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York National Bank is not authorized to buy commercial paper in the open market
H. R. HOLBURD,
Deputy and Acting Comptroller.
The section of the Act op which the foregoing opinion is founded reads as follows:
Sec. 30. And be it further enacted, That every association may take, receive, re-
And when no rate is fixed by the laws of the state or territory, the bank may take,
CONTENTS FOR FEBRU A RY.
MARCH, 18 6 7.
THE PREVAILING COMMERCIAL DEPRESSION.
Complaints are universal of the stagnation and the unprofitableness of business. A spring season so depressed and generally unsatisfactory as the present is hardly within the memory of our city merchants. The trade of the interior is generally reported dull and unpromising. Although the South has realized upon a large portion of its cotton crop, it is found devoid of trading spirit, and even unable to liquidate much of its indebt. edness on account of last year's purchases. In the Western States mer. chants complain of unusual difficulty in making their collections, and have on hand a heavy balance of fall stock; the result being that their obligations to the Atlantic cities, in many cases, have to be renewed for 30 to 60 days. The New England cotton mills find the demand for goods so limited, compared with their production, that at the beginning of this month some of the manufacturers made a still further curtailment of their time of running. The woolen trade, now une of our most extensive industries, although it recently diminished its aggregate production probably quite 20 per cent., finds little relief from the reduced supply of goods, and manufacturers have to sell a large amount of their products at a discount from cost. In the leather and iron trades similar complaints prevail; and, indeed, it would be difficult to find an important exception to the cominon stagnation.
VOL. LVI. NO, III.
This condition of affairs must be regarded as, to some extent, a natural reaction from the remarkable activity of trade immediately succeeding the close of the war. For the first twelve months after peace all the markets exhibited an extreme buoyancy. Producers took no care about the probable permanency of this activity, but strained every resource for meeting the unexpectedly brisk demand, all flattering themselves that this was but an evidence of the wonderfully recuperative energy of our com
It turned out, however, that the large trade of 1865-6 was but a feverish impulse, inspired by hopes natural enough, but more sanguine than reasonable; and we now witness a general prostration as the result, partially, of the overstrained production of manufactures. The more potent causes of the prevailing depression, however, lie deep
We are in the midst of a process of recovery from the derangements incidental to the war; and the recuperation is much more painful than was the growth of the disease. When, from the rise in the gold premium and the steadily-growing scarcity of products, prices and wages were rapidly advancing, all flattered themselves upon their rapid gains, and deemed war a singularly prosperous game, never for a moment dreaming that the pleasing prosperity was altogether fictitious—the hallucination of a disease. Soon after the war ceased the unhealthy stimulus was withdrawn, and the self-curative tendencies of commerce began to assert their force. The gold premium had to decline, if we would ever return to a safe business basis; and the processes of supply and demand, in respect to products, had to be restored to their normal relation to each other, in order that the ordinary range of values might be recovered. The first thing to be anticipated was a curtailment of consumption, from the inability of the people to purchase at the prevailing high prices. The result of that process must be a steady gain of supply upon demand; and the result of that a loss to producers and to merchants upon their stocks, especially of merchandise. These losses, again, have a tendency to enforce a contraction in the consumption of the classes employing their capital in trade and manufactures ; while they have also caused a certain amount of labor to be thrown out of employment, which has necessitated a still further curtailment in the consumption of the working classes. We are now in the midst of the operation of these processes; and their effect is apparent in the general lack of profit upon producing or trading operations, and a consequent curtailment in the amount of capital thus em. ployed.
But while this process of reaction from high prices must be regarded as the chief cause of the existing commercial depression, yet cotemporaneous circumstances have materially aggravated the derangements. Taxation has pressedwith extreme severity upon the trade and production of the country, on the one hand lessening the profits of the manufac turer, and on the other, diminishing the purchases of consumers. In many instances the taxes, by-as we have heretofore shown--iujudicious methods of impost, have driven capital from employments hitherto profitable; while the constant changes in the distribution of taxation have beset some branches of business with discouraging uncertainties. Again, the close of the war has naturally raised in Congress many fundamental measures of legislation, the discussion of which has developed differences of opinion and political animosities, which have been regarded by merchants
as involving contingencies vitally affecting the prospects of trade. Questions of reconstruction, of impeachment, of tariff, of internal revenue, of banking, of currency and currency contraction, have been raised and earnestly discussed at Washington; but upon no one of these weighty issues has any definite conclusion been reached. A protracted suspense as to the settlement of so many grave questions cannot but prove an important source of disturbance to business operations. Whilst so much remains undetermined, upon matters which directly affect the conditions of production and distribution, the only alternative presented to capitalists is employing their means at a blind venture, or remaining idle; and in many cases they choose the latter. We are not disposed to attach to Congress any undue responsibility in this matter. It must be conceded that some of these questions required to be raised at the time they have been, and were too weighty to be disposed of hastily; their discussion, however, has been needlessly protracted by partisan harangues and party schemes ; and the commercial interests of the country feel sorely
grieved that their convenience should have been disregarded in ke ing open disturbing issues longer than is necessary from such unworthy considerations. The present demoralized condition of the trade of the whole country appeals loudly to Congress for moderation and despatch in the settlement of these momentous measures.
