a commission of one-quarter or one-half per cent. on the balance, making the poor debtor pay 7 or 8 per cent. per annum. 9. With what classes are the evils of credit most conspicuous? With the working classes. Many houses sell goods of all kinds on weekly or monthly payments, thus inducing poor people to buy more. than they can pay for, and if any illness, suspension of work, or other misfortune occurs, then there is a stoppage on the payments, and the life of the purchaser is never free from the pressure of the vender. There is also the famous "hire system," which causes the payment of three times the value for articles. 10. What kind of manufactured articles command cash returns? Tulle houses are the only, or nearly the only, ones in trade in which credit is not allowed. All perishable or edible goods should be paid for in cash, and are generally so paid, as no lien exists for the security of the vender. 11. Are credits of record (mortgages and judgments) prevalent; and, if so, among what classes? Such credits are rarely employed, and are the specialty of a class who, having a small sum of ready money, are induced by notaries to buy a plot of ground and build a house thereon, and, the funds being exhausted before the house is completed, the notary furnishes the money for the unpaid portion of the builder's bill and takes a mortgage upon the premises. 12. When a person has once failed, or been discredited, can he resume, and what are the obstacles to such resumption? If he has failed evidently through misfortune, and not through misconduct or bad character, he can reinstate himself in business, but will even then labor under difficulties and suffer from want of confidence. Seldom has any one who has failed succeeded in the same district or country. 13. Is bankruptcy frequent? No; the laws on the subject in France are very severe, and this precaution renders bankruptcy or fraudulent failure quite exceptional. 14. To what extent do relief acts in bankruptcy prevail? A bankrupt can seldom resume business in France under his own name or for his own account. 15. Are fortunes readily made and lost? No. French people are not speculative, and generally prefer small fortunes slowly accumulated to great risks incidental to acquiring rapid or large fortunes. After realizing a sufficient sum to yield a moderate income, they prefer to retire from business rather than incur the risk of losing all that they had toiled for. 16. What is the general effect of credit? Credit wisely asked and granted can be considered as the life of trade and basis of business. Unfortunately the public ask for more than reasonable credit, and it is granted without sufficient information of the standing of the debtors. If more discrimination and a closer scrutiny were given to the subject of granting credits, they would inure to the advantage of debtor and creditor, and prevent the former from incurring obligations beyond his real force and income. UNITED STATES CONSULATE, CHAS. P. WILLIAMS, Consul. Rouen, France, July 12, 1883. SWITZERLAND. BERNE. REPORT BY CONSUL-GENERAL CRAMER. I have the honor to acknowledge the receipt of your circular-dispatch of May 15, asking for information concerning the system of credit which prevails in this consular district, and its effect on the general prosperity thereof, and submitting a series of interrogatories in relation to this subject, replies to which are requested. Before answering, seriatim, these interrogatories, I beg to observe that the canton of Berne is largely an agricultural and cattle-raising district. With the exception of the manufacture of watches in the Bernese Jura, and the manufacture and export of cheese in the Emmenthal Valley, there is little industry and foreign commerce in this canton. Hence the system of credit in vogue here possesses, to some extent at least, a peculiar form. 1. Does credit stimulate trade? In general, credit stimulates trade; but it also intensifies, if it does not hasten, financial crises. 2. Are people averse to contracting debts? No; on the contrary, to give and to take credit is here carried on to such an extent that general prosperity is already injured thereby, and will probably be injured still more in future. The credit system is extensively used not only in trade and commerce, but even in the purchase of the necessaries of life from grocers, butchers, bakers, tailors, shoemakers, and even among employers and employés. Monthly, quarterly, semi-annual, or annual settlements are the rule, instead of cash payments. This state of things injures especially the small traders, and affords a great temptation to the laboring classes to spend their earnings for luxuries and amusements. The same is true in regard to real estate, both in cities and in the country. Large parts thereof are heavily mortgaged, so that in consequence of several years of partial failure of the crops the state of agriculture is in a precarious condition, the proceeds thereof being scarcely sufficient to support the parties and to enable them to pay the interest on their debts. The same is true with reference to the erection of large and expensive hotels and other buildings. The granting of extensive credits to specu lators in these matters has brought financial ruin upon bank-institutions and many private parties. This whole matter was carried on to excess. 3. Are there any sumptuary laws or regulations concerning credits? There are no laws regulating credits. 4. To what extent does credit prevail in proportion to the volume of business? As has already been indicated under 2, the credit system in several branches of business is largely in excess in proportion to the volume of business, while in reference to the manufacture and export of watches and of cheese the proportion is said to be a normal one. 5. To what extent do losses incidental to business prevail? At the present time losses incidental to business are abnormally large, but this is to be accounted for from the fact that in prosperous times several branches of business have been extended beyond all reasonable limits, especially in regard to the building of hotels and houses in new quarters of different cities. 6. Do tradesmen extend credit to mechanics and laborers? Yes, as already stated under 2. 7. What advantage have cash buyers? The advantage consists generally in the granting of from 2 to 5 per cent. discount of the price of articles. 8. Is interest demanded on time accounts? In ordinary commercial transactions this is not generally the case, unless these accounts have a long time to run. 9. With what classes are the evils of credit most conspicuous? The reply to this question is already furnished under 2. 10. What kind of produce or manufactured articles command cash returns? This question in its present form can scarcely be answered. There are scarcely any articles that cannot be purchased on credit. 11. Are credits of record (mortgages, judgments, &c.) prevalent; and, if so, among what classes? The granting of credit upon mortgages, &c., is very prevalent here among real-estate holders and farmers, so much so as to cause grave anxiety among capitalists. 