberson, & Smith, Randall & Wierum, Gregory &Ballou, P. Gallaudet & Co. , had failed in New York, the North River Bankof that city had been thrown into a receivership, and in Philadelphiathe failure of Messrs. Barker Brothers, had been followed by a number ofothers. This was all bad enough, but sinks into insignificance when werecall the financial terror inspired by the great and historic house ofBaring Brothers proving unable to meet its engagements, amounting toabout, L28, 000, 000. The Bank of England received notice of itsdifficulties on September 7th, and by the 15th had secured from asyndicate, composed of the great London houses, a guaranty that it wouldbe protected from loss to the amount of L4, 000, 000 if it would liquidatethe Barings' business, and from the British Government the right toissue L7, 000, 000 of notes provided that sum was used to loan theBarings, and it therefore assumed on that date the task of paying theBarings' acceptances of L21, 000, 000 and L7, 500, 000 of other liabilities. Thus was averted what would probably have been the greatest panic in theworld's history. That which occurred was a mere bagatelle to what wasthreatened. It is difficult to bestow too much credit upon Mr. WilliamLidderdale, Governor of the Bank of England, for conceiving and managingthis plan. He has saved hundreds of thousands of homes and interestsfrom misery. Under his able administration it is expected to extinguishthe Barings' liabilities without calling on the Government, and it isbelieved something will be saved for the Barings from their formerassets in business. This is deeply to be wished, for though the Baringshave continued business under form of a stock concern with a millionpounds capital, they are wonderfully restricted as compared with theirformer state. They have performed in banking too many helpful actions infurtherance of civilization to be eclipsed without sincere regret. ] inmid-November, which failure itself greatly accelerated the panic, werethe chief events of the year. Railroad building had increased to 6, 081miles, and the consequent new securities were poorly absorbed. Manufactures were generally prosperous. 

The huge imports to take advantage of old tariff rates absorbed muchmoney, while the Baring liquidation and that of other houses identifiedwith South American enterprises, and the distrust bred by our SilverBill caused a return of our securities, necessitating such a curtailmentof credit that our panic took place. From July through December 31st, money ruled high and fluctuating. 

The year shows a decline in circulation to $123, 000, 000, a decline ofspecie reserve to $178, 000, 000 with a subsequent rise to $190, 000, 000, adecline in legal tenders to $82, 000, 000, and of deposits to$1, 485, 000, 000, while the banks increased to 3, 573 with a capital of$657, 000, 000, and a surplus and reserve of $316, 000, 000, and discountsand loans rose to $1, 932, 000, 000. 

The year 1891 has exhibited the usual incidents succeeding a time ofreorganizations after panics and, after a period of selling andsettlement, a rehabilitation of affairs and the consequent advance inprices of securities. The unprecedented abundance of our crops as awhole, coupled with the almost universal shortage in European countries, largely aided the rehabilitation. Bank balances reflected thisstartlingly. On February 26, 1891, loans and discounts and over-draftsamounted to $1, 927, 654, 559. 80. On May 4, 1891, loans and discounts andover-drafts amounted to $1, 969, -$46, 379. 67. On the former date capital, deposits, surplus, and undivided profits amounted to $2, 462, 456, 677. 92, and on the latter date to $2, 567, 288, 143. 45. 

On July 9, 1891, discounts, loans, and over-drafts amounted to$1, 963, 704, 948. 07, and capital, deposits, surplus, and undivided profitsto $2, 522, 609, 679. 78. 

Confidence is restored and prices have advanced, and should advancestill further. There seem to be only three things that could check theadvancing market, and of those the two chief ones seem pretty surelyrelegated to a fairly distant future. These latter two are, in the orderof importance: (1) a free silver law, _i. E. _, a law making, say, 67cents' worth of silver pass for an equivalent of a 100-cent dollar; and(2) a very radical and abrupt change in our tariff law. The remainingand very minor influence is the breaking out of a general European war, which would at first induce a selling of our securities, and so lowerprices, but which finally and shortly would benefit us by a subsequentreturning flood of money exchanged for our various bread-stuffs, andsupplies, and even securities of different sorts. 

It would be better for our future if the liquidation of the last panichad been more radical in some cases, notably in land speculation. Inthis liquidation has not been thorough, and, as far as these casesinfluence the market, it has remained for a long time unsound, and evennow is not fully recovered. 

