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Thursday, September 18, 2008
Origin and Nature of Credit.
Origin and Nature of Credit. — There can be no system of credit until there has been a considerable accumulation of capital; for, when capital first begins to be accumulated, those who possess it apply it directly in aid of their own labor. As a country increases in wealth, many persona acquire capital which they cannot employ in their own business, or can only employ by offering inducements to purchase in the shape of deferred payments. As soon as a sufficient capital exists, a system of credit has a natural tendency to arise, and will continue to grow with the increase of capital, unless it be checked by a general insecurity of property, by imperfect legal securities for the payment of debts, or by a want of confidence in the integrity of the parties who desire to borrow. When the society and laws of a country are in a sound state, and capital is abundant, credit comes fully into operation.
In a recently published article, the Hon. George B. Roberts, Director of the United States Mint, thus lucidly discusses the nature and value of credit as a substitute for money:
"There is a very common misunderstanding of the meaning of the word 'credit' when used as a banking term. Some people associate it wholly with advances of money or goods upon time, but credit is also a substitute for money in cash transactions. When a customer gives a merchant a check for a bill of goods and the merchant deposits the check for his own bank account and simultaneously draws against it, credit is being used, and a great convenience and economy are effected over payments of money from hand to hand. When payments are between distant localities the advantages are obviously greater. The great bulk of the payments between the East and West are accomplished by offsetting the purchases they make of each other. The great bulk of the bank deposits of the country are created in this way, and not by passing money over the counter. All of this involves the use of credit. This method of doing business will not be changed. The public will not go back to a greater use of money from hand to hand; on the contrary, it is certain that the various forms of bank credit will more and more become the means by which payments are made."
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Wednesday, September 17, 2008
Financial Panics in America
Financial panics in America were common before the adoption of the Federal Reserve Act of December 23, 1913. They were chiefly due to the want of a centrally controlled banking system. That there had long been a movement among American bankers to remedy this deficiency is strikingly shown by the following extract from an article by the Hon. A. Piatt Andrew, published in the "American Academy of Political and Social Science" for November, 1910.
"No phase of recent American banking is more striking than the groping of over 25,000 independent banks toward some coherent organization and leadership. This is shown not merely in the consolidation of great city banks and the affiliation of banks and trust companies, but in the development of association and joint control through the clearing houses, and the absorption on the part of these institutions of new and far-reaching functions. The adoption of methods of mutual supervision through clearing-house bank examinations which has been so much in evidence in western and middle cities during recent years is one step in this direction. The more careful regulations governing the conduct of firms which are admitted to membership in the clearing-house, and with regard to the non-member institutions which clear through members, about which so much controversy has centered during, recent years in New York, is another instance of the same tendency. Above all, the resort to clearing-house loan certificates in times of unsettlement which became so surprisingly general throughout the country in 1907 is the best illustration of the way in which our banks are forced at times to act together under common leadership. It shows, too. how an ingenious people can improvise a needed institution if it does not already exist.
"The operations of the clearing-house associations during the panic of 1907 were essentially akin to the ordinary functions of the Bank of England, the Reichsbank, and the Bank of France. With the banks as customers, these clearing-house associations made loans on collateral, re-discounted notes, and made the reserves of all of the banks available for each other in practically the same way as do the great national banks of Europe. The operations were of an identical nature, but there were two essential differences in form and in measure of effectiveness. First, the arrangements had to be devised in the stress of an emergency, and only began to operate after the panic had become acute, and it was no longer possible to forestall the general collapse. Second, there was no general clearing-house association for the country as a whole, and even though the banks of each locality were able by a belated expedient to pool their reserves and transform their commercial paper into available, liquid assets, there was no arrangement for a similar settlement of accounts as between different cities. Hence the struggle which was witnessed, of each locality endeavoring to fortify itself at the expense of every other locality — a spectacle which could not have occurred in any European country and which we ought to make impossible of recurrence here."
