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V
FINANCIAL CRISES
*
2''3'?A€.^
FINANCIAL CRISES
AND
PERIODS OF INDUSTRIAL
AND COMMERCIAL DEPRESSION
BY
Theodore E. Burton
^IVJ- df-
li 7f
NEW YORK
D. APPLETON AND COMPANY
1902
COPTRIOHT, 1902,
COITTENTS
PAOQ
Introduction » 1
CHAPTER I
Definitions ... 6
CHAPTER II
CHAPTER III
CHAPTER IV p^^_ I
CHAPTER V
IjfDICATIONS OF PROSPERITY OR DEPRESSION . . . 136 *)
— —
and in creditor countries Income taxes Excise or
internal revenue taxes— Bank clearances— Production
j
—
Railway tonnage and earnings Bankruptcies Social —
statistics — —
Other statistics General tendencies. ',
CHAPTER VI
Indications of the Approach of a Crisis or Depres-
sion '
184
Banking statistics, loans, deposits, paper currency,
rates of interest, relation between specie and loans.
—
CONTENTS VU
CHAPTER VII
Preventives and Remedies 243
CHAPTER VIII
Beiep Account of Crises and Depressions in the
United States . . . . . . . . 270
CHAPTER IX
Summary and Conclusion 806
—
APPENDIX A
page:
A Selection of Opinions relating to the Causes of
Crises and Depressions 311
— —
Walter Bagehot David Macpherson W. Stanley Je-
— — —
vons Horace White Bonamy Price John B. Clark
— — —
Paul Leroy-Beaulieu Leone Levi J. E. Thorold
— — —
Rogers Robert Giffen President Van Buren Pros-
— —
pective Review Bankers' Magazine, London Albert
—
Gallatin and others Matthew Marshall— N. C. Fred-
— — —
eriksen James Wilson James A. Lawson Bankers'
— —
Magazine, London H. T. Easton Charles A. Conant
— — —
Henry C. Carey Alexander Baring Robert Baxter
—Charles Coquelin — W. Gilbart—Edward Everett
J.
APPENDIX B
Statistical Data 329
Bibliography 347
Index. 379
DIAGRAMS
PAGE
Railway Building in the United States, 1854^1900 . 85
States 230
ix
FINANCIAL CRISES
AND
PERIODS OF INDUSTRIAL
AND COMMERCIAL DEPRESSION
IXTRODUCTIOI^
Ko subject of economic discussion has provoked
a greater variety of conflicting opinions than that of
financial crises and periods of depression. ISTumer-
ous explanations of their causes have been advanced.
Some of them will be found in Appendix A of this
book. It will be seen that they display irreconcil-
able differences. Nor is it in explaining their causes
alone that differences appear. Those who review the
history of business in past years do not agree
upon the seasons which can be considered as pros-
perous or the contrary; some maintaining that cer-
tain years were years of crises or depression, while
others deny that such was the fact.
ISTotwithstanding the general dread of these
periodical visitations, the question has recently been
much discussed whether they are, after all, calami-
ties. been strenuously asserted that crises
It has
are a necessary and beneficial check to increasing
expansion and extravagance; also, that periods of
depression, while bringing misfortune to some, afford
1 1
2 CRISES AND DEPRESSIONS
CHAPTER I
DEFINITIONS
Substantives
Panic. —
The word panic is defined as
" A sudden fright, especially a sudden fright
without real cause." *
Also as
" A sudden, unreasonable, overpowering fear,
especially when affecting a large number simul-
taneously."f
DEFINITIONS ^
1
X Article, Crise.
* See especially the description of two kinds of crises by
Paul Leroy-Beaulieu, quoted herein, chap, iv, pp. 124-125.
:
p. 381.
p. 96.
DEFINITIONS IS
money matters.":):
By general usage this adjective relates to the
agency of credit as well as to the use of money, and
thus includes reference to the relation of debtor and
creditor.
A crisis in its predominant features is financial.
DEFINITIONS 15
* See the figures for the failures in 1893 and the two suc-
ceeding years, given in Chapter III, pp. 58-59.
f Century Dictionary.
—
* Worcester,
Summary
The word crisis, if employed with entire ac-
curacy, describes a brief period of acute disturbance
in the business world, the prevailing features of
which are the breakdown of credit and prices and
the destruction of confidence. It has especially to do
with the relations of debtor and creditor. The word
panic describes a different phase of the same general
condition or situation, which is essentially mental
or psychological. On different occasions, one or the
other phase is the more prominent. The adjective
financial is appropriately used with each of these.
The term depression, or period of depression,
describes a disturbance having a much longer dura-
tion, and which cannot be designated as financial.
It pertains rather to industry and commerce, and in-
cludes the whole field of production and exchange. It
is properly described as industrial and commercial.
pp. 24-25,
FACTS CONCERNING CRISES AND DEPRESSIONS 25
p. 592.
FACTS CONCERNING CRISES AND DEPRESSIONS 33
p. 230.
FACTS CONCERNING CRISES AND DEPRESSIONS 41
Increase,
1870. 1871. 1873. 1873. per cent,
1870 to 1873.
Increase,
July, 1897. July, 1898. July, 1899.
per cent,
July, 1897.
[to July, 1899.
* Bulletin of the
Department of Labor for March, 1900,
articleon Wholesale Prices, by Roland P. Falkner, Ph. D.
The percentages are computed from the prices given.
f Decrease.
PHENOMENA OP CRISES AND DEPRESSIONS 55
Fossick,
66 CRISES AND DEPRESSIONS
CHAPTER lY
CAUSES OF CBISES Ain) DEPRESSIONS *
inhabitants." f
Forms of Derangement of Capital. The de- —
rangement which causes
in the condition of capital
depressions manifests itself in a variety of ways.