The past twelve months have witnessed a continued settling of oldaccounts, and the undertaking of new business, in a limited way, despitea somewhat uneasy feeling about silver and the now accomplishedPresidential election. But the fact that an analysis of the bank returnsto the Comptroller of the Treasury shows that available resources(capital, deposits, surplus, and undivided profits), as compared withdemands (loans and discounts), are good and growing, considered inregard to the other signs indicating prosperity (see Introduction), justifies the prediction of the steady development of a prosperousperiod. 

PANIC OF 1893-4. --It was early in 1893 that I wrote the last page of_A Brief History of Panics in the United States_. Two of the threechecks to business prosperity to which I then referred, virtuallyoccurred very soon. The determined resolve of the "free silver" membersof Congress to continue the heavy monthly utterance of silver dollarsredeemable at par in gold kept many business men most disquieted. Theysaw that the free gold in the Treasury was sinking greatly and steadily. They knew, also, that there was semi-official assertion of the right ofthe United States to redeem its silver dollars in Government notes. TheFree-Coinage Bill had been passed by the Senate in July. The Housedefeated it. The legal fights against certain great railroadcombinations and frequent labor strikes put additional burdens on themarket. 

In the United States and abroad the doubt of our willingness and abilityto redeem our obligations at par in gold on demand grew most rapidly. Accordingly, exports of gold increased and hoarding of it began at home. To all this was added the expectation of a severe downward revision ofour tariff laws if the Democratic Party should succeed, as was expected, in the Presidential election in November. 

Business was scared and slowing down and, therefore, using less and lessof its working capital. The false ease of increasing loanable funds inthe custody of the banks lulled many into a specious confidence. Butgold was exported in increasing quantities. Should the Government issuebonds in exchange for gold for the purposes of redemption? ThePhiladelphia & Reading receivership occurred. Easy money led to manyconsolidations of transportation properties and to very many largecommitments. Money tightened. In March, it loaned at 60% per annum. Would President Cleveland call an extra session of Congress in March torepeal the silver law and to issue bonds in order to replenish the freegold in the Treasury? The Stock Market showed a great decline inquotations. 

In April, 1894, Secretary of the Treasury Jno. G. Carlisle forbade thefurther issuance of gold certificates for gold deposited in the Treasuryunder Act of July 12, 1882, whenever the gold in the Treasury "reservedfor the redemption of United States notes falls below $100, 000, 000. "This further alarmed the business world, which was not reassured when onthe 20th Carlisle announced that the Treasury would pay gold for allTreasury notes so long as he had "gold lawfully available for thatpurpose. " President Cleveland, that stalwart man, uttered this high andfirm pronouncement on April 24th: "The President and his Cabinet areabsolutely harmonious in the determination to exercise every powerconferred upon them to maintain the public credit, to keep the publicfaith, and to preserve the parity between gold and silver and betweenall financial obligations of the Government. " Very good, thoughtbusiness, but how and when will you act accordingly?

Lack of business confidence increased greatly. Money rates advanced. Security values fell; imports greatly exceeded exports. Silvercertificates were at 83. Something was about to snap in the generalbusiness machine. National Cordage broke from 57 to 15-1/2 on May 1st, receivers were appointed, and the panic of 1894 had declared itself andgrew worse on the 4th and 5th. Call money rose to 40%. June witnessedgreat distress in business circles. On the 27th the Government of Indiastopped the coinage of silver for individuals and decreed the exchangevalue of the rupee at 16 pence. This lowered the exchange value of oursilver bullion certificates to 62. President Cleveland helped matterssomewhat by announcing that Congress would be convened early inSeptember. In early July the panic increased somewhat despite thePresident's call for Congress to assemble on August 7th. Time loans werehardly obtainable. Conditions in August grew worse. Business was almostat a standstill, and failures were very frequent. From August 7th untilthe affirmative action on the 28th by the House of Representatives as tothe repeal of the Silver Act, there was great concern. 

Then hope revived; but hoarding of currency increased. Great bankinginterests in New York helped the situation mightily by importing over$40, 000, 000 gold. September was an anxious but more hopeful month as theprompt adoption by the Senate of the Free-Silver Bill was anticipated. However, the weary debate dragged on in the Senate. President Clevelanddemanded the unconditional adoption of the House measure. Certaincompromisers, led by Senator Arthur P. German of Maryland, suggestedthat during each of the following fifteen months the Government purchasethe minimum amount of 1, 000, 000 ounces of silver, and then stop all suchpurchases against which silver certificates had to be issued. This planfor speedy action President Cleveland and the Secretary of the Treasuryopposed as worthless unless concurrently there was an issue of$100, 000, 000 of Government bonds to replenish the gold in the Treasury. They asserted that new legislation must be had before any such bondscould be validated. So the business world continued to suffer. 