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"No phase of recent American banking is more striking than the groping of over 25,000 independent banks toward some coherent organization and leadership. This is shown not merely in the consolidation of great city banks and the affiliation of banks and trust companies, but in the development of association and joint control through the clearing houses, and the absorption on the part of these institutions of new and far-reaching functions. The adoption of methods of mutual supervision through clearing-house bank examinations which has been so much in evidence in western and middle cities during recent years is one step in this direction. The more careful regulations governing the conduct of firms which are admitted to membership in the clearing-house, and with regard to the non-member institutions which clear through members, about which so much controversy has centered during, recent years in New York, is another instance of the same tendency. Above all, the resort to clearing-house loan certificates in times of unsettlement which became so surprisingly general throughout the country in 1907 is the best illustration of the way in which our banks are forced at times to act together under common leadership. It shows, too. how an ingenious people can improvise a needed institution if it does not already exist.
"The operations of the clearing-house associations during the panic of 1907 were essentially akin to the ordinary functions of the Bank of England, the Reichsbank, and the Bank of France. With the banks as customers, these clearing-house associations made loans on collateral, re-discounted notes, and made the reserves of all of the banks available for each other in practically the same way as do the great national banks of Europe. The operations were of an identical nature, but there were two essential differences in form and in measure of effectiveness. First, the arrangements had to be devised in the stress of an emergency, and only began to operate after the panic had become acute, and it was no longer possible to forestall the general collapse. Second, there was no general clearing-house association for the country as a whole, and even though the banks of each locality were able by a belated expedient to pool their reserves and transform their commercial paper into available, liquid assets, there was no arrangement for a similar settlement of accounts as between different cities. Hence the struggle which was witnessed, of each locality endeavoring to fortify itself at the expense of every other locality — a spectacle which could not have occurred in any European country and which we ought to make impossible of recurrence here."
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Monday, September 15, 2008
FINANCE, CREDIT AND COMMERCIAL EXCHANGE.
Money and Credit are so closely interwoven with the commercial life of a nation that it is essential for every person engaged in business to have some knowledge of the part which they play in it.
The Part Played by Banks.-- As generally understood, bankers are merely middle men who borrow from one set of persons at a rate in order to lend to another set at a greater rate, the difference between the two rates being their margin of profit. But in reality they are much more than this. They are conservers of a nation's capital and promoters of its trade and industry.
The most common function of banks is the discount of commercial paper running for short periods of time and representing actual transfers of property in the business world. In this way the bank exchanges its well known credit for the less known credit of merchants and manufacturers.
How Banks Increase the Potency of Capital.-- By means of banking, a given amount of wealth acquires nearly the same potency when diffused among millions as when concentrated in the hands of a few. Banks take the place of large capitalists; they gather into one fund the small savings or reserve-wealth of the masses, and thus render these as available for the employment of labor as if they belonged to a single possessor. And also they supply the knowledge and enterprise requisite for the employment of that wealth, which is in great part wanting on the part of the actual owners of it. Hence the banking system accomplishes the same results as if the wealth of a country were concentrated in the hands of a few large capitalists, and yet allows of that wealth being actually diffused among tens of thousands of owners. The banking system, in short, immensely increases the potency of capital, which has quite as much to do with national progress as the actual amount of national wealth.
Banks, as before stated, take the place of large capitalists; so that the money expended by the wealthy and enterprising portion of the community in trade or industrial works, such as railways, etc., although dispersed in wage payments among the laboring classes, who do not themselves employ the money thus acquired in reproductive industry, is not thereby withdrawn from production, seeing that it immediately finds its way back into the banks, who employ it just as a large capitalist would.
