The Austin weekly statesman. (Austin, Tex.) 1883-1898, 1895-06-13
THE PANIC OF 1888
PROF. J. LAURENCE LACGHLlN
OF THE UNIVERSITY
OF CHICAGO
HAS A WORD OR TWO TO SAY
on THE MATTER.
He Jumps Astride of the Insane SILVER
Policy Since 1873, Which Is
Made the Wonder Of the
Civilized World.

The popularity of the commercial criSl
of 1893 was that it did not extend 10 o'ht
countries but was due to causes Wlthl
thn United States. Canada had no sue
manic; nor did Great Britain nor Eerihau!
And vat Coin makes it out that IN
crisis was due to lack of "redemptloI
money" whatever that may De- II ne
monetiZatiOn of silver in $50 prouuceu u"
panic, why did it not mt Ger'hahE a9o
why was its injury confined TO the INV,
Statesy How could 1t nave Deeh uuc -
the act of 1873, and the alleged sJdio on!
of money, when there was more SoIu az ~.
silver i'm circulation in 1873 man IN ioI'
by about 81 ,OOO,OOO,OOOE Such tax l.
monetary nonsense .,,
The thing, however, peculiar 10 th'
limited States was our insane silver pollcS
since 1878. 1t made us the wonder o.
The civilized world. Financiers wondered
ot the wild vagarics of crude monetar!
science INDUCED in by this country. 1h'
whole silver legislation since 1919 was uh
paralleled in monetary history, because
II was a deliberate tampcrlng WIN III,
standard of payments. This is the glst oil
+be whole matter. 1t produced danger
inst as soon as it was thought possible
that the standard of payments and prices
would be transferred from the former
gold standard to deprecated silver stan
dard. The credit of the government was
consequently smirched. No slight at,
tempt can be made to alter the standard
in which all transactions are expressed,
all prices quoted, all obligations and future
payments to be made, without creating
a fright throughout the whole framework
of trade and industry. And yet reckless
hands laid hold of this delicate system,
thinking only Of their individual selfish
interests. ready to drag us all down to
destruction with willful confidence in their
ignorance. 1t was as if an acrobat, skill
fully poised in midair on a tight rope,
were to find that wanton hands were pull
ing at the guy ropes and stays and drying
70 shake the firmness of his footing.
The silver act of 1878 brought in the
beginning of the attempts to get free COIN
age of silver; but it was shOrn by Senator
Allison of that danger, and only limited
purchase of about S2,OOO,OOO of silver 4
month resulted. The question was, could
we do this and keep the old standard OF
payments? In 1SSi1SSG there were very
grave doubts and we came nearly to
the point of silver payments under Secre-
tary FOlger Then we recovered some
what, because by clever use of small
certificates silver was forced out of the
treasury into general circulation. Inc
treasury was thereafter able, through Gus
toms payments, to get gold sufficient to
maintain gold payments, until about lS3o.
During 1887, 1883 and 1889, the money
paid into the government by our people
was from - to % per cent of gold. If
gold came in, the treasury could always
nay out gold.
But then came n new attack on the
security Of the standard. The acrobat on
the rope felt II violent jerk, so to speak:
He needed support. not disturbance oil
his footing. From the date of the Sher-
man act. July II, 1890 which about
doubled the purchase of silver the pay
ments of gold into the treasury began to
fall off until in 1891, the percentage had
gone down to II per cent. With the eN-
ception of two brief periods lone in Jan
uary, 1892, and one in September. 1888,
the payment of god currency jgold and
gold certificates into the treasury had SO
seriously dropped since the passage OF
the sherman act that the government has
found itself cut off from its usual and only,
supply of gold. And in 1891 it has prac-'
tically ceased to flow in all. This was due
to the public fear of n change in the stan
dard. The moment the government
should be unable to pay out gold on de
mand and have only silver on hand that
we should have reached the silver
standard. If the silver party could eX-
cite aiarm and bring about distruSt as to
the standard gold would be held back,
silver money only would he pushed back
on the public treasury and the gold basis
destroyed. BY Juggling hard enough AZ
the guy ropes which held up the standard
and credit of the government, all might
be brought in crash to the ground. And
this was exactly what happened. BY 1S|3
the insecurity of our standard was 50 we'll
recognized in Europe. and at home, be-
cause of the inevitable creeping upward
of silver in the treasury reserves that al
most nj the same time everyone tried to
get his securities turned into gold while
there was yet time and before silver would
be the only means of payment.
This was not the only unreasonable
cause of fright. There had been no UNI
healthy expansion of commercial tranSac-
tons in general. The country was on a
sound and healthy basis. No serious
speculation had produced a fictitious re-
lation of demand to supply. In fact,
fairly prosperous condition of production
and trade was suddenly intcrfered with by
the fright arising from a cause wholly
That cause was the fright
and diStruSt produced by the rush 10 get
gold in case we should drop To the silver
standard. Foreigners holding our securi-
ties sent them here to Ice sold and get
gold for them. and investors at home
tried TO protect themselves Cor the same
reason. Such 4 sudden precipitation of
demand upon the banks could he met no
more easily than in any other crisis.
Hence the collapse. ruin. failures and con-
sequent stoppagc of trade. The crisis of
1898 was directly traceable to the silver
legislation which tempered with the sta
hility of our standard. and is fair illus
ration Of what would follow free coin
age act Of 1G to /.
!. LAURENCE LAUGHLIN.
Professor of Political Economy. Tniver-
si'y Of Chicago.