, 1878-02-16
win the Next be a Bond Panic I?

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 up
IN legislative bodies, and those having au-
tbority To plunge the public into debt.
The ease with which school districts, Will
apes. townships, counties, cities, and
states could issue bonds and raise money,
has operated to produce an extravagance
in expenditures for all classes OF publlc
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, townships, and school
districts is strongly suggestive OF bank
ruptcy and Reputation. Statistics bear
ing upon this subject are OF the most start
ling character, and capitalists are becoming
alarmed. The Indebtedness of 40 cities
Of the United States now aggregates over
81. 600, ,OO0,O0 The debt Of many cities
equals one third Of the assessed valuation
of their property.
Under the practice of issuing bonds,
not only extravaganza III public improve
ments has grown up, but the number of
officers has been greatly increased, saler-
les have advanced, ard current expenses
have more than doubled IN nearly every
department of local government The
current expenses of the 13o cities referred
TO amounts, in the aggregate, to 500
OOO. 900 per year-withln SiO,OOO,000 OF
the current expenses of the United States
government. For the past ten years, the
Indebtedness If these l30 cities has In
creased at the rate of 10000, 900 per
wear. Hard times has not operated to
check tins great tide of public extrava-
gance, but in many instances has doubt
less had the effect to increase its volume.
The pressure of capitalists for their favor
itc securities. the opportunities of contrac-
tors, the private interests of members OF
councils and Others in authority, have all
combined to swell this public indebted
ness. Prudent business men, burthened
with enormous taxation and alarmed at
the reckless manner in which bonds have
been issued without reasonable prospect
of ability to meet them at maturity. have
urged state legislatures, to materially con-
uact the power of local authorities to in
cur indebtedness, but these efforts avail
ed little, and there has been no perceptl-
bic check to the issue Of bonds.
During all this period of extravaganza,
capital has Stunned business investments
and the farmer and manufacturer have
found 1t difficult to borrow money at less
than twelve per cent The capitalist pre-
ferred bonds bearing from four to seven
per cent to first-class mortgage securities
at eight and ten per cent, and few indeed
could be induced to take stock III any
business enterprise. Business generally
has suffered severely through the with
drawal Of capital from mercantile and
manufacturing pursuits for Investment i'll
bonds, and thousands of failures have oc-
cured on account of the inability Of busi-
ness men to obtain money at far rates OF
interest.
All extravaganza must have an end, and
thoughtful business men and capitalists
think the bond extravaganza 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 other investments. Say
ings baLks' and men having large SUMS of
money to invest, are already beginning to
turn bond negotiations away with the re-
mark that "We have al that class Of Sc
curities desired, and would rather sell
what We have got than buy more. This
certainly looks like the beginnin. of the
end of the bond flood If there is no mar
ket 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 by taxation, what must the re-
suit be-
As we have always said, capital is be-
ginning to avoid this class of securities
and many holders Of bonds are unloading
to escape the effects of panic, which is
generally regarded rs certain to occur
Many think it must come soon, while
others are disposed 10 be!ive that the
crisis will be averted for few years. All
agree that 1t must come, sooner or later,
when bonds issued by local authorities,
instead OF being in demand, as heretofore,
will be at such discount as TO prevent
their issue.
While this condition Of things must re
suit IN heavy taxation, it cannot fail to
enforce rigid economy on the part OF mu
nlcipal authorities and cause capital to
seek investment in real estate and busi-
ness enterprises. When business men can
get money at the same rates of interest
which have been paid upon bonds, We may
look for bettertimes. Capitalwill be invest
ed IN productive industries, and instead Of
.sapping the wealth Of the people, it will be
employed III adding to the general wealth
and prosperity of the country. Ii we
must have bond panic-if there is no
other and better road leading to general
economy and prosperity-that panic can
not come too soon. Certainly, the sooner
1t comes the less must be Its disastrous
effects upon the interests Of the country,
and the greater It's benefits IN relieving
the load. THERE'S an abundance of money
IN the country, We are told, but it has
been so presistently withheld from legiti-
mate and healthful business pursuits, and
so lavishly expended upon unproductive
and extravagant public improvements
that there has at least existed seeming
scarcity OF money for ordinary bushes
transactions.
Let extravaganza cease-let there be
no increase of municipal Indebtedness
let money seek investment In real estate
and legitimate business pursuits-and we
may confidently rely upon great improve
ments in business and general prosperity.
The facts which We have cited afford much