The Washington herald., 1907-11-02
Experts on the Financial Crisis

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Three Yale professors of political econ
onv have given their views en- the causes,
effects. and probable duration of the iiuan-
cial crisis. The veteran PROT Sumner
frankly traces the initial cause back 10
the White House:
Il think ue actions Of Prcsdcut Roosevelt are
largely resreasible f'r the present diaicntigs Ills
continued warning against corporate interests has
unsettled public confidence. The people are timld,
-He public mind i- no an unrest investors arc caU-
uaus The country erows. has grown s,y fast.
and the industries want money The people fear
Iest these industries controlled by corporations. may
be the subject Of Federal attack. and they refuse 90
invest. TIE result Is crisis because. Of q lack OF
money o. co1tuue'
His colleagues Prof Irving Fisher and
Prof. Henry c. Emery, DO not share this
view. They have q theory that the real
trouble is i'm the failure of the interest
rate to rise in correspondence with the
rise i'm the level of prices. As the price
level rises. Prof Fisher explains. or as
the purchasing power OF money declines.
il affects the relation between debtors and
creditors, as well as the rate of interest
He attributes the present crisis 10 an of-
fort % readjust interest rates TO the
changed conditions of money supply and
prices, an adjustment which is taking
place suddenly. whereas. If il had Oa-
CURED gradually no crisis would have
been felt Financial Interests according
TO ;his theory. had been going on and on
borrowing money at the unchauging rate
.r s4,
power of the money borrowed and loaned
II was inevitable that when money could
be borrowed at low rate of interest and
invested in industries that brought iu
rapid and swollen returns, overspeoula-
u1n would follow Prof Fisher thinks the
higher rate of interest now obtaining. had
il obtained earlier. as, according Co his
theory of normal financial operations. it
should have obtained. would have pre-
vented this ovcrspeCulation and avcrted
the collapse of credit
Prof Emery believes the supply of gold,
i'm q sense, TO be too large I'VE have" he
said what Bryan wanted IN 1895. an ez-
uanded currency. With the greatly iu-
creased supply Of gold, the level of prices
has risen, and the interest rates have not
kept the pace Ovrrspecuiatiou has
caused heavy loans for investment pur-
poses. and now that the borrowers cannot
continue their loans mt the same rate Of
interest because Of the inevitable read
jUstmeu,, there is a stringeucy." His pre-
veutive remedy for financial stress would
be 20 increase the rate Of interest correl-
atively with tho rise in prices. With O.
rising interest rate the period of over
speculation would never have reached an
acute stage point Of interest u the
theory here outlined is that both Prof.
Fisher and Prof Emery hold the banks
responsible far Keeping the interest rate
down. and $50 encouraging speculation
For example, Prof. Fisher observes thgt
If the interest rate had been gradually
advanced as the price level rose. the cri-
sis would not have occurred. and yet Dee
says. almost every banker in the couu-
Try. almost every fHaucier. believes that
high interest rate is not desirable"
Prof. Emery iutmates that the banks
might have stopped speculation 10y this
means. just MS They stopped tt last week
when money was being poured into The
market to ease the strinEeucy.
An encouraging feature of the opinions
0f all three Yale economists is that they
see no reason why the financial crisis
should be Of long duration. nor WHY It's
effects should he disastrous. Prof. sum
ner. In pursuance IF his idea that the
President had good deal 10 DO with
bringing about the crisis. suggests the
possibility that another one might follow
q too vigorous onslaught ON corporations
In the forthcoming message. But. says
this temerarious professor. the people are
paving less heed 90 recurring Executive
outbreaks; and he has the 8udacity to-
hint that. iu course Of time 10 more att
tsntion may Doe paid Go them than to the
rhetorical onslaughts Of Tom Lawson,
"Cortelyou is not To blame" SAYS
headline i'm the Lyuchburg Advance. Ger
taiHly uot He was graduated from that
position long ago.