The times dispatch. [volume] (Richmond, Va.) 1903-1914, 1903-08-13
Financial Conditions Present and Future

Financial OOnCIl|CI'S 'lcSt'ie o''S N'N'~
Editor OF The Times Dispatch
sir.1Many believe that our financial
difficulties are caused BY insufficient cur
re rel and accordingly. they advocate
increase thereof as asa r that there is not
mate business and for Wild speculation on
excessively inflated yaiu a rtT p nar,na
nent relief it could only relieve tenn en-
pora rily, to be followed almost certainly
BY yet wilder speculation ano yet more more
currency, to wind UP finally with 1lnan.
cIal tempest, severer probably than mas
been seen in two generations.
permanent relief cannot come from the
soothing syrup OF increa sed currency:
medicine is needed and Of a drastic a ,ha
medicine needed until the wind and wa
ter are squeezed out OF business general
" but more especially out. OF the STOCK
market. or until business. iegltlina.e' as
we'll as speculative, Is reduced TO- the
point where price represents the rea SON
able cost of production: where dollar
represents one hundred cents; no more.
present, anywhere from zero to par
The obligation Of contraction rests. OF
course, upon the, banks for their own
safety. because they rest now upon an
even more unstable foundation than sand:
they rest upon the treacherous foundation
OF wind ana water. and their safety and
that or BUSINESS UcpclAS uPoh oSsI"'s2 ~
on the solid foundation of sound values
which. as stated. Is fair ratio between
cost and price.
For example, a railroaa or a m ash h,,iit
to-day; it, therefore. really represents
only It's cost and 1t should only repre-
sent that much In stock ana Donns.
various forms OF indebtedness BY sums
vastly In excess OF cost and though even
widest speculation does not accept these
price represents greatly more than cost
and the excess is speculation. pure ana
simple. Now. all such excuses. or. at
the so Ppa and 81 SOUND
Foundation is reached. This excess still
probably represents billions. notwith-
standing the billions already wiped out.
but squeezed out 1t must be. and the
banks must be tho squeezer.
| What the true ratio between cost and
| price, no one is competent to say, but in
Of legitimate business, and which are like
" to continue indefinitely, IT. may, It is
| thought, be reasonably assumed that u
per cent return upon Investment fairly
s Yielding per cent, should DO worth only
about par while securities yielding s. 4,
l-2 and 8 per, cent. should be worth
e ease Of United states Bonds and virginia
centuries where they enjoy special priv
leges or exemptions, when their value
should be on a six per cent basis, plus
| tions.
On this basis the greater part, OF the
price above par OF such securities as
Central central ST. Paul and other roads pay
Ing 6 per cent. dividends may be regarded
as speculation, and It must be wiped out
ssS before hsas i bu1 sHs wRes
can enjoy the ease it is entitled to, SINH.
larly vast deal OF speculation Is repre-
per cent, that sell around par. and the
greater part OF such speculation must
be wiped out also.
IL =. bonds should DO worth 81 IL. New
). -; e' cSssa peaks and ohio S0i l:s
should be worth En ios IL; "a, and and, the bonds
leading railroads are glad to borrow at
per cent and when per Is the minimum
bank rate for best paper, and when per
nItely. Most OF this speculation must be
and HidS possibly it may never 30 wiped out out.
but It seems plain that legitimate bust
ably seriously until 1t is wiped out The
alternative seems to be contraction and
erpplnE speculation and arinn Sneeulators or
bushes. and those engaged therein.
Choose, ,ye bankers. whom We win serve.
| speculation or legitimate business!
The banks doubtless perceive the ne
cesstv OF contraction. and are doubtless
| anxious to contract hut that they find
/ themselves Handicapped by the serious
fact that they are virtually ah,yy, mariners Of
the speculative world. which unfortun-
body, inasmuch as the greater part Of
speculative securities have been hypothe-
Gated to them, and they also perceive that
| deliberatsn, or that II they. proceed too
fas they may ruin n or or at or,n Least crpple
counts for the fact that asyet they have
but on the contrary. have actually ex-
as The following official figures of tie
New York clearing house clearly show
Ianilary g. 1903. loans. SS76.352 100: August