One of the great dangers to which banks and discount houses are exposed in their business, and especially new banks, is that they are too eager to lend, too anxious to see profits made on paper. The main consideration with the buyer of a bill, as also with the bank manager who lends money against any kind of security, is to direct all his attention, immediately the proposition is made to him, to the question of the reimbursement of the sum advanced. He should avoid above everything the possibility of his mind being preoccupied with the question of the gain upon the transaction to the exclusion of the due consideration of what demands all his attention until he is satisfied that he can entertain the business at all, namely, the question of punctual reimbursement. The interest or commission is a secondary matter. Can we be sure that all givers of credit look sufficiently to this important part of the operation ? We are forced to entertain a suspicion that the joint-stock system has rather diminished the fierceness of the managerial light which was once brought to bear upon the responsibility of the persons asking for credit in the money market. The development of the banking system has entailed, as with most other things, a coarseness in the texture of the system which allows what ought not to escape to slip through. Over a larger surface the insidious worm eats its way to the reserve more successfully than when two or three persons, having a greater interest in the result, did the work which in these more rapid times is performed by one.

The larger the quantity of the floating capital that is laid down in fixed capital, which does not at once give a return, the wider spread will be the disasters which must always ultimately ensue from the consumption greatly exceeding the production. In the case of the establishment of new companies, for instance, upon an unusual scale, not only is a large amount of floating capital fixed, but the act of fixing it causes a great increase in the consumption of many of the prime necessaries of life. It is obvious, therefore, that while those companies cannot for some time restore the floating capital withdrawn, but, besides, are the means of increasing the unproductive expenditure at a dangerous period, the vicious circle has been entered which forms the foundation upon which commercial convulsions are built up.

Among the leading axioms which should guide the managers of credit institutions, the one demanding special consideration is that which requires floating capital to be employed as much as possible on short credit. Long credits are accompanied with a sort of ignis fatuus-a will-o'-the-wisp-which, in the shape of high interest or bonus commission, is very apt to lead the credit-giver into the marsh in which he is discovered floundering when the time comes for him to require a quick return of his pounds. Floating capital is necessary to keep up the production of things; if it is withdrawn and lent in too large proportions the candle is being burnt at both ends by the aid of a double draught. In the case of the transfer of floating capital into fixed, which is always accompanied by more or less of inflated credit, certain persons called promoters, in their efforts to benefit themselves in very many cases, are unconsciously benefiting the future at the expense of the present. Whether enterprises succeed or not some either positive or negative benefit is sure to be derived from them in the future. If the commercial results are nil, the community gains by the experience which is derived from a test having been applied. We have numerous instances of this all over the country. Railways and steamships that do not pay are often kept in working order for some time; and, although returning nothing, perhaps, to the original shareholders, open up and supply the means of communication between places whose industries languished for the want of such facilities. Incalculable benefits have been conferred upon millions of the lower orders in England by the Crystal Palace at Sydenham, yet it would be difficult to point to an enterprise which from first to last has been so signally unsuccessful in a commercial sense; without the liberal aid of credit that splendid building and those fairy-like grounds would never have existed. Many like examples may be found all over the world.

M. Victor Bonnet has well said when he remarks, in his book on ' Le Credit et les Banques d'Emission,' "Ce que nous venons de dire de la speculation, et de l'infmence heureuse qu'elle exerce sur les rapports economiques de la societe, s'applique, bien entendu, a celle qui est contenue dans des sages limites et qui s'appuie sur des ressources disponibles, et non pas a cette speculation a outrance que n'a de ressources que dans l'emprunt, et qui donne a toutes les valeurs des cours factices et exageres. On ne peut pas trop s'appliquer a combattre celle-ci, car elle est la source de tous les troubles financiers et de toutes les crises; et le premier moyen pour la combattre, c'est de ne pas trop encourager les avances sur valeurs mobilieres qui ne servent qu'a l'entretenir."

Some writers maintain that that which is most injurious to credit is sudden oscillations in the price asked for it and unexpected contractions. This is rather the opinion of those used to a system of credit which is not of the latest and most approved type. It may be remarked that those who require credit as a means, must take it upon the conditions to which all other marketable commodities are subject. Credit-takers have no right to depend upon being able always to obtain it to any extent they may require and at a fixed cost. Credit, like time, is money. The extent to which credit can be granted, especially in the higher commercial affairs, and the price at which it is to be obtained, must always depend upon circumstances which in their very nature are always changing, even although at times almost imperceptibly. Credit-takers must leave a margin for eventualities on the same principle as that which points out the impossibility to traders of carrying on their business successfully without capital. Operations, it is true, are engaged in conditionally upon the credit that can be obtained at any particular time; but the operator who commits himself to engagements on the basis of the available supply of credit remaining unaltered makes the same mistake as the captain who goes to sea provided only for the continuance of a fair wind.