If there were no banks, a large portion of the money employed in the construction of a railway would stagnate as small hoards in the hands of thousands of owners, and a very long period would elapse before it became again available for production by returning it into the hands of large capitalists; whereas, through the agency of banks, the small sums are quickly re-united, and become disposable anew for industrial investment. In this way capital is re-collected as soon as dispersed, and hence, by means of Banking, the reserve-wealth of a country, although ceaselessly dispersed in industrial expenditure, practically remains massed or concentrated in compartively few hands and therefore in the most effective condition for augmenting production. In this way a very large amount of capital which would otherwise become "fixed", in consequence of its being employed in industrial enterprise, immediately reappears as "floating" capital, available for similar investments by other parties.
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The Part Played by Banks.-- As generally understood, bankers are merely middle men who borrow from one set of persons at a rate in order to lend to another set at a greater rate, the difference between the two rates being their margin of profit. But in reality they are much more than this. They are conservers of a nation's capital and promoters of its trade and industry.
The most common function of banks is the discount of commercial paper running for short periods of time and representing actual transfers of property in the business world. In this way the bank exchanges its well known credit for the less known credit of merchants and manufacturers.
How Banks Increase the Potency of Capital.-- By means of banking, a given amount of wealth acquires nearly the same potency when diffused among millions as when concentrated in the hands of a few. Banks take the place of large capitalists; they gather into one fund the small savings or reserve-wealth of the masses, and thus render these as available for the employment of labor as if they belonged to a single possessor. And also they supply the knowledge and enterprise requisite for the employment of that wealth, which is in great part wanting on the part of the actual owners of it. Hence the banking system accomplishes the same results as if the wealth of a country were concentrated in the hands of a few large capitalists, and yet allows of that wealth being actually diffused among tens of thousands of owners. The banking system, in short, immensely increases the potency of capital, which has quite as much to do with national progress as the actual amount of national wealth.
Banks, as before stated, take the place of large capitalists; so that the money expended by the wealthy and enterprising portion of the community in trade or industrial works, such as railways, etc., although dispersed in wage payments among the laboring classes, who do not themselves employ the money thus acquired in reproductive industry, is not thereby withdrawn from production, seeing that it immediately finds its way back into the banks, who employ it just as a large capitalist would.
If there were no banks, a large portion of the money employed in the construction of a railway would stagnate as small hoards in the hands of thousands of owners, and a very long period would elapse before it became again available for production by returning it into the hands of large capitalists; whereas, through the agency of banks, the small sums are quickly re-united, and become disposable anew for industrial investment. In this way capital is re-collected as soon as dispersed, and hence, by means of Banking, the reserve-wealth of a country, although ceaselessly dispersed in industrial expenditure, practically remains massed or concentrated in compartively few hands and therefore in the most effective condition for augmenting production. In this way a very large amount of capital which would otherwise become "fixed", in consequence of its being employed in industrial enterprise, immediately reappears as "floating" capital, available for similar investments by other parties.
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Wednesday, September 10, 2008
COMMERCE.
"Commerce is King," remarked Thomas Carlyle, and if the aphorism was true in his day, how much more truthful and pertinent is it at the present time! To it England owes her wealth, power, dominion and influence, and by means of it America bids fair to outstrip all history in the achievement of commercial success and importance.
The close and steadfast pressing of our material interests during the past twenty years; the wonderful inventive genius of our people, so richly productive in labor and time-saving devices and processes of manufacture, and their aggressive, inquisitive and enterprising spirit have combined to place this nation in the front ranks, if not in the lead, of the great civilized powers of the world. The political expansion of the United States is only a visible and symbolical representation of the growth in commerce, manufacture, art, education and general progress. With our varied climates extending now from the tropics to the frozen north, our vast seaboard, expansive lakes, broad, rolling rivers, exhaustless mineral and agricultural wealth, no argument is necessary to establish beyond peradventure the manifest destiny of this nation.
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The close and steadfast pressing of our material interests during the past twenty years; the wonderful inventive genius of our people, so richly productive in labor and time-saving devices and processes of manufacture, and their aggressive, inquisitive and enterprising spirit have combined to place this nation in the front ranks, if not in the lead, of the great civilized powers of the world. The political expansion of the United States is only a visible and symbolical representation of the growth in commerce, manufacture, art, education and general progress. With our varied climates extending now from the tropics to the frozen north, our vast seaboard, expansive lakes, broad, rolling rivers, exhaustless mineral and agricultural wealth, no argument is necessary to establish beyond peradventure the manifest destiny of this nation.
