| Show I SOME WALL STREET PHILOSOPHY I The Financier Agree on the Causes of the Trouble I I I Special Correspondence NEW YORK Nov 2It is an agreeable novelty to have an explanation of a financial 1 I I finan-cial disturbance which satisfies all parties j I Economists of all schools agree that the recent troubles in Wall street and in Lon i I don were due to a rapid perhaps too rapid development of new countries and new lipespf trade which rendered old investments j invest-ments unavailable The present condition of the Argentine Republic and its threatened inflation alarmed European financiers they withdrew with-drew their confidence and as far as possible possi-ble their cash and so the Baring Bros carrying immense blocks of Argentine I stocks were forced to the verge of bankruptcy j bank-ruptcy A panic is sometimes caused by previous prosperity There is a great movement for i investment a consequent rise in prices j and therefore a greatly increased demand I for money even for money to do the same volume of business The rate of interest rises rapidly and checks the tendency to investment Then there is a reaction and if it is great enough a panic This was plainly the cause of the first great panic in the United Statesthat of 1797 Alexander Alexan-der Hamiltons measures had so strengthened strength-ened credit that there was an excessive I confidence in the rapid development of the country Hence a rapid transfer of movable mova-ble capital into fixed capital and a failure to realize In that case there was but one remedyto wait until the country grew up to the investment limits I From 1797 to 1873 every panic in the United States was preceded by a considerable consider-able and sometimes very great increase in the volume of bank paper The natural consequences were rapid rise in prices great rage for investment excessive speculation specu-lation commercial fever and then collapse From the close of the second war with England till 1819 the speculation was general gen-eral and so the panic of 1819 was followed by a long depression In 1837 the speculation specu-lation was chiefly in farm produce in 1873 in railroad construction In both cases the cure came through suffering the people simply toiled on until the country grew enough to honor the drafts the speculators had made on the future In 183739 all the known causes of panic came togetherall the destructive forces were in full operation at once The banks inflated their currency the staple crops were short speculation was excessive investments in-vestments in raw western lands and city I lots went to a degree that now seems like insanity and individual states projected improvements to cost almost as much as the entire assessment of such states The legislature of Illinois for instance had legalized and work had begun on canals and railroads to the value of 100000000 more in proportion than 1000000000 in that state now Wheat in New York city sold above 52 a bushel and was imported I Jan 1 1831 the bank capital of the country coun-try was 8200000000 bank notes out 95000 000 loans and discounts 324000000 On Jan 11836 they had been increased to Cap ital 251000000 notes in circulation 140 000000 loans and discount 8457000000 Five great cities were laid off in northeastern north-eastern Ohio alone and the lots sold high In December 1835 a fire swept clean fifty two acres of the business part of New York city within a year the space was covered with larger and finer buildings The people peo-ple were mad with speculation The crash was terrible Many poor old man as late as 167075 could be heard to sigh over 37 The recent flurry in London and Wall street was but a short lived affair but it illustrates the essential fact that the rapid development of new countries and consequent conse-quent overconfidence is a powerful cause of panics J H BEADLE I |
