Imágenes de páginas
PDF
EPUB

when stocks were falling 10 points in five minutes. There were many cases that day in which wealthy commission houses saw a large percentage of their capital disappear in customers' accounts between 11 and 11.30. The rapidity of the recovery was all that saved multitudes of customers and many commission houses. Loans, small and large, were unsound and sound again before lenders had time to sell even if they had been disposed to do so.

There were, however, many cases where stocks were sold entailing large losses and the location of these losses is in a number of cases still in legal controversy, with the probability that the decision will turn more or less upon the circumstances peculiar to each case. The 9th of May was a very extraordinary day and allowance must be made for its unusual character. Stock Exchange rules based on the occurrences of the 9th of May would prohibit doing business under ordinary conditions, but such days come and on this account brokers and customers should make provision for the unexpected by a clear understanding as to what shall be done in emergencies.

It is often difficult to say what shall be done when a loss has occurred through unusual conditions and under circumstances which made the action taken largely discretionary. This fact in its application to the May panic has led brokers and customers in cases to adopt a policy of trying to divide the loss equitably and with due reference to the facts involved in that particular case. A jury familiar with Stock Exchange business would be very likely to render a decision along somewhat similar lines.

CHAPTER XIX.

* THE RECURRENCE OF CRISES.

A correspondent writes: "Is it true that commercial or stock exchange panics are approximately periodic in their occurrence ?"

The facts point distinctly in that direction, and there is reason back of the facts. The reason is that the business community has a tendency to go from one extreme to the other. As a whole, it is either contracting business under a belief that prices will be lower or expanding under a belief that prices will be higher. It appears to take ordinarily five or six years for public confidence to go from the point of too little hope to the point of too much confidence and then five or six years more to get back to the condition of hopelessness.

This ten-year movement in England is given in detail by Professor Jevons in his attempt to show that sun spots have some bearing upon commercial affairs. Without going into the matter of sun spots and their bearing upon crops, commerce, or states of minds, it may be assumed that Professor Jevons has stated correctly the periods of depression as they have occurred in England during the last two centuries.

The dates given by him as the years in which commercial crises have occurred follow: 1701, 1711, 1712, 1731-2,

*Dow's Theory.

1742, 1752, 1763, 1772-3, 1783, 1793, 1804-5, 1815, 1825, 1836, 1847, 1857, 1866 and 1878.

This makes a very good showing for the ten-year theory, and it is supported to a considerable extent by what has occurred in this country during the past century.

The first crisis in the United States during the nine.. teenth century came in 1814, and was precipitated by the capture of Washington by the British on the 24th of August in that year. The Philadelphia and New York banks suspended payments, and for a time the crisis was acuté. The difficulties leading up to this period were the great falling off in foreign trade caused by the embargo and nonintercourse acts of 1808, the excess of public expenditures over public receipts, and the creation of a large number of state banks taking the place of the old United States bank. Many of these state banks lacked capital and issued currency without sufficient security.

There was a near approach to a crisis in 1819 as the result of a tremendous contraction of bank circulation. The previous increases of bank issues had promoted speculation, the contraction caused a serious fall in the prices of commodities and real estate. This, however, was purely a money panic as far as its causes were concerned.

The European crisis in 1825 caused a diminished demand for American products and led to lower prices and some money stringency in 1826. The situation, however, did not become very serious and was more in the nature of an interruption to progress than a reversal of conditions.

The year 1837 brought a great commercial panic, for

which there was abundant cause.

There had been rapid

industrial and commercial growth, with a multitude of enterprises established ahead of the time. Crops were deficient, and breadstuffs were imported. The refusal of the government to extend the charter of the United States Bank had caused a radical change in the banking business of the country, while the withdrawal of public deposits and their lodgment with state banks had given the foundation for abnormal speculation.

The panic in Europe in 1847 exerted but little influence in this country, although there was a serious loss in specie, and the Mexican war had some effect in checking enterprises. These effects, however, were neutralized somewhat by large exports of breadstuffs and later by the discovery of gold in 1848-9.

There was a panic of the first magnitude in 1857, following the failure of the Ohio Life Insurance & Trust Company in August. This panic came unexpectedly, although prices had been falling for some months. There had been very large railroad building, and the proportion of specie held by banks was very small in proportion to their loans and deposits. One of the features of this period was the great number of failures. The banks generally suspended payments in October.

The London panic in 1866 precipitated by the failure of Overend, Guerney & Co., was followed by heavy fall in prices in the Stock Exchange here. In April there had been a corner in Michigan Southern and rampant speculation generally, from which the relapse was rather more than normal.

The panic of September, 1873, was a commercial as well as a Stock Exchange panic. It was the outcome of an enormous conversion of floating into fixed capital. Business had been expanded on an enormous scale, and the supply of money became insufficient for the demands made upon it. Credit collapsed and the depression was ex

tremely serious.

The year 1884 brought a Stock Exchange smash but not a commercial crisis. The failure of the Marine Bank, Metropolitan Bank and Grant & Ward in May was accompanied by a large fall in prices and a general check which was felt throughout the year. The Trunk Line war, which had lasted for several years, was one of the factors in this period.

The panic of 1893 was the outcome of a number of causes-uncertainty in regard to the currency situation, the withdrawal of foreign investments and the fear of radical tariff legislation. The anxiety in regard to the maintenance of the gold standard was undoubtedly the chief factor, as it bore upon many others.

Judging by the past and by the developments of the last six years, it is not unreasonable to suppose that we may get at least a stock exchange flurry in the next few years. This decade seems to be the one for the small crisis instead of the large one-a type of 1884 rather than a recurrence of 1837, 1873 or 1893.

« AnteriorContinuar »