New-York tribune., 1907-11-11
CAUSE OF THE CRISIS.
Correspondent Says Credit Erran-
sion of Dollar Has Reached Limit.
To the Editor of The Tribune.

uted TO President Roosevelt. Wall Street is violent
IN its denunciation of the methods pursued by the
administration; sober. intelligent newspapers bitter
ly reflect the feeling and as n consequence a
wave of distrust and Of confidence is sweep
ing over the land. Yet President Roosevelt is no
more responsible for the present condition affairs
than the Car of Russia, the Emperor of the Ger
man Empire or the King of England. 1t is a con
dition which exists throughout the world, and while
II is more dangerous here than in other countries
It Is not confined 10 the borders of the United
States.
1t Is not my purpose to give unqualified indorse-
ment to the Presidents policy attacking corpora
uons. The wisdom % that policy is to be deter
mined by results and the preponderance of public
opinion but II certainly responsible for pres
ent conditions. although its relentless enforcement
may have hastened events. At present, in the
minds of many, II is unpopular.
The cause is far deeper. and II is based on the
fact that the credit expansion of the dollar has
reached its utmost limit and cannot be further
panded one single cent.
In the last ten this country has experienced
a stupendous growth, reflected by the Increased
number and transactions of banks. increase in
population and the reports of clearing houses The
number of banks has trehled. deposits and loans
have Increased in the same proportion while the
clearing House reports show an increase of nearly
double the volume of business. Merchants. manu-
facturers corporations. trusts. farmers profess
sional men and the people generally have this
prosperity. Improvements have been made. facil
ties increased heavier lines OF stock carried more
! erected. Prob
ably nine out of ten Of those who have entered
into ventures still borrowers from the
banks.
Money has been easy get; there has been
boarding up of gold. and the nimble sixpence
not be compared with the great activity of the
American dollar. It's potential power is something
! phenomenal when compared with that Of the dollar
! in circulation in the times of Washington,
| twenty years ago
! But has it occurred TO the unthinking mind that
o has bePO no
/ substantial saving?
This is shown in the expansion Of loans which
! is at least three times what carried by banks
| in 1906 and there has been an increase I'm gold and
other kinds OF circulating medium issued under
| the authority OF Congress Of less than one-half
The Clearing House reports for 1906 show that
business 10 the extent OF nearly $4,000 100000
transacted basis of a circulation OF little over
/ S.0000o,OO0 That amount is the total sum Of
money which has the mark of the United States
! upon H. and OF that Treasury experts claim
they cannot trace 8. 600 O0OO0o. II is supposed 10
| be in the pockets the people. at least. it does
not find its way into the statement of banks. Con
! sequently the reports OF clearing houses, the
| loans OF banks, the deposits in banks and the
serves OF banks are all based upon actual cash
circulation of less than S.0OOOOo0OO and Of this
sum about Il per cent OF the entire cash output OF
the country is locked up in the Treasury. leaving
! nearly 80 per cent OF the whole amount in the
| banks.
/ Is It therefore any wonder that there should be
moving period? In the last ten years this strin-
gcncy has annually occurred. and will and
/ recur again and again, matter how large the
! amount Of money may be in circulation. The crop
moving period comes regularly the coming
| Of Christmas. It begins about September ! and
ends about the middle OF December. Bankers all
/ over tho country struggle meet the demand
for money at that time, when It takes $780, 600
/ to move the cotton crop alone. 100000 for the
wheat and almost much for the corn. This
/ means the actual movement OF currency from
! place another II is reported that 81. Louis
sends over 10000 day during the months
! Of September and October. that the demand
! Chicago is greater. and that New York is drawn
I upon for ten times the amount OF ST. Louis and
! Chicago together.
! During the remaining months Of the year there
! is plenty OF money In circulation 20 meet the de-
; mands OF commerce At least. bankers say there
IS. but II it not for the system OF credit,
change and the popular use OF checks. drafts and
bills OF exchange there would be a strin-
EenCy in the money market. In fact. the business
| OF the country done upon credit. based upon the
comparatively Insignificant amount OF gold and
currency held by the banks.
Now, TO the character OF loans made by the
banks 1t is popularity supposed that Wall Street
is tho large borrower. and that all loans in New
| York made by banks 10 spectators In the stock
market. the cotton or other exchanges. 1t
may be of interest state that loans OF this char
| acter including loans secured by mortgages con
stitute only one-thrd Of the S3.OooOOOOo OF loans
outstanding. The remaining two-thirds Of these
| loans are made commercial paper indorsed
| by one or two names therefore is apparent
| that the manufacturer the iobber and the retail
merchant the principal borrowers from banks
| They borrow their stock in trade good Will and
| their reputation as TO ability pay 1t is rather
| surprising that in the world of commerce every
business house of standing gain credit except
| bank bank in easy times has money TO lend; In
hard times It is in the position as It's Gus
toners. It may have gilt edged collateral, com
prsed Of stocks, bonds and prime commercial pa
per but II cannot borrow for every other bank IS
in the same condition Were the banks allowed TO
issue promissory notes which stamped by the
government as legal tender there would then be
given to currency elasticity which II has
not AT present. said Legislation OF this kind
would produce imitation, and there is no doubt this
would be the result if these promssory notes re-
manned outstanding Indefinitely. But il 1t be true
as representative bankers maintain, that there is
plenty of cash except during the crop moving
period this credit currency of the banks would eX-
pand and contract only with the demand.
II was predicted one year ago by representatives
oF the Bankers Association OF the United States
appearing before IN" Committee on Banking ana
! Currency OF the House of Representatives that
dire disaster would visit the country II congress
failed provide relief.
That disaster has come within the last month is
quite evident that it's immincnce at any time with
in the last wear been quite apparent, but that
its happening is due the policy 50 earnestly en-
forced by President Roosevelt is absurd 1t is en-
tirey due the abnormal increase OF loans over
the small increase Of cash in actual circulation In
other words the credit value OF the dollar which
safely should be calculated basis OF four to
one has Increased until it is about eight 10 one.
Anticipating the present condition of affairs the
BANKERS Association recommended scheme by
which national banks could issue credit currency
based upon capitalization, such rates to be subject
s