Financial loss

“ This, the greatest economic catastrophe that the modern human structure has known, immeasurably more calamitous than any other that ever occurred, was borne by the financial system of the United States almost without a tremor. ”

“ Now, gentlemen, if we were to have a trial, the real amount of the loss would become known; and although we ourselves may feel confident that we can weather the storm, and can in time pull round, it is by no means certain that the public will take the same view. The run which has now been averted might then take place, and the bank be compelled to shut its doors. And you know, gentlemen, that when you come to a forced realization of effects, how far the sum realized falls short of the value placed upon it, and how heavy the calls upon the shareholders to make up the deficiency! ”

“ I desire to go on record right here in declaring that all financial institutions which in any way are engaged in taking from the people the money that is their surplus earnings or their capital, for the ostensible purpose of safeguarding it, or putting it in use for them, or exchanging it for stocks, bonds, policies, or other paper evidences of worth, are a part of the machinery for the plundering of the people. ”

“ Relatively, the loss will fall heaviest on those who are too poor to get in debt, who work for wages or a salary. Those of the bond-holders to whom the now familiar term of "money-sharks" will in any degree apply will be found quite competent to take care of themselves. ”

“ But while under the individual system everybody charged for the risk of loss, the losses in reality fell on only a part, and so the rest got something for nothing. When insurance companies were organized to distribute part of the risks, making those who did not lose, contribute to make up the loss of those who did, the risks of all were diminished, and the profit and interest charges on that account reduced. ”

“ And to very many persons engaged in business for themselves, this is a time of great anxiety, for one can hardly tell exactly whether he is getting on favorably until his account books are posted and the balances are struck. If one’s capital is small and the result of the year’s business is a loss, that means a reduction of capital, and raises the question whether this can go on for some years without failure and bankruptcy. ”

“ As used in economics, the term, however, implies a sudden change of business conditions for the worse, a collapse of prosperity. What precedes has not the appearance of disease, but rather that of exuberant health. Crises in economics may be distinguished as industrial, speculative, and financial, according as one or another influence seems to be more potent, but all are essentially financial. The change that occurs always is connected in some way with the use of money and credit. ”

“ So the leaven of the law works its way through all society. The payments cannot be made out of these reduced means, the loss of the credit follows the loss of the money; the means of exchange, employment, and consumption are destroyed, and the world looks with amazement on the consummation of your work—the wealthiest nation in the world withering up under the blight of a universal insolvency; an abundance of all things beyond compute, and a misery and want beyond relief. ”

“ Some types of undertakings are more subject to the effects of wasting assets than others. Concerns dealing in investments, insurance of all kinds, brokerage and commission, manufacturers’ agents, banking and financial houses, professional firms, and the like, only a small portion of whose capital is tied up in fixed assets, are comparatively unaffected by the charge for depreciation. ”

“ In the course of my task I shall describe such parts of the general financial structure as will place my readers, especially those unfamiliar with its more complicated conditions, in a mental state to comprehend the methods by which the savings they think are safely guarded in the banks, trust and insurance companies, are so manipulated by the votaries of frenzied finance as to be in constant jeopardy. ”

“ When A and B find their £1000 bill about to fall due, and the expected proceeds of their speculation not forthcoming—when they find, as they often do, either that the investment has resulted in a loss instead of a gain; or that the time for realizing their hoped-for profits, has not yet come; or that the profits, if there are any, do not cover the extravagances of living which, in the meantime, they have sanguinely indulged in—when, in short, they find that the bill cannot be taken up; they resort to the expedient of manufacturing other bills with which to liquidate the first. ”

“ After all, such figures give us no adequate measure for losses of this kind. "Among the experiences of working people none is more demoralizing and few are more cruel than loss of savings through failure of banks or absconding of individuals intrusted with funds." To such people there is cold comfort in the assurance that the average loss of savings bank depositors over a long period of years is but a fraction of a mill on a dollar. ”

“ I was now too proud to work as a mere journeyman, and I commenced business for myself; but I began without capital, and a gourd of sorrow hung over me, while I stood upon sand. I had some credit; but, as my bills became payable, I ever found I had put off, till the very day they became due, the means of liquidating them; then had I to run and borrow five pounds from one, and five shillings from another, urged by despair, from a hundred quarters. My creditors grew clamorous; my wife upbraided me; I flew to the bottle—to the bottle! ”

“ When the value of the unit is diminished, creditors lose; when it is augmented, debtors lose. We may therefore safely conclude, that every diminution of the metals contained in the money-unit, must imply a loss to all creditors; and that in proportion to that loss, those who are debtors must gain. ”

“ What are called financial crises are merely an extension of this critical condition to the larger business community. Financial panics which sometimes follow upon financial crises are a precipitate of this critical condition. ”

“ You owe God all your love, all your heart, will, strength, service. What an awful score of unpaid debts, with accumulated interest, there stands against each of our names! Think of some bankrupt sitting in his counting-house with a balance-sheet before him that shows his hopeless insolvency. ”

“ To say nothing of the graver matters which figure in a banker's book, and make, in these days of pounds, shillings, and pence, so large a part of the domestic tragedy of life—putting wholly aside all the grander transitions of property in house and land, of money on mortgage, and money in the funds— (and yet I might put in my claim to no trifling amount of ill luck in that way also, if I had a mind to try my hand at a dismal story) —counting for nought all weightier grievances, there is not a lady within twenty miles who can produce so large a list of small losses as my unfortunate self. ”

