Barton County democrat. [volume] (Great Bend, Kan.) 1885-1915, 1891-01-15
THE LATE FINANCIAL CRISIS.


tion or of great earthquake are eager
ly Investigated b5 men Of science for
what light they may cast upon the
working of the laws of nature. Not
less reasonable may it be for the stu
dent of economics to avail himself Of
periodic financial upheavals for acquir-
ing broader judgment upon the ta~s
Of finance. For, as certainly as inor-
ganic natyre IS governed by unchaDg-
ing laws, are the exchanges of the pro-
ducts and services of mankind control
led by fixed natural ordinances, which
ignore and finally supersede all the con-
ventional arrangements by which
society attempts to regulate its coh-
mercial intercourse.
1t cannot be said that crises ante-
cedent to the recent one have taughs
all that can be learned from such
events. The late arrangements have a
special significance from the fact that,
whilst the instrumentalities of finance
remain virtually the same as they were
under former panics, yet the conditions
Go which they are now applicable differ
widely from those of previous periods,
and that circumstance suggests Il prob
ability that existing arrangements May
be found imperfectly adapted to cur
rent requirements, which is one of the
main conclusions hope to establish.
First of all. then, what are the Bhe-
nomena with which We haye to deal?
tIl sudden, extreme, and almost
simultaneous fall in the prices Of
securities in both New York and Lou
don. (2) The antecedent symptoms of
the break were apparent in some weeks
of steady realizing upon corporate
issues at both those centres, ottended
with the return from London to New
York of large amount ESTIMATED at
10 to IL miUiOns) of railroad stocks and
bonds. t3) This selling was stimulated
by stringsncy in money in both cities,
the Bank of England advancing its
minimum rate Of discount from to 6
per cent, while the reserves of the
New York Associated Banks fell 81
millions below the legal minimum. az
At this stage came rumors that large
London clearinghouse was in trouble.
The extraordinary negotiation of loan
Of 80 millions of francs by the Bank of
France to the Bank of England, re-
newed large shipments of American
securities from London to New York,
and a condition of the local loan
market which induced the New York
Clearing House to authorize the issue
Of clearinghouse certificates to its
members-an expedient never resorted
20 except under grave emergencies. (5)
"A few days later came the explanation
of she London rumOr and IF the extra
ordinary precautions so suddenly taken
by ahe Bank of England and by the
New York Clearing House in an
announcement that the great house of
Barring Brothers was unable to provide
f0f over thirty millions sterling of COM
naittmontss and that the house had
been protected by the Intervention of
the Bank of England. coDjointly with a
syndicate comprising several of the
leading banking-houses of London and
of the provincial cities. l6) 10 better
enable the Bank of England to meet all
Dossible arrangements arising from the
oroubles of the Barings, the British
government authorized the bank to
lhake, if found necessary, a special issue
OF nStes, without the legally-required
security of specie, the amount and con-
ditions of which authorization have not
yet been made public (7) Following
tAese extraordinary measures of pro-
lection at the ewO financial centres,
there was a marked recovery of conf
dence in London. and few days later
Of discount from to per cent, with
the ample Seserve As 81 per cent, whilst
in New York there was IA transient ad-
gance i'm the prices of stocks, followed,
however, by a reaction and an increase
of monetary stringency, which caused
much commercial prostration and pro-
duced serious crop of failures among
mercantile, manufacturing, and bank
ing establishments; these effects being
especially severe in New York and
philadelphia.
Inquiry into the occasion OF these
Extraordinary conditions will show that
they are attributable to two entire dis
tinct sets of causes; one set..being con-
nected with the development of Ger
tain departments of enterprise and the
negotiation of fiscal undertakings, and
the other having to do with the financial
instrumentalities through which such
operations are effected. l propose to
discuss these causes separately.
The wave-law appears to play a part
in human activities as important as the
place assigned to it in the physical
sciences. Material enterprise constant
" oscillates between :he extremes of
auiescence and excitement, OF conser-
Iation and speculation, of contraction