CAUSES OF OUR RECENT FINANCIAL TROUBLE.
[From the Degradation of Wall Street, in Leslie’s Monthly for December.] THE Shipbuilding scandal sums up in itself the weaknesses, follies, and vices of the whole chapter of what Wall Street calls its great industrial boom—the period which saw the rise and decline of the billion-dollar Steel Trust, the $75,000,000 Copper Trust, the Asphalt Trust, the International Ship Trust, the Consolidated Lake Superior, and other enterprises formed on the same exaggerated notion of prudent company finance. When conservative history, some decades hence, reviews the three past financial years it will probably set forth as the three characteristic features of the movement, (1) the absence of any intelligent view of the true relation between market prices and intrinsic value; (2) the utter disregard in the industrial combinations of principles which had been for years observed by the manufacturers whom they had bought out, and (3) the confidence apparently entertained by experienced financiers in the continued and endless gullibility of the investing public. It was part of the penalty which has been inflicted on these promoters of inflated enterprises that they came to share themselves in the delusions into which they had led the public. Some of them branched out recklessly into buying the stocks of other trusts, and carried their purchases so far that, immensely rich as the “boom” had made them, they were forced to borrow money to keep up their extended speculations. In the case of one prominent trust financier, the president of an enormous combination, common report of his wild speculations of this nature forced the directors to require his resignation. Other millionaires of the same recent growth subscribed huge sums to these “underwritings,” reckoning that the public would easily buy all the stocks, and that their own money would come back to them, with a few million dollars in “commissions.” Very fortunately, the public came to its senses in time and refused to buy the stocks. The “syndicates” had to pay the money which they had expected to keep, and in return for it got nothing but the stocks of whose real value they were unpleasantly aware, and which they had hoped to sell at false values to the confiding public.