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Thursday, March 13, 2008
Introduction: NEW AMERICAN BUSINESS CYCLOPEDIA.
This work is intended as a safe and authoritative guide to the proper transaction of all kinds of business. It supplies the necessary legal and business information, together with the appropriate forms. No one man can possibly know everything about business; for that matter, no one man can know everything there is to know about any single business. Next to possessing all the knowledge in the world, the most valuable thing is to know where to find it ; to be able to turn readily, with the expenditure of little time and small effort, to the subject sought. In order to transact business successfully, a man must carry in his head a great mass of details to be drawn upon when needed, or he must know exactly where to find information on any matter when he requires it. The person who knows where to find what he wants, does not have to burden his memory with things used perhaps only once in a lifetime, and then be in doubt as to whether or not he is right.
This volume tells you what you want to know when you want to know it. The opinions and the mass of material which form it, come from the best authorities of the land — practical specialists, experienced in the particular kinds of business of which they respectively treat. It is a book which every man, no matter what his business, should have where he can lay his hand on it at any time.
It is compiled upon sound, constructive business lines. A novice may take it as a safe instructor in Founding, Building and Conducting a business. Its collection of commercial and legal forms is so complete as to enable any person to readily draw up almost any kind of business document — Contracts, Deeds, Leases, Mortgages, Bonds, Bills of Sale, Bills of Lading, Building Agreements, Articles of Partnership, Promissory Notes, Orders, Due Bills, Guarantees, Wills, etc.
Every imaginable question that may arise in a business transaction is answered. It gives a history of and explains every phase of the Banking Business. It gives complete information on Stocks, Stockholders, etc., covering Treasury Stock, Common and Preferred Stock, Watered and Deferred Stock; what is Fully Paid and Non-assessable Stock ; the Stockholder and his Rights; Dividends, etc. It covers Corporation Bonds, Mortgages and Legal Investments; the
Promotion and Financing of Enterprises; How to Incorporate a Company: form of By-Laws; Minutes of Meetings; how to transfer property to the company and how to issue stock. The Stock Exchange is dealt with very thoroughly ; Duties and Liabilities of Brokers; Market Manipulation; Trading in Grain, Cotton, Stocks, etc.
There is sound advice and helpful instruction on such subjects as, Ordering Goods, Collections, Lawsuits, Claims and Taxes; Income Tax; How to Buy and Sell Anything; Hiring and Discharging Help; Hiring a Minor; Building, Interests, Shipments, Agents, Affidavits, Bail Bonds, Insurance, Landlords and Tenants,; Leases, Liens, Patents, Advertising, Coal and Land; Sending Money by Mail; How to Become Naturalized; Starting a Business; Discounts, Commissions; Window Dressing; Business Letter Writing and almost everything else.
Besides its legal and practical business information, the work contains:
1. Easy Lessons in Penmanship and Bookkeeping, with helpful forms and illustrative examples in Social and Official Correspondence.
2. Exhaustive explanations of the various Swindling Schemes of the Day, thoroughly exposing the dangerous confidence games and other frauds by which honest farmers, bankers, merchants and business men generally, are so frequently victimized.
3. The Latest Census Tables; Interest, Limitation and Exemption Laws of all the states, and a large amount of statistical information that cannot be found in any other publication.
4. Tables for Rapid Computation and Ready Reference, constructed so simply that they can be easily understood and practically used by anyone having the slightest knowledge of figures.
5. A miscellaneous collection of useful and instructive facts pertaining to all the Business and Social Relations of life. The innumerable points of law and valuable business Helps and Hints are not scattered haphazardly through the work, but are all arranged systematically under appropriate headings, with index commencement words printed in bold-faced type.
