The Mankato free press. [volume] (Mankato, Blue Earth County, Minn.) 1879-1924, 1883-08-17
BUSINESS DONE ON TICK.
The Credit System Evils and Its
Benefits.

Ine UroulC system -ltS bVllS anu 1S
Benefits.
Credit, used in its mercantile sense,
is not IN 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 i'm the writings of clas-
steal Greece and Rome are numerous.
During the middle ages it was the Jews,
in their capacity rs bankers, agents,
middlcmcn 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 tho credit
system is. You may 90 where you will
in these broad United States and you
will find that the backbone of trade is
credit. At first sight that may seem
strange, but common experience teach
Is that the needs of commerce. in its
higher as well rs lower and lowest
branches, are so complex and manifold
that sales and purchases are effected SO
quickly rs To- render it absolutely inn
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 j.. paradoXical Us 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 coilapscS, were al
WAYS due to the excessive use of the
creii; system.
Walk into the next saloon. Over the
bar you'll see suspended Il sign, paste
board in cay cU,Ors, containing the brief
legend, No Trust. Don't ASK It," Yet
his diatruslful bonifacc cant help trust
ny. lie would ruin his business if he
tried To follow up his maxim on the
i'm. That is only blind to scare the
acaibr",~ wi;h. Nosvonsible parties are
aGd mast BE- trusted.
Follow uS into the store of Il popular
merchant. He, too, has n sign display
ed. II Slows in Somhcr black and on Il
background OF mawkish gray, n well
shat Was pumped dry--a suggestive
way Of calling attention to the fact that
lis well of human Kindness must not be
900 far presumed upon. Thus figures
tE!i'l Ult'i - w ttltS Jaw
financial question ri credit vary in diff
ieiant places. until they assume no tam
giblc shape in the big commercial
i.ouScs, where. nevertheless, the IFS and
whcrrtoreS of trust or no trust are
thoroughly understood, even felt ut once
bl the initiated. But every business,
GREAT and small. has to do more by
credit than otherwise. That this is nee
CSS:irv under the circumstances is best
saown by the fac. that even after the
most severe panics, such rs overlook
this nation ten years ago. the credit sys-
TEN itself is not shaken, but ilOurishes
on Enthusiastically: only it is pruned of
its various unhealthy eXcrcscences, such
rs trusting for too long a time and con-
Quoting large business on 4 small capt.
TIL
1t is perfectly true that the modern
system OF giving and taking credit has
developed into Il regular science. One
of the most important mcchanisms em-
rioyed in il are the mercantile agencies.
They have only Of late years assumed
suclI an elevated and trusted position.
Every mercantile house has to issue
written promises TO rov 1T a certain
stated time in the fu;I this applies to
the wcalthiest rs wei - to the smaller
and less important. Mercantile agen-
cies take it to be their legitimate field
OF activity 10 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
4 :, MI, -
capital invested, and moral and mer-
camille qualities of houses are correct
and ~ Il rule they arc-it will be easily
perceived oi how much importance they
become 10 all dealers, but especially to
wholesalers, who dispose of their goods
e ail kind of men. often in far-away
:; :'cs and III little on, -of-,hc-way towns,
~ out whose antecedentS AMI CONNER.
cial standing it would be often impos-
siblc 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
80 per cent. above invested capital. For
ai individual account 10 per cent. is
HtUtitilN tltDNt'i at viz tlilit. cV thNt
if The capital of the house be- so, 900,
they will be credited by one house with
5000 worth of goods. In few eases of
tlat kind the credited amount would
ca .il the capital. The facts regarding
newly established concern are quickly
known. Ii it begins business with $780,
600 capital. aud at once lays in stock
triple that amount. it would n. once be
pul down rs III unsafe one to deal with.
For if its transactions figure this up to,
say million ayear. il 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 Il complete statement
of all these things in this place. this
little sketch must for the present suf-
flee.