Let me here state the fact, that without any fresh authorization, Secretary of the Treasury Carlisle did in January, 1895, issue$50, 000, 000 of Government bonds to replenish the free gold in theTreasury, and that an injunction suit against their sale was dissolvedby Judge Cox at Washington on the 30th of that month. Gorman had beenright. The credit of the country would not have suffered by theadditional issuance of some final $60, 000, 000 (?) of silver certificatesif the gold in the Treasury had concurrently been upbuilt to the extentof $50, 000, 000 to $100, 000, 000; but an immensity of business loss wouldhave been averted. 

But to resume the orderly recital of those times. October dragged alongits weary length, while the Senate debated and business withered. Finally, on the 30th, the Senate accepted unconditional repeal of theFree-Silver Act. On November 1st, it became a law. The fear ofrepudiation thus escaped, though with fearful loss, the country plungedinto all the unsettlement caused by a too sudden and too extensivechange in the tariff. These changes were announced by the HouseCommittee on December 27th. 

The conditions mentioned in the last paragraph beginning on page 22 ofthe introduction to this book, were at work. Before the market hadrecovered from the "Silver panic" of 1893-4, the terror caused to thebusiness world by the proposed very decided changes in the customs dueslaid hold upon every trader in the United States and reflectedly uponevery one of its citizens. It shook business throughout. Would not sucha plan as is set forth in the footnote below [Footnote: "Mr. DeCourcy W. Thorn expressed himself yesterday as heartily indorsing the Democraticcelebration to be held in this city January 17 next, to which all theparty leaders will be invited and at which subjects of interest to theparty will be discussed. 

"When asked to give his opinion on some of the questions worthy ofdiscussion at this gathering Mr. Thorn mentioned the tariff and economyin the conduct of national affairs. 

"In the coming national Democratic celebration, " he said, "I hopesuggestions dealing with a rational reformation of the tariff and theneed for national economy of every kind will be duly considered, andthat on these two subjects alone, to be treated thoroughly buttemperately, will this national Democratic gathering advise our party asto its best course to pursue. 

"In three successive Presidential canvasses since the Civil War theDemocratic party has received a majority vote of the people of theUnited States, and in my opinion would have gained three thereby, instead of the alternate two, elections to the Presidency if the tariffissue, the major one of the two great issues--namely, tariff andeconomy--on which they won, had been so sought to be applied as not tothreaten unduly to affect general business. "

PROTESTS AGAINST EXTRAVAGANCE

"All will agree with me that a reasonable economy, instead of the actualwild extravagance of government, is more than ever a national need. Whowill disagree with me, that in addition to the contribution frominternal revenue, the tariff should be used merely to contribute towardsthe due expenses of the Government economically administered, but soapplied as not to break down the standard of American citizenship, asexemplified in the working people of our country; and eked out, if it ispossible, by contributions into the national treasury of soundinheritance taxes?"

URGES CUT ON NECESSARIES

"Is it not possible to apply that general plan as follows: Divide, say, all of the articles now upon the tariff list into three classes. 

"(_a_) All such as are usually found in the typical Americanhomes--I mean the homes of those admirably called by Grover Clevelandthe 'plain people, ' who are just the same class, I believe, as thoseindicated by Abraham Lincoln, when he said, 'God must greatly love thecommon people, for he made so many of them'--and put that list ofarticles on a free list or a severely tariff-for-revenue-only list. 

"(_b_) Create a second division composed of all the articles ofluxury. Put upon them the very highest tariff they will stand and yetcome into the country, except in the case of articles of antique art. These latter should be admitted free. 

"(_c_) Keep upon all other articles now in the tariff list theactual duties for the period of one year, but after that period and theactual imposition of the proposed new tariff I am discussing shall havebegun, put all the articles involved in Class _c_ upon atariff-for-revenue-only basis, so constructed as not to break down thestandard of the American workingman's living. "

YEAR TO MARKET STOCK

"This period of one year--say, would allow manufacturers to market theirstock on hand or already required to be produced on the basis of themarket influenced by the quasi-Government protection extended by theexisting tax laws of the nation. 