All these tend to produce, directly or indirectly,
waste or exceptional loss, permanent or temporary.
In some forms this waste or loss is obWous enough.
In others it is not. It is controlled by human will
in some cases. In others it is not. The different
forms in which this derangement manifests itself
may be grouped in three divisions:
Direct loss or waste, such as results from pri-
I.
Nominal capital
Tear.
Capital created Actual money of joint-stock
and issued. calls on same. companies reg-
istered.
^s 1860
1
2
\y
3
/ 4
\
5
\ s
V
6
7
\ ^"~» 8
^ "
9
1870
"^ 1
^,_-^ 2
^^^
"^ 8
_^ 4
'
/
V,
5
^, 6
7 7
V .^
8
9
^^ 1880
1
2
8
^^,^
^ 4
^ ,
5
6
* 7
8
.--'
-^
9
,\ 1890
,^ 1
is 2
-»«" 8
/ 4
/ 5
( 6
V\ 7
*s_ 8
"^ ^«> 9
7 190<.>
86 CRISES AND DEPRESSIONS
Percentafre.
Tears ending June 30th. Exports. Imports. Exports to
•
Imports.
production.
The statistics of coal mining in the United
Kingdom show, on comparison of 1883 with 1897,
that the number of coal miners increased by a
larger percentage than the output of coal. In 1883
there were 514,933 coal miners employed, while in
1897 there were 695,213. In 1883 there were mined
163,737,000 tons, while in 1897 there were mined
202,119,000 tons. The increase in coal mined was
23,44 per cent, while the increase in the number of
coal miners was 35.01 per cent.*
In the consideration of the influence of ma-
chinery and labour-saving devices, two opposing
errors have obtained wide acceptation:
First, that labour-saving" devices are an evil.
Second, that they confer an immediate and un-
mixed benefit.
It a grave error to suppose that the increased
is
Incidental Features
Tendency to Side by
Exceptional Overaction. —
side with the destruction which inevitably accom-
panies an improving condition is the tendency to
overdo in those things which are new. Upon
analysis it will appear that this tendency is quite
different from a speculative disposition. It is due
to the ever constant desire to accomplish the
greatest results with the least labour and in the
readiest way. The
disposition to enter new and
and by overaction there, to pro-
fertile territory,
mote crisis and depression has frequently been
noticed. The same temptation to overaction in
exploiting valuable inventions operates with still
greater force.
CAUSES OF CRISES AND DEPRESSIONS 97
*
"In some books on political economy the removal of capi-
tal from one employment to another is spoken of lightly, as if
it were an easy process. No delusion can be greater. Such
changes can, of course, be made in some kinds of business with-
out very serious loss. A banker, whose fixed plant consists of
a few chairs and tables, may, if he has been prudent, wind up
his affairs and invest his capital elsewhere. But a manufac-
turer or farmer, with money sunk in all sorts of ways, cannot
sell his plant without heavy loss, except in very peculiar times
—
and under extraordinary circumstances." William Fowler,
M. P., Contemporary Review, vol. xlvii, p. 538.
118 CRISES AND DEPRESSIONS
Increase,
1862. 1883. per cent.
Meat, France 25.9 kilos 33 kilos 27.41
1868. 1890.
* Statistics and Economics, part ii, pp. 40, 41, 40, 47.
—
* Seo Table III, pp. 645-646, of the above article also the
;
Pekoentages Employed
OTCs-iOo coo o o
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' 1900
INDICATIONS OF PROSPERITY OR DEPRESSION 141
dix B, p. 339.
f There may be a que.stion between 1893 and later years.
142 CRISES AND DEPRESSIONS
Yean.
Number of establish- Total number of
ments considered. persons employed.
SB
&
a>
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INDICATIONS OF PROSPERITY OR DEPRESSION 145
Exports. Imports.
Foreign valuations, 1898 $1,279,617,183 |265,046,080
Home valuations (average of
1897-'98 and 1898-'99) 930.1 75,31 307.990.327
Excess, foreign valuation $349,441,865
Excess "
37.5^
Excess, home valuation $42,944,247
Excess 16.2jg
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158 CRISES AND DEPRESSIONS
165
/s,
160 / \
1
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1
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1 \
145 1 \
1 I
140 I \
1 \
135 \
130 1
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5 60
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30
IMPORTS y V\
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.4"
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20 ^-<:^v K\ \
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— '"^^FS^^' \ s.
_— —
^
r^«"
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VTdS
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"**^
— <'^<
o-^-o-
^_,^___ All exports.
• _^„«^ All imports.
.
Imports of iron and manufactures tliereof.
_^___,_^y_ Imports of material for railways, etc.
Bank Clearances
Large bank clearances denote large trade and
frequent transfers. Clearances furnish excellent
indications of the volume of transactions. Their
amount is increased by high prices, whether of com-
modities or securities. A large volume is favour-
fNote especially the fif^ires givinp: per capita tax for 1878
and 1879, 1887 and 1888, and 1897, in Appendix B, p. 386.
166 CRISES AND DEPRESSIONS
* Both 1873 and 1880 are given for this decade because the
amount in each year was notably in excess of the amounts for
the intervening years.
