Financial panic

“ There are no safety deposit vaults for God’s gifts to man. When times of financial panic come, frightened and panic-smitten men withdraw their currency from circulation, store it away in a vault, thus hastening the national disaster. ”

“ Indeed, the major cause of "business" or "financial" panic is just reasoning upon existing conditions rather than a foolish fear of them. Over-trading and loss of nerve constitute the medium. Recent national legislation has gone far in enabling the business world in the United States to prevent panics, and farther yet in providing the means to cope with them when, in spite of precautions, they shall recur. ”

“ In financial crises the thing men want is money; that which everybody must receive in payment of debt or forever thereafter forego all claim of interest thereon. What men want in such seasons of panic and distress is that which will pay a note in a bank, will meet the exactions of government, will avert the sacrifice of homestead, warehouse or other property by sheriff’s or marshal’s sale ”

“ Early in October, 1907, a financial panic occurred in the United States which was very disastrous in many ways, and peculiar in that it happened during a period of prosper- I'fidto. ParkLT OREGON TRAIL MONUMENT AT BAKER ity. It was properly called a "banker's panic" for the reason that it started through fear on the part of wealthy men that something was about to happen* and clearly illustrated the saying that "there is no coward so great as money." A lack of confidence in one instance was sufficient to frighten others, and the condition became national in twenty-four hours. ”

“ The financial history of America is the record of a series of great panics, coming at intervals of from seven to ten years. In these crises the bankers used to suffer as well as the rest of us; but this was intolerable to them, and so they put their experts to work. To save yourself in a panic you must have money—a great deal of money in a hurry ”

“ Never will panics cease so long as trade and fear are exemplified on this earth, but just as modern medicine is overcoming the dangers threatening the physical man, so is modern finance overcoming panic and the other dangers which threaten financial stability. After all, reserve power and only a rational use of financial resources are the surest preventive of panic. And that the American people have not been forced through entrance into the "World War" to deplete their reserve strength, especially in a financial way, is due to the splendid conduct of our great President. ”

“ Henry of the Deposit supplemented with added detail. "The national mind is hysterical beyond the usual and this is a time of heightened danger. It's the period when $200,000,000 are needed for crop-transportation and delivery. That means financial equinox."
The young Titan glanced seriously from one to the other. "I know of influences coming to a head tomorrow which are calculated to throw the Street and Exchange into panic condition—unless we devise means of averting that catastrophe. For that reason I asked you to come here tonight." ”

“ 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. ”

“ The crash brought on ruin by closing weak banks, building and loan companies, and financial houses. It wiped out the savings of millions of people through bankruptcies and foreclosures of an unprecedented panic. The result was a large world wide depression which lasted for years.
"And when you, the public, had finished throwing over securities at the bottom of market prices, who purchased them? Why, those who originally sold them to you.
"Not content to rig the stock markets, they also trade and [Pg 92] corner in futures of your most staple commodities. ”

“ The worst of the financial depression has been seen, and the long-distance view is certainly more encouraging than at any time during the last six months. Business men have now no reason to feel otherwise than confident. I firmly believe that recuperation will be quicker after the recent panic than was experienced after any of the previous great panics since the one of 1857. ”

“ But whether there was scarcity or plenty, the failures went on with a continuous ruin that nothing could check, while our larger economic life proceeded in a series of violent shocks, which we called financial panics, followed by long periods of exhaustion and recuperation. ”

“ A hundred people are talked about, and a thousand think,—'Am I talked about, or am I not?' 'Is my credit as good as it used to be, or is it less?' And every day, as a panic grows, this floating suspicion becomes both more intense and more diffused; it attacks more persons; and attacks them all more virulently than at first. All men of experience, therefore, try to strengthen themselves,' as it is called, in the early stage of a panic; they borrow money while they can; they come to their banker and offer bills for discount, which commonly they would not have offered for days or weeks to come. ”

“ In the midst of all the agitation that has prevailed at home and abroad, intrigues and quarrels and wars begun or threatened in various countries, we have been absorbed by the great panic in the money market, which is still at its height, and of which no man ventures to predict, or thinks he can see, the termination. ”

“ On the other hand, the lowest point of depression following a panic is accompanied by the converse of the symptoms just enumerated.
Bank balance sheets reflect in cold figures the result of the above influences. Prices being high, and discounts and loans large in proportion to deposits, and having steadily increased for years, danger is near; further, when discounts and loans are not only large in proportion to deposits, having increased steadily for years, and then suddenly fallen off noticeably for a considerable time, only to increase again, danger is imminent. ”

“ Buy when the decline caused by a panic has produced such liquidation that discounts and loans, after steady and long-continued diminution, either become stationary for a period or else increase progressively coincident with a steady increase in available funds ”

“ That is on the supposition that my money only increases by its banking power, which is the smallest way to look at it. In seven years I'd start with a billion preparing for the grand coup of the next panic. It always comes within a decade. The man who enters a panic with one billion dollars in cash if he had the nerve, the daring, and the brains can emerge with fifty! ”

“ If we note what occurred in the Associated Banks of New York, the very place where the greatest amount of business is carried on, the depression of the amount of paper on hand is most noticeable after the inflation observed at the height of the panic, while the decrease that we point out showed itself more slowly with the slackening of business. ”

