The American Panic.
From the London Saturday Review.
Although it is far from certain that the panic in New-York and the Atlantic American States has been altogether produced by the progress of genuine commercial mistrust, its existence is not to be questioned. Several banks are in difficulty from the advances they have made to railroads, and all forms of railway securities are extraordinarily depreciated. But how far the railroads deserve the disfavor into which they have fallen, is a question not quite decided by the present state of the share market. There are certain illegitimate influences, which, as we shall show, have been industriously brought to bear on them; nor until these are allowed for, can the commercial opinion of New-York be regarded as an altogether reliable barometer. The railways of the Northern and Northwestern States are divisible, it should be observed, into two classes–those which connect emporia with each other, and those which simply enable new countries in the West to communicate with the Atlantic coast. There are some circumstances about the last which Englishmen, on the look-out for a high rate of interest, would find it worth their while to attend to. On their first formation these Western railways, though grossly over-puffed like everything American, are rarely unprosperous. They set off at the outset with what may be called a burst of creative energy. All the land on each side of the line rises enormously in value. Speculators and settlers hurry to and fro between the stations. Farms are rapidly taken and towns commenced, to which building and agricultural materials have to be brought from immense distances; and then, for a year or two, almost everything that supports life is purchased in the older States with the savings of the immigrant population, and travels to the buyer in the goods trains of the railroad. But this is obviously a kind of prosperity which tends rapidly to exhaust itself. A district in the Western States, when once settled, contributes almost nothing to railway receipts. It is nearly self-supporting; most articles of consumption are raised on the farms; and the few luxuries in demand are procured at the little towns which come into being at the same time that the forest and the prairie are brought into cultivation. Americans tell us that a new Western settlement is something marvelous, and so it is; but surprise is invited by its comparative, not by its positive, advance. Contrasted with the desolation which it succeeded, it is worthy of all admiration; but it pays for a railway about as well as the poorest district in the poorest part of England. There is no old wealth; no demand for costly luxuries; no manufacturing industry; no tide of busy traffickers ebbing and flowing with the calls of business. Four-fifths of the interior of the Western American States would deserve to be described as in a condition of sheer stagnation, were it not that the point attained, though a low one, has been reached from zero with a celerity unparalleled in the history of civilization.
The state of things we have been describing is liable to be varied in many ways; but no Western American railway can be relied upon as permanently profitable, which does not unite an exporting State with or more large emporia, into which the surplus produce of a very large district of country is regularly drained. It happens, however, that one or two of the lines mentioned by the American intelligence as most discredited in the market, do precisely exhibit these favorable conditions. How is this to be accounted for? We suspect that the English public is but little prepared to hear of a phenomenon which has recently presented itself in New-York, and more or less in all the American cities. This is the systematic intervention of journalism in mercantile affairs. The money article of many powerful American papers has long ceased to be regarded as a perfectly impartial record of prices and fluctuations, but it is only lately that journals have begun regularly to take sides in the stock and share markets. The Bulls and the Bears have now their respective organs. At the head of the Bear party is the notorious New-York Herald. For a long period, the mission of this journal was to palm upon the public what are called fancy stocks. Silver mines in Mexico, copper lodes on Lake Superior, patent washing companies, nearer home, found in the Herald an unfailing patron. Soon, however, some of these speculations exploded with serious consequences to the purses of the shareholders, and not a little damage to the character of the journal, which had praised them so steadily; and since then the New York Herald has devoted itself to negation, instead of assertion. It has steadily libeled every one of the great investments preferred by American capital. The other side of the controversy has, it is true, been taken up by all the more respectable newspapers in New-York, but in such a quarrel the disputant who maintains the affirmative necessarily argues at a heavy disadvantage. In the strange biography which the founder and proprietor of the New-York Herald has suffered to be published about himself, we are informed that JAMES GORDON BENNET studied journalism under a matter who produced the very greatest results by day after day calling upon particular firms to “pay their debts.” In brief, when this gentleman had every day for a week published some such adjuration as this, “I say, Smith, Jones & Co., why don’t you pay your debts?” it is generally followed that Smith, Jones & Co. broke. The New-York Herald, formed in this promising school, has now for a year past carried these early lessons into practice against all the particular railways. It has morning after morning asserted that their receipts were down to nothing, their paper at a discount, and their balance sheets a fraud. So sweeping a condemnation may really have included some insolent undertakings; but the universal opinion of Wall-street is that some of the soundest concerns in the country have been simply destroyed by slander. For, though the initiated in New-York were on their guard, the small capitalist over the country, on whose confidence the market position of all investments ultimately depends, were frightened into timidity, and their increasing rejection of railway securities has told at last upon every Company in the United States.
At one time we were a little in danger of having to contend with influences of this sort in England. The Royal British Bank suffered under a series of attacks from an obscure London periodical, exactly resembling those of the New-York Herald; and, as it turned out that the undertaking assailed amply merited its fate, it would have been wonderful if the example had not been followed. In the midst of the uneasiness caused by the British Bank exposures, a well-planned attempt was made to destroy the credit of a respectable joint-stock Banking Company; but the conspiracy was met by an appeal to justice, and the conspirators were utterly routed. On the whole, we have been remarkably free on this side of the Atlantic from the sinister intervention of journals in monetary affairs. We should, indeed, be complimenting at the expense of truth, if we were to say that we never observed a trace of irregular influences in the money-articles of some of our contemporaries; but it is at least true that the greater the authority of an English newspaper, the higher is its character for purity. It will always be to the credit of the Times that it has never been seriously charged with dishonestly weighing the scales of criticism, either in the Bull interest or in that of the Bears.