INDICATIONS OF PROSPERITY OR DEPRESSION 167
B1LL10X8 OF Dollars
OOtOMOOJOOlO
—
tiTO Ot
^- 1
1
1854
/ 1
5
— \\
K- 1
6
•^^ ^ 7
8
\ 9
\ 1860
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2
8
-- — "<
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7
c
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^^ 1870
\ 1
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s_^S 3
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4
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""^tH .^ 1880
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——^j.^
1
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6
7
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8
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1890
1
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2
3
_„,—-
4
^. .^
5
V\ J 6
s_
^'«— 7
-*"=r; - 8
' '-'' 9
^,^
1900
Billions of Dollars
INDICATIONS OP PROSPERITY OR DEPRESSION 169
b- CO rt o
S 2 2 2
40 ^
/
/
35
/
/
/
O / s^ /
\ /
z, /
o /
/
-^
V\ /
gao /'
/
15
^V /
*"
/ v ^
19
Bankruptcies
In this country the greatest number of bank-
ruptcies and insolvencies, as well as the maximum
liabilities, occurred in the years 1857, 1861, 1873,
1878, 1884, 1893, and 1896. In number and
amount, 1893 was the most notable year. A finan-
cial occurred in that year, as well as in
crisis
1857, 1873, and 1884. The record of 1861 is ex-
plained by the embarrassments incident to the be-
ginning of the war. The other two years of
civil
maximum 1878 and 1896, when considered
failures,
with the years named in which crises occurred, il-
lustrate an important principle, viz., that if the
crisis is relatively the more important event, the
maximum of failures occurs in that year, and is fol-
jVIiLLioNd OF Dollars
OC;iOOTOO«00?0 WOWOOI o
1857
^^
8
9
\ ^
1860
1
1
,
2
/
{
8
4
\ 5
^^ "^^ G
^^
r>s 7
8
\
•^
\ 9
1870
/^
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——
'
2
8
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4
5
/ 6
\
7
.
— •
8
9
f^
V k.
1880
N 1
'2
....^
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4
^ -^ —"" 5
i 6
^
^
<N
7
8
^^ -^ 9
1890
-
J 1
2
1
-
^^ 8
4
\ "^
— 5
6
^ '
^__
7
8
9
1900
INDICATIONS OF PROSPERITY OR DEPRESSION 179
Social Statistics
In this connection much reference has been
made to social statistics, such as those of pauperism,
deaths, births, and marriages.
As food supplies become more available, and
communities by law, and private individuals by inde-
pendent benevolence, take greater pains to provide
for the unfortunate, constant changes must occur
in the number of those seeking relief. There have
also been frequent changes in the policy and man-
ner of affording assistance, notably in the extent to
which indoor and outdoor relief are rendered.
These changes minimize the value of statistics re-
lating to pauperism. There is an increase of deaths
and a decrease of births when severe and prolonged
distress exists, such as arises from war, famine, or
pestilence; but otherwise the information afforded
Other Statistics
ness.
2. In more recent times these alternate periods
are longer.
3. The upward and downward movements are
more uniform and continue longer in countries of
long-established industrial and commercial develop-
ment, like France and England.
4. The variation between the highest and
lowest point of activity is greater and the alternate
upward and downward movement is more inter-
rupted in growing countries, like the United States,
where undeveloped fields are being opened. In
brief, where the opportunities for enterprise and
the resulting progress are greater, there the shock
is more severe.
5. Before the commencement of recent de-
INDICATIONS OF PROSPERITY OR DEPRESSION 183
1825. —
The figures available for loans and dis-
counts are the averages for quarters; those for
specie reserve for specific dates: *
Percentage of
specie to
Specie. Loans and discounts, t loans and
discounts.
as a result of experience.
Financiers note with extreme apprehension ex-
ports of specie. So great is this apprehension that
a symptom of the disease is often mistaken for the
disease itself. When there is a drain of specie,
usually accompanied by an increase in loans, bank
directors hastily convene and raise the rate of dis-
count. This measure, more than any other, has
tended, in more developed countries, to prevent
the occurrence of severe crises in recent years, and
is largely responsible for the fact that the depres-
sion feature has become relatively more prominent.
The the earlier crises of 1825, 1837,
statistics of
1847, and 1857 show the course of events unre-
strained by the preventives which experience and
prudence have suggested.
While the proportion of specie reserve was
198 CRISES AND DEPRESSIONS
p. 399, also pp. 246, 409, 411, 415, 418, 422, 428, and 432; also,
for the period from 1875 diagram at the end of the
to 1885, the
book. See also p. 330 of the Statistical Abstract for Foreign
Countries, 1885 to 1895-'96, prepared by the British Board of
Trade.
200 CRISES AND DEPRESSIONS
Percentasre of
Exports. Imports.
exports to imports.
(Millions of gulden.)
1866 329 218 150.9
1867 407 294 138.4
1868 429 387 110.8
1869 438 419 104.5
1870 395 431 91.6
1871 467 540 86.5
1872 388 613 63.2
1873 (Crisis in May).. 423 583 72.5
1874 449 568 79.0
1875 550 549 100.1
1876 595 534 111.4
* See Report of the Director of the Mint for 1900, pp. 246-
247. Figures showing the movement of gold are given from
1825; those pertaining to silver from 1821. Prior to 1821 im-
ports and exports of specie were not reported separately from
merchandise. Of the balance of gold in this period, $20,000,000
were imported in 1847
212 CRISES AND DEPRESSIONS
a S
O
2 a
.
a
5-3. 11
11 2S ?l.2 1^
Is "Il-
is
dollars dollars dollars dollars dollars dollars dolls. dollars
Dec., 1889. 27.25 19.25 17.25 18.25 23.75 35.00 2.15
Jan., 1890. 27.50 19.90 17.90 18.00 23.60 35.25 2.20
May, 1893. 17.50 14.85 13.00 12.25 13.51 29.00 1.75 21.69
July, 1897. 11.50 11.75 10.19 8.36 9.39 18.00 1.25 14.00
pTieioO'<iioeot:-aoa>9T40ieo'<iiiaest-aoo>9i-<e«s3-<]'>ocswaoe>o
60
45 j \\
40 \
1
35
/ \
\
a* \ 1\
o \ 1 \
«ao \\ / \ > <
s/ s -* r \ > V tf
V
16 /
>
\-/
:=
10
Q [.
promise to pay.
