The Manitowoc pilot. [volume] (Manitowoc, Wis.) 1859-1932, 1883-08-02
BUSINESS DONE ON TICK.
The Credit System-Its Evils and Its
Benefits,

The Credit System-Its Evils and It's
Benefits.
Credit, used in its mercantile sense,
is not an invention of modern times.
There are indications in the hierogly-
phic records of the ancient Egyptians
that even they did business by credit.
And the evidences of dealing by credit
In the Bible and in the writings of clas-
sical Greece and Rome are numerous.
During the middle ages it was the Jews,
in their capacity as bankers agents,
middlemen and brokers, who did most
of the business that was transacted on
trust.
But if the thing itself is not new, at
least the immense extension OF the credit
system is. You may go where you Will
in these broad United States and you
will find that the back bone of trade is
credit. At first sight that may seem
strange, but common experience teach
es that the needs of commerce, in its
higher as well as lower and lowest
branches, are so complex and manifold
that sales and purchases are effected so
quickly as to render it absolutely i'm
possible to trade without trusting and
being trusted. A few exceptions there
are, of course, to this rule, but they are
only exceptions; and it is true that this
system is, paradoxical as it may sound,
perfectly healthy and right, if the proper
safeguards are applied. But there's the
rub The panic of 1873, in fact all our
panics and financial collapses, were al
ways due to the excessive use of the
credit system.
Walk into the next saloon. Over the
bar you'll see suspended sign, paste
board in gay colors, containing the brief
legend, mo Trust. Don't Ask It." Yet
this distrustful boniface can't hel p trust
ING. He would ruin his business if he
tried to follow up his maxim on the
sign. That is only blind to scare the
deadbeats W ith. Responsible parties are
and must be trusted.
Follow US into the store of popular
merchant. He, too, has a sign display
ed. 1t shows in somber black and on a
background of mawkish gray, well
that was pumped dry-a suggestive
way of calling attention to the fact that
his well of human kindness must not be
too far presumed upon. Thus figures
and modes of elucidating this grave
financial question of credit vary in diff
ferent places, until they assume no tam
gible shape in the big commercial
houses, where, nevertheless, the ifs and
wherefores of trust or no trust are
thoroughly understood, even felt at once
by the initiated. But every business,
great and small, has to do more by
credit than otherwise. That this is nee
essary under the circumstances is best
shown by the fact that even after the
most severe panics, such as overlook
this nation ten years ago, the credit sys-
tenn itself is not shaken, but fourishes
on undisturbedly; only it is pruned of
its various unhealthy excrescenceS, such
as trusting for too long time and con-
Quoting large businessen small capi-
tai.
1t is perfectly true that the modern
system of giving and taking credit has
developed into q regular science. One
of the most important mechanisms en-
ployed in it are the mercantile agencies.
They have only of late years assumed
such an elevated and trusted position.
Every mercantile house has to issue
written promises to pay at certain
stated time in the future; this applies to
the wealthiest as well as to the smaller
and less important. Mercantile agen-
cies take it to be their legitimate field
of activity to gather carefully all the
statistics relating to the thousands OF
business houses in the country and to
make their information thus obtained
available to their customers. If the data
collected as TO the Debit and Credit, :"
capital invested, and moral and mer-
camille qualities of houses are correct
and as rule they are--it will be easily
perceived of how much Importance they
become to all dealers, but especially to
wholesalers, who dispose of their goods
to all kind of men, often in far-away
states and in little out-of-the-way towns,
about whose antecedent5 and CONNER.
cial standing it would be often impos-
sible or not worth their while to satisfy
themselves through their own channels
of information.
There are certain rules undertaking
this whole system of credit. For in
stance, the normal credit is limited to
so per cent. above invested capital. For
an individual account 10 per cent. is
generally allowed at one time So that
if the capital of the house be $50, 900,
they will be credited by one house with
$1,000 worth of goods. In few cases of
that kind the credited amount would
equal the capital. The facts regarding
a newly established concern are quickly
known. If it begins business with $780,
600 capital, and at once lays in stock
triple that amount, it would at once be
put down as ali unsafe one to deal with.
For if its transactions figure this up to,
say million ayear, it must necessarily
have outstanding an amount perhaps
larger than its whole invested capital.
There are great many more points and
pointers about this system of give and
take that would be of general interest
to the reading public, but as it is not
intended to give complete statement
of all these things in this place, this
little sketch must for the present suf-
fee.