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

wise enterprises, in extravaganza IN
living, in wars. and absolute destruc-
tien 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 to embark
in new enterprises. however; the capt.
tai fails them. and disaster comes.
CAPITAL Near Exhaustion.
"FOr eight or nine months last past,
there were mnny indications that the
loanabIe capital OF the world was near
exhaustion. This result was brought
about not only by the enormous ex-
pnnSiOn of business plants and busi-
ness investment, which could not be
readily converted, but nIsO by the
living and by the Spanish war, the
Boer war, and the acknowledgements
war, and i'm such catHstrOphes as Bal
tismOre 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
II was felt here
Secondly, the conclusion cannot be
avoided that the revelations of irregu-
larity. breaches of trust, stock jobbing,
overissues of 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
much more effect, probably, abroad than
they had here because here we were able
10 make distinctions while there. at a 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, 20 be used in the transaction OF
the day, a 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
20 counteract the sudden drain OF money
BY the boarding in a panic. 1t is probable
that the stringency. which reached its
height on that dark day of October "a
might, in part, have been alleviated. had
we had a currency which could auto
matically enlarge itself 10 meet the tre-
mendous demand Of day. or a week. or
a month. while public confidence was
being restored.
The national administration. together
- -
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 70 follow from this
ranic are not likely 10 b 50 long drawn out or
70 result in such disastrous Industrial depression as
the panic Of lss3 the pnic of 1873 and this for
the thR: the conditlon Of the country makes
It SO much easier 10 resume business gradually. TO
accumulate capital. and then 70 renew the enter
prises which had 20 Be abandoned for lack Of H.
In the first place. we have gold currency with
no suggestion Of departure from the gold
standard
In lsss the pressure fo- free silver was on. and
the throat Of national repudIatoD had much 70 do
with the delay IN the retJTn 90 prosperous times.
Our government finances are in excellent con
dltloAt ana We nave a large surplus Our farming
communities IN the West to-day not under the
weight Of mortgages and Of debt which distressed
them in 1888 and 1878. They are prosperous and
wealthy.
Railroads Are Solid.
Again. the railroads. which make Up large
part Of the wealth Of this oountry are on a nrch
solder foundation than they were in 1885 Then
many Of them had 70 be taken into the h4nds Of
receivers and immense amounts expended By means
Of receivers certificates displacins and destroying
the value Of vested securities in order 10 put roads
in a safe and income-earning condition. The rail
rUads to-day in better physical condition than
they have ever been in tfeir history. But few q
them have recently been built into new TERRITORY
IN which business has 10 be created BY introducing
a population.
Again, the balance of trade is with US. We
able TO settle for the hundred millions Of gold
that Withdrew from Europe IN order 70 meet
the demand fer money in the markets IN New 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 Tesump-
ton OF business on normal basis.
The System of Credit.
Modern business is conducted on a sys-
TEN 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 total
of many billions to rest on a 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
seasons. The banks themselves, in turn.
require the means Of granting these
credits largely from the money of their
depOSitoTs. And in loaning from their
deposits. the banks rely on the improba-
bility that more than a certain part of
the deposits will be called for at any one
time A lack of public confidence In the
banks creates Il common desire among
bank spositors TO withdraw their money.
"The fright which SeiEes the cred
itOr-the deposItOr-and leads him 20
hoard his money, spreads like wiIdare,
and it is ms unreasOning and unreasOn-
able az the spirit of mob. A run on the
bnnk ensues. The banks then call on
their debtors, and the tremendous
structure depending upon credit tum-
bies. Meantime. men who properly
count themselves as miIIIOnaires, who
are honest, conservative, solid busi-
ness men, always responding to their
obligations, find themselves ns helpless
under such n financial cataclysm rs
they would be in an earthquake.
Reason Resumes Sway.
Gradually, reason resumes its sway, but
the injury 20 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