Fifty years in Wall Street

Being now myself optimistic, I look on the sunny side and hope for the best. It is, however, a time for conservatism, and while trusting in Providence, it is well to keep our powder dry. It is a good time to cultivate the virtue of patience, and make haste slowly until all the aftermath of the panic, in the way of liquidation and the elimination of unsound timber from business structures, is completed. This will leave everything in the financial and industrial world stronger than before. It will also leave us with a higher standard of business morality resulting from the exposure of looting and other illegal practices and abuses of power in the management of large corporations. The stoppage of the evil of rebating by the railroads is of itself a great gain in this respect, and for this we have to thank President Roosevelt. As to the future, Pittsburg and the iron and steel trade should be the first to feel improvement in the general business of the country, for iron is still the best barometer of the times, as it leads all other industries in both depression and recovery, and what an eventful history Pittsburg can point to, the world knows. It was at Pittsburg that the Bessemer process was first applied to steel making in America, and the giant strides in the industry that followed its supersedure of the open-hearth process not only astonished ourselves but all Europe. It was a new departure on a grand scale, this application of science to mechanical methods, a revelation that was marvellous in the trade expansion and wealth it produced. Yet it is not improbable that before long, if not immediately, the Bessemer process by which this immense development was achieved will be very generally superseded by the open-hearth process of steel making, which originated and had its early development in this country. Thus in the whirligig of time it will displace the Bessemer process, by which it was itself displaced. This, as you are of course aware, is owing to improvements, chiefly by Talbott, an American engineer, in the open-hearth process, which for a long time has been considered almost out of the race in competition with the Bessemer process. This reminds us that history repeats itself. The open-hearth process has now been brought to such perfection that its superiority over the Bessemer process is declared by many in the trade to be established. Thus practice makes perfect, and time works wonders. Its superiority over the Bessemer process is said to have been particularly demonstrated in dealing with ores of any but a very low phosphorus grade. This American improvement in the open-hearth process has been already widely recognized and adopted in England, and we are in this way repaying the debt we owed to that country for the Bessemer process. The steel manufactured in the United States last year aggregated 23,246,000 tons, of which 12,275,000 tons were by the Bessemer process and 10,971,000 tons by the open-hearth process. There were also some other varieties of production, copied from processes in use on the European Continent, but the general drift, I am informed, is now towards the open-hearth process. Out of Pittsburg, of course, I should not talk so much about steel, but iron and steel are Pittsburg’s bread and butter. This reminds me that apart from agriculture the principal sources of our national wealth are minerals and manufacturing. Mining and manufacturing are primary and fundamental industries. Our agricultural income last year, according to the United States census estimates, was about seven thousand millions of dollars, while the metals mined were valued at about two thousand millions, against $1,902,517,565 in 1906. This metallic product for the year, it is estimated, was turned by manufacturing it into materials having a market value of fifteen thousand millions of dollars. If we add that of agriculture, the metallic products, and manufacturing, together, we have a total valuation for the year of twenty-four thousand millions of dollars. The fertility of our natural resources is here shown by their rapid rate of development. But this, while contributing so largely to our present national wealth, is not an unmixed good. We should always bear in mind that the more we take out of the earth, and the more we strip our forests of timber, the less we have remaining. In forestry, however, we are now preparing for the future by replanting, but we cannot replant minerals. The mineral products of this country have more than trebled since 1890; more than doubled since 1899; and are more than five fold what they were in 1880. From 1900 to 1906 our mineral product increased at a rate representing a hundred and ninety millions a year. I am quoting these statistics as a reminder of the vastness of our natural resources, and the recuperative power of the nation, which is one of the most encouraging features of the national situation. These resources are the backbone of the country’s greatness; and those who can see nothing cheerful in the outlook and to whom everything at times looks as blue as indigo, will do well to think of them, for they are Nature’s national banks, that can never fail, and unfailing sources of our national prosperity. It was these resources, in the form of exports to foreign countries, that enabled us to purchase and pay for—without borrowing or asking favors—the one hundred millions of gold that we imported to relieve the crisis. Here was indisputable evidence of the large international trade balance in our favor, and of our monetary and commercial independence of the rest of the world; and this gold we still hold, although in the ordinary course of commerce we may reasonably export some of it before long, for we have plenty to spare and money is superabundant at two per cent on call in Wall Street. Meanwhile our exports