The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1856-1888, 1857-12-17
THE PACIFIC
Commercial Advertiser.
J,HURSDAY. DECEMBER


The last news from the United States reported
most of the large cities and many of the inland
towns as conyulsed with a financial :. panic,'
caused by the withdrawal of that public conf
dence which has given to the credit system such
unlimited power in all business transactions. Up
to the first day of October, 116 banks, and from
500 to 600 mercantile firms, involving several
hundred millions of dollars, had been suspended
or failed. The origin of this panic is in a great
measure attributed TO want of confidence When
public confidence becomes shaken in a bank from
any cause whatever, as in the case of the Ohio Life
and Trust Company. to which institution the
public had entrusted, in the way of deposits and
loans, an aggregate stimated rs high as 81 ,OOO,-
900, there commences n run on it by those who
have confided their money TO its keeping, or who
hold its promises to pay. Banks do their bust
ness largely on credit, and when confidence in
them becomes impaired and their specie basis is
exhausted, they fail or become bankrupt. Their
failure invariably carries with them those mer-
camille firms who have relied on them or are their
creditors to any large extent and the failure of
these in turn perhaps carries down other banks
or firms who may be their creditors. Thus a
panic commences, the extent of which depends on
the degree to which confidence is withdrawn be-
tween man and man in business transactions
How far the money crisis in the United States
will extend itself, or whether it will appear in
England and France, with both of which coun-
tries the business relations Of American merchants
are intimate, remains to be seen.
'sToo much of the business of the world, - says
a contemporary journal, :. and therefore too much
of its wealth, prosperity and happiness, is made to
rest only upon promises TO pay. Any fabric built
on such a basis or rested partially even on such
insure props and pillars, cannot be secure. And
as the relations of commercial life are so init
mately interviewer and so endlessly ramified, we
may Judge how fearful must necessarily be the
shock which they receive by the giving way of a
link or two in any part of the complex chain of con-
~nections and dependencies. Those who have read
the American papers and have watched the pres
ent financial difficulty and embarrassment have
seen how the alarm, the feeling of insecurity,
which is called a panic,' peryades the whole
trading community. They have seen how the
sudden failing of one house has thrown down ten
OF twenty more and shaken hundreds which have
just escaped ruin by the skin of their teeth.
They have seen, too, how this evil of over doing
credit, which in turn causes business to be over
done, bears its own penalty with it, in the neces-
sity to rely on forced loans. at enormous rates of
interest, at moments when a general crisis comes
and money is hard to be got at any price by those
who have to meet heavy engagements and carry
through speculative operations. These things
should teach men to borrow less and lend less to
trade less, in short, on credit. Of late years the
amount of trading and speculation that is done
purely on paper, endorsed and unendorsed, has
increased immensely, and unless our progress in
this direction be checked it will inevitably lead
to terrible disaster. The personal misfortune and
distress, and the consequent public inconvenience
that result from these excuses in commercia1r1ea
ings, is not the worst effect. The habit Of ope-
rating on unreal capital, of plunging deeper and
deeper into debt, and of r~esorting to all sorts of
shifts to postpone the day when the bubble must
burst, engenders false ideas of integrity, corrupts
the principles of mercantile honor, and lowers
and deadens the moral tone of the entire trading
community. Hence, too, those contrived failures
by which the bankrupt, paying nobody, goes
into retirement upon a splendid competency, be-
yond the reach of the sheriff."
Although business in these islands is not done
so exclusively on credit as in England and Amer
lea, yet as the system of seeking and giving ex-
tended credit is yearly gaining ground, and ap-
parently without yielding benefit, we take the
occasion of the present panic to say a few words
on the evils attending the credit system which
must deyelope themselves wherever it is fol-
lowed, and generally to the extent that it
gains ground. That a large proportion of the
failures occurring in any place arise mainly
from giving or receiving credit, which might have
been avoided, is generally conceded. A firm that
does business on the cash principle seldom be
comes embarrassed or fails. The same may be
said of a man not engaged in speculative bust
ness, whatever may be his circumstances in life,
rich or poor if he deals only in cash and for
cash, he runs no risk of embarrassment. His
business, though more limited, is safe, and his
profits, though less, are sure while he who
continually seeks credit for what he buys,
wears, eats and drinks, has a load on his back
that creates discomfort and, if allowed to increase,
wears on his mental faculties and brings ulti-
mately too often disgrace and ruin.
Yet there must be credit to some extent here
and everywhere. And as long as this is the case,
as long as every firm must extend some trust to
those who deal with it and who seek credit, we
must impress promptness in all engagements.
Where a man gives his promise to pay a sum on
such q day he should consider his honor at stake
and honorably satisfy the claim the moment it
falls due. Where custom, as in Honolulu, re-
quires a quarterly settlement of accounts, a man
who buys ON credit binds himself to such quart
Eerly payment of his debts as fully as if he made
IN o2en agreement 50 to do. In all such claims,
.pronhptnes- should he the rule. for il saves