2. Certainty of payment, or the degree of as-
Number of Number of
maximum prices. minimum prices.
January.. 61 89
February., 42 25
March 82 85
April 26 87
May 28 25
June 40 26
July 13 27
August . . 14 22
September, 40 22
October. . 86 81
November 47 86
December 66 60
Peeventives
Preventives may be viewed from three stand-
points —namely, those of
I. Established laws; governmental control by
legislation and administration.
II. The management of banks.
III. Individual action.
except as money
is shippedPout of the country to
of reserves to do away
entirely with interest on
pay a merely nominal rate
deposits, or at least to
of interest. The abolition of interest on reserves
deposited was recommended by a committee of the
New York Clearing-House after the crisis of Sep-
tember, 1873. If interest is to be paid upon these
reserves, lenders must be found to take them. If
the demand for loans is slack, an increased effort
is made to find borrowers. When this season of
slack demand is followed by one of active demand,
as in the changing conditions it surely will be, there
will not be a sufficient supply of money. There are
minimum and maximum demands for money in the
same year and at short intervals. Call loans, under
the present policy, cause the lending of the full sup-
ply of loanable funds at the time of the minimum
demand, and leave no additional supply for a time
when demands are at the maximum.
4. Diminishing Proportion of Capital and Sur-
plus to Loans. —An examination of the reports of
national banks shows that the proportion of capital
and surplus to the aggregate of loans and discounts
has been diminishing from year to year.
Banks de-
pend for their loanable funds more upon deposits
Individual Action
Among rules enjoining prudence and careful
calculation, Professor Jevons states a very practi-
cal one:
" In making investments it is foolish to do just
what other people are doing, because there is almost
sure to be too many people doing the same thing." *
In the same connection is a rule, worthy of con-
sideration —namely, to be careful about investing
in undertakings from which an exceptional return
has been realized. Profits in all enterprises tend
towards equality. After making due allowance for
the skill and trustworthiness required, risk incurred,
and regularity of employment, investments afford
approximately the same profit. If there is an ex-
ceptional return from any line of investment, it is
almost certain that the business will be overdone.
Divers suggestions have been made in the treat-
ment of this subject upon the necessity for higher
standards of honesty and better education. The
benefits of superior honesty and education are ob-
vious enough, but their attainment must be worked
out on lines other than economic.
Remedies
The only remedy that suggested by Lord
Beaconsfield —sure is
my "
out of sunshine.'
CHAPTER Vni
A BEIEF ACCOUNT OF CRISES AND DEPRESSIONS IN THE
UNITED STATES
While magnitude
earlier disturbances of serious
occurred, by general consent been consid-
this has
ered the first in the United States which displayed
the general phenomena belonging to a crisis. It
was precipitated by the capture of the city of Wash-
ington by the British on the 24th of August, 1814.
The Philadelphia banks suspended specie payments
August 31st; the banks of New York city, Septem-
ber 1st. The distress which culminated in this year
has often been ascribed to the waste of resources
incident to the war, but a more critical examination
discloses more potent causes. They were:
1. Erroneous policies in regard to foreign trade
serious nature.
Paper money in 1815 in different localities and
different months of the year was depreciated from
20 to 50 per cent, and, until the year 1817, in-
creased in quantity. This increase, however, was
so palpably unsound that a radical change in policy
was made and the quantity was suddenly restricted.
The bank circulation, which had reached $110,000,-
000 in 1815 and 1816, fell to $65,000,000 in 1819.*
The new United States Bank, which was granted
a charter by the Act of April 10, 1816, and com-
menced operations later, at first issued a large quan-
but afterward, in order to secure safety,
tity of bills,
made a vital change, and restricted its issues very
rapidly. Thus, while bank issues at first promoted
speculation and a rise in prices, at a later time their
restriction caused a ruinous fall in prices. In no
epoch of the century is it probable that the fall in
prices of commodities and real estate was so
marked as in 1818-'19. Labour also was without
employment, except at starvation wages. Inci-
dental to expansion of credits and speculative enter-
Crisis of 1857
Crisis of 1873
20
CHAPTER IX
SUMMARY AND CONCLUSION
306
SUMMARY AND CONCLUSION 30Y
of grander destinies." *
Walter Bagehot
" Much has been written on panics and manias,
much more than with the most outstretched intellect
we are able to follow or conceive; but one thing is
wish,' said one of this class, ' for the largest imme-
diate income, and I am therefore naturally disposed
to purchase an advowsonJ At intervals, from causes
which are not to the present purpose, the money
—
from these people the blind capital, as we call it,
of the country —
is particularly large and craving;
David Macpheeson
Distress in 1793
APPENDIX A 313
W. Stanley Jevons
" The remote cause of these commercial tides
has not been so well ascertained. It seems to lie in
the varying proportion which the capital devoted to
permanent and remote investment hears to that which
is hut temporarily invested soon to reproduce
itself."