"At the end of this period the manufacturer would be obliged to produceat less cost in order to find a market in competition with his foreigncompetitor, which competition would result in lower prices that he andhis foreign competitors would have to offer to the working people andother citizens of our country, "

EFFECT ON WAGES

"Those working people and other citizens would for a year have beenenjoying at lesser cost all of the articles used in the typical Americanhome I have referred to and could without loss therefore well afford tosubmit to a reduction in wages so long as that reduction in wages wascontemporaneous with affording them a proportionate or more thanproportionate reduction in cost of the articles for whose purchase thosewages were sought to be expended. At the same time, the manufacturer ata proportionately lesser cost of production, through this reduction inwage-paying, would be selling as much or more of his old products attheir old profit. 

"Could we add to the income from the tariff and internal revenue thesums derived from the sound national inheritance tax I have mentionedabove it is evident we would have supplied for the period of change fromone tax system to another an 'adequate governor' to use a mechanicalillustration, to prevent undue oscillation of prices in the businessworld. "

BANK RESOURCES TO PREVENT STRAIN

"The further use of the existing financial agencies for cooperation ofthe banks in all sections to mass resources and apply them to preventundue local strain upon credit dispels the fear of any necessary injuryto the financial fabric in effecting this change. 

"Grover Cleveland, whose character and principles I have long revered, seemed to me in the application of his plan for tariff reform to haveendangered at once the success and the permanence of his reform of thetariff--which you recall was confessedly and very properly not areformation to free trade--by failing to provide in it a method foravoiding or at least minimizing and shortening any incident disturbanceto the business world. His plans, further, failed by not reasonablyinsuring for the transition period from the old tariff to the new onesufficient national income for national expenses. "] have virtuallyprevented all that? When I sent that plan, which I had stated in aninterview in the _Baltimore Sun_ of December 24, 1910, to thevarious members of the Finance Committee of the United States Senate andto the Committee on Ways and Means of the House of Representatives, verymany of them wrote me affirmatively on the subject. 

To revert, however to the due order of our tale. It was on January 17, 1893, that Secretary of the Treasury John G. Carlisle, without any newlegislative authority, offered to sell $50, 000, 000 Government bondsalready mentioned. If issued during the Silver-repeal fight when Gormanproposed his compromise, and if Carlisle had made it clear very earlythat as many such issues for gold would be made as were needed to keepthe trading public safeguarded against any monetary-business crampingcaused by the governmental policy affecting the tariff, a minimum ratherthan something approaching a maximum of disturbance would have followed. In better spirits because of the issuance of the $50, 000, 000 Governmentbonds for gold, the business world worked along. The House had passedthe Tariff Bill early in February by a big majority. Business soonlooked up decidedly. But the Seigniorage Bill was adopted in March. President Cleveland, that sturdy upholder of the Nation's credit, vetoedit. He knew that any new moral obligation to keep at a parity with golddollars worth in themselves less than one hundred cents in gold wouldmaterially shake domestic and foreign credit. 

The veto had a deservedly splendid effect upon all our tradinginterests. This was increased by the failure of the House to overridethe President's veto of the Seigniorage Bill. But the Senate had notacted on the Tariff Bill. Business dwindled and there occurred strikesand other widespread labor troubles, especially in the bituminous coaltrade. In many parts of the country the militia, and in Chicago UnitedStates troops, had to be employed to maintain order. Call money was adrug on the market. The net gold in the Treasury was very low. TheTariff Bill dragged its weary length along. President Cleveland andChairman William L. Wilson of the Ways and Means Committee of the Houseinsisted that the bill would produce sufficient revenue for the expensesof the Government. Senator Gorman and others in the United States Senateinsisted to the contrary and demanded that the tariff on sugar should bekept at a high figure. A bitter controversy ensued. Finally, on August13th, the House accepted the Senate Tariff Bill. It was time for someaffirmative action, for among other threatening conditions the net goldin the Treasury had fallen to the lowest figure since resumption ofspecie payments in 1879. 

Business began to revive. The issue of $50, 000, 000 Government bonds forgold to replenish the Treasury stock was a very stimulating influence. The improvement dated virtually from the agreement in February betweenthe Government and the Morgan-Belmont Syndicate to prevent the export ofgold. In June, 1895, the Government gold was thus brought up to a round$100, 000, 000 for the first time since December, 1894. Butnotwithstanding the fact that the business outlook was decidedly better, the inevitable disturbances to business following a general change inthe tariff, unsettled political conditions in Europe and the selling ofAmerican securities owned abroad, the shortage of the American cottoncrop, President Cleveland's Venezuela message, which many personsthought might bring on war with England, and another decline in theTreasury free gold, again shook business confidence. 

