, 1878-02-01
Will the Next be O Bond Panic ?

TOi eoLhC ycA past Sopihni hhN nousuN
investment in bonds, and the demand for
this class Of securities has undoubtedly
had much to do in stimulating the issue
Of bonds. Capital has great influence
upon Legislative bodies, and those having
authority to plunge the public into debt.
The ease with which school districts,
villages, townships, counties, cities, and
States could issue bonds and raise money,
has operated to produce an extravaganza
in expenditures for all classes of public
Improvements which has no precedent in
the worlds history. the amount of
bonds now held by capitalists is truly
alarming, and the Indebtedness Of cities,
villages, States, counties, tow wnships, and
school districts is strongly suggestive of
bankruptcy and reputation. Statistics
bearing upon this subject are Of the most
startling character, and capitalists are be-
coming alarmed. The indebtedness of
1870 cities of the United States now ag.
gregates $1,000,000,000. The debt Of
many cities equals one-thri of the as
sessed valuation of their property.
Under the practice of issuing bonds,
not only extravaganza in public improve
men,s has grown up, but the number of
ofcers has been greatly increased, sala.
ries have advanced, aud current expenses
have more than doubled in nearly every
department Of local government. The
current expenses of the 1870 cities referred
to amounts, in the aggregate, to $780,
10000 per year-wi:hin $40,0O0,O00 of
| the current expenses Of the United States
Government. For the past ten years, the
Indebtedness of these 1870 cities has in
creased at the rate of $50,000,000 per
year. Hard times has not operated 10
check this great tide of public extrav i.
gance, but i'll many instances has doubt
less had the effect to increase its volume.
The pressure of capitalists for their fa-
vorte securities, 'tue opportunities of
contractors, the private interests OF mem
bers of Councils and others i'll authority,
have all combined to swell this public in.
dGbtedness. Prudent business men,
burthened with enormous taxation and
alarmed at the reckless manner in which
| bonds have been issued without reason
able prospect of ability to meet them at
maturity, have urged State Legislatures
to materially contract the power Of local
authorities to incur Indebtedness, but
these efforts avaied little, and there has
been no perceptible check to the issue Of
| bonds.
During all this period of extravaganza,
capital has Stunned business investmc nts
and the farmer and manufacturer have
found it difficult to borrow money at less
than twelve per cent. The capitalist
preferred bonds bearing from four to seven
per cent. to tirst.class mortgage securi-
ties At eight and ten per cent, and few in
deed could be induced to take stock in
any business enterprise. Business gener-
ally has suffered severely through the
withdrawal of capital from mercantile
aud manufacturing pursuits for invest
ment 10 bonds, and thousands of failures
of business men to obtain money ut fair
rates Of interest.
All extravaganza must have an end,
and thoughtful business men and capi-
talists think the bond extravagance must
soon terminate in bond panic. 1t
seems scarcely possible that the interest
upon the bonds now issued can be paid,
and the time is near when there must be
AN end to the payment of interest upon
old bonds by the issue and sale of new
bonds. Capital is beginning to turn
away from bonds and seek otner invest
ments. Savings Banks and men having
l.rge sums of money to invest, are al
really beginning to turn bond negotiators
Away with the remark that I'VE have all
that class of securities desired, and would
rather sell what we have got than buy
more" This certainly looks like the be-
ginning of the end of the bond flood.
II there is no market for bonds, there
must be an end to the issue Of that class
OF securities, and when bonds cannot be
sold to raise money for the fragment of
interest which cannot be raised 10y taxa
ton, what must the result bet
AS we have always said, capital il be-
ginning to avoid this class of securities
and many holders of bonds are unload
ing to escape the effects of u panic, which
is generally regarded as certain To occur.
Many think 1t must come soon, while
others are disposed To believe that the
crisis will be ayertod for few yeats. All
/ agree that it must come, sooner or later,
when bonds issued by local authorities,
instead Of being in demand, As bereto-
/ fore, will bc at such discount A. 10 pre-
/ vent their issue.
While this condition of things must re-
sol, In heavy taxation, it canbo, fail "a
enforce rigid economy 90 the part oi mu-
Hicipal autbuIiiie. aud cause capital IA
I seek investment 10 real esiaic and bust
ness enterprises. Nhta bu.iusss mes can
. get money NJ the same rsirs u interest
7 which have bosn paid upon bonds. Ne
may iuuk f1 lsrtlef iimrs tapilai Sill
/ ir investe,i 10 protective iudusinss, and
. ia-teai Oi sappiug The ntalh uI 3as
fr8uIa. h wiII o. smuluyet tu aiding to