Evening journal., 1908-06-06
PANICS, THEIR
CAUSE AND CURE
Strong Address by 40. CrOzief
Before National Reform
Association Here

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The recent sessions Of the National
Reform Association at Grace Church,
this city, were made memorable by a
number of forcoful speeches. Among
others, the address of Alfred O. Crozier
of this city on "Panics. Their Cause and
Cure" delivered last Thursday even
ing was an attack on the Wall street
interests which has created consider
able comment Mr., Crozler said.
Excessive prosperity has been given
as the cause of the recent business
panic. That everybody was making
too much money The soil, under tha
touch Of man, was yielding more than
seven billion dollars of new wealth
annually. or nearly three times all
the money of the country. Industries
were running night and day glutted
with orders yielding the highest pro-
fits ever obtained. This produced BIZ
lions of fresh wealth. All labor was
employed, at the highest wages in hI-
man history. Railroads were swamp
ed by the increasing traffic and tn si.
earnings reached high water mark
All others were prohting by these con-
ditions of unparalleled prosperity TN
til the entire world marveled at the
growth and fabulous richness OF this
republic
Then the panic came. Out of this
clear sky shot the Lightning bolt Of
/ destruction and devastation that en-
quilted all in wild and frenzed pan ic
Banks closed or suspended cash pay
ments, industries shut down, railroads
stopped all improvem ents, the public
lost billions through shrinkage of val-
ues of securities, agriculture suffered.
u million honest American wage earn
ers were summarily thrown into idle
ness and their wives and children into
suffering and distress.
This sudden transition Of the entre
country from the heights Of prosperity
down into the depths Of despair, and
the staggering financial losses through
out the land, caused suicides, embez-
elements and even murders almost
wholesale. The increase of insanity
due solely TO these conditions is heart
rending ana appalling
Cause Of Panics.
Charging panic 10 excessive pros
perty is like saying that sickness ia
due TO excessive health. II is ridicu-
lous. Many economic doctors have
searched the far corners of the eartl,
for the cause of the recent panic, be
cause they feared the disclosures
which might rsult from a search Of the
ruins here at home. Unusual increase
in the output of gold. too much new
wealth, Is one explanation given. An
other, economic conditions in foreign
countries. But the panic occurred l,e.
fore any appreciable decline IN the de-
mand for our products abroad II
would be more correct to say that con-
ditions now prevailing in other coun
tries are partly the result rather than
the cause, of our panic. Panics can
not be cured until their cause is dis
covered. And the cause Of the recent
panic will not be found outside of OIL
own country.
No doubt the rapid expansion o.
business enterprises entered into th'
problem 1t induced a vast expansion
Of credit But as this great business
development was legitimate. based OF
actual demand at prices yielding fd.l
profits, why was il not sound and jus
tihed? Why was il not simply proper
and sane development due to the raais
growth of population and business o.
the country, 10 the opening up of rs
vast natural resources, and to en-
ployment of the immense volume ol
new wealth, the product of human
toll, taken from the soil and the fac
tory?
Only when expansion increases pro.
ductionbeyond demand. causing al
overproduction that induces cutting oi
prices until losses take the place ol
profits, is IL dangerous.
Is More Money Needed.
If the expansion of business wa.
legitimate, but the danger was the un.
due expansion Of credit, perhaps ther,
should be a greater volume OF money
so that business can be transacls+
more nearly on a cash basis. Nus
we force a slow pace in the growth Of
the country's business by keeping th,
medium of exchange so low in volum
that there is not enough, and in orlci
not to overstrain credit? Why keeg
down the volume of money and forc'
the country to take the risk of doinl
its business more and more on credit
If frequent panics are to occur, thi.
would be dangerous. A bank loans iti
credit, or the right to draw cheek,
against the bank to the face of th'
loan. 1t seldom loans actual money
The borrower can get money on his
check If he wants it, except during 8
panic. but experience proves that eev
take the actual cash.
Panies Wreck Credit.
Because a panic wrecks credit, II Il
dangerous TO the banks. and to INDUS
trial and commercial borrowers. who's
loans the banhs are forced suddenly I,
call, that they may meet a possib,'
run by frightened depositors who arr
alarmed by fear lest the banks b.
unable to pay them their money OF
demand.
With the supply OF available money
only a telth Of the total deposits, thl
banks are pat in deadly peril the mo
msnt a banic frightens depositors gen
eraily into dem andins the actual casl
that they may heard it FOR safety.
If pan r should frighten the peOpl
into Withdrawing in cash and hoardins
tenth of all deposits, the banks vii
not have and cannot get a doiar o
money With which to pay the other 81
per cent. If the run continues thi
banks must close, with disaster to all
II is a narrow margin of safety. TIT
banks always are skating on thin Ice
For this reason banking has been call
ed a bluff. II would be more propei
TO call it a business depending who'll,
on public confidence. II speaks wei
for the standing, integrity and skill o
American bankers and the patienc'
and self-restraint of the millions o
depositors, many of whom might ios'
their all. that banks have so wal
weathered the panic storm Of tn