The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1901-10-17

price.
The commonly accepted explanation of
THESE phenomena is that market values
are governed by the relation of supnl1,
10 demand, and that the panic had been
preceded by activity in production to such
al extent that there was over-produc-
tlon. 1t Is my contention that the ex-
tfacrdlnary relation of supply to demand
was not due to over-production, but to
under consumption. There was not q
minute during the panic in which all the
ncmeS of this country would not have
peen In demand for occupation. and there
was no time during the panic in which
the products of the farm and of the fac
torres would not have had their normal
| consumption if all the consumers of the
country mad possessed the means of OBJ
tanning them. The 100000 laborers who
tfanped the country, clothed in rags and
with mSufncient food. had capacity to
| consume everything their labor would
nave produced had the captains of in
! dustry been IN position to set them to
| work, and thus the normal equilibrium
| between supply and demand would have
| beer maintained
| The reason why the captains of indus
try were not in position to set these la
| berers to work was apparently the lack
| of money; but, in fact, it was the short
! age of 100000 coo of the medium of ex-
change, resulting from the banks unduly
! it's.
There are no classes of the people SO
much interested N the introduction of a
/ system of banking which has capacity
to continuously exercise the banking
| functions as the debtors and laborers
These are prosperous days. The condi-
tons of trade are such that the mer-
| chants and banks have expanded their
| liabilities. beyond all presidents. 1t is a
| period of confidence in which everything
! goes, and there is no lack of the medium
| of exchange. But l warn you not to be-
| lleVe that the country has grown so ricn
that there will never be another period
! of .distrust.
Substantial wealth is created by the
| slow processes of industry, Combined with
| skill and the use of capital. Bubble
| wealth is created by the rapid process OF
! placing one piece of paper in the pos
! session of trust company as collateral
| security for two pieces of paper. Some OF
! the enormous quantity of bubble wealth
| which is now beine created will sooner
! or later collapse. Such collapse should
| affect nobody but the bubblers. But
j sustain legitimate credits, there will fol-
! low a panic which will again destroy
the market value of intrinsic values, ruin
debtors, deprive laborers of employment
! and create general distress.
| PANICS PREVENTABLE.
| Would that I had the ability to arouse
! the American people to the Importance of
| a banking system In panic after panic
| they have suffered, but their minds seem
4 to be possessed wiz the fatalism of the
Turk-'it is the will of Allah" But l
| say it is not the will of God which pro-
| duees panics. History abundantly proves
| that such panics as occurred in this coun-
| try in 1887, 1857, 1873 and 1888 are pre-
| Ventable by a known system of banking.
Thls system of banking originated In
Scotland, separated by only an imaginary
| line from the then independent and iso-
| lated banks of England The superiority
| OF the system was demonstrated through
| commercial crisis after crisis, in all Of
| which the Scotch .sanks remained solvent
and continued the exercise of the banking
| function, while the independent banks of
England suspended the banking function
| and fell like rows of bricks
! In 1925 a parliamentary commission de-
| Veioped the fact that in the panic of 1892
| upwards of hundred English country
banks had failed. In seven years, 1S1O
panic of 1925, up to the date of the in
CURRY, tWenty-Six failures had taken
place. The banks which failed paid but
a small percentage of their Indebtedness.
! Before the same commission Mr. Gill
/ christ, manager of one of the Scotch
| banks, testified that within his reeoIIec-
and it Immediately paid fourteen shillings
on the pound, and ultimately paid all its
! liabilities.
The superiority of the system having
| been thus proven, by d gradual process
! of amalgamatien of independent banks.
! the system was introduced into England
and the superiority of the system over
| the want of system in the United States
| has since been demonstrated
In the great panic of 1S37-1S3S more
| than thousand banks, practically all
/
! In England and Scotland not bank fall
ed. In 1856 nearly every bank in the Unit
! ed States closed it's doors and went out
of business, and but few of them ever
resumed. There was a great commercial
crisis in Great Britain, but not a bank
! in England or Scotland failed. Again in
1873 a great many banks in the United
! States failed, but there were no bank
failures in Great Britain, except the City
! of Glasgow bank, which had been prac-
| t1e1ng fraudulent methods for years.
! In the panicS of 1S90-1S93, which are now
| fresh in the memory, when bank after
/ bank failed In the United States, and
! all the banks in New York city suspend
ed payments and only certified their Gus
! toners checks, there was not bank
| failure in Great Britain. And more, there
! was not a day when any bank in Great
Britain refused to extend its usual cred
! It's Without unusual restrictions, except
| for about week in $780, at the time of
the Earrings failure, they put the brake
! on to the extent of raising the rate OF in
| terest to per cent.
This system has been adopted by the
countries of continental Europe The
United States is the only nation in
the world of commercial Importance
| which has not adopted it, 1t is a re-
markable fact that during the last panic
while the commercial crisis was univer-
sal, there Were no bank panics except III
the United States. In no other country
was the commercial crisis continued so
long, and in no other country did the
| people distrust the solvency of their
! there bank failures.
But it may be objected that the sitia
ton Is different In a vast area of sparse
| ly settled country like the United States.
| In reply will say that along cur north
ern boundary stretches a country from
ocean to ocean. much more sparSeIy set
| tied than the United States. Canada pos
SesseS a system of banks. In Canada the
same commercial conditions existed dur
ing the last panic as in the United States
but only two unimportant banks of the
Isolated and independent order went into
liquidation, and not one of their systems
of banks excited suspicion as to it's sol
vency, and at no time during the panic
did any of them suspend the banking
function of swapping credits with cuSto-
merS
In 1898, 1894 and 1895, when the great
banks of New York city dared not ex-
tend their credits cent, the Canadian
banks advanced millions to move the
wheat crops of my own state of Mimic
sofa and the state of Dakota. Little Can
ada, with scarcely 100000 of peoIAe. oc-
| cupying the sttngy fringe of perpetual ice.
! with meager agricultural resources, few
mines and only rich in her forests Of
| timber, was able to loan the credits to
move the abundant haryests of Mime
sofa and Dakota solely by reason of her
system of banking.
In the olden days of small affairs in the
banking business of New York city one
of the banks having increased it's capital
I to the then unheard of amount of $780,
600, q customer made application for an
unusually large loan After some days OF
consideration the directors declined, not
because the collateral was unsatisfactory,
but simply because the loan was unusual
ly large. Upon being informed of the de-
eision of the directors, the customer re-
marked that, in his opinion, that bank
needed either an act of the legislature to
reduce its capital to the capacity of its
directors, or an act of God to increase the
capacity. of its directors to its capital.