The Cincinnati daily star. [volume] ([Cincinnati, Ohio]) 1875-1880, 1876-01-22
Commercial Credits.


Commercial Credits.
1t has been charged as saying OF
General Jackson, s'that every man who
did business on borrowed capital ought
to break" The saying as coming from
him may not be considered as improb-
able; for in his times commercial bust
ness was almost entirely predicated
upon the actual capital of the merchants
themselves. The merchants of those
days were not unfrequently private
bankers as well as traders. They dealt
in money as well as in merchandise.
Instead of being borrowers, they were
often lenders. That order of things is
now almost entirely reversed. To a
greater or less extent merchants are
now almost invariably borrowers, sell
lom lenders. 1t was in vindication of
bhe old order Of things that General
jackson made the above declaration, at
which his political opponents We're won't
10 utter bitter ratings and reviIfngs.
: Then it was that our present system
sf expanded commercial credits began
10 be inaugurated; and borrowed capital
speedily took the place Of actual capital
IN business life. Considering his long
conflict with the old United States Bank,
1nder which borrowing was made easy,
It would not be wonderful that sold
Hickory" disliked the innovation and
denounced 1t in just such terms as have
been imputed to him. But the change
has been made. Thousands of men, hav-
ing means of commanding money, more
or less, by personal credit, embark In
commercial business, not unfrequently
on stupendous scale, without any pro-
portfonate amount Of actual capital.
They are borrowers from the beginning,
and are generally borrowers to the end
Ing. s....,.. sss
1t must be admitted, however, that
some, perhaps many, Of such beginnings
have led on to fortunes. But 1t must
likewise be admitted that these cases
are rather the exceptions than the rule.
Men who can command large commercial
credits may do an immense business
while the man who relies upon his act
ual capital may lag far behind. The
reasons for this are two-fold: the man
whose means come by borrowing is COM
PEELED to employ the utmost activity In
his business in order that 1t may en-
able him to pay for the use OF his cap.
ital as he goes along, II he does
not, the very, cost Of his capital
must speedily swamp him. His is conse.
quentIy q speculator. He is riskine
other mems money in the effort to mafe
some for himself. The man whose act
ualcapital is already paid for and his
own, is not compelled to use the same
reckless energy in forcing his business
And his capital being his own he IL
naturally more cautious and prudent IL
his operations; because If he loses, the
loss is his own; if the borrower loses
the loss is his creditors. The differenc'
may be compared to the difference IL
driving his own horse, or q hired horse
The result of this expansion OF com
mercial credits is, that the men Of actua
capital, generally speaking, are nj
longer merchants. They find that the,
can make nicer profit on their money
than they can on their merchandise
They accordingly become bankers; pre-
ferring to supply the means OF trade
rather than to engage in trade itsell
This may not be the most substantial
mode of conducting business; but 1t ]
the mode upon which most of the bus
ness Of the world is now done. 1t is no
peculiar to this country. 1t prevails /
Europe quite as widely as it does here.
AS a matter Of course, when o rumo
OF trouble is whispered, when some at
cident has compelled a default, capit'
takes the alarm, the sources of suppl
are stopped, the course OF trade is q
ranged, panic comes on, and failure
are innumerable. Such must ever be II
result Of these expanded commercii
credits. Because, capital, when hire
from without, can not be retained with
In the business under circumstances
dIstrust and alarm. In this regard
makes no difference whether the bui
ness be conducted upon coin
currency basis. The failur
In Europe, especially in England al
Germany. have been, for the past yei
more numerous and disastrous than
this country. Yet in England, !
amount Of money in circulation, AID
equivalent to coin, was $S2 per capt.
in America only SIT per capita In O
rency. This shows that the system
commercial credits is iar more extend
in England than in America; ana v
account for the numerous and enormo