The Topeka state journal. [volume] (Topeka, Kansas) 1892-1980, 1907-09-02
THE BORROWING EAST.

The time is here when the east is
looking to the west for money. 1t is
calling for it in no uncertain tones
the tones that carry good interest
rates with it, Well known western
banks are daily receiving from the
east propositions for loans. The east
is short of funds, the west has plenty.
All sorts of enterprises, even those with
the highest kind of credit, are offer
ing six and seven, and some eight per
cent for money. Department stores
with national regulations are willing
to pay six per cent on short time loans
in amounts of $1,000 and $4,000 to
secure money to discount their bills.
1t is no wonder that Wall street is
going populist and has visions of
panic.
Yet the situation Is by no means
serious. The producing sections have
simply paid off their debts to the fl
nancial centers, have accumulated a
surplus, and now they are investing
their own funds instead of sending
them to New York and Chicago for
the use of stock gamblers and specu-
lators. AS a result. the legitimate in
dustries and enterprises in those CEN
ters must also pay a higher interest
stocks have fallen off.
Here is the way DR.. Albert Shaw
diagnoses the money scarcity in the
Review of Reviews:
1.-The fall in prices of stocks and Sc
curities is due. primarily, to the abb
sorption of capital the world over. If
it were local to the United States, as
some of the critics of the administra-
Z oicyn he
attributed to local causes. In fact,
however, it affects Great Britain,
where the price, of consols has fallen
a slow as so Il. or lower than at any
time since 1S4S; it affects Berlin,
where serious banking troubles have
been feared; and even affects Paris.
where the Bank of France carries a
stock of gold which makes the Paris
market almost impregnable.
There is simple philosophy to
the monetary situation in these great
markets. 1t is a philosophy which is
simple. at least to the student of
political economy but unfortunately |
not all our statesman nor even all our
financial writer's are trained econo- |
mists- The explanation of high rates
for money all over the world is that |
the capital sought for the creation of |
new enterprises. like railway extern |
sions, new rolling mills, new build |,
lngs, and the opening up of new coun-
tries, does not equal the demand for |
1t. Every civilized community today |
produces annually not only all that is !
needed for its immediate consum ptive |
wants, but a surplus over for making
additions to the existing equipment of
production. It is not money which is
lacking in the sense of gold coin and |
notes It is a sufficient supply of raw
material, labor, and machinery to
create all these new works. Men who
wish to enter upon such creations seek
10 borrow capital of others through
he form of banking credits. They
ind that those credits are exhausted
or reduced. They then offer a higher
bid for surplus capital by offering
lew securities cheap. In order to buy
hese new securities, holders of old
securities are willing to sacrifice them
n some cases at reduced prices in
order to take the new. In other words,
he mass of securities both old and
lew, competing for a market, is in ex-
less of the combined demand for Sc
,urities at former prices. Hence the
all in their current quotations"
This is the reason why the east is
rying to borrow money of the west.
Meanwhile the west has it. There is no
hortage of funds out here This is
he producing section and everybody
S prosperous