418 BAKES AND MONEY. 



it does not generate a financial storm. Then a bad war. &quot;War 

 is the most destructive thing in the world. It is a deliberate 

 work of men to destroy; they destroy food, clothing, iron, ships. 

 Nothing destroys like war. It is the most uneconomical thing 

 on earth. But a war does not necessarily produce a panic. 

 It is this terrifying fear which we know accompanies a hur 

 ricane in London. Very well. Again, take a cotton famine in 

 England. It was a terrific loss of money. Wealth in those districts 

 was paralyzed because America had no cotton. The poor men 

 had no wages. All that vast apparatus of capital was earning noth 

 ing; consuming, buying, but not selling. But there was no panic. 

 That year is not enumerated as one of storm. Therefore we don t 

 get, by mere destruction alone, into a reign of panic. Then again, 

 another curious thing. The typhoon has this character; that it 

 whips up the water terrifically in a particular spot, but the neigh 

 boring waters are dead calm. At the time in 66, in 47, and other 

 times, when money charges were at twenty, when people could not 

 get advances on the best security, when the bank had to say, &quot; I 

 can t,&quot; all this time the market for advancing money on agriculture, 

 to squires and county gentlemen, was so that they could get all they 

 wanted at four per cent. That is absolutely historical. Therefore 

 these convulsions have something very peculiar about them. The 

 real fury of the storm, in its national importance in distinction to in 

 dividuals, is its bearing upon banks, upon discounts. It is not so 

 much on rate per cent. , though that is bad enough, but it is the im 

 possibility of discount which constitutes the terrific agitation and 

 the loss to the nation. Modern trade, as you are well aware, is 

 carried on upon a very peculiar method. I have no doubt it is in 

 New York as in England. The characteristic is that it is carried on 

 with other people s capital, not the traders . The traders are not 

 the people who provide the capital for their business. Some they 

 do provide; the bulk certainly not. The distinctive peculiarity of 

 modern trade is that it is carried on by bills, and bills have to be 

 discounted, because a bill means, &quot; I cannot pay to-day, but I will 

 pay this at three months.&quot; The goods are given, the sale is com 

 pleted, and the man who sells holds in his hand a piece of paper 

 which says that after three months he will have his money, but not 

 before. The man so circumstanced wants to go on with his busi 

 ness, which he cannot do if he has to wait three months for his 

 funds to come in. How are his working-men to be paid or his ship 

 to be sent away? That is done by discounting bills at banks, and 

 the national strain of the crisis is its action upon the general trade 

 of the nation by acting upon the discount market. This discount 

 ing takes place in banks, and, therefore, we now see a locality of 

 the storm. It is somehow or other connected with banks. 



Banks are peculiar institutions. I know a great many of the emi 

 nent bankers of England well. I have asked directors of banks, 

 the governor of the Bank of England, and personages of that kind 

 a very simple question; but I never met only one man, dead and 

 gone now, who could answer me this question: What is a bank? 

 and what does a bank deal in? That lies at the root of the question 

 of crises. I have only met one, Mr. Potter, the founder of the great 

 London Joint Stock Company, who could answer that question. I 



