Worcester daily spy. [volume] (Worcester [Mass.]) 1850-1888, 1859-02-21
THE PANIC OF ,57-1rs CAUSE.

After all that has been said upon the panic
OF 81, it is surprising that its true existing
cause is so little understood. 1t was precipi-
tated upon the country with such suddenness,
as to astound and confound everybody, and,
like passengers after a railroad collision, or
steamboat explosion, few, even now, have re-
covered their selfpossesson sufficiently to
give an intelligent account of it. 1t is various
ly attributed, to extravaganza, speculation
stock gambling, railroads, banks, failure of the
Ohio Life and Trust want of confidence, &C.,
&C., but boldly affirm, and am prepared to
prove, that neither one nor all of the above
reasons combined, were its direct, exciting
cause.
1t is rule of logic, as well as of sound philos-
ophy, that, for given effect, no cause assign
ed can be considered the true one, which does
not account for the effect, in all ats relations !;
and, when you have found such cause you
need look for NO other. Tested by this rule,
all the above reasons wholly fail For exam
pie they existed to fully as great an extent in
1855 and 1856, and yet those were prosper
GUS years-again, most of them had no ex-
istence in large portions of our country-such
as New England and the South in 1857, and
yet, the panic pervaded every part, like the
atmosphere, and was about equally disastrous
every where.
There probably never was a sounder condition
Of business, or of business men, in New Eng
land, than when they were stricken down by
this tornado. What then was the cause? The
following brief statement will explain the whole
in nutshell and fulfill all the conditions of
the rule above laid down. Under the strong
stimulus given to importations by the free
trade tariff of 1857, the imports into New York
Sept. l, 1857, for eight months, amounted to
one hundred and seventy million dollars Elk
ports, in same time, including specie, to sixty
five millions, leaving a balance against New
York, of one hundred and five million, due in
specie or its equivalent. Our principal equiva-
Tents are cotton and breadstuffs-for the latter
there was no foreign demand-the crop of the
former had not come forward, and this mon
strous balance of one hundred and five million
had therefore to be met chiefly in specie
What was the ability of New York and the
country to meet this demand The New
York banks held but fifteen millions of
specie, while they had discounted paper for
the importers, and placed to their credit,
eighty-five millions, which was liable and ne
cessary to be drawn in specie, to meet their
foreign payments. AS to the total amount of
specie held in the country we hear the most
conflicting and exaggerated statements Free
traders, and even Governor Banks, speak of
two or three hundred millions Where is it
For all available commercial purposes, the
banks are our only resource ] have before me
the official returns of all the banks in the Uni
ted States, made to the Secretary of the Trea-
sury, March Z, 1857, and the whole aggregate
amount of specie returned, is but So millions.
Where are we to look for the remaining two
hundred millions? If we believe the free
trade writers, it will be found boarded up in
old boots, old stockings, and lying round loose
everywhere very probable supposition
when we consider, that, even the strongest
vaults, with iron bolts and combination locks
are not proof against burglarious assaults
Commercially speaking, banks are our only
resource for specie, and these collectively held,
on the 7th of March 81, SO millions, which
was reduced, by expectations in the following
Summer, to about so millions. We have then,
this startling astounding, and appalling fact,
that, on the first of September 1857, there was
not one-half specie enough in all the banks of
the United States, topay what New York owed,
as a balance on foreign importations Does this
not account for the panic in all its length,
breadth, and depth Specie is the life-blood of
our currency, small in proportional amount,
but quite essential to its existence. Whenever
uSie Sohles u HedNy, CONTINUOUS foreign ue-
mand for specie, the jugular vein is tapped,
and, if long continued the currency falls with
a Tremendous crash, crushing all branches of
busness-annihilating all values, and enyelop-
ing the whole country in common ruin.
Specie is the sensitive nerve of the banks, and,
whenever disturbed, that nerve is touched, and,
by an invariable law of its being, as often as
u is touched, a contraction instantly follows.
The banks are all connected, as by electrical
wires, and any disturbance Of specie, in one
part of the country, is felt almost simultan-
eously throughout the whole.--This accounts
for the suddeness of our financial revulsions.
Whenever, therefore, foreign demand for
| specie arises a contraction of the currency
invariably follows, and increases in stringeney
in an accelerating ratio, so long as that demand
continues. The rate of foreign exchange may,
therefore, be considered an unerring barome.
tor, to indicate the money market. Many
cast severe censure upon the banks in such
revulsions for not ganting accommodations
but it is unjust Self-defence (Suaye gu peutj
is the first law Of existence.
! The above view of the panic is well under.