Bisbee daily review., 1907-11-24
Boston commercial1

a valuable lesson to those who are able to interpret it's significance cor rectly If 1t can be understood by the statesmen who direct governmental affairs, it will be of tremendous bene- | fit to the nation It is imperative that | banking interests should make a cor rect analysis and so fully satisfy | themselves as to the cause or the | trouble we have experienced that | they can unite upon a plan Of action which will prevent its recurrence
 It is a most unfortunate fact that l hardly two bankers can be found who | can outline plans of currency reform and be in agreement
 Men who ought to know better are telling us that our panic resulted from | speculation. This theory pre-sup- 1 poses that the surplus money of the country was used up in the specula- | tion which caused the very high se- | curity prices recorded in January this | year. If this supposition were cor rect we should have had extreme monetary stringency in January and 1 it's antithesis at the present time The four or five billion dollars which the | shrinkage in security values repre- sents would be in the banks in the | form of cash, and money "ould be lending at per cent.
 The easiest way to understand the money question is the right way. The ! currency of the country is limited in quantity It is not absolutely rigid, | but nearly so. The supply has been increasing with more than usual l raL idity for four or five years past, and while it has increased it has diminished in purchasing power. All commodities have advanced in price, and industry has received unusual en- couragement- Wages have increased tremendously, and labor has been more fully employed in productive and constructive lines than at any time previous in the history of the world
 When the recent curtailment of rail road building, mining and industrial operations occurred in the West, the thousands of discharged workingmen withdrew their surpluses From the To cal banks, put the cash in their pock
 cts and started wandering about from place to place in search of work This
 helped to drain the Western banks
 of their supply of ready money. The : very prosperity referred to made the
 situation worse, as the deposits with
 drawn were much larger because oi
 it
 The worst thing about the banking
 system in this connection is the re
 quirement that 25 per cent of total
 deposits shall be retained constantly
 as a cash reserve. This requirement
 may be absolutely right in principle and it may not be advisable to make
 any reform in this particular; but il . is a fact, nevertheless, that it has
 tied up and made unavailable tens ol
 millions of dollars of currency
 which is now sorely needed for the
 transaction of business.
 At the termination of the business
 and financial depression which oc.
 cured in 1903 men of large financial resources became very heavy buyers
 of active railroads and industrial
 stocks. They went on the usual prin
 ciple that when the public awoke to a realization of the increased volume of business and earnings, it would buy these securities for speculation at ! much higher prices. These expecta- tions, however, Tailed of realization. The San Francisco disaster, the reve- lations of the insurance investigation, the antagonistic attitude towards cor porations of the administration at
 Washington, the $29,000,00 Standard Oil fine, and other things made the public skeptical regarding the value
 of railroad and industrial securities.
 At the same time the discovery oI phenomenally rich deposits of silver and gold at Tonopah, and Goldfields, Nevada, and at Cobalt, Canada, and the advance in the price of copper to 26 cents, attracted the public's attention and caused it to put its sur. plus money into mining stocks in preference to railroads and indus trials
 The public appetite for the active stocks traded in on the New York Ex- change was never so poor as during the period of high prices of the past two years. Spectators and pools kept the market active, chiefly by buying the stocks that investors were selling There never was a time in the history of the stock exchange I when it was so easy to buy control of one of the old companies whose stock had been distributed and lain for years in the boxes of investors
 Traders and pools carried their con stantly increasing loads of high grade stocks as long as monetary conditions would permit These stocks were never too high, viewed from the standpoint of capital invested. equip ment, earning capacity, or foreign and domestic investment standards. The speculation was justified; but sas aim was defeE tes by the failure OE Pahlic confidence to increase with tho pros | perity of the country Many of the brightest business men in the world l lost millions by buying and holding too many of the stocks of the com panies operated under their own per sonal supervision and direction. They knew that the stocks were worth more; but they were finally forced to sell them in declining market at 1 tremendous loss
 These speculative operations contri- butsd to the intensity of the panic. by reason of the fact that the banks had teen loaning more on some of these stocks before the decline than they properly could after it got fairly under way Practically an of the banks were able to get additional col lateral, or by forcing the borrowing spectators to sell, to keep intact their assets. The largest loans they made were in every way conservative.