Loudon free press. (Loudon, Tenn.) 1852-1855, 1854-08-23
The Financial Pressure. Cause, Character
and Effect

J -
natl Price Current, and bespeak for it a careful
reading:
The history of the financial operations of this
country, does not furnish a parallel for the
money pressure that has prevailed for nearly a
year past. The cause and character Of the
movements Of the past year are different from
those connected with the disasters of 1867
and 1910, though in some respects the cause
which operated to depress commercial interests
atthe several periods, bear some degree ofsim-
ilarity. But in the character of the disasters,
! there is an almost total difference During the
period between 1886 and l640, the commercial
interests Of the entire country were prostrated;
mercantile hoases failed in immense numbers,
and but few we're able to hold up under the
/ pressure that was experienced; and on the part
Of the Banks, ttere was a general suspension of
specie payments. Prior to the commencement
ofthat crisis the spirit of speculation was Wild
extravagant, and irrcpressible; greatly more so
than during the years 1853; while the
/ country was greatly deficient in commercial
/ strength, as compared with the present period.
/ Speculation was large component part of the
cause that led to the difficulties in 1886 4,
which is also the case now. and this is the only
resemblance that the causes of one period bear
to those of another, while the speculative move
ments were different
Looking at the result of the pressure of the
past year, we fad the disasters confined almost
entirely to stock and real estate spectators
! The currency of the country instead of being in
| fiated, has been contracted, and l. in mercantile
circles, the failures have been comparatively
few. The country is unquestiOnably strong
! financially. It's Agricultural, Mineral and Mer
camille interests, as a whole, are healthy, other
wise the pressure that has been experienced,
could not have been sustained. The Banks are
also in q healthy condition, there not having
been over half dozen failures in the whole
country, during the past year. Such was not
the condition Of affairs during the former pres
sure referred to;aud therefore there is good rea-
son to anticipate different result now, from
that which was experienced subsequently to
/ 1897.
/ The present difficulties are traceable to three
causes; lst. Excessive speculative movements;
2nd The absorption Of capital by Railways;
3D. The increase Of foreign Indebtedness.
We have already said that there have been
/ excessive speculative movements, within the
last two years These operations have however
been restricted nuinly to stocks and real estate
I and therefore the failures that have lately ta-
/ ken place, have been confined mainly to these
two classes of spectators. That the market
! for both was unduly inflated, will generally be
admitted. There existed a year ago, perfect
mania for Railway Stocks and Bonds, and bus-
ness paper was regarded by capitalists gener-
ally, as uncertain and Improbable, compared
with the former. As a consequence, the price
of Railway securities was run up greatly above
their real value. The shares Of companies,
that never paid a greater dividend than ten
/ per- cent, sold as high as one hundred and
twenty.six per cent, and the shares of non-divi-
dend paying, unfinished roads, ranged from 75
to 9j While these prices were being paid,
good go and 80 days business paper sold with
some difficulty at from 10 to 10 per cent, per
annum, showing that capitalists were slow to
buy current paper that paid 10 to Is per cent
! interest, at par, while ten per cent stocks
brought premium of s26 on the $l00 At
that time these operations were considered good
but it is now apparent to all, that the arguments
used in favor of such transactions were absurd
In country situated as ours is, with her rapid
I progress in Improvements, and the great de-
mands that are made upon capital for the de-
velopement of our resources, ten per cent stocks
the value ofwhich must always depend upon
contingencies, cannot be considered as worth
much if any more than par
1t is law of trade, that when any article of
trade is carried by speculation above its real
value, it must when reaction takes place,
recede about as far below that point, before it
! finds its level. In accordance with this law,
we now find Railway securities greatly below
their real value. That an advance will be es
tablished upon present prices, cannot be doubt
ed. The intrinsick value of the stocks of the
leaking loads, is as great and even better, now
than it was a year ago; and to suppose that a
stock was worth l26 in August 1853, and only
80, in August 1854, while the business of the
road has Increased would be absurd. The fall
in price, has resulted partly from an unwarrant
ed advance, and partly from panic. The effect
of the latter cannot be permanent, and as it
passes away, stocks will recover sufficiently to
place them at their true value. SO much for
stocks.
And now as to real estate. The advance in
the price of city and country lands has been
large, and this was rapidly established. The
speculative fever, however, was not so high as
that exhibited on the part of stock operators,
but still it has become evident, that prices of
city and farm lands are too high for the times,
and consequently a reaction has taken place.
The result of the reverses in these two bran
ches of business-stocks and real estate-is
seen in the heavy losses that have been expert
er!ced, and the numerous failures that have
taken place. and the effect of these disasters has
extended to departments oftrade that were ju-
diciously managed, and properly, had no con-
Al. g