*
HoEACE White
" The antecedents of the crisis of 1873 were
identical with every other commercial crisis
namely, speculation, the act of buying with a view
to selling at a 'higher price, and overtrading, or the
act of buying and selling too much on a given capi-
tal. Most commonly these two elements are ac-
—
companied by two others viz., the destruction or
accumulated capital, and the rapid
loss of previously
conversion of circulating into fixed capital. Specu-
lation and destruction of capital usually go together
in preparing the way for a crisis." f
BoNAMY Price
1. " What is it that makes a crisis? You will
never understand unless you go to the root of that
great word capital. The word capital consecrated
to the great fact that the workman must have tools,
living, shelter,and clothes while working. There
is a division of labourand employments. There
are the makers of goods and the traders who put the
Leone Levi
" If the predisposing cause of the different
crises is considered, it will be seen that there has
been a rash spirit of adventure created under the
influence of successful operations and large accu-
mulations of capital. The issuance of notes is
usually subsequent to, and not antecedent to, the
occurrence of the crisis. The main cause for the
occurrence of crises is the sudden realization of an
insufficiency of capital to meet present demands." f
J. E. Thorold Rogebs
1. The cause exists in the function of ex-
change, in the expectation of unreasonable profits,
and in incorrect calculation.:}:
2. " A commercial crisis is the consequence of
a miscalculation as to the power of endurance which
capital possesses in waiting for and thereby con-
*
trolling the market."
Robert Giffen
1. " The explanation is the condition of prices
for many Usually a great depres-
years past. . . .
Prospective Review
Crisis of 1847
APPENDIX A 319
*'
First, American system of granting too long
credits; second, too rapid extension of our banking
system, arising out of gold discoveries in California
third,undue development of our railway system;
fourth,war in Europe, diverting European capital
to the Black Sea; fifth, frauds and peculations
which, by shattering confidence, have precipitated
the contraction of credits." f
]\Iatthew Marshall
" A more complete and philosophical solution of
the problem seems to me, in the consti-
is found, it
N. C. Frederiksen
" It
not the policy of the leading banks which
is
ing policy.
" itfor is it simply the character of the harvests.
James Wilson
1. " We are now more than ever convinced,
both by principle and by facts, that the fluctuating
character of the cost of the and imperative first
whole
necessities of life is the chief cause of the
derangement of the monetarial and commercial
interests of this great country, which have been
James A. Lawson
" The cause is to be attributed to a sudden
check given to an extensive and long-continued trad-
ing upon credit." ^
Charles A. Conant
" The salient feature of nearly every crisis has
been the sinking of capital in unproductive enter-
prises. These enterprises have usually been in new
fields, whose limitations have not been accurately
Robert Baxter
" A provision should be made for such a con-
tingency as a panic, so that, when hoarding inter-
rupts the necessary flow of currency, a new stream
t Ibid., p. 14.
% The Financial and Commercial Crises Considered, p. 7. .
APPENDIX A 325
Chari,es Coquelin
" It is, then, not true that the source of disorder
is to be found in the multiplicity of banks. On the
contrary, they act as a check to it. And, in fact,
where have commercial crises always commenced?
In London and in Paris, the localities of banks
armed with exclusive privileges. These are their
usual seats. There they incubated and thence ex-
tended their ravages far and wide." f
J. W. GiLBAET
" Although be true that each monetary crisis
it
is in by a distinct proximate
large part produced
cause, yet the primary cause of each and all is
inordinate speculation, begotten of the lust of gold.
. . Men live as they journey at a railroad
.
Edward Everett
Crisis of 1857
M. Clement Juglae
" Crises are stated to be a natural reaction which
is produced after efforts for increased production,
excess." X
D. W. Thom
" Panicsmay be broadly stated as due to over-
trade, which causes general business to need more
tlian the available capital. This produces general
lack of credit. There are, first, panics of circulation,
M. Maurice Block
" The fact that we desire to bring to
light, and
from which we draw the principal consequences, is
the rupture of the equilibrium between agriculture
and industry."!
Edwin Goadby
" Every shifting is attended with a dislocation
of labour, until a more stable condition is attained.
A new invention of any magnitude, chemical or
'
William Watt
" The sum and substance of the depression of
trade may be expressed by saying that the produc-
J. B. Howe
" We may finish the summing up by adding that
the principal loss, stated in the fewest possible
words, consists in the blind misdirection of energy,
enterprise, labour, and capital." f
329
.
. .
Percent- Percent-
Persons age of Persons
Year ending employed.
Year.
employed. age of
increase. increase.
a Decrease.
The above figures were furnished by the Bureau of Labor,
through Mr. Carroll D. Wright.
APPENDIX B 331
WlSC0NSI> .
Massachusetts.
(Compiled from Biennial Re-
(Compiled from Annual Statistics of Manu- ports of the Bureau of
factures of Massachusetts.) Labo r and Industrial Sta-
tistics of Wisconsin.)
Number Estab-
of identi- Increase in lish- Persons
Years cal estab- persons Year. ments em-
compared. employed. report-
lish- ployed.
ments. ing.
—
Foreign Trade. Total of exports and imports
per capita for the United States, United Kingdom,
France, and Belgium from 1868 to 1900 inclusive,
and for the German Empire from 1880 to 1900
on the following page:
inclusive, is given
332 CRISES AND DEPRESSIONS
United
Year. States. Great Britain France. Belgium. Gfer-
Year ending and Ireland. many.
June 30th.
