Lexington weekly intelligencer. (Lexington, Mo.) 1871-1887, 1876-01-08
CASH VERSUS CREDIT.

OnsIfateu, III late issue, that the al
| legged plethora of funds seeking in
vesiment was not currency, but cred
it mohilier, transferable creditsl
on the bank icdgers, resulting, for til
most part, more or less remotely, ,froI
discounts, and available by checks
thus being largely, both in creation
and utilization, bottomed on conf
dence, and peculiarly suggestive an,
provocative of paTics when that ba
SIS is even i'll q slight degree shaken
Sir John Lubbock, an emiuen
British banker, demonstrates that tn,
proportion of this money .manufac
turcd to order in the bank parlor
constitutes ninety-seven per cent. O
the bank deposits of England, th
balance being composed of half of oil,
per cent. specie and two and hal
per cent. bank bills. Prof. Bonam,
Price tells us that these s'credits mo
saier' of bank ledgers care the Chi
rs asa Sea ofs panics'-the region ;,ron
wi.e5'e foliow;e those cyclones of imam
cial aud commercial devastation ant
ruin which periodically sweep ovel
our land, with devastation moro
obliterating and widespread tia,
that of the whirlwind, the earthquak.
or the battlefield. Fortunately tol
the human race, statisticians have
classified the phenomena of both me
teorological and money cyclones, and
though as to the former, being purel,
product of natural forces, they car
only point out the line of travel and
the ''habits Of the nonsters''- that
II we cannot prevent them we can
measurably escape them-as to the
latter, as the causes lie entirely in oul
social orgamZation, we cannot only
escape their effects but eradicate the
causes of their existence.
Prominent among the sources OF
statistics which bear upon panics are
the reports of our commercial agen-
cies, which have of late exhibited a
wonderfully graded scale of CONNER
cla! and manufacturing failures, reg
ularly increasing from 642 in 1865,
when our supply Of the "money OF
the realm" was the greatest, to over
Z 200 i'll 1873, when the nations circu-
lation had been reduced TO the lowest
point it has yet attained, and the cred
Its mobllier - the panic breeding
money created in bank parlors-has
been inflated to the highest point vet
reached. The ratio of sOlVency, as
with insolvency, seems to
be most remarkably indicated by the
which the real money of
the nation bears to the inflated pri-
vate credits of the bank ledgers
which interested parties are constant
ly striving TO substitute for the
money OF the realm.''
If this fact were of smaller dlmen-
sions il would be enorc easily grasped
and readily handled but men are
apt to consult their laziness, aud
prejudice their material interests, by
eit her stupidity accepting some shibo-
eth or barbarism of the past with
equal stupidity, ascribing to plain
principles of finance some, mysteri-
ous subtlety, which can only be sue
:essfully grappled by men Of pro-
ound study and reputed genius.
But let us suppose case which will
we'll represent the facts.
Imagine the tWenty-six letters of|
he alphabet to be persons A has
occasion for the services of Il, and Z
or those of C,and so on down through
o L, who requires the especial labor
II A. Each having engaged the SER
ices OF his next door eighbor, they
ii go to work, say Monday morning,
t five dollars Il day. When night
ONES. A pays b five dollars, u pass
s the same bill to G, and so OH to Il,
Who pays it to A. Each Jnan is paid.
nd the money has reverted to A,the |
rIginal owner and holder. This is
II illustration of cash basis and cash
such as prevailed to such |
Ii extent i'll 1866. Then the national
honey was Withdrawn from the busi-
ess community and consolidated into
lg bonds bearing gold interest and
dapted to European requirements
nj tastes. Commerce, abhorriug
acuum i'll finance as much as nature
| fluids, was forced to adopt credit
5 substitute. How this worked,
e will show by another supposed
Sperience of our alphabetical
Imily.
This time each sets his next door
elshbor at work as before, but at
Sht there Is no money. Every
ne OF the number is responsible
Wns thousands of dollars worth of
nd, houses, cattle and stock but has
, money. Consequently each settles
ith his neighbor by giving his note
+ five dollars. AS there are 25 :
'tes of SO each, credit currency Of, ,
thus been created. =
But one of the number, say IL, hav- =
g read Prof. Prices lectures ON =
Banks and Banking" aad noted his =
mark that bankers do not require e
use capital, only confidence, and, r
ing i'll fair repute, starts bank and I
viie5 his ncighbors to open ac- =
UNITS. They call and state that they y
{ short of money to deposit, but a
ould like discounts, showing the u
ties of five dollars. IL examines the ,
ties; expresses himself entirely sat !.
led with the drawer and endorser =,
It., really, "to open bank account h
tn discount Is not quite regular" G
you'd be Il bad precedeut"-"iu "
ort is not good banking" and so ,at ~
request, each man hurries around =,
d raises fifty cents, which he de- n
sits. Then the note is discounted, -
'ulIing, after deduciing the inter b
J, go cents), is 81 75. This, with n
2 30 cents, makes Il bank credit, =,
posit, mostly constructive of So 25. +
due time ii charges up the notes i;
y to each, which leaves a balance =,
70 cents to each mans credit "A y,
Oh work has been done. TIE only nj
1erers arc the twenty-five ueposi-
IS, who lose % cents discount each, r
Il the only gamer is the banker, a,
10 makes it. That is credit-bank- r,
Say 1870. p
Tins thing works so we'll that our r,
'habetical friends keep on until u
.sehliy one OF The number, Z, thinks of
abroad on the northwest corner OF ey
1ariE may be handy some time and ca
'ws out his So before his note is 40
e. When the paper natures there nj
no funds 10 meet it, and it is pro-
ted the owner and endOrser of p,
note is cramped by its return, ,and lit
It pay T., and SO it runs through of
circle, and all are bankrupt. oe
at is 1873. ~
We fad here three illustrations. ! ri
wit:
ST, of 1866. 35 cash iloating almost de
'ultaneously $3.50, OF exchange. sa
u, OF 1S11: When the absence of ~
h medium forces the organization d.
credit mediums. In
rd of 1873: When q single futl,re otI
:hs tie intuition balloon, and the p,
bLe collapSeS.-[New York Mer- ri
tile journal. th
he moral of the above article is, d,
too much confidence OH a credit 70 re
IS Is much more dangerous to the -,
! n. t.,,,. r.l