The Pacific commercial advertiser. [volume] (Honolulu, Hawaiian Islands) 1885-1921, 1904-07-18
The Panic of 1918.

There is something almost uncanny
in the thought that panics in the fiIan-
cial and commercial world have habit
of recurring at such regular intervals
that, if not prevented, we, here in the
United States, are doomed to suffer
another cataclysm in the business
world. in 1913. 1t would seem that,
given nine years warning, we ought to
be able to forestalI such catastrophe.
Yet we are stared in the face by the
! fact that during the last one hundred
years the United States has been visit
ed by periodical commissions of the kind
described, at intervals of almost exact
ly twenty years, with premonitory
symptoms of arrangement, at or about
midway intervals. The first real panic
in the domestic commercial world in
the nineteenth century was in 1S14-the
outcome of the War of 1912, the eXclu-
sion laws, and the embargo; the next
was in 1878, following the United
States Bank convulSion, wildcat bank
ing, and speculation in land, with 49,
000 resultant failures, more than three
times the average annual total to-day:
after that came the big reversal -of
1857, consequent on over-expanded
banking credits and tariff legislation;
! and next, the disturbance of 1878, caus-
ed by over-speculation following the
Civil War; and, finally, the most seri-
Gus panic in our history, in 1893, due
to over-extended credits in commercial
and other lines. Punctuating these five
plunges into the region of unreasoning
fright there were minor panics: those
of 1918, of 1896, and of 1929, due to tariff
legislation upsetting business; that of
4xvai i
conditions in Europe; one in 1864, which
was lost sight of by the turmoil incl
dent to the closing year of the War of
the Rebellion; the Eastern commercial
and banking credit arrangement in
1884, the echo of the Barings failure
in $780, and last, but not least among
these disturbances of so-calIed minor
class, the wrenching liquidation or de-
ferred panic of 1903. This brief review
makes 1t plain that some not well-un-
derStood psychological or sociological
law has, for century past, exercised
an unerring influence to produce the
cycles of prosperity, panic, and liquida-
ton which have SCARED the domestic
business world. 1t likewise emphasizes
in a way which should come home
keenly to every banker and business
man, that in 1913 it is certain that the
twenty-year variety or major panic
will be due. There was not much in
the Mississippi or South Sea Bubble en-
terprlses which was not duplicated in
kind at least in that which underlay
the violent liquidation in prices of Sc
curities that so married the fortunes of
millions in the year which has just
elapsed. The theory has gry-rn apace,
In view of the liquidation without panic
in 1903, that with stronger and bigger
banks, chains of banking houses, clear
ing houses, combinations of industries
and mercantile enterprises, panics may
be prevented, just as civilization has
the flesh is heir. But fright, which is
the basis of panic, is like thief in the
night. 1t may seldom be foreseen. No
solvent bank or merchant could meet
all its or his obligations if asked for
peremptorily, at the instant. The I'M
due expansion of credits, by either, in
proportion to reserves, in an emergency
is always likely to precipitate a crisis,
after which the house of cards falls.
The dangers of company promot ion
over-ca pitalization, undue expansion of
credits have and still are too often
overlooked. Nine years is long while
in which to prepare to avoid a given
contingency. 1t also furnishes time in
which to grow prosperous and careless,
and in which to forget