22 Minnie TJiroop England 



clearings on stock exchange settlement days. On the average, 

 trade bill clearings reach their maximum 6 months before the 

 crisis year, and speculation clearings not until 9 months later. 

 This shows in a striking manner that before a crisis, credit for 

 speculative purposes must form a proportionately larger part of 

 the total credit in use than at other times. 



That this point may be brought out still more clearly, the pro- 

 portion which trade and speculation clearings respectively form 

 of the total clearings is given in chart II. Naturally when the 

 proportion of stock exchange clearings increases, that of trade 

 bills falls off. As has been said, it is significant that trade bill 

 clearings are larger in proportion to the total clearings during 

 the bad years than in the years of "boom" times when the stock 

 exchange clearings mount up enormously in proportion to the 

 total clearings. Thus in the cycle from 1873 to 1883 trade bills 

 reached their highest proportion in 1877, the year the stock ex- 

 change clearings were lowest ; the highest point of stock exchjlnge 

 clearings was in 1881, the lowest point of trade bills in 1882. 

 During the next cycle, 1883-90, stock exchange clearings formed 

 the largest proportion of the total in 1886, and trade bills the 

 smallest proportion the same year. In the third cycle, 1890-1900, 

 the high point for stock exchange clearings was in 1895, the year 

 of the lowest point in trade bills. 



The gist of the matter is this : when loan credit is being used 

 for mere speculative purposes, i. e. for professional buying and 

 selling, so much purchasing power is withheld from the goods 

 market. This is what takes place before each crisis when the 

 gambling spirit comes more and more to the front. In this way 

 the loans of the banks may continually increase, while the actual 

 amount of loan credit ofifered for goods in the market is decreas- 

 ing. It is well known that the loans of the banks in New York 

 City are greatly expanded during prosperous times because of 



1873, stock exchange clearings reached the lowest point in 1877 ; after the 

 crisis of 1883, stock exchange clearings touched their lowest point in 1894 

 and trade bill clearings in 1892. although the latter showed no permanent 

 improvement until 1896 — the same year that stock exchange clearings 

 showed a marked increase. We may then say that there is a tendency for 

 stock exchange clearings to begin to increase before trade bill clearings. 

 This lends support to the order of rise- of prices as shown in table VIII. 



62 



