Their hoarding it, naturally made conditions all the worse, through very seriously increasing the stringency of the money market. So great became the scarcity of loanable funds that from the 23d to the 31st of October, call loans were made daily on the New York Stock Exchange at rates averaging 50 per cent per annum, with some ranging from 75 to 100 per cent. Such hoarding, on a large scale, is fraught with great danger, as it involves a sudden contraction of the circulation and drain upon bank reserves. In this instance it caused renewed panic and fresh breaks in stocks, and it alone compelled the New York Bank Clearing House members to vote unanimously to issue Clearing House Certificates—nothing else would have offset the run on deposit institutions.
It would be very far from President Roosevelt’s wish to say or do anything that would cause people to hoard money instead of employing it in customary channels; for hoarding is a public injury and contrary to good citizenship. Furthermore, it is entirely un-American. But the public mind has been wrought up to such a pitch of distrust and semi-hysteria, through the disclosures of corporate dishonesty, and other disturbing causes, that a false, or at least exaggerated, impression exists among many that all corporations are, or may be, in the same boat. This want of confidence in the situation is very largely what has caused the heavy and prolonged liquidation in stocks, and led to the bank and trust company runs and great monetary and industrial disturbance we have witnessed in this great and far-reaching crisis.
Mr. Roosevelt will, therefore, see, now that he is becoming more and more cognizant of the situation, that what the public, and particularly the investing class, needs in this period of stress and storm and anxiety, is to be calmed and reassured and made aware that there is a silver lining to the cloud, and no good reason for their loss of confidence; for the country is still as great and grand, and prolific in its resources, as ever, with its future no less promising and magnificent than it was before this crisis darkened the sky.
It is known that he takes this view of the situation, and is earnestly co-operating with the Secretary of the Treasury to ease the money market and restore confidence.
CHAPTER LXXXII.
OUR GREAT AMERICAN PANICS FROM FIRST TO LAST.
The panic of 1907 naturally revived public interest in all our previous panics, and therefore a brief historical review of these is timely. The small one that followed the throwing overboard of the historic tea in Boston harbor in George the Third’s time, and which was the prelude to the War of Independence—the victorious struggle of the old Thirteen Colonies to throw off the British yoke—was of no importance, owing to the country’s scanty trade and banking development, and the corresponding scarcity of credits. It was a tempest in a teapot, this sequel to the Boston tea party.
The panic of 1812 was the first of much magnitude in the history of the United States, and it resulted from over-trading and undue expansion in all directions, but was precipitated by our war with England in that year. The banking capital of the country was then only seventy millions of dollars, yet more than ninety banks failed in the run upon their deposits that ensued, and the Government found great difficulty in raising a war loan. Meanwhile, trade and manufactures, which had been very active and prosperous before the declaration of war, suddenly became almost paralyzed.
The change from undue inflation to the undue contraction born of fear was disastrous in its wholesale destruction of market values and credits. But the Government war expenditures, after it had succeeded in disposing of its securities, gradually stimulated recovery from the worst effects of the panic, and industries that had been suspended were resumed, thus re-employing labor that had been left idle.
Not much has been recorded of the panic of 1823, which caused trade depression till 1825, so it was evidently much milder and less disastrous than that of 1812. It was another instance of the reaction that follows over-trading and an over-extension of credits, without any war or other great event to precipitate it.