CAUSES OF CRISES AND CYCLES 189
us to classify or systematize them. There is no recognized condition of the
banks, or currency, or trade, which has existed at the happening of two or
more crises, so similar as to form the basis of logical deductions for the
guidance of financial pilots.
His own explanation of the crisis of 185%, upon which he was commenting,
lay in a long list of varied causes, and his proposals ran
through the gamut of banking reforms commonly urged at the
time, with suggestions in addition for a number of changes in the
methods of doing business.
“In every country where credit enters extensively into the
transactions of people, there must always be liabilities to what are
called panics,” thought Condy Raguet.? And Gallatin wrote:
“All active, enterprising, commercial countries are necessarily
subject to commercial crises. A series of prosperous years almost
necessarily produces overtrading. Those revolutions will be more
frequent and greater in proportion to the spirit of enterprise and
to the extension or abuse of credit.” 3 Walley admitted, despite
his denial that the causes of different crises are sufficiently uniform
to permit of generalization, that there would be little danger
of crises, at least of an alarming nature, if all business were conducted
by barter, or with money. It is to the introduction of the
credit system that these troubles must be laid.
Credit was believed to play a threefold part in producing crises.
First, it enabled men to “overtrade” in periods when mutual
confidence was high. Secondly, it formed a network of interrelations
through which the insolvency of a few merchants embarrassed
a great many others. “It is the practice of giving credit
that implicates trading men so much with each other, so that one
very often involves many others in his misfortunes or errors,”
t Walley, The Financial Revulsion of 1857 (1858), p. 9. This paper was read before
the American Statistical Association. Its author was a bank commissioner of
Massachusetts who had previously gained prominence as a lawyer, Congressman,
and financier.
* Examiner and Journal of Political Economy (1834), ii, 127.
? Gallatin, “Suggestions on the Banks and Currency” (1841), Writings (Adams’s
edition), iii, 385.
* Walley, The Financial Revulsion of 1857 (1858), p. 8.