This volume tells you what you want to know when you want to know it. The opinions and the mass of material which form it, come from the best authorities of the land — practical specialists, experienced in the particular kinds of business of which they respectively treat. It is a book which every man, no matter what his business, should have where he can lay his hand on it at any time.
It is compiled upon sound, constructive business lines. A novice may take it as a safe instructor in Founding, Building and Conducting a business. Its collection of commercial and legal forms is so complete as to enable any person to readily draw up almost any kind of business document — Contracts, Deeds, Leases, Mortgages, Bonds, Bills of Sale, Bills of Lading, Building Agreements, Articles of Partnership, Promissory Notes, Orders, Due Bills, Guarantees, Wills, etc.
Every imaginable question that may arise in a business transaction is answered. It gives a history of and explains every phase of the Banking Business. It gives complete information on Stocks, Stockholders, etc., covering Treasury Stock, Common and Preferred Stock, Watered and Deferred Stock; what is Fully Paid and Non-assessable Stock ; the Stockholder and his Rights; Dividends, etc. It covers Corporation Bonds, Mortgages and Legal Investments; the
Promotion and Financing of Enterprises; How to Incorporate a Company: form of By-Laws; Minutes of Meetings; how to transfer property to the company and how to issue stock. The Stock Exchange is dealt with very thoroughly ; Duties and Liabilities of Brokers; Market Manipulation; Trading in Grain, Cotton, Stocks, etc.
There is sound advice and helpful instruction on such subjects as, Ordering Goods, Collections, Lawsuits, Claims and Taxes; Income Tax; How to Buy and Sell Anything; Hiring and Discharging Help; Hiring a Minor; Building, Interests, Shipments, Agents, Affidavits, Bail Bonds, Insurance, Landlords and Tenants,; Leases, Liens, Patents, Advertising, Coal and Land; Sending Money by Mail; How to Become Naturalized; Starting a Business; Discounts, Commissions; Window Dressing; Business Letter Writing and almost everything else.
Besides its legal and practical business information, the work contains:
1. Easy Lessons in Penmanship and Bookkeeping, with helpful forms and illustrative examples in Social and Official Correspondence.
2. Exhaustive explanations of the various Swindling Schemes of the Day, thoroughly exposing the dangerous confidence games and other frauds by which honest farmers, bankers, merchants and business men generally, are so frequently victimized.
3. The Latest Census Tables; Interest, Limitation and Exemption Laws of all the states, and a large amount of statistical information that cannot be found in any other publication.
4. Tables for Rapid Computation and Ready Reference, constructed so simply that they can be easily understood and practically used by anyone having the slightest knowledge of figures.
5. A miscellaneous collection of useful and instructive facts pertaining to all the Business and Social Relations of life. The innumerable points of law and valuable business Helps and Hints are not scattered haphazardly through the work, but are all arranged systematically under appropriate headings, with index commencement words printed in bold-faced type.
Welcome to the New American Business Cyclopedia!
This blog will feature a page a day (or so, time permitting) from the New American Business Cyclopedia, a book I found a few weeks ago.
While some of its usefullness may have been distilled by time into mere quaint and amusing facts, anecdotes and insights about a country that has radically changed, some might say almost wholly replaced over the past 80 years, I also decided to publish pages from this book to share the enduring passages which to this day still contain sound, practical financial and business advice.
If you run a similar blog and would like to exchange links, please leave a comment. All other feedback and reactions are welcome too.
Thank you,
Lionel Houde
While some of its usefullness may have been distilled by time into mere quaint and amusing facts, anecdotes and insights about a country that has radically changed, some might say almost wholly replaced over the past 80 years, I also decided to publish pages from this book to share the enduring passages which to this day still contain sound, practical financial and business advice.
If you run a similar blog and would like to exchange links, please leave a comment. All other feedback and reactions are welcome too.
Thank you,
Lionel Houde
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