The Cecil Whig. [volume] (Elkton, Md.) 1841-current, 1894-09-15
THE CREDIT SYSTEM AND PANICS.

COHC0mItantS OF the vast expansion
Of business which has been the
result of the development of credit.
II at transactions were settled in
cash as soon as made there would
be no crises. The industrial pro-
eress Of the last century has, how
ever, been chiefly due to the growth
of credit to the facilities which have
bsen extended to those who en-
deavor 10 grow rich by running into
debt. And the development of the
confidence OF mankind in each
other and in the future has without
doubt been an excellent thing and
mark OF civilization and progress.
Probably the basis of the modern
credit system was the invention of
the bank, by which the power OF
money was reduplicated. Before
this invention there were speculations
and enterprises adventures as they
were then styled. but they were con-
fined to few hands. Modern banks
by gathering in the money of the
whole public extended the liberty
of using the credits founded upon it
to the whole public alike. The
gradual abolition OF monopolies,
which had confined almost every
branch OF commerce and manu-
factures in the hands OF a few, was
an accompaniment and result OF this
extension of credit. Competition
called out new inventions, and
cheapened all products of industry.
But with the advantages that were
gained came also new dangers. The
failures and financial disasters and
consequent losses were no doubt
more frequent previously than they
have been since. but they did not
come all together, were more dis
tributed and attracted less attention.
More financial machinery, by which
credit is iostered and systematized
gives longer and longer periods of
prosperity, which are broken into
from time to time as crises or break.
downs occur.
Some have attempted to show
that there was a regularity amount
ing to periodicity in the monetary
panic or crisis. but among the seers
of finance they must be rated as the
weather prophets who claim a
regularity of period in storms and
other meteorological phenomena are
rated among the experts of the
weather bureau. 1t is true that
close students of the financial crisis
Justly observe that there is a certain
sequecne in the conditions that lead
up to the catastrophe. The symp.
toms by which they are preceded,
and which give fair warning of their
approach, rapid advance OF prices
and wages, great activity OF trade
and multiplication of new enterprises
have been often observed, just as
the symptoms of an approaching
storm. The imaginations OF traders
and those who desire to partake OF
the profits of trade are strongly
excited and with rising prices an era
of speculation is sure 10 enlarge and
culmlnate. The desire to buy on
credit to sell at an advance Seizes
upon all but small minority of the
community. The crisis begins with
a panic during which debtors and
creditors, every one at once, sud-
denly lose confidence in each other.
Those who have been granting the
credit upon which the business has
been done either are unable to grant
more Or shut down from fear of
doing SO. Enterprises once most
hopefully looked upon lose all their
glamour. Whether they have real
merit or not makes no difference.
This panic does not last very long.
1t is the forerunner o! the crisis,
which bears the same relation to the
panic as cleaning up the railroad
wreck does to the accident ITSELF
The modern credit system is the
cause of panics and their attendant
crises. Its benefits and its evils
come alternately. so the remedy tor
panics and commercial crises is
in careful management of the credit
system.