“ The influence of these days are of a quality and tendency calculated to excite in the minds of persons born on them, an extraordinary itch for speculation, to make changes in their affairs, commence new undertakings of various kinds, but all of them will tend nearly to one point, loss of property and pecuniary embarrassments. Such persons who embark their capital on credit in new concerns or engagements, will be likely to receive checks or interruptions to the progress of their schemes or undertakings. ”

“ For, as to the injury, I have already remarked, that a very trivial annual loss—one life, perhaps, upon ten millions, and that life often as little practically valuable as any amongst us—that pays our fine or ransom in that account. ”

“ Then not only has the nation a smaller dead loss, but the owner also has a smaller annual expenditure for his combined contributions toward the losses, the management of his insurance, and the protective measures. ”

“ Any partner can demand that all the assets be sold and that the proceeds be applied in satisfaction of the interests concerned.
Sharing Losses.—In the case of insolvency, the partners are compelled to share the losses in the profit and loss ratio, not in capital ratio, and these losses are chargeable against their capital accounts. If the capital account of any of the partners is not large enough to satisfy his share in the losses, a deficit in that partner’s interest results, which is represented by the debit balance in his capital account. ”

“ Quite so, count, but money is dear just now, and it does not seem right that yours should remain uuproductive. A financial crisis threatens to extend over the whole country. The position is not an easy one in the interior. ”

“ At this juncture any accident to our venture might affect the whole American business fabric, and no one realized the danger of the situation better than Mr. Rogers and myself. During the anxious days that were passing we canvassed the dire possibilities that the situation contained, just as children tell each other ghost stories when left alone in the darkness of the night. The great catastrophes of finance, we remembered, had all been born of the unexpected—of unforeseen contingencies—far beyond the range of human foresight. ”

“ Under the operation of the present system, by which prices are constantly falling and money is constantly increasing in value, the surplus earnings of the people are flowing in a steady stream into the vaults of money-lending institutions, and into the pockets of creditors. ”

“ When those gentlemen, whoever they are, which have frightened the poor woman with a small security to have her sell it at a complete loss and robbed the estates of the little possessions which they may have from which income may have been afforded, and then the little-business man shall be compelled to get rid of what he possesses on the ground that what he has is a loss and then induced to enter doubtful investments again, this result will reproduce exactly the situation of 1929-30. ”

“ That a heavy pecuniary loss should have been sustained by a Cause so poor as ours, of course we deeply regret, but that is nothing to our sorrow that the most unwearied labor and generous devotion of time and money should be met with entire failure and disappointment. ”

“ The debt of the borrower loads his heart, cramps his hands, and dulls his labour. The gain of the lender hardens his heart, fouls his brain, and puts every means of mischief into his otherwise clumsy and artless hands. ”

“ No other business, perhaps, carries200 so large a fixed indebtedness, in proportion to its value, as railroads, and the stockholders suffer more from an advance in the value of money than most other owners. ”

“ On the other hand, if they are forthwith bankrupted, carrying with them others, and these again others, there follows a disastrous loss to all the creditors: property to an immense amount being peremptorily sold at a time when there can be comparatively few able to buy, must go at a great sacrifice ”

“ To get on the highway of fortune, you must rush headlong down the Road to Ruin, continue straight on till you come to the Insolvent Court, and—there you are. Let business grow dull, and capital object—like a fat turtle—to be turned over and over, and the haberdashers have still the safe expedient left them of being ruined before taking in their spring goods. About six "fearful bankruptcies" will make an enterprising tradesman comfortable for life. ”

“ It may be argued, and with a good show of reason, that such losses are so infrequent, occurring perhaps only once or twice in the life of any business, as to make it unfair as between periods to burden some with a charge of this sort and not all. ”

“ So grave were the financial disturbances that several of the States were swept from their honest moorings by the cheap money craze, and irresponsible banks were created almost without limit or restraint, all of which brought speedy and fearful disaster to the people. ”

“ So many presidents of savings banks, even those belonging to the Young Men's Christian Association, run off with the funds; so many railroad and insurance companies are in the hands of receivers; there is so much bankruptcy on every hand, that all capital is held in the nervous clutch of fear. Slowly, but surely we are coming back to honest methods in business. Confidence will return, and then enterprise will unlock the safe and money will again circulate as of yore; the dollars will leave their hiding places and every one will be seeking investment. ”

“ At the worst, too, the nation would not dock me of more than half my income, so I should still be as well off as before my investment, and in the meantime I shall be drawing a double income until the catastrophe arrives. A nation doesn't become bankrupt more than once in a century, so I shall have plenty of time to amass a little capital out of my savings. ”

“ Secondly, because one of the risks, or expenses, of industrial operations is the risk or expense of what are commonly called bad debts, and every saving which can be effected in this liability is a diminution of cost of production; by dispensing with an item of outlay which in no way conduces to the desired end, and which must be paid for either by the consumer of the commodity, or from the general profits of capital, according as the burthen is peculiar or general. ”

“ For economic bankruptcy or breakdown, like physical bankruptcy or breakdown, is generally the result of faulty organization in the system of income and expenditure. Physically a person breaks down because he has been spending more energy than he [Pg 49] can recoup by rest, food, and recreation. Economically he breaks down because his scale of expenses exceeds his regular income. ”