1896
Foreign valuation 106,34r,349£ 313,747,000 fr. 528,304,000 marks
" " in dollars 516,846,116 60,553,171 125,736,352
Home valuation " 473,223.899 53,343,571 113,145,073
Excess of foreign valuation 43,622,217 7,209,600 12,591,279
" " " d.2% 13.5 5< 11.1 !<
1807
Foreign valuation 113,041,627£ 437,540,000 fr. 652,108,000 marks
" " in dollars 649,382,807 84,445,220 155,201,704
Home valuation " 482,695,024 73,665,199 136,277,886
Excess of foreign valuation 66,687,283 10,780,021 18,923,818
" " " 13.8^ 14.6 j< IZ.8%
t
1898
Foreign valuation ]26,062,15.5£ 623,000,000 fr. 876,100,000 marks
" '• in dollars 612,662,073 120,239,000 208,511,800
Home valuation " 538,758,027 80,154,266 163,776,623
Excess of foreign valuation 73,904,046 40,084,734 44,735,177
" " " 13.7^ 49.9^ 27.3 JC
1899
Foreign valuation 120,081, 188£ 400,000,000 fr. 893,800,000 marks
" " in dollars 583,594,673 77,200,000 212,724,400
Home valuation " 509,926,635 70,107,127 161.405,852
Excess of foreign valuation 73,668,038 7,092,873 51,318,548
" " " 14.4^ 10.1^ 31.7 J<
APPENDIX B 335
1806
Foreign valuation 32,086,784£ 224,715.000 fr. 383,250,000 marks
" in dollars 155,093,910 43,369,995 91,213,500
"
Home valuation 134,440,228 55,694,541 93,749,168
Excess of foreign valuation 21,2.53,682
15.8 J{
1897
Foreign valuation. 37,933.917£ 242,162,000 fr. 397,394,000 marks
in dollars 184,358,836 46,737.266 94,579,772
"
Home valuation 159,002,286 66,730,631 98,062,278
Excess of foreign valuation 25,356,550
15.9^
Excess of home valuation. 19,993,365 3,482.506
42.7 !< 3.6^
1898
Foreign valuation. 28,534,477£ 210,000,000;fr. 322,900,000 marks
in dollars 138,679,558 40,503,000 76,850,200
Home valuation " 111,208,803 55,719,002 77,679,471
Excess of foreign valuation 27,470,7.55
24.7^
Excess of home valuation. 15.216,002 829,271
87.5 J< 1.0)(
1899
Foreign valuation. 34,975,472£ 236,000,000 fr. 877,500,000 marks
in dollars 169,980,793 45,.548,000. 89,845,000
Home valuation " 142,327,207 70,404,908 89,579,389
Excess of foreign vtiluation 27,6M,586 265,661
19.4^ 0.2%
Excess of home valuation. 24,a56,908
54.5 ;(
1 s
ill S
"5.3
.
f ft"?"
^ it H cS lis
1868 5.17 6,146 £430,368.971
1869 4.19 6,342 434.803,957
1870 4.79 6.574 444,914,228
1871.... 3.62 7,740 465.594,366 + 20,680,138
1872 3.22 8,659 482,338,317
1873.... 2.75 9,633
"-33' 513,807,284 + 31,468,967
1874. . . 2.39 9,600 543.025,761 + 29.218,477
1875. . . 2.52 9,452 -148 671.056,167 + 28,030,406
1876. . . 2.59 9,903 579,297,347
1877. . . 2.56 9,810
'-92' 570,331,389 -8,'965,958
1878 2.32 10,241 578,294,971
1879.... 2.32 11,103 578,046,297 -248,674
1880. . . 2.47 13,347 + 2,244' 576,896,901 -1,149,396
1881 2.64 14,311 585,223.890
1882 2.79 16,952 + 2,641' 601,450.977
1883 2.69 17,757 612,836.058
1884 2.21 18,998 628,510,199
1885 2.00 19,185 631,467.132
1886. . . 2.03 20,710 629,855.623 -1,611,510
1887. . . 2.02 23,121 '+2,41 i' 629,397,963 -457,660
1888 2.07 24,680 636,154.693
1889 2.13 25,119 645,158.689
1890. . . 2.28 27,561 '+'2,442* 669,358.613 +24,199.924
1891.... 2.28 30,478 + 2,917 698,407.549 + 29,048.936
1893 2.36 31.817 710,752.684
1893.... 2.43 34,554 "+2J37" 713,377,117
1894. . 2.17
. 33,334 -1,220 706,130,875 -6,146,242
1895. . 2.08
. 83,561 690,351,675 -15,879,200
'+"2*,265'
1896 2.09 35,826 709,651,556
1897. . . 2.05 34.433 -1.403 700,447.064 -9,204,492
1898.... 2.34 37,493 + 3,070 739,328.295 + 28,881,231
1899. . . 3.68 36.581 -912 758.571.709 + 29,243,414
1900. . 3.89
. 39.330 + 2.749 788.023.603 + 29,451,894
* In the United States fiscal years ending June 30th, are in-
tended. In the United Kingdom the assessment for the income
tax is made for the year ending April 5th.
....
. .
Bank Clearances
United States. Enol-and. Values (approx.) of
London Bankers' shares sold on N. Y.
New York Olearing-House. Clearing-House. Stock Exchange.
(In millions of dollars.) (Millions of pounds.) (Millions of dollars.)
Decrease* Decreases Decreases
or notable or notable or Dotable
1854. . . 5.750 iacreases. lacreasef. increases.
r-(
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APPENDIX B 339
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APPENDIX B 339
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342 CRISES AND DEPRESSIONS
Statistics of Capital created and issued, and Nomi-
nal Share Capital of Joint-Stock Companies regis-
tered, United Kingdom
In thousands of poiinds.
