The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1875-03-08
Capital Diverted from Industrial to Spec
uIative Uses
DEFECTS OF BANK SYSTEMS.
The Delusion Of the Age
Promises to Pay.
70 THE EpIroR OF The HsxALp:-


rency question, which has occupied so much OF
The public attention of late. have arisen from a
eoniusion IN the terms which have been used.
Money Is one thing and currency Is another, al
though they are so often treated as Identical.
Money IN the civilized world Is specie, and credit
Is the promise to pay specie, but never can be.
come the thing Itself. The idea that credit IN It's
higher form. such as the bank note can ever be-
come precisely equivalent to specie Is the mistake
which has msled the world Tor SO long. properly
organized system OF credit Is essential TO great
prosperity and progress In every civilized COM
munity but 1t can never entirely supersede the
use or money although this has been often at
tempted, and almost always with mischievous
consequences. The large proportion OF the credit
OF society and the part upon hicn It's progress Is
dependent. Is the pledge OF LABOR to restore the
capital loaned for purposes Of production. with
sonnet thing for It's In the shape OF interest,
PAYABLE at a definite time. Upon the fact that
the enter prise shall be OF character to repro
duce the capital employed with something over TO
pay the lender Tor its aud pro1t to the
producer, depends manly the prosperity of a COM
munity. Capital is sometimes borrowed to be
consumed in It's by states and i'm
provldent individuals. But this must be
the smaller portion or, the society de-
chnes The interest OF the State consists
IN employing as much capital as possible IN pront.
able reproductive industry. AS far as possible to
Increase the facilities for this mode OF employing
capital and to diminish It's waste In other ways
Is true craftsmanship, SO lar as either OBJECT can
be accomplished by government. In country
where there SO many species Of productive in-
dustry, naturally probable as is the case with
purs. government has nothing to do but 10 facli-
tate the access OF such industry to capital Every
thing which impedes that or contributes to
THE WASTE OF CAPITAL
Itself is eminently mischievous. II labor were re.
strcted 10 Its use OF capital TO SUCH amounts as 1t
could repay in money It's operations would be so
greatly restricted as 10 occasion mucn disaster,
especially If it had been in the habit OF using much
more. THIS want is generally supplied by or.
ganizing higher forms OF credit approaching
more nearly to money in its value, which are
loaned to labor on It's own pledges and who Sc use
enables 1t to procure capital. These higher forms
are, for the most part, created oy the banks, aud
consist OF their promises to pay specie on demand
In effect IL Is the promise OF the bank to make
good the pledges oil the individuals deposited with
them, and promising to pay interest Tor the use OF
these notes. which they are generally able TO DO
out OF the profits OF their Industry, for whose
necessary use they obtain capital in exchange for
the bank notes thus borrowed. The ability OF the
bank to perform Its promise depends upon the re-
demption OF individual pledges. But this Is
economic The use OF money and open a wider
deld Tor the employment OF labor. They take ON
deposit any surplus OF money or credit held BY
Individuals and lend them out again for the uses
OF production, and by a system of Offset settle
large amount OF individual and corporate liza.
bilities without the use OF specie. The amount Of
wealth produced in q community where there 10 o
system OF credit properly organized Is vastly
greater than in one where no such system exists.
When a arrangement occurs in q well organized
system much dis rress Is occasioned by the embar-
rassment oil Its functions. Nations settle their
accounts either by an exchange or balances re-
spectvely due or by the actual use OF none y,
unless, indeed, the government is supplied with
the highest OF all forms OF credit, good State
bonds. To protect a community o. ainst national
demands 1t must either have an active system OF
prof able production or q lair supply OF specie or
good government credit Upon a system OF profit.
able Industry the others all depend, and not only
these, but 10 a great extent peace and prosperity
also.
FINANCIAL CURSE OF TIE WAR.
To establish sucn a system as this. upon which
the all depends 1t Is essential not only re.
frain from wasting or misapplyIng the capital OF
the country, but to facilitate the access oil INDUSTRY
to that capital Has our government observed
either OF these rules' Far IRON II. On the con-
trary the late panic, H. indeed, 1t has yet subsded.
was due IN a great degree TO the div version OF
the capital OF the country rom profit produc-
ZION TO improper uses. In the nrsL place a
large amount OF that capital-about 5000 000 900,
according, think, to an estimate OF Mr.. Wells
was consumed by the war. This may be said TO
have teen necessary. Stiiit is TACT, and not tho
less riischicvous on account OF lis necessity,
whether real or supposed. BESIDES this, the steam
ana productive machinery OF the South, and TO
Vat. l.er
and the capital thus invested was totally con-
sua,ed. 1ac labor once owned for the most part
by the landowners OF the South was emancipated
without compensation. and, whether this was
right or wrong, the owner was forced To meet
oeots contracted on the altn OF TINS property, and
10 raise the money necessary 10 Organize an IN
dGstral system entirely new when capital was
scarcest ana more or IL was required for ms opera
tons than ever before. or course the system was
but partially organized and that at deadly ex-
pense. Tus change may become ultimately as
prod abe as Was the Old system, but undoubtedly
IN as iutitallou It costs a great deal more Mucn
oil the old system Of production IA the south, once
30 profitable, was abandoned and when partially
resumed the cost was 20 great as 20 leave but
little profit 10 the producer. The landowners
made Uut tn 1--we. but AID nttIc more instead OF
creating u large surtlus, as heretofore. what
little capital once existed In that section was
almost entirely consumed.
1neir banSs we're entirely destroyed, and the
capital once neid by individuals was generally
lost. The state governments which, n directed
and regulated by the interests OF the people,
fedcral Intervention unocr the rue OF the igno.
rant negro and corrupt carpet-Dagger, ana be-
came actual Duisances ana objects Oi dread TO
me industrious and intelligent part Of the com
munlty.
THE DAY or RECKONING.
Under all these circumstances the credit OF the
average individual was impaired TO an extent
never KNOWN before In the south. And ct IL was
by this credit that the capacity OF TINS region TO-
producing wealth was 70 be measured. As the
credit o. inc one rises or falls so does tnc pecun
AIRY prosperity oil the community increase or de-
a. me a ZEE n u
tion OF hgbcr iorms 10y the banks to give IN ex
change for H. or, IN iact 10 insure it Das al~ays
been eninently uselui. But the stale banks had
been dvstiofcd ny the war aud prohibited Dy leu
eral legislation. Nnen tne commercial q 1878
came, therefore, .hc south was unable 10 assist
so Largely as u mad done DItBerto. The North aud
West we're manly ef to their own resources 20
eXtricate themselves from financial emoa
Tassments. hut the day OF reckoning mad
come .Or them, TOO and they did not nc once
recognize nov mucn oil tDeIr distress was Occa-
stoned by unNtsc legislation fhe best hOte o. re-.
Ile sAccc.A OF LheLr InauaIrI