Disturbances of the course of trade arise largely from the necessity of readjusting its conditions to the common standard and measure of value. The common standard of value is money, and the conditions of trade which require to be adjusted to it are the price of commodities, and contracts and obligations of all kinds. Contracts and obligations, agreements to pay money at a future time for something presently received, form the credit system of modern commerce. Inability to meet these obligations constitutes bankruptcy, and a great multiplicity of bankruptcies occurring simultaneously constitutes a commercial crisis.

If all persons were in the habit of paying immediately for everything received, there could be no debts, and consequently no failures nor panics. Those nations where the credit system has received its widest development, and where consequently the spirit of commercial adventure and speculation is most rife, are most exposed to the ravages of recurring periods of bankruptcy.

Money panics are usually preceded by years of active trade, high wages, multiplication of new enterprises, and general prosperity. Each period of abnormal and exciting prosperity is followed by a violent collapse, resulting in increased rates of interest, closing of factories, failures of banks and mercantile houses, and enforced idleness of large numbers of people, often resulting in extreme social disturbances. There is no remedy except in the concurrence of mankind to keep out of debt and to avoid all temptation to make gain without equivalent labor. This is impossible, however. Civilization is so interlaced with the credit system that it is idle to talk of abolishing it. The interests of mankind require that it should continue, even at the cost of its abuses.

There is, too, a desire for gain without labor which is legitimate. Nine-tenths of all the inventions and discoveries which have advanced mankind from the stone age to the age of electricity have had their origin in this desire. It may be, too, that an occasional crisis is a good thing, inasmuch as it shows commercial leaders by an object lesson the influences which tend to make trade successful or disastrous.

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