The Portland daily press., 1867-01-03
The Price of United State. seeeuri.ie. Gu

d. ~ .4~tt~
We copy the following passages from long
letter from the Hon. Demas Barnes, on the IL
nances aud currency, which appears In the
New York Times. The extracts selected bear
expressly upon the causes which determine
the price of securities acknowledged, like our
own, to be perfectly good for their annual or
semi-annual interest and ultimately for the
principal. Mr. Barnes says
1t appears not to be understood that cir
cumstances other than the solvency OF the
Government are necessary to stability IN the
value OF its bonds; that the manner OF its is
sues, the uses to which they are put, and the
ability OF the people TO invest and retain their
investments in any kind OF securities, are the
real principl,s governing the value OF an acre
of land, a pound OF merchandise or a Nation
al Bank bill. We are apt to estimate the val
ue of an article or SECURITY by the earnings
or the interest which It viii produce. We say
that the stock OF the Pacific Mail Company is
cheap at 250 when it earns 70 per cent. divi-
dends, and that OF the Erie Railroad Con,pa-
NY is dear at 70 when it earns but per cent.
dividends. But suppose we multiply Pacific
Mail Company stOcK to two Thousand million
dollars, with the same per cent. OF earnings,
what would be the result? Could the market
take this stock without lessening its price ald
displacing other securities to an equal amount?
Mr.. Gladstone no doubt truly reflected the
financial opinion of England when he took
occasion to inform Parliament that with
proper legislation American bonds would be
the best sec lrities in the world-that our rev.
enue bills were now producing two hundred
millions OF dollars year beyond our necessi-
ties to pay interest and current expenses"
And at that very time the Ways and Means
Committee of Congress were devising means
/ to reduce our revenue one hundred millions
year. Yet United States securities, bearing
per cent. gold interest, are to-day selling at 90
per cent This very clearly illustrates that
solvency--the mere fact that bond win be
paid at maturity, and the TACT that it bears
| high rate of interests, does not govern its
value. If other evidence is wanting it can be
made stin palmer by asking why ton OF coal,
barrel OF flour, the notes OF an individual OF
oil the Government, are one price to-day, an
other tomorrow, and always widely huctuat-
ing during the year? :? The answer is found in tie
law of supply and demand. When we divest
ourselves of the mistaken idea that Govern
ment bonds are governed by a different prin-
ciple than other securities, we can realize our
true financial position, and not till then.
| When there are more buyers than sellers, the
| arice goes up; when more sellers than buyers,
the larice goes down.
The causes which govern fctuations in bonds
are several. /. Quantity. 2. BY what class
of men. g. The value of money. 4, and
lastly-not first-the real value and earnings
OF the security ITSELF
First, then, it is evident that the world can
not invest faster than the accumulation of its
earnings. 1t requires very long time to alb
| sorb the vast amount OF securities we have is
sued. If the Rothschild's desire to invest a
! hundred millions in United States securities
| they must first dispose OF hundred
1nillions of other securities To whom
and what the effect The certain
loss on their sales would balance the pros
pective gains on their purchases. There be-
ing just SO much money in existence, if the
property which it represents should be doub-
led in quantity, the price per item would be
only half as much. Hence every dollar of new
security created dilutes and reduces the value
| of ALL Our debt is too large, and has been too
suddenly created to be stable In price, what
ever interest it may bear.
2. The stability OF securities is affected by
the strength OF holders. We a1e well aware
that tue high rate OF interest and the patri-
o'ic appeals made to our people during time
| of .~reat national excitement, placed many of
these securities in the hands OF merchants,
mechant les and laborers. Many business men
| purchased $4,000 in the morning. and bad
| Them depositSd as collateral tor a loan of
$4,000 before 3 O'clock The lower the inter-
EST. the more stable will be the price of the Sc
cufity. Only our Astors and Girards will in
vest in three per cents, while men of moder-
ate means, savin4 S bank depositors, will inv st
1 in seven per cents. When business stagna ates
| and labsr is n1iewarded, these latter classes
must sell-sell for what they can get.
! Now suppose tiiab some day capitalists
make up their minds Blat we are living be
| ycnd our income, and Withdrawal of co, f"
| dence takes place for only thirty days; that
they should call in their loans and re- &c to
put them out except upon largely ir reAs !, 1
and different qualities OF margins, nd T. Il
1 we have not got the margins. Wls n .es
place? Why, rush to se9 securities, mer-
! chandise, property anything which will
bring legal lenders and pay debts, thee KUN
dred millions of which mature weekly. The
banks hold but sixty millions Of legal tenders.
| IF you draw ten millions, they must curtail
thirty; II you draw thirty, where are they
! If when you 60 to Wall-street TO sell twenty
thousand dollars of Government securities
you meet your neighbors there with million
yea, with hundred millions--who is tc
buy? The price goes down to 100, 95, 90, and
when it reaches 89--just this arbitrary, fiNeG
fgure--an Of the bills of the fifteen hundred
and odd 10 per cent National Banks are at
per cent discount; at 10 those bills are at Il
per cent. discount, and those of the 20 Del
cent banks are affected in the same ratio
Billholders will endeavor to protect them
selves by focking to the banks. A panic sets
in, intensified by the participation Of ever,
man, woman and child who owns dollar bill
The price OF these securities will 60 as muei
lower than mere tight money market viii
carry them, as arrangement OF the cnrren
cy will add to the depressing tendencies. Th'
bonds may still draw their interest, but tina
| f,oI fboir