APPENDIX B 343
Railivay Tonnage
1871., 169,364,698
1872. 179,302,121
1873., 190,953,457 + 11,651,336
1874., 188,538,852 -2,414,605
1875., 200,069,651 + 11,530,799
1876. 205,965,064
1877. 211,980,495
1878., 206,735,856 -5,244,639
1879. 212,188,155
1880. 235,305,629 + 23,117,474
1881. 347,045,000 + 11,739,371
1883. 360,490,375 356,215,821
1883. 400,453,439 + 39,963,064 266,382,968 + 10,167,147
1884. 399.074,749 -1,378,690 259,327,886 -7,055.082
1885. 437,040,099 + 37,965,350 257,288,454 -2,039,433
1886. 482,245,354 + 45,205,155 254,626,643 -2,661,811
1887. 552,074,752 + 69,829,498 268,926,884 + 14,300,241
1888. 590,857,353 + 38,783,601 281,748,439 + 12,821,555
1889. 619,165,630 297,506,497 + 15,758,058
1890. 691,344,437 + 72,178,807 303,119,427
1891. 704,398,609 310,324,607
1892. 730,605,011 309,626,378 -698,229
1893. 757,464,480 293,341,247 -16,285,131
1894. 674,714,747 -82,749,733 324,457,633 + 31,116,386
1895. 755,799.883 + 81,085,136 334.230,991
1896. 773,868,716 356,468,009 + 22,237,018
1897. 788,385,448 874,389,246 + 17,921,237
1898. 912,973,853 + 124,588,405 378,564,285
1899. 975,789,941 + 62,816,088 413,623,025 + 35,058,740
1900. 1,071,431,919 + 95,641,978 424,929,513
..
.. . .....
.
.
12,186
9,337
10.774
130,662,899
90,879,889
138.495.673
I
Changes in Amounts of Money in the Treasury and in
General Circulation, illustrated by Increases and
Decreases
Increase Decrease
of amount in
Increase in Decrease in
Years. of amount in
circulation. circulation.
Treasury. Treasury.
Dec, 1878. $19,401,915 $10,258,373
Feb., 1879. $17,100,493 $7,042,052
May, 1879. 17,696,990 18.555.364
Feb., 1881. 22,458.006 18,848,901
Oct., 1882. 19,120.498 12,399,474
Feb., 1885. 27,450,616 6,375,838
Sept., 1887. 6,399,136 32,353,735
Sept., 1890. 32,969,841 61,887,372
Aug., 1893. 20,425,292 69,463,654
Oct., 1894. 19,630,566 17,054,440
Aug., 1895. 19,665,798 10,950,758
Dec, 1896. 17,353,201 3,778,654
Oct., 1897. 18,474,549 27,892,366
July, 1898. 34,980.125 34,237,405
Aug., 1899. 50,018,321 11,013,937
These figures show the iufluence of the Independent or Sub-
treasury System.
344
..
APPENDIX B 345
Price,
Annual
cotton crop
Years. United States. World. Decem-
of the United
ber Ist.
States.*
United
Years.
Kingdom. Germany. France.
BIBLIOGRAPHY 351
BIBLIOGRAPHY 355
BIBLIOGRAPHY 357
ARTICLES IN PERIODICALS
i
366 CRISES AND DEPRESSIONS
BIBLIOGRAPHY 367
pp. 5-40.
1870. Les dernieres crises financieres aux Etats-Unis,
et les valours americaines. T. Balch.
Journal des economistes, 3. ser. 18: 419-29.
1871. The causes of commercial crises and their reme-
dies. The causes of financial panics and
their remedies. Bankers' magazine {N.Y.),
26:357-70.
Commercial crises. B. Price. North British
review, 53:450-78.
La Banque de France et la crise monetaire.
V. Bonnet. Revue des deux mondes, 2.
per. 96:682-98.
1873. The bank charter act and the crisis of 1866.
H. Chubb. Royal statistical society. Jour-
nal. 35:171-95.
1873. The panic in the U. S. Bankers' magazine
(L.), 33:917-19.
The American crises. Bankers' magazine (L.),
33:993-96.
24
370 CRISES AND DEPRESSIONS
G. B. Baker.
effects. Contemporary re-
view, 58:680-92.
1891. The Bank act and the recent crisis. Bankers'
magazine (L.), 51: 419-27.
The panic of 1873. Bankers' magazine {N. Y.),
46:392-98.
The crisis of 1890. Economic journal,
1 : 192-96.
The Baring financial crisis. A. Crump. Eco-
nomic journal, 1 : 388-94-
De Xovember-crisis. G. M. Boissevain. De
economist, pp. 63-89.
The sources of commercial panic. B. D. Mac-
kenzie. Gentleman's magazine, new ser.,
46:154-75.
The late financial crisis. H. Clewes. North
American review, 152: 103-13.
1892. The financial outlook in 1892. W. E. Law-
son. Bankers' magazine {L.),53:44-
57.
Runs on banks, 1866 and1892. Bankers' maga-
zine (L.), 54:633-39.
The depression of 1892. Bankers' magazine
(L.), 54: 779-88.
1893. Industrial depressions: their cause and cure.
F. H. Cooke. American journal of poli-
3:597-604.
tics,
The financial problem and business situation
discussed from a practical standpoint.
G. C. Kelley. Arena, 9: 118-29.
A whirlwind of disaster; its lessons. E. Wiman.
Canadian magazine, 1:517-22.
What causes depression of trade? L. Irwell.
Chautauquan, 18:307-13.
The crisis in the United States and the repeal
of silver purchase. F. W. Taussig. Eco-
nomic joumalj 3: 733-45.
BIBLIOGRAPHY 375
379
380 CRISES AND DEPRESSIONS
relation between specie and of absorption of capital, 81;
loans, crises of 1825 to 1857, in the United States, 279, 281,
—
193 reasons for less variation 283.
in recent years, 196; decrease Cannon, James G., referred to,
of reserve, 201. 167.
