University Missourian. [volume] (Columbia, Mo.) 1908-1916, 1913-01-12

ich is seeking to bring about re-
is cOuntry.)
They are the outgrowth of our de-
fective banking system. LAS long as
our banking and currency system re-
mains as it is." said Secretary of the
Treasury MacVeagh in his recent re-
port to Congress, ''the immeasurable
disaster of a panic will remain a pos
sibility:;" and he continued:
The system under which We are
living not only will not prevent a
panic. but after certain point
in the generation of panic condi-
tiOns is reached, will make it in
evitable. So that. as long as the
financial system created by our
Federal laws remains unchanged,
the Government will be exclusively
responsible for the commercial.
industrial and social disasters
which flow from panics. .....A
avoidable as an epidemic of small
pox.
George H. Hull. a financial writer.
distinguishes between an Industrial
depression and what he calls ''finan-
cial panic" One lie calls "physi-
cal disorder" the other IAN acute
malady," which he describes as the
effect of mental excitement whose
chief element is fear. Others dis
tinguish between Industrial depres-
sicns and money panics." But these
distinctions are misleading. inasmuch
as industrial depressions are due also
to monetary troubles of one kind or
another, and are therefore in a sense
financial" or money" panics. Some
newspapers took exception to the Sec
retary's statement that we could avert
panics by reforming our banking laws
They were right. So was he. They
were considering one phase of a phe-
nomenon. He was considering an
other
Two Phases Of Panics.
Ii is true that at more or less ir-
regular intervals this. like every 9TH
er great commercial country, is swept
by a business crisis. A certain num-
ber of men i'm every community con-
duct their businesses on too optimistic
a basis, and it inevitably follows
that they run into straits and founder
Being debtors of sound concerns and
unable to meet their obligations, they
involve others in their embarass-
ments. III their number is relatively
great, We have a crisis assuming the
proportions of a panic. Bankers. un-
der our system, must cut off loans,
deny renewals and collect outstand
ing obligations in order to husband
their reserves. Business men begin to
hoard their money to meet payroll
and other cash requirements This
reacts upon the bankers, and we have
an Overwhelming circle of disaster.
The failure of badly administered
is natural and inevitable,
and it can not be prevented. We can
nc more legislate il out of existence
than We can legislate wisdom into the
ignorant or morality into the criminal.
But the failure with them of wisely
conducted concerns is an economic
absurdity and injustice. 1t can and
should be prevented.
Under scientific banking system.
industrial crises work little damage to
any but business houses improperly
which lack sound CONNER
cial paper for discount. Cnder our
system they bring incalculable harm
t. sound concerns and cause humili-
ating suspension of specie payments.
Then we suffer the kind of panic Mr.
had i'm mind. He referred
to what Mr.. Hull calls a financial
panic"
What Is u Bank Deposit!
II is important to understand, be-
fore going further into this discussion.
just what bank deposit is. De-
posits are not money, except to a very
limited extent. They are largely
loans. If a manufacturer arranges
with his bank for a $4,000 loan on
his promissory note. he does not lex
cept in rare instances) take the ac-
tual currency. He receives the right
to draws checks and drafts against his