Improvement, however, was stimulated by a remarkable increase in thesupply of money in our balance of trade and by the virtual settlement ofthe Venezuelan question. The business situation was steadily clearing. The ills from the panic of 1893-4 were well behind us. TheSpanish-American war proved to be harmless to us financially, while ittended to show that National neighborliness could be exercised in asplendidly unselfish way. By our treaty of peace with Spain on December10, 1898, an additional emphasis was given to the revival of trade. During 1899 a great rush to speculate brought the pinches in moneyinevitable in those pre-Reserve Bank days, but could not stop thegeneral broadening of business interests although the industrialsituation was unsatisfactory in spots. Indeed, the succeeding year wasto witness severe industrial trouble destined to cause a generalset-back in business. The situation cleared considerably when theNovember elections of 1900 showed the country to be safe from the Bryansilver policy. 

Big business interests took hold of market conditions. Huge combinationsof trade interests became the order of the day. The United States Steeltrust was the vastest and was the transcendent achievement of J. Pierpont Morgan. The Stock Exchange was wild with speculation. Thecollapse came there in the famous decline of the 9th of May, 1901, precipitated by the Northern Pacific corner. In a month the market wastranquil again. The shooting of President McKinley produced greatfinancial nervousness. The over-trading abroad, especially in Germany, was influencing us and all the rest of the world, which had not yetrecovered from the vast financial cost of the English Boer War. 

The ever increasing closeness of business relations the worldover--their virtual solidarity, in fact--was being illustrated againwith us. A chief example was trouble in the copper groups following aslackened world demand for their products. 

Overtrading was doing its usual work. This induced loss of businesscourage in many quarters, or shall I say a realization that nowhere inthe American business system was there any arrangement empowered so tomarshal the competent strength of financial America that large andoverwhelming disturbances should become impossible in businessgenerally. Indeed, the Government forces seemed to tend contrariwise tobig business practices. They took virtually their first step in"trust-busting" when they tried to break up the Northern SecuritiesCompany, which had been concocted to handle the celebrated NorthernPacific case. Labor troubles supervened. Many great speculative stockcampaigns collapsed. The banks yielded to the imperative need to reducecredits. The year 1902 had almost experienced a widespread panic: butthe marshaling of great private resources had restored confidencetemporarily, and it closed in peace. 

PANIC OF 1903. --Then came the real beginning of the protracted "trustbusting" campaign. Business took fright, for it believed it was to bebullied rather than soundly regulated. Great failures oh the StockExchange were its sure indications. Fear and distrust was upon all theAmerican business world. Industries languished. Money was easy becauseless and less employed in trade. The great captains of industrialfinance, however, patched up troubles and differences here and thereand, availing themselves of the plentiful supply of money, soon had anotable speculation at work. Gradually the country took heart again andbusiness experienced a revival. 

It was thought that President Roosevelt, elected in November, 1904, would help bring about discrimination between "good" trusts and "bad"trusts, and whose "trust" is bad! But "trust busting" became an evenmore popular and political pursuit. Indeed, the abuses practised by manyof them had created a situation regarding which the question wasbecoming in the popular mind simply this, "Shall trustdom rule thepeople or the people rule the trusts?" The sound control of both beforethe Constitution of their country must be the happy solution. 

The Bill of May 9th of the House of Representatives, giving theInterstate Commerce Commission power to fix railroad rates, was ominous, and little noticed by the general business world; but some noticed andacted. The Senate had not voted; nor did they realize whatrate-regulation implied to railroad balance sheets and so to the StockExchange. Some interest was selling securities. The business public wasawakening to the fact that legislators, legislation, the people, and thelaw were hot after the business methods of many organizers. Fear, founded on a tardy awakening to facts, declared itself, butspasmodically, for now and again the great captains of finance andindustry were trying to save the situation. They successfully aidedwhatever of momentum there was in general business. But Congressionalactivity as to any combinations in restraint of trade was unabated. Itcalled upon the President for such information as the InterstateCommerce Commission might have as to a combination in restraint of tradebetween the Pennsylvania Railroad and certain lines allied with it. 

