he reads that part of the President's Message of Decem ber, 1906, which is devoted to Secretary Root's visit to South America. The third International Conference was held at Rio Janeiro from July 23 to August 29 and the Secretary of State was sent as our delegate. It was considered a great honor by the South American republics that we should send so high an official and one of such distinction. He was cordially received and made an honorary President. How well Roosevelt understood the value of such a meeting is seen in the words of his Message. "The example," he wrote, "of the representatives of all the American nations engaging in harmonious and kindly consideration and discussion of subjects of common interest is itself of great and substantial value for the promotion of reasonable and considerate treatment of all international questions." After the Conference Root "visited Brazil, Uruguay, Argentina, Chile, Peru, Panama and Colombia. He refrained from visiting Paraguay, Bolivia and Ecuador only because the distance of their capitals from the seaboard made it impracticable with the time at his disposal. He carried with him a message of peace and friendship, and of strong desire for good understanding and mutual helpfulness; and he was everywhere received in the spirit of his message." There was a misunderstanding in regard to the Monroe Doctrine. The prevalent idea was that it involved an assumption of superiority and the right to exercise some kind of protectorate by the United States over the South American republics. "That impression," said the President, "continued to be a serious barrier to good understanding, to friendly intercourse, to the introduction of American capital and the extension of American trade." "It was part of Secretary Root's mission to dispel this unfounded impression"; and he therefore made an address at Rio on July 31, in which he said: "We wish for no victories but those of peace; for no territory except our own; for no sovereignty except the sovereignty over ourselves. We deem the independence and equal rights of the smallest and weakest member of the family of nations entitled to as much respect as those of the greatest empire, and we deem the observance of that respect the chief guaranty of the weak against the oppression of the strong. We neither claim nor desire any rights or privileges or powers that we do not freely concede to every American Republic. Let us preserve our free lands from the burden of such armaments as are massed behind the frontiers of Europe." The arches which spanned the streets in the city of Buenos Ayres had the names inscribed on them of Washington, Jefferson and Marshall and also those of James Monroe, John Quincy Adams, Henry Clay and Richard Rush, a silent testimony to the friends of South America who had labored for them in the greater republic. It was a "graceful courtesy" on the part of the Government of Brazil that the building in which the Conference was held was labelled "Palacio Monroe." The President said, "Our grateful acknowledgments are due to the Governments and the people of all the countries visited by the Secretary of State for the courtesy, the friendship and the honor shown to our country in their generous hospitality to him." 1 In these words the President represented the sentiment of the American people. 1 Review of Reviews, ed., 966, 967, 968, 969, 970. CHAPTER XV NINETEEN hundred seven may be called the Panic Year. In making a study of the panic of 1857 I wrote, "The reason of panics lies deep in the human heart." Passing through the panic of 1873 as a business man, those of 1893 and 1907 as an investor, I have seen no reason to change this opinion. Accepting the theory of periodicity of panics it is unnecessary to explain fully why the period is not always the same; sixteen years elapsed between 1857 and 1873, twenty between 1873 and 1893, and fourteen between 1893 and 1907. But the cause is always the same. If men were always wise, if they themselves or corporations in which they held stock never ran into debt, if there were never fluctuations in the prices of produce — in short if all business was done for cash, if men never incurred obligations which they could not at once meet, if they did not spread out with the idea that every extension, every conversion of liquid into fixed capital meant a larger income from their enterprise, financial panics would never occur. But a society of that kind would lack commercial energy, would cease its material progress and, in fact, would be impossible in one based on European civilization. Taking into account the actual state of affairs debt seems a necessary adjunct. Certain men have more energy than money; others more money than energy. It was entirely natural then that out of this condition should be developed on the one side the manager and the Banks are the promoter and on the other the investor. basis of all financial affairs and they are deeply in debt to their depositors. It is a commonplace that the function of a bank is to lend money to borrowers at a higher rate of interest than it pays its depositors. Financial panics mean a loss of confidence, and one of its marks is that Savings Banks depositors start a run on banks where their savings are placed. This puts a strain on National Banks which have a large amount of Savings Bank money and besides have their own troubles to face in the vain endeavor to collect their loans and to meet the demands of their own depositors. So far as I know such have been the characteristics of the panics of '57, '73 and '93. Theodore Marburg in his business dissertation attempted to show that "each recurring panic has its own special causes" but to my mind he in no way traverses the general law. It is true enough that 1857 and 1873 were caused by the too rapid building of railroads, that the operation of the silver purchase provision of the Act of 1890 was a contributing cause to the panic of 1893, but if one needs one word to describe the cause of all these he finds it in "overtrading." . A Boston banker found in a printed description of the panic of 1857 substantially the same characteristics as were passing before his eyes in 1907. A. Piatt Andrew, Assistant Professor of Economics at Harvard University, in an article printed in the New Year's number of the New York Journal of Commerce on January 2, 1907, found a close parallel between the situation at the beginning of the year 1907 with that of 1857, and wrote further 1 Address before the American Academy of Political and Social Science, April 10, 1908. that a financial panic might occur during the year as it had a half a century earlier.1 The devotees of high finance ascribed the panic wholly to the Roosevelt policies both "legislative and executive." A cartoon in Life pictured Roosevelt emerging from a bear hunt in the South with the usual eyeglasses, showing his front teeth on the broad grin, dancing in high glee and shooting to the death "Big Game" labelled "prosperity." The cartoon represented the general feeling among financial men as is shown in Roosevelt's speeches and messages, in his private letters and in varied recollections of the period. Everywhere that these men congregated, the conversation was Roosevelt and the financial ruin which he had brought upon the country. A glance at Roosevelt's own description will be useful. "We have our ups and downs," he said on October 22, "no law and the administration of no law can save any body of people from their own folly. If a section of the business world goes a little crazy, it will have to pay for it; and being excessively human, when it does pay for it, it will want to blame someone else instead of itself. If at any time a portion of the business world loses its head, it has lost what no outside aid can supply. If there is reckless overspeculation or dishonest business management, just as sure as fate there will follow a partial collapse. There has been trouble in the stock market, in the high financial world during the past few months. The statement has frequently been made that the policies for which I stand, legislative and executive, are responsi Letter of A. Piatt Andrew, Oct. 15, 1921; Boston Daily Advertiser, Roosevelt, Speech, Oct. 22, 1907, Review of Reviews, ed., 1964. |