The star of the north. [volume] (Bloomsburg, Pa.) 1849-1866, 1859-03-09
The Crrdit System.

AT recent meeting of the Glasgow
Chamber OF commerce, a report on CONNER
cial crisis was presented by the Commits
tee on Banking Laws, which abounds with
sound, practical sensible views, plainly
and forcibly stated. They are as applica-
BILE 10 this country as that in which they
were express, and are especially commend.
ed 10 the attention of the people of this
State, at this tises when they are engag-
ed in an effort 10 reform the banking sys.
TEN, and thus put check upon the great
fountain Of excessive credit The similari-
ty Of the principles stated with those which
are now engaging Tie attention of the friends
of reform in the currency both in Penn
sylvanla and New York, shows that men
are begiring TO look at this question from
the stand point of commercial experience.
and hence are verging TO the same conclu-
sions.
The report says "ihe bestsecurity against
commercial commissions is 10 limit credit
The nearer we come TO a cash business,
the sounder will he our trade The com.
7aratlve security Of French commerce dur
ing the late crises, was, no doubt greatly
owing 10 the modified nature of its credits :;
and, on the other hand, the disasters which
overwhelmed the commerce o. America,
were as cer.----+s, -+l4rc result of an exagger.
ated credit system. Eveyywhere The stability
Of CONNIE ce IS in on inrerse ratio 10 the dcrei.
opment Of credit. Bm tie abuse Of me csntile
cred could moi exidto any great erient, ,crre
II not Jode'ed ty the abuse Of 'anking credit -
In our commercial system the credit given
by one trader 10 another, depends nlainiy on
tie crehf given hy bn,kers 10 traders Traders
could not give excessive credits unless
bankers supplied them with the means -
Impr"denf banking is The root Of all unsouni
trod'ng. The great fault of modern bank
ing is the insufficient of reserves. Bankers.
like traders, are hound to provide for their
solvency; they must reserve ample means
10 meet obligations, and in their case any
departure from this rule is the more mex.
cusable that the proper amount of reserve
for them TO hold may he ascertaned with
almost mathematical precision. But the
desire of profit or the urgency of their GUS
toners induces bankers. in TOO MANY in.
Stances, 10 invest their deposits more close
ly than prudence warrants; safe'y is sacr.
| feed FOR an addition per centage of profit,
the reserve is allowed TO fall dangerously
low, and when time of pressure comes
the Bank has nohing TO fall back upon.
This insuhiciency of banking reserves is
the immediate cause of our panics. When
pressure occurs our great money lenders are
the first 10 take alarm; with enormous La.
bilies and inadequate reserves of immed
a'ely available resources, they feel that
their solvency is endangered, and their
violent efforts 10 regain position of sa!e,y,
are the chief couse of disturbance in The
money market. Instead of lending 20 others,
| they become themselves the most impor-
tunate a FborrGwers, Those who should
sustain credit 'arSTEef chief authors of dis.
credit; they who should inspire confidence
are themselves panic stricken, 1t is not
the needy deposilor or ignorant noteholder
OF the provinces who cause our panics; it
is the millionaire money-leuder of our great
centres of commerce. Ole great cause OF
insufficient reserves is undoubtly the high
rate of interest allowed upon depo SITS
Such rates can only he paid, and profit
realized hy close investment of deposits.
Our trading credi rest mainly on accom-
mediation from the Banks. The provincial
Banks deposit great part of their reserves
with London bankers on cali. The London
bankers again invest their deposits closely,
and trust mainly 10 advances from the Bank
of England in case of need, while the Blk OF
England itself allows its reserve in times OF
pressure 10 fall 10 lrihing fraction of its
deposits. Thus the vast superstructure OF
British commerce pests ultimately OH mere
trihe of reserved capital Our whole credit
system is an inverted pyramid.-Pena'dn.
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