The battle between the old style and the new style of managing greatcorporations was fairly on. Labor troubles added to the existingdisarrangement of business. San Francisco's vast earthquake andconsuming fire sucked much capital away from financial centres in orderto replace the $350, 000, 000 of capital destroyed. The money market wasgreatly restricted. The stock market showed signs of panic. TheSecretary of the Treasury continued to help the situation as best heknew how. Notably, he offered $30, 000, 000 Panama Canal Bonds, and verysuccessfully sold them. That afforded an additional basis for bank-noteissuing. The stock market responded with a fine upward swing. Heavydividends were declared by certain leading railroad and othercorporations. Indeed many high records were made by securities and sodistracted attention from that steady tide of keener inspection andstricter regulation by the agents of the people which was destined tounmoor and toss and injure many a financial craft. Railroads assertedthat the country needed a great increase in railroad trackage, but thatthe actual treatment of the roads deterred extensions throughfrightening capital. So the year 1906 wore away after having sorelytried the nerves of the whole business world which it left in a mostjustly apprehensive state. 

THE PANIC OF 1907. --The panic of 1907 opened with great but feverishactivity in business. Driven by necessity the railroads adopted theissuance of short-time notes for new capital, as the market would absorbno long-time obligations except at forbidding interest rates. Anysignally untoward happening could promptly precipitate a panic. TheUnited States Treasury withdrawal of Government deposits from the banks, and the collapse of the Knickerbocker Trust Company in New York weresuch happenings. 

On March 14th, the panic declared itself and pandemonium ruled on theNew York Stock Exchange, --that prominent barometer of businessconditions. In its coming it had exemplified again the characteristicsymptoms of a panic which I have set forth on pages 7-16 of theintroduction to this book. After the spasm of March 14th and thebusiness cataclysm of the following October, the business worldstaggered along, but with the strength merely that results from courageand the exercise of reserve power husbanding its resources andlightening its load. The decrescendo movement of another business cyclehad begun. Runs on financial institutions were prominent in our country. But throughout all the western world resources were strained. Money hadbeen overused. Money rates were extremely high. Failures were frequenteverywhere. In our own country painful disturbances, relaxation, andunrest were everywhere apparent. The radical doctrines of many politicalleaders tended to further unrest. 

The business of the country was halting between the need sanely toregulate "big business" and the fact that "big business" had beenobliged to fight for prosperity in the welter of unallowable but veryoften undeniable conditions. The railroads justly claimed that they wereforbidden living rates. Their opponents accused them of carelessness andwaste. The railroads and the Interstate Commerce Commission were theprotagonists respectively of the conservative and the radical thought ofthe country, which is so rich in natural wealth and is inhabited by soresourceful a people that though by statutes they be well managed ornot, their National wealth increases. So ran the business world away, but with a very slow and steady approach towards a rationalrectification of disputed legislation as affecting business. Meanwhilethe courageous "captains of industry" were leading in business as bestthey could and were better appreciating the temper and needs of theAmerican people. 

Added to the difficulties resulting from our languishing trade at home, we suffered reflectedly from the constriction of business in Europe, which was acutely aware that the disturbance in the Balkans threatenedto destroy the peace of Europe. Conditions were not yet quite readythere for a cataclysmic war. For example, statistics had not quitedemonstrated to Germany that the physique of her people and the rate ofincrease of their families were declining while the expenditures forsuperpreparedness for war was demanding either retroaction in thatregard or else an expenditure from the principal of their property. Germany did make in one year the sacrifice of five per cent. Of herprincipal for yet fuller preparedness for war. Indeed since late in1908, it is fair to say that consciously or unconsciously the wholeworld has been in travail. Whatever broad measures statesmen anywherehave promulgated, have been subjected to the unusual stress and strainof world-wide unrest. Like the treacherous undertow that wrenches thosewho venture in, has been the world unrest upon all phases, incidences, and predicates of business. Some of us have long realized this; somehave not. 

With November, 1908, came the election of that great constitutionist, Taft, to the American Presidency upon a platform less radical than thatof his opponent. This heartened the constructive forces of the country. But very little upbuilding resulted. The coming revision of the tariffwas of itself sufficient further to restrict business undertakings, andto cause many great producers of goods to arrange to unload at loweringprices their actual and their future outputs. But the conserving ofresources since the panic had helped the superficial situation, and thespasmodic stimulus that so often follows a general heightening of thetariff showed itself after the adoption of the tariff bill in August, 1909. 

The illness and after a month or two the death of the great businessleader, Harriman, caused in the securities market a great decline. Fundamental conditions were unsettled. The best that could be expectedwas a see-saw movement until some power should set our country and thebusiness world at large once more securely on their respective bases. The Anti-Trust Law, the Interstate Commerce Law, and such likeinfluences continued to disturb the United States, while Europe wasbeneath the surface unendingly agitated. 

