It would be better for our future if the liquidation of the last panic had been more radical in some cases, notably in land speculation. In this liquidation has not been thorough, and, as far as these cases influence the market, it has remained for a long time unsound, and even now is not fully recovered.
The past twelve months have witnessed a continued settling of old accounts, and the undertaking of new business, in a limited way, despite a somewhat uneasy feeling about silver and the now accomplished Presidential election. But the fact that an analysis of the bank returns to the Comptroller of the Treasury shows that available resources (capital, deposits, surplus, and undivided profits), as compared with demands (loans and discounts), are good and growing, considered in regard to the other signs indicating prosperity (see Introduction), justifies the prediction of the steady development of a prosperous period.
PANIC OF 1893-4.—It was early in 1893 that I wrote the last page of A Brief History of Panics in the United States. Two of the three checks to business prosperity to which I then referred, virtually occurred very soon. The determined resolve of the "free silver" members of Congress to continue the heavy monthly utterance of silver dollars redeemable at par in gold kept many business men most disquieted. They saw that the free gold in the Treasury was sinking greatly and steadily. They knew, also, that there was semi-official assertion of the right of the United States to redeem its silver dollars in Government notes. The Free-Coinage Bill had been passed by the Senate in July. The House defeated it. The legal fights against certain great railroad combinations and frequent labor strikes put additional burdens on the market.
In the United States and abroad the doubt of our willingness and ability to redeem our obligations at par in gold on demand grew most rapidly. Accordingly, exports of gold increased and hoarding of it began at home. To all this was added the expectation of a severe downward revision of our tariff laws if the Democratic Party should succeed, as was expected, in the Presidential election in November.
Business was scared and slowing down and, therefore, using less and less of its working capital. The false ease of increasing loanable funds in the custody of the banks lulled many into a specious confidence. But gold was exported in increasing quantities. Should the Government issue bonds in exchange for gold for the purposes of redemption? The Philadelphia & Reading receivership occurred. Easy money led to many consolidations of transportation properties and to very many large commitments. Money tightened. In March, it loaned at 60% per annum. Would President Cleveland call an extra session of Congress in March to repeal the silver law and to issue bonds in order to replenish the free gold in the Treasury? The Stock Market showed a great decline in quotations.
In April, 1894, Secretary of the Treasury Jno. G. Carlisle forbade the further issuance of gold certificates for gold deposited in the Treasury under Act of July 12, 1882, whenever the gold in the Treasury "reserved for the redemption of United States notes falls below $100,000,000." This further alarmed the business world, which was not reassured when on the 20th Carlisle announced that the Treasury would pay gold for all Treasury notes so long as he had "gold lawfully available for that purpose." President Cleveland, that stalwart man, uttered this high and firm pronouncement on April 24th: "The President and his Cabinet are absolutely harmonious in the determination to exercise every power conferred upon them to maintain the public credit, to keep the public faith, and to preserve the parity between gold and silver and between all financial obligations of the Government." Very good, thought business, but how and when will you act accordingly?
Lack of business confidence increased greatly. Money rates advanced. Security values fell; imports greatly exceeded exports. Silver certificates were at 83. Something was about to snap in the general business machine. National Cordage broke from 57 to 15-1/2 on May 1st, receivers were appointed, and the panic of 1894 had declared itself and grew worse on the 4th and 5th. Call money rose to 40%. June witnessed great distress in business circles. On the 27th the Government of India stopped the coinage of silver for individuals and decreed the exchange value of the rupee at 16 pence. This lowered the exchange value of our silver bullion certificates to 62. President Cleveland helped matters somewhat by announcing that Congress would be convened early in September. In early July the panic increased somewhat despite the President's call for Congress to assemble on August 7th. Time loans were hardly obtainable. Conditions in August grew worse. Business was almost at a standstill, and failures were very frequent. From August 7th until the affirmative action on the 28th by the House of Representatives as to the repeal of the Silver Act, there was great concern.
Then hope revived; but hoarding of currency increased. Great banking interests in New York helped the situation mightily by importing over $40,000,000 gold. September was an anxious but more hopeful month as the prompt adoption by the Senate of the Free-Silver Bill was anticipated. However, the weary debate dragged on in the Senate. President Cleveland demanded the unconditional adoption of the House measure. Certain compromisers, led by Senator Arthur P. German of Maryland, suggested that during each of the following fifteen months the Government purchase the minimum amount of 1,000,000 ounces of silver, and then stop all such purchases against which silver certificates had to be issued. This plan for speedy action President Cleveland and the Secretary of the Treasury opposed as worthless unless concurrently there was an issue of $100,000,000 of Government bonds to replenish the gold in the Treasury. They asserted that new legislation must be had before any such bonds could be validated. So the business world continued to suffer.
Let me here state the fact, that without any fresh authorization, Secretary of the Treasury Carlisle did in January, 1895, issue $50,000,000 of Government bonds to replenish the free gold in the Treasury, and that an injunction suit against their sale was dissolved by Judge Cox at Washington on the 30th of that month. Gorman had been right. The credit of the country would not have suffered by the additional issuance of some final $60,000,000 (?) of silver certificates if the gold in the Treasury had concurrently been upbuilt to the extent of $50,000,000 to $100,000,000; but an immensity of business loss would have been averted.
But to resume the orderly recital of those times. October dragged along its weary length, while the Senate debated and business withered. Finally, on the 30th, the Senate accepted unconditional repeal of the Free-Silver Act. On November 1st, it became a law. The fear of repudiation thus escaped, though with fearful loss, the country plunged into all the unsettlement caused by a too sudden and too extensive change in the tariff. These changes were announced by the House Committee on December 27th.