of produce and other merchandise continue extremely heavy, and they were never heavier than during the crisis, that is, in the last three months of 1907, while in January, 1908, they rose to a total value of one hundred and twenty-eight millions, or $17,742,352 more than in January, 1907. This is all the more favorable because our imports since the crisis have very largely decreased. In our January exports, cotton alone represented $76,687,508 of the total, and breadstuffs $24,463,503. As to our national finances and the defects of our currency system, there is much that calls for reform, but there seems to be little or no prospect at this session of Congress of the passage of a comprehensive financial measure, although it is a remedy we need. We shall therefore have to rest content for the time being with the much amended emergency currency measure, familiar to us as the Aldrich Bill. This provides only for the issue of a maximum of five hundred millions of currency by the Government to the national banks, to ward off a panic or mitigate its effects, the banks to pay six per cent interest per annum for whatever they take of this emergency currency, and give security in acceptable railway, municipal and other bonds for it to the Treasury. So far, so good. I am, therefore, strongly in favor of the Aldrich measure as a panic remedy, naturally so as I originated the fundamental part of it. It will do much to prevent panics, and will effectually stop the hoarding of currency that accompanies them, for what inducement would there be to hoard it when a supply of five hundred millions of new currency would be open to the banks? There could be no extreme scarcity of money then; nothing in any way approaching the stringency that not only New York but the whole United States suffered under in the last three months of 1907. Yet the great remedy, the comprehensive financial reform measure we need will be ultimately passed by Congress, and its provisions will include the modification of the Sub-Treasury system, which has always been a source of much mischief through locking up Government money received for Customs duties and internal revenue taxes, that ought to be kept in circulation. The proposition, however, to establish a central national bank in New York, or anywhere else, as a substitute for it, is to be strongly deprecated. It would be a rich plum for those who controlled it, but would excite the jealousy and hostility of all the other banks. Moreover, such a bank would in effect be a revival of the old United States Bank, against which, and the scandals and corruption connected with it, President Jackson made war so vigorously as to force it into liquidation. The second experiment of a United States bank was no less involved in scandal and no less a failure than the first, and in each case there was the same inglorious end, compulsory liquidation. Both, too, were used as political machines, and guilty of favoritism and many abuses of power, and a new central bank would give us another big political and speculative machine, liable to the same evils and objections. Therefore all bankers should resolutely oppose a central bank. It would not be a remedy for any of the evils complained of, but, instead, furnish us with a new complication. While we can hardly expect any fundamental changes in our currency system at present, one improvement might easily be made in it by Congress at once, and that is by the removal of restrictions on the amount of national bank notes taken out or canceled per month, as well as by establishing a bank-note redemption bureau at every United States Sub-Treasury, so as to save the delay and expense of sending to and from the Redemption Bureau at Washington, that all the national banks are now subjected to. As a minor remedy this should be urged upon Congress. Turning to the United States bonds pledged with the Treasury to secure the national bank notes, we all know that they are as good as gold, if not better, but still they are evidences of debt, and it is a false economic principle to issue currency on such a basis. Moreover, it is costly for the Government, for it practically and permanently prevents it, in the interest of the national banks, from redeeming the bonds deposited to secure national bank notes, out of its surplus income. Still it has great merit in giving us a safe and sound bank currency. Ultimately this system, born of the civil war, will be superseded by a better one, but this will doubtless be done in a manner which will not interfere with or impair vested interests. Owing to the short time now left of this session of Congress, nothing more than the “Aldrich” bill can possibly be enacted at this time. Its simplicity is a recommendation to Congress. But, nevertheless, Congress should later pass a permanent currency bill, a bill which will settle every question as to the finances of the nation, at once and for a century to come. Such a bill is possible, and in fact it would be the simplest kind of measure for the Government to adopt—one to provide for just the kind of currency, and the amount of currency the business of the nation, the banks, and the people should have; one to provide for a perfectly elastic currency without creating the slightest depreciation of money or danger of loss to banks or Government. It should provide a perfect way of obtaining money to move the crops, and furnish an all-sufficient means of preventing or breaking panics. It should make the money of the United States still more current and acceptable in all parts of the world. This would make the nation greater in the eyes of other nations, and give the United States Treasury a proper command of the commerce and finances of the world, within ten years after being put into operation. All the Government need do to effect such change in the finances of the