General business marked time while statesmen or pseudo-statesmen plannedand promised panaceas. President Taft joined that populous group. Thesecurities market, that barometer of business, fell beneath suchassurance of further unsettlement. How can you continue to trade unlessreasonably sure that conditions will remain fairly constant! All thismilitated against a normally quick recovery from a great panic. Littlescares were frequently experienced. Influences matured and presented onegreat political party split into two great factions, while the otherchief party endured something of the same development. 

A conservative handling of National policies, or a radical one was thequestion in each case. The November elections indicated a popular revoltagainst the party in power--the Republican. Unshaken, President Taftfollowed his convictions and in his Presidential message, of December, 1910, to Congress called for a halt in legislating to regulatecorporations, until the effect of the laws on the statute books could bestudied. The stock, money, and industrial markets were marking time. Notto go forward in business or elsewhere is in itself to retrograde. Thusopened the year 1911. Under the influence of easy money, better businesson some of the western railroads, better dividend declarations here andthere, a rosy "prediction as to the early future of the iron market, andthe belief that the Interstate Commerce Commission would grant betterrates to the railroads, general business felt encouraged and pricesadvanced somewhat. But in February the Interstate Commerce Commissionforbade the railroads any increase whatever in rates. The roads wereobliged to institute many cramping economies which to them very oftenmeant the using up of their corpus and to the business world of theUnited States a permeating retrogressive influence. Reductions inrailroad dividends were symptomatic of that. To add to all this theredeveloped additional business unrest predicated in the general tariffchange favored by the House of Representatives in April. 

The United States Supreme Court decision interpreting the ShermanAnti-Trust Law of 1890 as affecting the Standard Oil Company case andthe American Tobacco Company case were delivered late in May and wereunexpectedly reassuring to business. This was another evidence that thebest thought of the Nation everywhere was seeking to rectify thelooseness of the past without killing business initiative and continuedendeavor. So matters see-sawed in the business world. It was indeed in astate of unstable equilibrum. Stocks declined now abruptly; then, aftersome slight recovery, gently; but the slant was decidedly downward. 

The Government felt that its duty required it to push forward theinvestigation of industrial corporations; and that the Nation sodemanded. And it was in October that the chief of such corporations--theUnited States Steel Trust--had a Government suit for dissolution filedagainst it. The sturdy bell-wether of the corporation flock was attackedby the great United States Government. What would happen to the humblermembers of the flock! Certain court decisions were reassuring tocorporations in November and business brightened for the time being andduring much of December in certain notable instances, for in that monththe Interstate Commerce Commission report appeared and seemed lessdrastic in tone. 

The year 1912 opened with an additional influence promising increasedalarm and marking of time. I mean that candidates for the Presidentialnomination began their canvasses, which, of course, implied new plansfor making new laws to govern business conditions. Former PresidentRoosevelt announced his candidacy in February. President Taft wasalready constructively in the field. Governor Harmon of Ohio wasmentioned in many quarters as a successful reformer who wished soundlyto guide but not unwittingly injure business, while Underwood wassimilarly praised in addition to his record on the recasting of thetariff into a further revenue measure. Champ Clark, Speaker of the Houseof Representatives, was a popular candidate. And Woodrow Wilson loomedup as though forecast by destiny. At first and in many importantsections of the country considerably more delegates to the RepublicanNational Presidential Convention were chosen for Mr. Taft than for Mr. Roosevelt. This and brisker business served to hearten conservativeinterests, and the general market revived despite the decidedly downwardinfluence in our country of the gigantic strike among English coaloperators, who thereby spread trouble throughout the British Empire, and, through the solidarity of the financial world to-day, affectedevery financial centre. 

The remainder of the year was dominated by the Presidential canvass. Taft, called by many a "stand-patter"; Roosevelt, "the insurgent, " whoproposed to mend all the troubles of the political public by his usualbrusque methods; and Woodrow Wilson, the "conservative with a move on, "made their appeals for popular support. Until the verdict in Novembera see-saw market took place in the United States, while Europe andreflectedly the remainder of the world became alarmed lest the wardeclared in October by the Balkan States against Turkey should produceworld-wide trouble. 

The November Presidential election showed that Woodrow Wilson received435 votes, Mr. Roosevelt 90, and Mr. Taft 8. However, the popular votefor Woodrow Wilson was more than 1, 000, 000 below that cast for Messrs. Roosevelt and Taft jointly, and about 2, 000, 000 short of a majority ofall the votes cast for the Presidential nominees--Socialist, Republican, Democratic, and so on. But the vitally significant fact is that thepopular vote for the "stand-pat" candidate--Mr. Taft--was very small incomparison with the joint vote of the three candidates whose platformscalled for a drastic handling of National policies, --Debs, Roosevelt, and Wilson. 

