The Wichita daily eagle. [volume] (Wichita, Kan.) 1890-1906, 1890-12-14
SOME WALL STREET PHILOSOPHY.
The Financiers Agree on the Causes of
the Trouble.

The Financiers Agree on the Causes of
the Trouble.
Especial Correspondence
NEW YORK, Nov. 24-It is an agreeable
novelty TO have an explanation of finan-
cial disturbance which satisfies all parties.
Economists of a2 schools agree that the
recent troubles in Wall street and in Lon
don were due TO rapid, perhaps too rapid.
development of new countries and new
lines of trade, which rendered old invest
ments unavailable
The present condition of the Argentine
Republic and it's threatened imitation
alarmed European fnanciers; they with
drew their confdenos and as far as posi-
BILE their cash, and so the Barring Bros,
carrying immense blocks of Argentine
stocks, were forced to the verge of bank
ruptcy.
A panic is sometimes caused by previous
prosperity. There is q great movement for
investment, consequent rise in prices,
and therefore greatly increased demand
for money, even for money TO do the same
volume of business. The rate of interest
rises rapidly and checks the tendency to
investment. Then there is a reaction, and
if it is great enough panic. This was
plainly the cause of the first great panic in
the United States-that of 1897. Alexan-
der Hamilton's measures had so strength
ened credit that there was an excessive
confidence in the rapid development of the
country. Hence a rapid transfer of nova
BILE capital into fixed capital and failure
to realize" In that case there was but
one remedy-to wait until the country
grew up TO the investment limits.
From 1907 to 1873 every panic in the
United States was preceded by a consider
able, and sometimes very great, increase
In the volume of bank paper. The natural
consequences were rapid rise in prices,
great rage for investment, excessive specu-
lation, commercial fever and then collapse
From the close of the second war with
England till 1919 the speculation was gen.
eral, and so the panic of 1919 was followed
by long depression. In 1857 the specu-
lation was chiefly in farm produce; in 1873
in railroad construction. In both cases the
cure came through suffering; the people
simply toiled on until the country grew
enough to honor the drafts the spectators
had made on the future.
In 1879 all the known causes of panic
came together-all the destructive forces
were in full operation at once. The banks
inflated thar currency; the staple crops
were short; speculation was excessive; in
vestments in raw" western lands and city
lots went to a degree that now seems like
insanity, and individual states projected
improvements to cost almost as much as
the entire assessment of such states. The
legislature of Illinois, for instance, had
legalized, and work had begun on. canals
and railroads to the value Of S100, 900. 600
more in proportion than 81 GOO, 900, 0C0 in
that state now Wheat in New York city
sold above 81 bushel and was imported.
Jan. l, 1884, the bank capital of the coun-
try was 500 0O0, 600; bank notes out, S95, O0O,-
600; loans and discounts, 1924, 900, COO On
Jan. /, 1886, they had been increased TO: Cap
ital, S251 900 600; notes in circulation, S14D,-
81, 600; loans ana discount, Sf57 900, 000
Five great cities" were laid off in north
eastern Ohio alone and the lots sold high.
In December, 1885, fire swept clean fifty
two acres of the business part of New York
city; within a year the space was covered
with larger and finer buildings. The peo-
pie were mad with speculation. The crash
was terrible. MANY poor old man as late
as 1S70-75 could be heard TO sigh over 81"
The recent furry in London and Wall
street was but short lived affair; but it
illustrates the essential fact that the rapid
development of new countries and conse-
quent overconfdence Is powerful cause
of panics- j. II. BEADLE