334 POPULAR SCIENCE MONTHLY. 



Suppose a similar transaction to be undergone with each of 

 three sets of notes given by the coal company to the railroad com- 

 pany, each set originally amounting to forty thousand dollars. 

 Instead of the original indebtedness of one hundred and twenty 

 thousand dollars of the coal company to the railroad company, 

 there is created by the exchange of notes for half that amount a 

 joint liability of the coal company and the railroad company for 

 one hundred and twenty thousand dollars. The coal has all been 

 sold, but how is it with the coal company ? How is it with the 

 railroad company ? And how is it with the banks that have dis- 

 counted their notes ? 



The coal company continues business, giving new notes to coal 

 producers for coal purchased, and new notes to the railroad com- 

 pany for freight. It is responsible not only for these notes, but 

 for the previously issued notes. Because of this burden, it is 

 obliged to increase its shipments of coal, and therefore to extend 

 its markets. To do this it is obliged to undersell other coal-ship- 

 ping companies, and therefore to dispose of coal at prices that do 

 not yield enough to pay the notes given coal producers and the 

 notes given the railroad company. The coal producers must be 

 paid ; but such remaining funds as it can obtain can not pay the 

 increasing mass of notes given the railroad company, which ma- 

 ture at shorter and shorter intervals. There is more juggling of 

 notes through banks, and the mutual liability of the coal com- 

 pany and the railroad company rolls up, like a big snowball 

 pushed by schoolboys. The coal company must stop business or 

 its shipments must increase. To stop is to acknowledge its bank- 

 ruptcy. To increase shipments necessitates still further expan- 

 sion of markets. It builds docks at the places of market, and 

 organizes another company to operate them. 



Although the stock of this receiving company is controlled by 

 the same men that control the stock of the shipping company, the 

 shipping company sells coal to it, and takes notes of the receiving 

 company in payment therefor. These notes the shipping com- 

 pany discounts at banks. Notes have therefore been given by the 

 shipping company to the coal producers for coal, and notes for 

 the same coal have been given the shipping company by the re- 

 ceiving company. But the shipping company and the receiving 

 company are controlled by the same men, and neither have work- 

 ing capital. The notes can not be met. There is more juggling 

 through the banks, and the snowball grows. The shipping com- 

 pany must sell coal ; the receiving company must sell coal. They 

 cut prices ; their competitors cut prices to retain their trade. The 

 cutting continues until the wages of the miners who dig coal are 

 cut; they are cut and cut. Coal is piled up on the docks. A 

 great panic sweeps over the country. The shutting down of mills 