“ In times of prosperity and confidence credits are safely increased to 290accommodate the increasing volume of business, and the specie basis is sufficient merely because it is not put to the test, the people preferring paper money because of its superior convenience. But at such a time a pebble may start an avalanche. A startling failure occurs somewhere, creditors press for liquidation, the banks are besieged, and, being unable to redeem their promises to pay gold, they suspend—and the panic is complete. Such is the recurrent history of finance in all civilized lands. ”

“ We come, finally, to the third need which emergency elasticity is supposed to meet, that is, a prompt and great contraction of the circulation when the panic has passed and the inevitable business depression consequent upon such a panic has set in. Here, again, though not in the same degree as in the last case, if the new law proves as successful as many conservative students expect, the need in question will be little, if at all, experienced. We shall usually escape the extreme business inflation of the antepanic period; the panic itself will be much abated, if not completely eliminated ”

“ A panic is sure to be caused if that reserve is, from whatever cause, exceedingly low. At every moment there is a certain minimum, which I will call the "apprehension minimum," below which the reserve cannot fall without great risk of diffused fear; and by this I do not mean absolute panic, but only a vague fright and timorousness which spreads itself instantly, and as if by magic, over the public mind. Such seasons of incipient alarm are exceedingly dangerous, because they beget the calamities they dread. What is most feared at such moments of susceptibility is the destruction of credit ”

“ If you propose greatly to reduce that amount, you will cause many failures unless you can pour in from elsewhere some equivalent amount of new money. But in a panic there is no new money to be had; everybody who has it clings to it, and will not part with it. ”

“ A great part of the current coin in the kingdom was locked up in the houses or banks of a few stockjobbers and speculators.
But the scarcity of gold and silver was felt, people's eyes were opened, and the bubble burst, but not until half of the national debt had been paid off by this swindling transaction.
The nation was furious. A panic spread among all classes; the bank had no money with which to redeem its notes; the shares fell almost to nothing; and universal bankruptcy took place. Those who, a few days before, fancied themselves rich, now found themselves poor. ”

“ This is an extraordinary period for America's economy. Over the past few weeks, many Americans have felt anxiety about their finances and their future.
I understand their worry and their frustration. We've seen triple-digit swings in the stock market. Major financial institutions have teetered on the edge of collapse, and some have failed. As uncertainty has grown, many banks have restricted lending. Credit markets have frozen. And families and businesses have found it harder to borrow money. ”

“ Americans from all walks of life are continuing to feel the effects of the financial crisis. In recent weeks, concerns about the availability of credit, the safety of financial assets, and the volatility of the stock market have made many families understandably anxious about their economic future. ”

“ Especially what has been advanced to merchants cannot easily be recovered; they are under immense liabilities, and they will not give back a penny which they imagine that even possibly they may need to discharge those liabilities. And bankers are in even greater terror. In a panic they will not discount a host of new bills; they are engrossed with their own liabilities and those of their own customers, and do not care for those of others. The notion that the Bank of England can stop discounting in a panic, and so obtain fresh money, is a delusion. ”

“ There isn’t a thing wrong with my affairs except this slump in stocks—this panic. You sit there, a fortune in your hands, and you allow a lot of schemers, highbinders, who don’t know any more of your affairs or mine than a rabbit, and who haven’t any interest in you except to plan what they can get out of you, to frighten you and prevent you from doing the one thing that will save your life. Three hundred thousand paltry dollars that in three or four weeks from now I can pay back to you four and five times over, and for that you will see me go broke and yourself to the penitentiary. ”

“ Unless it was the rumour, which has no doubt spread abroad, of the loss of your deeds. I suppose it was that: magnified in telling, possibly, into the loss of half the coffers of the Bank. Panics have arisen from far slighter causes; as those versed in the money market could tell you.”
“But how foolish people must be!”
“When a panic arises, people are not themselves,” remarked Thomas Godolphin. “One takes up the fear from another, as they take an epidemic. ”

“ Seeing the dreadful state in which the public were, we rendered every assistance in our power.' After a day or two of this treatment, the entire panic subsided, and the 'City' was quite calm.
The problem of managing a panic must not be thought of as mainly a 'banking' problem. It is primarily a mercantile one. All merchants are under liabilities; they have bills to meet soon, and they can only pay those bills by discounting bills on other merchants. In other words, all merchants are dependent on borrowing money, and large merchants are dependent on borrowing much money. ”

“ Even an involved state of affairs may be hidden by certain conditions, and the situation, although itself exposed to the same excessive speculation, may witness the breaking out of the panic which has been delayed for a certain time, only to occur simultaneously with the beginning of a decline of prices, and when it is thought that danger has been escaped. ”

“ If that alarm is not so met, it aggravates into a panic, which is an opinion that most people, or very many people, will not pay their creditors; and this too can only be met by enabling all those persons to pay what they owe, which takes a great deal of money. No one has enough money, or anything like enough, but the holders of the bank reserve.... ”

“ A man who is told that he can have no help on any terms falls into a panic, seeing no escape from failure; one who is told that he can have a loan, if he cannot get along without it, but at some enormous rate, recovers from panic and goes home to see if he cannot manage some other way rather than pay such a rate. ”