The morning call., 1890-09-19
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GOULD ON FINANCE.

Mr.. Jay Gould's views on the money
panic in New York will command the atten-
tion which is generally paid to the opinions
of millionaires. He says there has been no
stringency, and that people who have the
right collateral never experienced any dill
Guilty in getting money. This may surprise,
but will hardly console, the brokers VINO
paid 80 and 10 per cent per anDum for the
use of currency to make their bank accounts
good. He says there can never be any more
pancs of the old style because the system OF
cable transfers enables borrowers In New
York to obtain money in Europe instantahe-
ously when there is any need for II.
Money panics spring from two causes
an actual scarcity of money, and an appre-
hension that scarcity is impending, which
operates for the moment precisely in the
same way as an actual scarcity. When
currency is drawn out of the banks to be
placed in the Sub-Treasury, or to be shipped
to the country for the movement OF crops.
the instinct of self-preservation impelS each
bank TO strengthen itself by calling in its
loans, and borrowers are compelled to seek
mmodatOn elsewhere. 1t is not en-
tirely a question of the quality of their col
lateral; the point is to find money. A bank
which is apprehenSiye that it may become
debtor at the clearinghouse to an extent
which may prove embarrassing will not lend
on the best possible security. 1t is not good
leans that it wants, but coin or legal-tender
to straighten its accounts at the clearing
house. That was the situation last week in
New York; had it been otherwise money
would never have been worth 30 per cent per
annum.
MI Gould's idea that a monetary crisis
can be arrested by Geographic drafts on
Europe is an old idea. A debtor bank can
not balance its account at the clearinghouse
with foreign exchange. If other banks are
in a condition to buy bills on London they
may help it out. But in times of panic
each institution locks out for itself; none
will load up with paper which locks up
funds even for week. In 1857 the strong
est banks in New York refused to lend on
gold bars; they had not the currency. In
1878 holders of Governments vainly sought
leans at eXtrayagant rates of interest Those
who were willing to lend had no money;
those who had money hung on to ii on
vague notion that no one knew what might
be coming, and that whatever betell they
prop osed to he found solvent and well sup
piled with cash for all emergencies.
The railroad king believes that this coun-
try will never again witness panics like those
Of 1887, 1S47, 1857 and 1873. 1t is to be hoped
that he is right, but it is not clear why he
should be. We are working in this country
on a n-elastc system of finance. We have
so much coin and so much currency in use,
and there is no machinery to contract either
when money is drug, or to expand either
when their volume is insufficient for the wants
OF business. In England. under PeePs a t.
when money panic occurs the Bank of
England is authorized to issue paper without
regard TO its metallic reserve. The mere
order, in council, suspending the bank law
generally allays the panic and restores con-
fidence without any new paper issues. We
have no similar device in this country. 1t
is difficult to say what would happen if a
short cotton or wheat crop should happen to
coincide in time with any political disturb
ance which should lead to a large shipment
of American securities from Europe to this
country. All the banks of the Atlantic
States are sailing close 10 the wind. Their
mercantile customers require the use of
every dollar they have got. If any accident
depleted their reserve and shook confidence
in their stability, it is hard to see how
panic could be avoided.