Banl: of France, system of issu- Capital, abundance of, as a
ance of paper currency, 190; cause of crises, 115, 212, 2S0,
relation between specie and" 296, 303, 307; absorption of,
loans and comparison with tlie and future production, 81-84,
Bank of England, 198. 89-91, 283, 287, 297, 306;
Bank of the United States, changes from circulating to
first, 275; second, 276, 280, 283. fixed, 51; defined, 69, 71; re-
Bankruptcies. See Failures. lation to land, 70; to labour,
.Baring, Alexander, quoted, 324. 71; derangement of, 72-73;
Bateman, Sir A. E., quoted, 149. eflfect upon foreign trade,
Beaconsfleld, Lord, quoted, 267. 89-91; comparative effect of
Belgium, conditions as regards loss and mere transfer, 107;
crises, 41; maximum and min- uses of, 123; effect of de-
imum production of pig-iron, rangement or loss postponed,
172. 134.
Benttiam, Jeremy, quoted, 269. Capital created and issued, 82,
Bergfaik, P. E., quoted, 128. 342.
Bergmann, Eugen von, referred Capital, share, of Joint-stock
to, 28. companies registered in the
Bibliography, 347-377. United Kingdom, 82. 342.
Births, significant only In un- Carey, Henry C, quoted, 323.
usual periods, 179. Cash, relation between, and
Black Fridays of 1745, 1866, and loans, 199.
1869, 18. Causes of crises. See Crises,
Bland Act, effect of, 214, 215. Causes of.
Block, Maurice, quoted, 11, 327. Chicago, building operations in,
Bolles, Albert S., quoted, 272, after 1873, 269.
276. Chubb, Hammond, quoted, 9.
Bradstreet's, statistics of busi- Clark, John B., quoted, 315.
ness failures, 58, 59. Clearances. See Bank Clear-
Brazil, depression of 1873, 37. ances.
Business and credit, 101; de- Clearing-House certificates, 32,
pendence upon prices, 104; 252. See New York Clearing-
conditions of, significant of House and London.
the approach of crises, 220- C16ment, Ambroisc, quoted, 80.
223. Coal-mining in Great Britain,
93.
Calrnes, J. E., quoted, 4, 64. Collapse, term defined, 12.
Call loans, nature and effect of, Commercial, term defined, 16.
264. Commercial and Financial
Canal building, prominent fea- Chronicle, quoted, 167, 337.
ture preceding several crises, Commodities, requisites of ex-
44, 279, 281, 283; as a form change, 77; tendency to sup-
INDEX 381
25
386 CRISES AND DEPRESSIONS
228; fluctuations more notice- Lawson, James A., quoted, 322.
able in recent cycles, 229; Leroy-Beaulieu, Paul, quoted or
upward movement shorter referred to, 124, 208, 315.
than downward, 229; rapid Levi. Leone, quoted, 25, 317.
rise continues for a short Lincoln, Abraham, quoted, 249-
time oul}-, 230; rise in 1899 250.
significant of more general Liquor trafiJc, effect of, 132.
use, 231; prices of anthracite Loans, demand for, prior to
and Bessemer pig, 230; pres- crises, significance of in-
52;
ent course of, as compared crease of, 185, 200; increasing
with that preceding depres- proportion to capital and sur-
sions, 297; production and plus of national banks, 265;
consumption of pig-iron In the foreign, in the United States,
United States, United Kiag- 211, 280, 292, 293, 301. See
dom, and Germany, 1868 to Specie and Loans.
1900, 340; prices in the Uni- Lockyer, Xorman, quoted, 28.
ted States, 1868 to 1900, 341. London, rates of interest In cer-
tain years, 113; Bankers'
Jevons, W. S., quoted, 26, 65, Clearing-House, 167, 168, 337.
267, 313. London Economist, quoted, 50.
Juglar, Clement, quoted, 2, 32, Loss, direct or indirect, a cause
186, 198, 309, 326. of crises, 72, 74. 76, 79: Influ-
ence of, recognised, 79; less
Knox, J. J., referred to, 251. serious In causing crises than
formerly, 80.
Labour, employment of, 48, 52; Luxuries, effect of importations
conditions in 1879, 1885, and of, 206.
1894, 61; .defined, 69; maxi-
mum and minimum, 137, 141; Macaulay, Thomas B., quoted,
before a period of depression, 42-44.
138; lnsufl3clency of statistics, Machinery, labour-saving, infla-
138; comparative value of sta- ence of, 92, 116.
tistics, 142; figures complied Macpherson, David, quoted, 312.
by George H. Wood, 138: Manufactures, growth In, more
employment In the United rapid than In agriculture, 74;
Kingdom, 139, 329; In the partial growth In, preceding
United States, 142, 276; in 1814.275; growth of. 18S0 to
Pennsylvania, 142, in 330; 1890, and after 1890, 294, 295.
Massachusetts, 143. In 330; Manufacturing communities, ef-
New York, 330; in Wisconsin. fect of food scarcity, 76.
331; course of, relative to Marriages, significance of sta-
prices and production, 183. tistics of, 180; statistical
Land, defined, 69, 70. table, 346.
I<angton, William, quoted or Marshall, Matthew, quoted, 320.
referred to, 34, 35. Martlneau, Harriet, quoted, 45.
Lnveleye, Emile de, quoted, 11. Massachusetts, statistics of em-
Laveleye, Georges de, quoted, ployment of labour In, 143,
118. 144, 330, 331.
INDEX 387
INDEX 391
THE END
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