The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1909-08-22

derful period or expansion, II appears now
10 have been wisely directed. There is an
insignificant percentage OF capital tied
UP in unproductive investments.
Business Was HenIthy.
The fact is that the business OF the
country was IN healthy condition at the
time OF the panic. No widespread cpl
demlc Of failures followed Il. notwith-
stnding the severe test TO which all cred
its were subjected. The banks which
were obliged TO close their doors generally
reopened or liquidated without loss to
their creditors. The more notable indus
trial failures were not due TO Improbable
business. but TO the embarrassment OF too
much business with sudden cutting OF of
business. Dun's Review for July 3 1903,
makes a conclusive showing from the rec
ord OF failures for thirty-five years that
with the wonderful expansion Of the
area and activity Of trade in the United
States there has taken place a CORE
spondingly remarkable decrease in the
percentage of business defaults It adds:
"On the basis OF such a showing, COW
ering such a long period Of time-a full
generation in human life-it IS surely rea-
sonable TO conclude that as the country IS
growing larger, its financial units bigger.
and It's industrial activities greater. its
stability OF business. owing 70 more con-
sentative financial methods and 70 more
careful systems OF credit and accounting.
is steady increasing"
II is difficult, therefore, even after the
pcst-mortem. TO see just wherein the pros
perlty which was interrupted in 1907 was
false or unsound, and Il is also difficult to
understand why period Of weil-directed
development and well-balanced trade
should necessarily end in panic and dis
aster. No reason Is apparent why a we'll
ordered system OF exchanges should not
go on as indefinitely as if each Individu-
al was supplying all his own wants.
Currency System NJ Fault.
The truth is that responsibility for the
panic OF 1907 lies at the door OF our cur
rency system. No other adequate cause
can be found. We do business by the
modern system OF bank credits. the enor-
nous volume OF which Is shown else
where. but we have failed 10 supplement
this machinery with the means for read
!ly converting bank credits into cash.
Elsewhere II is said that European
/ economists criticise American bankers for
lending up close to the legal reserves.
| leaving no margin for sudden and excep-
tional demands This unQuestionably Is
the true explanation for the extreme and
rapid fluctuations in interest rates here.
With money lending at unfemunerative
rates there Is little surplus now to meet
the impending fall demands II these de-
nands should be large our system has no
resource within Itself to meet the situa-
| ton Nothing can be done but buy or
borrow gold in Europe at the best terms
obtainable.
Cannot Hold Bankers Responsible.
It IS idle to hold the individual bankers
responsible for this state OF affairs. What
csn one individual banker In 5000 do. by
sacrificing his profits, to remedy the evil?
The individual banker must conform 70
the practices which prevail In the BUSH
ness. He must pay interest on deposits
II his competitor does, and when he has
assumed the same burden OF expenses he
Is under the same pressure TO keep his
funds employed. This is the inexorable
necessity which compels American bank
/ ers to lend up to the hilt." This is the
1 fundamental weakness of the American
system. incidentally It may be observed
that this weakness cannot be cured by
any guaranty Of deposits, which puts