Phenix gazette. [volume] (Alexandria [D.C.]) 1825-1833, 1826-11-22
PRINTED AND PUBLISHED,
DAILY,
WEDNESDAY. NOVEMBER %, 1896
From The Edinburgh chronological Journal.
COMMERCIAL. DISTRESS.

In period Of profound peace, and lmme-
diately after one Of the finest summers anu most
abundant haryests ever showered by boanti-
full Providence on Britain, this country has been
a theatre of almost universal misery. Id DC
tober and November, 1925, stocks began 10 tall
with alarming rapidity; in November. numer-
Gus bankers in London failed; in December the
evil spread to the country bankers; In January
and February, 1926, the distress overlook the
merchants and manufacturers, thousands OF
them were ruined, and their workmen thrown
idle: agricultural produce began TO tall, and
suffering and gloom have extended over the
whole empire.
This distress appears to us to have origina'-
ed in our paper currency, which, SO Tar as we
al present perceive, is founded In injustice, and,
consequently, is unsound, and dangerous IN Its
consequences.
Suppose A to possess 100000. in IN oney in
vested in land, houses, government stock, or
some other fixed and productive form, yielding
return of 4 per cent, or Sool per annum; thai
he pledges this investment to the public, and is
permitted on the security Of il TO issue bank
notes 10 the value of 2o,0oo5 in this case real
property could be made forthcoming in case of
necessity to retire the notes, and, according to
the general opinion, no harm would arise to
the public from the transaction. Let US, how
ever, trace out its effects.
Suppose A to conine himself TO the proper
business Of banking, and that he puts 10000
in notes into circulation, he would draw first
1900 year of interest from his capital, and
then 1000 year OF interest at per cent. from
his notes, in all 1880 per annum. 1t Is obvi-
GUS that he could afford to discount bills with
his bank notes, lend them at interest at a
lower rate than if he carried on the same ope-
rations with real money, which could not both
be laid out at per cent. in land or stock, and
remain a, its owners disposal, yielding five per
cent. more one and the same time time -
The moment, therefore, A with his notes comes
into competition as banker or money lender
with other individuals who employ real capltai
in these operations, he is able TO beat them out
OF the market by lowering the rate OF interest.
If he draws three per cent. Tor his notes ana
four per cent. Of regular return from the invest
ed capital, he will receiver per cent IN all,
when other capitalists, who do not first invest
their money productivity, ana theh issue notes.
are drawing only per cent
This is unjust; and yet this was the real state
Of matters during the prodigious TALL OF interest
in 1924 and 1925. The bankers issued their
paper in floods, and to keep 1t in circulation
and increase It's quantity, they lowered AMI
lowered the rate of interest:-Neyeriheles bank
stock rose trade increased, aud every one seemed
to flourish except the holders of money capital,
who were impoverished by :he impossbility OF
finding Investments, or obtaining moderate
interest for their stock. The bankers were well
able to do this; for those who had capital pro-
fta.,ly invested 10 the extent of their notes,
drew the above mentioned double return and
actually realised or per cent, when other
capitalists were receiving only or 4. Those
bankers, again, OF whom there seems TO have
been many in England, who had no invested ca
pial or real stock OF any kind, could discount
bills with notes, or lend at very low rate oil
interest; for, as their notes cost nothing beyond
paper, engraving, printing and stamp, and as
they had nothing behind them TO lose, what
ever interest they received, if it exceeded these
expenses, was all gain.
From these principles it follows, that every
man who first invests his capital productivity,
and then issues bank-notes at interest on the
credit ii, places himself in situation ofgreat
advantage over those individuals who act as
bankers. or lenders at interest, with money cap
ital itself, and that the latter can never COM
pete on equal terms with the former, except
by investing their capital also in a productive
form, aud issuing bank notes on the credit OF
il 10 the same extent as their rivals-lf TO pro-
tect himself every one were 10 issue notes to
the extent of his invested capital, paper would
become so redundant as to have scarcely any
value, and would speedily be put down as a
public nuisance; and yet, unless every man vino
possesses real property does This, he is injured
by the issue OF notes.
The effects of the paper system may be fur
Their illustrated. Let US suppose the trade a
country TO be carried on by means of gold and
silver as the medium of exchange, then the fol-
lowing results will take place. The precious
metals are real commodities, which Cannot be
Increased ins,antaneously to an unlimited ex-
tent They are procured by labour, and require
time for their increase. A small trade requires
a small supply, while great trade demands a
proportionate quantity Of them. II trade in.
screases faster than the supply of gold and sill
YER, they will become relatively scarce, and
their value will rise; or in other words, the
price Of goods will fall This fall will check
production until the supply ofgold and silver
has increased in proportion to trade, when pri
ces VIII again rise, and production proceed.