The Ouachita telegraph. [volume] (Monroe, La.) 1865-1889, 1871-06-17
Cost Of tho Credit System.

coming more apparent. TO say that an
individuals, or Il nations credit, stands
high in the market is considered n great
compliment, as betokening an unusual
degree both of thrift and integrity in
the party so complimented. Undoubt-
e<lly, such Il good reputation for credit
is always desirable-especially so far as
it relates to the personal virtues of
honor and integrity. But the CONNER
cial value of such II reputation is not
always us great as generally supposed,
and depends very much upon the uses
to which it is put.
Good credit, and too much of it, has
often in the end proved the ruin ofsonc
of our snlartcSt business men and we
need not go far back in our com nnercial
history in order to learn how it has
come very near bankrupting the mer-
camille interest of whole sections. In
fact, it is an endowment so liable to be
abused, and which leads so se<luctively
to imprudence in the management Of
business, that it is somewhat doubtful,
after all, whether the young merchant
who has no credit, and makes no effort
to gain it, does not stand the best chance
of success in the long run. This is be-
cause he only buys what he needs and
when he needs, because he can buy ut
lower prices than the time purchaser,
because he carries and pays interest on
no superfluous stock, and because he
does not have to make up for the bad
debts of others.
When the credit system generally is
in bad Odor, rs at the present time, and
business failures are heavy and numer-
able to get trusted, since it is just then
that he is obliged to pay the dearest for
this privilege. He not only has to pay
the highest market prices for whatever
he buys, but, in addition, he has to
help pay for what other people buy and
fail to pay for themselves. In other
words, beside submitting to IL little ex-
ira charge by way of guaranteeing his
own debt, he gets charged for pre-
MUM of insurance on the debts of his
neighbor, who does business Oh the
credit system.
This insurance premium is, of course,
graduated according to the average Of
losses from bad debts; and when the
percentage of these losses to the aggre-
gate of sales runs high, rs at the pres
ent time, the premium charged to all
time buyers is correspondingiy large.
If the average loss, by fraud and fail
ures, on sales to the extent Of $500, 900
L.
must be added to the price ofgoods bor-
roWed, or taken on credit, in order to
cover this loss. This approximates the
rates generally charged at the present
time, while before the war only pei
cent. was required for this contingent
fund.
But this 10 per cent. represents only
the additional price paid ON transactions
from first hands and tho interest charged
by the banks or brokers for discountine
the buyers paper must be added tC
that. The jobber, who has paid these
| extra charges to the manufacturer OF
! importer, in turn sells to the retailer,
! who also pays 10 per cent. on the score
of losses, beside discount for co or &c
days; so that by the time any commo-
dity reaches the consumer, in the ordi-
nary course of trade, its legitimate cost
is enhanced some % per cent, solely on
account of the credit system.
Perhaps it may be said that those
who uphold this costly system need not
care so long as the actual consumer foots
the bill. But they ought to care, since,
on the ground of selfintertSt alone,
there is abundant reason why the dealer
in merchandise should not wish to in
crease it's cost to the consumer more
than is necessary to yield the former /:
fair profit.
The sufferers by the credit system are
generally those who least suspect them
selves to be the victims of its robbery
They know that many people fail in
business, and that their creditors arc
supposed to lose large sums of money
but as long as none of these debts arc
due TO them they do not feel concerned
| They know, also, that they are Obliged
to pay unreasonably high prices fol
! many things; but they do not dream
that there is any connection between
these prices and the bad debts ant
bankruptcy resulting from this abuse
of credits. But there is such Il cOnnec
! ton, and the mass of consumers have
to pay roundly for the folly and fraut
of men who undertake to do an i'm
mense business with little or no capital
and who for II while pride themselvc
on the excellence of their credit.
The statistics of business failures il
this country during the last two o
three years exhibit an alarming in
crease. In 1868, the aggregate iossc
from this source We're $G3, 754 900; il
1863 they amounted to $75,O54 900; an,
in 1870 to $SS, 900. This is an in
crease for two years of some 33 per cent
and for the last year of nearly 20 pc
cent. But where did this loss of ntari
a hundred millions, during the yea
1870, fall: The superficial observe
would probably reply at once that i
was sustained by the bankrupt's credit
ors, and that nobody else was affecte
! by it, except, perhaps, in the way c
sympathy. But the truth is that thi
great loss has fallen upon the Who'll
country, and the people have got to b
| 4 N IN