Certain movements among the operative classes have in no trifling measure helped to aggravate the embarrassments connected with the present reactionary period. It would appear to be very obviously to the interest of the working classes that they should offer no unnecessary resistance to a process resulting in the fall of prices. No class suffers so severely from high prices, and none would be so largely benefitted by a fall in values.
As, however, labor constitutes almost the exclusive cost of products, it is clear that unless producers will consent to be constantly losing on their business, by paying more for labor than they get for products, the laborer must consent to a steady reduction of pay, waiting for compensation in the subsequent decline of prices. This requirement, however, is steadily resisted by the workmen; who quote existing prices as an evidence that they cannot afford to work for less. To make this resistance more effective they are combined in organizations embracing every branch of trade, and extending throughout the country. The trade associations dictate the terms upon which each member shall work, and this unanimous resistance prevents that steady process of yielding by individual workmen which would otherwise effect a gradual adjustment of the labor market to the downward tendency in prices. Many operatives are thus unnecessarily thrown out of employment; but, as the associations support them, and virtually keep their labor out of the market, those who remain in employ can, for a time, keep up their wages; and in this way the general reduction is temporarily staved off. The effect of this combined movement of the working classes is more disastrous than may appear at first sight, and should be resisted by capitalists. It involves manufacturers in unnecessary losses, without any compensating advantage to the operatives at large; while, by keeping a large proportion of the productive power of the country idle, it tends to keep up
the comparative scarcity of commodities and helps tu protract the period of high prices. It impedes the free operation of individual interest, and creates a large amount of sacrifice and suffering for no adequate purpose.
Such, then, are some of the principal causes for the unusual depression of trade at present existing, and it only remains for us now to consider how far this commercial situation is susceptible of remedy from legislative measures.
At the outset we should remember that the present condition of affairs is the consequence of events now past, and can only be remedied by operating on the source or seat of the disease and not directly on its results. If we can help to relieve the present feverish uncertainty, and infuse a healthy confidence among the people; if we can give to capital security in every part of the country so that it may be employed more largely in production and the development of our exhaustless resources, trade will be no longer, as it is now, a mere game of chance, but new life will at onre be developed, and influences be brought into play which in time will bring us through all our present difficulties.
And here we are met by the anomalous circumstance that there are now ten millions of our population whose federalstatus is undetermined. Before the war that portion of our people contributed two thirds of the products by which we were enabled to pay for our large importations ; and their purchases in the Northern markets took off fully one-third of our supplies of domestic and foreign merchandise. The lands and the labor which produced the cotton and rice crops and which formed the basis of our large Southern trade still remain, but the capital necessary
for rendering them jointly productive is wanting; the consequence is that the process of industrial recuperation in that section is impeded, and, instead of a gradual accumulation of wealth, the people are suffering from a lack of Decessary commodities, and our Southern trade is merely nominal. Northern capital waits to seek investment in the lands, the railroads and the factories of the South ; but very naturally halts until it is apparent what is to be the future relation of the seceded States to the central Government. Virtually, therefore, the failure of Congress and the President to agree upon a plan of reconstruction keeps the whole machinery of Southern commerce stagnant, by causing the withholding of the funds which constitute the motive power of industry. Every day that a practicable measure of rehabilitation is postponed augments the sufferings of the Southern people, and diminishes the probabilities that the merchants of that section will be able to liquidate their obligations to the North. There is consequently the most imperative commercial necessity that the discussion of this question should be no longer protracted. The mercantile interest requires that the issue be settled promptly and permanently, and upon a basis which will command the confidence of capitalists; and a new spirit of enterprise would at once be diffused throughout the trade of the country. The migration of Northern capital Southward would call for new supplies of goods, machinery and implements, which in due time would contribute largely to the national supply of products, and help forward the process of general recuperation.
The measure which has this week been passed by Congress and now awaits the President's signature or veto, shows that these ideas are now exerting an influence. We do not care todiscuss the merits or demerits of the present act, but trust that the decision of the President will be communicated to Congress before its adjournment; and if a disagreement is found to exist between the legislative and executive branches of the Gov.