The Washington herald., 1907-12-31
TAFT IS LOYAL
Continued from Page one.

living. in wars. and absolute destruc-
tion of property. until the available
free capital becomes well nigh exhaust
ed the world over. and the progress of
new enterprises must await the saw
ing of more. Men continue 20 embark
In new enterprises. however: the capt.
tai fails them. and disaster comes.
Capital Near ExhnustiOn.
"FOr eight or nine months last past.
there were many Indications that the
lOaDabIc capital or the world was near
exhaustion. This result WINS brought
about not only by the enormous ex-
pansiOn of business plants and busi-
ness investment, which could not be
readily converted, but also by the
waste of capital I'm extrnyaGance OF
living and by the Spanish war, the
BOer war. and the acknowledgements
war, and in such catnstrOphes hs Bal
tisnOre and San Francisco.
1T became impossible for the sound
est railroads and other enterprises to
borrow money for new construction or
reconstruction. The condition was not
confined TO this country, but extended
the world over and was made manifest
in the countries Of Europe even before
X was felt here
Secondly, the conclusion cannot be
avoided that the revelations of irregu-
larity, breaches OF trust, stock jobbing.
oveIissues or stock, violations OF law and
lack of rigid State or national supervision
In the management OF some OF our largest
insurance companies. railroad companies
traction companies. and financial corpora
tons shocked investors and made them
withhold what little loanable capital re-
mained available. Such disclosures had
nFfah ~ 1.l.1.1
they had here, because here We were able
TO make distinctions. while there. at re-
mote distance. the revelations created
distrust In our whole business fabric.
Public Easily Scared.
When. therefore. two or three institu-
tions. banks. and trust companies sup
posed to be solid. were found TO have
their capital impaired by stock jobbing
OF their officers. the public was easily
frightened. and the run upon the banks
began. The question then became. not
one of loanable capital, but Of actual
money, TO be used in the transaction of
the day, very different question. though,
of course. closely related.
1T would seem that our system OF
currency is not arranged so as 10 permit
its volume to be increased temporarily
TO counteract the sudden drain OF money
by the boarding In a panic. IL is probable
that the stringencE. which reached its
height on that dark day of October "A.
might. in part. have been alleviated. had
we had q currency which could auto
matically enlarge itself to meet the tre-
mendous demand OF a day. or a week. or
a month. while public confidence was
being restored.
THE national administration. together
with many of the large capitalists Of
New York and elsewhere. put their
shoulders under the load and by various
devices Of an unusual character have
| brought about the present condition OF
gradually increasing confidence.
Result Not Disastrous.
The injurious consequences to follow from this
panic not likely 20 b. 50 long drawn cut or
20 result in such disastrous industrial depression as
the panic Of Iss5 the panic Of 1873 and this for
the reason that tho conditloh Of the country makes
\ It much easier 20 resume business gradually 20
accumulate capital and then 70 renew the enter
prises which had 20 be abandoned f0- lack o. it.
In the first place, we have gold currency with
no suggestion now cf q departure from the gold
standard
In 1888. the pressure for free silver was on. and
the throat Of national repudIa:i0n had much 70 do
with the delay in the return 20 prosperous times.
Our government finances now are in excellent con
I a
communities in the West to-day are not under the
weight Of mortgages and Of debt which distressed
i them 10 1895 and 1873. They are prC srerous and
wealthy.
Railroads Are Solid.
Again. the railroads which make up a large
part Of the wealth OF this county. are on a much
solder foundation than they wrre in 1898. Then
many Of them had 10 be takea into the hands Of
receivers and immense amounts expended hy means
Of receivers certificates. dsplacng and destroying
the vaiue Of vested securities ia order % put roads
/ in safe and incomeearnng condition. The rail-
ruads to-day are In better physical condition than
\ they have ever beer in their history But few of
them have recently been built into new territory
IN which business has 10 be created by introducing
population.
Again. the balance q trade Is with us. We
were able 70 settle fer the hundred millions of gold
I that We withdrew from Europe in order 20 meet
! the demand Ter money in the markets IN Nes York
| by the excess Of our exports over our imports in
/ the single Month Of October
"All these things point to the probability
! Of a restoration OF confidence. and. after
a proper liquidation and an industrial
/ depression of some months, TO a resump-
/ ton OF business on d normal basis.
The System of Credit.
Modern business is conducted on a sys-
tenn of credit which, in normal times. in
crcases the facility with which the work
OF manufacture. production, and sale can
be carried on a thousand fold beyond the
| limit OF earlier days, and enables a total
of many billions to rest on d very small
percentage OF actual money passed.
Every manufacturer, every merchant.
is. under modern conditions. dependent in
the successful conduct of his business
upon bank credits, extended at regular
/ require the means Of granting these
credits largely from the money Of their
depOsitors. And in loaning from their
deposits the banks rely on the improba-
bility that more than certain part OF
the deposits will be called for at any one
time. 4 lack Of public confidence IN the
banks creates common desire among
bank depositors 10 withdraw their money.
"The fright which seiEes the cred
itOr-the depOsitOr-and leads him to
hoard his money, spreads like WiEdfre,
and it is unreasOning and unreasOn-
able rs the spirit of n mob. 4 run on the
bank enSueS. The banks then call on
their debtors, and the tremendous
structure depending upon credit tum-
bIes. Meantime, men who properly
count themselves as milliOanires, who
are honest, conservative, solid busf-
ness men, always responding to their
obligations, find themselves as helpless
under such financial cataciysm as
they would be in nn earthquake.
Reason Resumes Sway.
Gradually. reason resumes fits sway, but
the injury to credit and the blow which
has been struck at the normal business
progress has more or less permanence.
Values have shrunk, plans for new and
increased business enterprises must be
abandoned and liquidation and house