The Washington herald., 1914-02-26
LIES
in FIXED FORMS
Commercial Paper Does Not
Govern-Investment Ca
pacity Two Billions.
LESSON OF MR.. ARMOUR
Wall Street Has Been Safety Valve in
Times Of Loan Expansion-Wealth
Exceeds Population in Growth.

The highest estimate of growth in
values In this country Is N.ooaooo.0oo per
annum. This includes roadbuilding.
housebuilding, and all forms of property
accretion. II Is not probable that more
than 1900. 900 take form In stocks and
bonds. or In such shape as to be available
in bank loans.
If. therefore, we have an investment
digestion capable Of absorbing $1,000 0oo. 600
year. we are already and steadily over
invested by from four to five years This
overinvestment is taken care Of largely
In bank loans II is just as clearly
property moving 10 market as hogs or
cotton.
Strange as the statement may appear.
1t is nevertheless a provable fact that
the fexibility in our bank reserves is en-
tirely in this $4,000, 900. .00oo and not in
the S,OOe. 10000 of commercial paper.
Reply of Armour.
Ths most fixed thing In the bank loans
Is the commercial paper, as Mr.. Armour
had to show the Chicago bankers in
1907
They asked him to reduce his loans.
He exclaimed, What! I. who am liquidat-
ing the country and taking the cattle.
sheep, and hogs that are being daily sent
to larquidate bank loansi i. who am
for money. must curtaill Gentlemen, /
am the liquidatorI What would be the
condition of your bank loans IL I turned
these cattle back to the farms?"
Mr.. Armour was right. The theory Is
that a commercial loan based upon con-
sumable products liquidates itself. But
until the world stops eating and drink
ing or wearing clothes or consuming fuel.
there Is n new note right behind the one
liquidated by the consumable commodi-
ties. Across the continent there Is a line
Of sheep. and a commercial note on the
tail OF each sheep. in endless procession.
There is no fiuctuation possible with COM
mercial notes based on consumable COM
modities unless prices are changed, or the
capital Of the merchant, or middleman, is
expanded.
II Is Wall Street and its shrinkage in
stocks and bonds; II is slaughter OF the
lambs, and the liquidator of margin-held
Investments that has eased money. in
every pinch. up to 1913.
One of the most sagacious financiers in
Wall Street failed TO buy securities in
the latter part OF 1913 because he was
out Of sorts with the administration and
saw more clearly than Washington the
danger Of the situation. He declared.
1913 II 1897 over again. Wall Street has
been liquidated out, and there is no place
for further liquidation. Therefore. any
pinch must be met by suspension as in
1sJ7r
The whole Industrial and commercial
structure Of the country in relation to
eEnf .rEls mas - - tor r. - form
the lua s t.a irredurtnIe ltri-n.4n Of
rsnlr-geliJL credits based or tar con
ssisr,s bic cou.TcosItirs 81 iH~ 2O.ruy. Tbs
teso,thif1zs t,ass = the ffzrd trEzss ofi
Ir. pe-.g f prnesss cf construction aud
.ncestIusst d.resfiun
The top layer oi tI4is tss0-thir Is. arS
representing less than per cent Of the
fixed property forms. Is Wall Street with
less than S0O0o.Ooo in loans on margin
securities-the whole buffer or cushion
and the vibratory receiver between these
two forms Of loans. IL has been ground
once or twice each year for a generation
as the pressure has come upon the money
markets of the country for seed time
and harveSts- The margin spectators,
not in WalNStreet. but all over the coun-
try, have lost their fieeces in this squeez-
ing. The deniZens of Wall Street who
survive are those who have lodged. Those
who do not understand lost their fleece
and read "Frenzied Finance for conso-
lation and got it again. The system
was wrong. 1t was nobodys business TO
remedy II. Everybody assaulted Wall
Street and nobody from Washington or
the West went down TO Gotham TO in
quire what the trouble was
All the bankers Of Wall Street said, |
however. and said it emphatically. |
Reform your bank act" And that be- !
ing the cfy sent up from Wall Street, it |
went unheeded for a generation.
Now Wall Street is to be reformed-to |
give commercial paper proper expansion. |
II may be seen from the above that |
here can be no proper expansion of COM |
mercial paper, slightly, as the country |
grows. And as wealth grows faster than +,
population, there may be less need of |
paper in the future than in |
he past unless there be expanding prices |
for labor and commodities.-C. W. Barron |
Vol 1