The Birmingham age-herald., 1907-12-01
GAGE AND HILL
 ON TIE SITUATION Discuss Causes of Recent Fi-
 nancial Furry SOME EXPERTS DIFFER But All Agree That Present Crisis Had Been Widely Anticipated For sev-
 eral Months-opinion of
 Editor Holt.

the December Everybody's is a discus
 sion of What Caused the Panic" by
 Lyman J. Gage, eX-secretary of the
 United States treasury; James J. Hill,
 Stuyvesant Fish, Byron ". Holt, editor
 of Moody's Magazine; W. c. Sumner and 1 Thomas ". Lawson, The opinions of
 these experts differ on some points, but
 all agree that the present crisis has been
 widely anticipated for many months MT. l Gage thinks that the crisis is due pri- marily to q weak currency system, but i he also believes that the recent wars,
 natural disasters, and vastly augmented
 building Enterprises have been serious
 contributory causes. MT. Gage says in
 part:
 "A modest estimate of the destruction wrought by the Spanish American war, 1 the Boer war and the war between Rus
 sia and Japan is sS,0Oo, LOCO, and to this
 should be added at least s500O00,oO0 of 1 property swallowed up in the San Fran l cisco and the Chilean earthquakes or last year. All this vast sum, if not de- stroyed, would have been available for useful works of value to man. During
 the past few years, also, there has been an unprecedented activity in the creation
 
 The construction of railways, electric lighting plants, cotton mills, steamships, etc, in the past six years has used up no less than So, 00o Capital thus transferred and fixed in permanent form has been gradually furnished by those who possessed il, and In place of it the possossors have been supplied with se- curities such as stocks and bonds, from which they might expect to draw an in- come over an indefinite future.
 "The creation of these vast works has been justified by the needs of a progress i've civilization, but that does not nullify the fact that capital once transferred to the creation of railroads and similar en- terprise no longer exists in available form for other purposes It has been further evident to thinking persons that the pressure for the use of capital has outmeasured the supply of capital. It Is much easier and quicker to plan schemes, pass resolutions in directors meetings. print and offer bonds and stocks for sale, than 1t is to gather the capital to ex- change for them. no matter how merito- rious an enterprise may be. That we lately reached a period when the dead lock between capital and the demand for 1t was manifest Is shown by the higher terms of in terest offered by conservative enterprises. In fact, longtime bonds could find no buyers during the past year. In the exigency thus revealed, the great borrowing enterprises, finding It impossible to negotiate longtime bonds, resorted to the device of issuing short i time notes running for one, two, and l three years. at the most tempting rates 1 of interest. Under these unusual induce ments the controllers of capital repre- l sented by money and credits in bank, who
 would have considered it imprudent to invest funds in longtime bonds, felt jus | l,,. oIt .,f, 1oDes of dollars of short time securities, and thus the dellcacy of the situation was greatly aggravated.
 Situation In Early Fall.
 "This was about the situation in the early fall, when the annual harvest put In ita inexorable demand for the tempo
 rary use of capital It is a known fact that the thousands of banks standing next in proximity to the agriculturist keep a large portion of their funds on deposit In reserve cities. Upon these re- serve centers, then, the country banks from Louisiana to Minnesota made their usual autumnal acquisitions. The sith- alton thus created found the banks in
 reserve cities especially weak In their money reserves. With proper system of currency in the United States thls strain from the country would have been met by bank credits issued in the form or circulating notes, fully qualified and en- l tirely adequate to meet the temporary
 requirements of the crop period. But In
 the absence of any such system, these
 acquisitions from the interior upon New
 York banks had to be met out of the l already scant supply of their legal money ] reserves The withdrawal of these re- 1 serves operated upon the great super l structure of bank credit like the removal l of foundation-stones from under some 1 great building. To restore equilibrium, l the banks in reserve centers were obliged
 to turn upon their borrowers and force
 payment from their debtors with little ] regard to the inconvenience or the loss l incidental to liquidation by the dentor l class All the phenomena of shoek-a 1 horrible fall in the price of securities l fright and panic were the final result or
 the movement slSetched. This was nat l hral and inevitable consequence from the
 lack of a proper system of currency.
 James J. Hill.
 James ]. Hill believes that the trouble
 clearly comes from the hoarding of
 money, not by the few, butt by the many.
 The best and quickest remedy IS for eY-
 cry man who is hoarding money to re-
 turn 1t to it's usual employment It Is
 he who is doing the mischief. The money l is in this country, but it must be made 1 available It is as much the duty or
 every citizen to deposit all his surplus l cash in the banks, which are entirely
 sound and solvent. as it would be to sub scribe to a war loan. In this way will money be put into circulation. and the 1 financial institutions of the country Will l be enabled to make the advances without which business cannot be done.
 1 The opinion of Byron w. Holt, editor of Moody's Magazine. is carefully thought
 out and is worthy of serious considera- 1 ton. This is the gist of 1t:
 Present financial and industrial con 1 ditions as to gold, prices, interest rates.
 business and credit closely parallel those l of 1S57 If our banking conditions were
 not very much better than were those 1 of 1857, we might now expect to see du- 1 plicated the avalanche of failures of
 banks and commercial houses which then l laid business prostrate. The greater
 soundness and stability of our present
 banking institutions. together with bet | ter management and concert Of action, l have probably averted for us panic l which would nave been as much greater l than previous panics as our business ex- | panson is greater than that of any pre- l vious period.
 l "As happened in 1851, we may expect to I see a sudden and sharp business depres- 1 sion follow in the wake of our financial l crisis We may be well through this | depression in six months. 1t can hardly l last more than a year. with gold depre- 1 ciating in value and with prices tending | strongly upward. Liquidation in com 1 modities, real estate and labor is not like | ly to go nearly so far as it has goM in