CRISES AND PANICS DEFINED. 417 



banks, but is not quite so good for the depositor. No matter 

 how stringent the money market, or how great the reduction in 

 the value of real estate which forms the exclusive security for 

 the depositor s money the bank is not compelled to sacrifice 

 its property to pay the depositor, who has to wait till real estate 

 rises. So long as these savings banks continue to pay liberal 

 dividends, they can swim along smoothly; but suppose the de 

 mand for money fails, and interest drops to three per cent, per 

 annum what then? It often happens that instead of banks 

 being able to furnish money when there is a sudden panic, they 

 have to call in their loans, thus not unfrequently crippling the 

 most important business interest. The farmers often hear of 

 &quot;crises&quot; and panics in the money market, without a very 

 definite idea of what they are, or how they are created. 



Again we turn to Mr. Bonamy Price, who will not only give 

 us the needed explanation, but will tell us how the banking 

 business is managed in our chief market, Great Britain : 



What are crises? Great disturbances of the money market; diffi 

 culty of obtaining advances; high rates of discount; great firms in 

 danger; who is sound and who is unsound unknown; whose money 

 is safe; whose is unsafe a matter of great uncertainty. Just as it 

 was seen in England in 1866, it is a time when those who are the 

 strongest are exposed to the most formidable dangers. There 

 was probably no institution in London more exposed to peril in 

 1866 then the great London and Westminster Bank, the largest in 

 England and one of the ablest conducted. The cause of the crisis 

 was simply alarm; simply that those vast bodies of people who had 

 intrusted funds to this institution got into what may be called a 

 panic, to use a common word. In that state of wild alarm, all 

 rushed for their money, everybody catching the contagion, which 

 became more catching because it was unreasonable. There is noth 

 ing more stirring than alarm which has no definite cause, which 

 does not know what it goes upon, which, therefore, suspects any 

 cause of mischief because it has none that it can put its finger upon. 

 The fathers of the city, the great bankers and wise men, sat in 

 counsel all night and asked each other What is the cure ? &quot; I be 

 lieve the cause of these panics can be stated, and when you know 

 the danger and the cause likely to disturb you can take proper pre 

 cautions. Now, it is not the magnitude of the loss alone which con 

 stitutes a crisis. Destruction alone is not the cause. A bad harvest 

 in England is a loss of 30,000,000; that is, in such a case you have 

 got to buy or procure 30,000,000 worth of corn twice over. You 

 have sown, you have tilled, you have put the manure on the land, 

 but the August rain conies in, the corn is not matured, and you 

 have got to live, so you must buy in from the stranger. But that 

 produces no panic, no financial agony. It is a dead loss; a calam 

 ity, something bigger than a calamity in the money market. But 



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