and timber fall steadily, while the stock market
fluctuates wildly. Many financiers, including August
Belmont, J.P. Morgan and Henry Villard, warn Cleveland
that a panic is nearing, and add their pressure to get a
repeal of the Sherman Silver Purchase Act of 1890, which
they blame for the crisis.
The chief fear among Eastern financiers and businessmen
is that in a panic the United States could easily be
forced off the gold standard. Early in May the panic
begins. More railroads go broke; many of the great
financial trusts begin to collapse; European banks begin
selling their American stocks and bonds, and a huge run
on banks ensues, until more than 500 Banks have failed.
A vigorous battle begins, with the goal of repealing the
Sherman Act. Forces for and against repeal are lined up
geographically: the West and South favor retention of
the act, and the East favors immediate repeal. Despite
the repeal of the act in October, the deepening
depression is becoming worldwide, and is wiping out
prosperity in all sections of the economy.
1The Financial World
The events of the past week will pass into Wall Street
history as the "industrial panic." As a panic it was the
worst since 1873, and the full force of it fell on the
industrial stocks. It fell upon them because the
speculation was concentrated in that group, and it did
not touch the railroad shares with any severity because
so little has been doing in them as compared with the
industrials. One railroad stock there had been an
inflated speculation in, and it suffered as much as the
industrials, Manhattan. The time of extreme stress
lasted over three days. It reached its most acute stage
on Friday morning, when for nearly two hours it seemed
as if the whole Street would go down in a crash of
bankruptcy similar to 1873.
By noon the worst was over; by the afternoon there had
been a rebound of prices almost as great as the morning
fall: and three o'clock struck the excited throngs of
brokers on the floor of the Exchange gave vent to a wild
cheer, thankful that the trying day was over. Yesterday
the market was feverish and from feverishness it is
likely to quiet down into a weak dullness, like a
patient who has been exhausted by violent spasms. It is
unnecessary to note here the extreme declines, or the
rapid recoveries in prices. They have already been set
forth minutely and at length. But it may be said that to
see the like, one must go back twenty years: and in
those days it was all railroad stocks. There were no
others to speculate in.
The fact that they were railroad stocks, and not
industrials, did not secure them against the effects of
excessive speculation; neither because this panic, of
1893, has taken place in the industrials, does it follow
that industrial stocks are of less value than railroad
stocks. When a period of financial or commercial stress
comes upon us, whatever speculation has been the most
active in suffers the most in the general collapse.
This is equally true of securities or commodities, or
of any group of securities. We have seen (not to go back
to the old days of gold speculation) some terrible days
in Wall Street when the trunk line stocks were the storm
centers, when the Gould securities were, and Atchison
and Union Pacific, and notably when the group of stocks
known as the Velars wrought wreck and ruin. It was these
latter which gave Wall Street its last bad time previous
to the past week. Then there were no industrials, for
those stocks were at the time few in number and but
little traded in. They, therefore, were not responsible.
This time they are. Why? A few figures will show. The
first of the industrial group which the speculative
public took a fancy to was American Refineries stock,
called, for short, Sugar. It took the popular fancy,
because the company made large profits and paid big
dividends. Speculation in it became a craze, and then
followed in rapid succession the formation of other
large companies and the listing of their stocks on the
Exchange. Since first Sugar became prominent in public
speculation, we have had listed the securities of nine
or ten companies with capital stocks varying from
$35,000,000 to $8,000,000.
Here is a brief enumeration of all, the capital given
being the combined common and preferred stocks of each:
Sugar, $73,000,000; Cotton Oil, (reorganized,)
$30,000,000; Distilling, $35,000,000; Tobacco,
$29,000,000; General Electric, $34,000,000; Cordage,
$25,000,000; Lead, $30,000,000; Linseed Oil,
$18,000,000; Rubber, $26,000,000; Starch, $8,000,000.
The total foots up nearly $310,000,000, all the creation
of a few years. In addition these companies have bonds
to the amount of about $35,000,000. Here, then, is a
mass of $310,000,000 of stocks, of recent creation, in
which public speculation has been extremely active, so
much so as to leave the old railroad favorites of
speculation quite in the shade, but which have not as
yet found a settled standing among the financial
community.
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