12. When a person in business has once failed, or has been discredited, can he resume, and what are the obstacles to such resumption? When a person has failed, by which he loses his civil rights, he may rehabilitate himself by satisfying all his creditors, which is generally done when the latter grant a reasonable reduction of the entire amount. 13. Is bankruptcy frequent? In consequence of overspeculation in real estate and the granting of extensive credits, bankruptcy is rather frequent. 14. To what extent do relief acts in bankruptcy prevail? There are no special relief acts in existence. If a bankrupt person cannot carry on his business in the name of his wife or in any other legal form the local authorities must come to his relief, i. e., aid in sup porting him and his family. ;, 15. Are fortunes readily made and lost? At the present time the general condition of commercial affairs is such that it is exceedingly difficult to gain a fortune by trading, and not infrequently long-established fortunes become heavily involved. 16. What are the general effects of credit? For trade and commerce, if they rest on a reasonable basis, credit is a valuable factor; but in enterprises of a precarious nature it hastens financial ruin. Among small traders the effect of credit is injurious, because it withdraws from the seller the necessary means of placing his business on a solid basis and of enlarging the same, while it prevents the purchaser from establishing an equilibrium between his income and his expendi tures. M. J. CRAMER, Consul-General. UNITED STATES CONSULATE GENERAL, ST. GALL. REPORT BY CONSUL BEAUCHAMP. In acknowledging the receipt of Department circular dated May 15, 1883, submitting certain interrogatories for answers, I have the honor to state that the question of credits being one which might be treated differently by different individuals, it occurred to me that the most feasible plan to arrive at a true solution of the subject as to the methods prevailing in this commercial center would be to address a circular-letter to prominent financial and commercial individuals in St. Gall most likely to be well informed on such matters, and the result has been satisfactory, as most all those to whom letters were addressed have taken considerable pains to answer the interrogatories propounded. The following are the condensed answers obtained from the abovementioned authority: 1. Does credit stimulate trade? In the abstract, credit naturally does stimulate trade, but when it is extended to the degree it is here it is like a two-edged sword, cutting both ways. The loose system of credits prevailing in the commercial district of St. Gall is considered reprehensible to the sound and healthful progress of commerce. Credit is too frequently demanded and too easily granted without a sufficient guarantee to bona fide transactions; the result is that disturbances in trade circles are frequent. When the doors to unlimited credit stand so wide ajar, people are apt to enter into much larger transactions than their resources on sound business principles would permit of, and when once entangled in the net of indebtedness invariably try to avert failure by contracting further debts and usually land in bankruptcy. These failures naturally affect not only the parties directly interested but the entire trade circle; that is to say, the lending product of commerce is more easily calculated into net profits when the bankrupts shall have been disposed of and the business reckoned on a clear basis. While the system of credits prevailing here is not as perfect as could be desired, yet it is plain that a large body of trades-people (or shopkeepers) would be unable to do business without it. The bulk of trade in this commercial district is divided into two distinct classes: the one supplies the foreign market, the other relates to home trade. The former usually represents thirty days, or cash, and the latter a six months' credit. 2. Are people averse to contracting debts? No; on the contrary, it is claimed they contract them with the suavity of a Turk, and regard them as a luxury, for debts are considered a good "set off" against the tax collector. If an owner of a farm or house and lot valued at 10,000 francs can manage to "blanket" the realty with a mortgage covering the above valuation he is freed from taxation, while if the property was clear of incumbrances, which is the delight of most American realty owners, it would be subject to a tax on its full value. It is asserted, and I have been informed by reliable persons that it is very common among large property holders to resort to this method of evasion in their tax returns, while their bank and stock accounts would more than doubly balance the incumbrances. It appears from this that England is not alone of the opinion that "debt represents wealth," but that Switzerland is heartily in accord with her. 3. Are there any sumptuary laws or regulations concerning credits? No. 4. To what extent does credit prevail in proportion to the volume of business? From 60 to 75 per cent. 5. To what extent do losses incidental to business prevail? From one-half to 1 per cent. 6. Do tradesmen extend credit to mechanics and laborers readily? Yes; and when the laboring classes follow this system they are more or less in the power of the tradesman, who, it is claimed, falsifies his accounts to a great degree, in order to extort as much money as possible from this class of customers. The mechanic and laborer running accounts are subject to much higher prices than if they were making cash purchases. 7. What advantage have cash buyers? In the retail business as a rule, where the purchaser is considered No. 1, there is no perceptible advantage. In the jobbing trade 5 per cent. discount, instead of six months' bills, is allowed. In the wholesale trade 2 to 5 per cent. discount is made in preference to three months' bills. American buyers are preferable to all others in this market, and are considered cash buyers with an advantage of about 5 per cent. 8. Is interest demanded on time accounts? Yes; from 5 to 6 per cent. per annum. 9. With what classes are the evils of credit most conspicuous? With the retail tradesmen, stock and grain speculators, and mechanics and laborers. 10. What kind of produce or manufactured articles command cash returns? Grain, eatables, provisions, &c. 11. Are credits of record (mortgages, judgments, &c.) prevalent; and, if so, among what classes? Credits of record are common among all classes, but more especially among farmers and realty holders. 12. When a person in business has once failed, or been discredited, can he resume, and what are the obstacles to resumption? He can resume by passing through the court of bankruptcy and paying 50 per cent., or by making settlements, with a release signed by three-fourths of the creditors. 13. Is bankruptcy frequent ? The following statistics taken from the records of the court of claims for the canton of St. Gall during the years 1879, 1880, and 1881 shall be my answer: Statement showing the number of applications made before the court of claims for the canton of St. Gall during the years 1879, 1880, and 1881. In the above applications all claims are included which were put in motion by operation of law, whether sustained or not. |