Drastic recasting of the rules of any game unsettles play. The marketdropped. But fortunately for the country the ripe and balanced andactive intellect and character of Woodrow Wilson, elected President, lent much re-assurance against the extensive political surgery he hadbeen chosen to perform. All knew that he would be thorough andreasoning. All the grievous handicaps that business suffers fromuncertainty of regulation, it was thought would be overcome as promptlyas possible. But the pledged great change of the tariff was enough toinduce retrenchment of business endeavor. With a major factor unusual inany proposition, how can stability, much less progress, be expected inany interest?

THE PANIC OF 19l3. --Retrogression in business began very early in 1913and increased until mid-October, 1914. On October 3, 1913, the newTariff had become a law; but other reforms still jostled business. However, by mid-October, 1914, the Interstate Commerce Commission seemedto have become less radical in its views, the Industrial TradeCommission was at work apparently studying the essentials of theindustrial situation, the United States Supreme Court was deliveringopinions in check of indeterminate statutory meddling with business andthe splendid potential of the Reserve Bank system was offering for use. 

It is hard not to overstate the vast re-assurance offered to business bylinking together the banking power of the country through the ReserveBank system. Just as an enormously large number of troops skilfullythrown into an endangered--a panicky--position will ensure success, socan the vast resources of the Reserve Bank system restore financialorder when panic fear is declaring itself. During the past two years ofthreatening from the disturbances in Mexico, our country has learned toforecast the benefit that the Reserve Bank system predicates; but ourstay and confidence has been the cool and far-seeing statesmanship ofour great President, Woodrow Wilson. 

The breaking out of the "World War" in August, 1914, had so flooded ourmarket with securities held in Europe that the Stock Exchange, followingthe continental example, closed from July 31st till November 28th, whenthe New York Stock Exchange and other American stock exchanges openedfor restricted business in bonds and on December 15th to unlimitedtrading in stocks and bonds. Other kinds of exchanges acted much thesame. This checked business in every direction, despite the greatissuance of temporary Clearing House certificates. In two months thelatter tendency was changed in many quarters. 

Then began the "war boom. " Gradually it has spread, bringing suchenormous profits in all our lines of business supplying the needs of the"Great War, " that the first twelve months of it showed more than abillion dollars trade balance in our favor, and that balance then beganincreasing on a progressive scale. Money is yet plentiful. All businessis stimulated. Our crops are unexampled in quantity and money value. Everything points to great prosperity unchecked until the "Great War"ceases and withdraws the stimulating demand for our supplies. 

Then will come a readjustment of our trade. Money will have becomeactually or potentially scarce because of the previous vast expansion ofour business, and all the banking power of our country will be requisiteto prevent a crashing panic. The Reserve Banks will have gotten fully towork by then, it is to be hoped. They will be needed to lead in thelife-saving operations. Such first aid to the injured will obviate suchfinancial sufferings as the old-time panics presented. They can hardlybe expected to reduce the casualties to the volume of the slow panic insecurities in the year 1913, for the volume of business involved atpresent is vastly more swollen and the kind more circumscribed. 

It is interesting to note that panics have continued to appear about asregularly as usual, but less crushingly, since 1890, the date up towhich the first and second editions of this book had traced them. Remedial or partially preventive measures have been more and moreutilized by the financial powers to control them. Never will panicscease so long as trade and fear are exemplified on this earth, but justas modern medicine is overcoming the dangers threatening the physicalman, so is modern finance overcoming panic and the other dangers whichthreaten financial stability. After all, reserve power and only arational use of financial resources are the surest preventive of panic. And that the American people have not been forced through entrance intothe "World War" to deplete their reserve strength, especially in afinancial way, is due to the splendid conduct of our great President. Heis leading this country to unexampled prosperity. Instead of consentingthat old abuses in the business world should continue until anover-indignant public had grown riotously injurious, he has guided thecurrent of their wrath, initiated or promulgated the methods forredressing their grievances, and has saved to the country, to itspeople, and to general business itself, the splendid and full service ofbusiness enterprise freed from the abuses and handicaps that unregulatedconditions had forced it to employ in the unrestrained struggles of theopen mart. 

DECOURCY W. THOM.