Page:Oregon Historical Quarterly volume 25.djvu/316

t* 278 JOHN TILSON GANOE &' & In the first place business conditions, as we have noted, had their effect. The period 1867 to 1873 was a period of unlimited speculation. Railway building was a mania. More than that, the imports of the United States had in- creased so rapidly that United States had not the ability to pay for them. Added to this was the Franco-Prussian War of 1870, which gave Germany an indemnity and pro- duced an abnormal stimulus in business conditions, an ab- normal demand with its consequent rise of prices. Then, too, when we consider the speculation in metals, we can see that soon a turn in affairs must have taken place. This period of rapid expansion in railway construction caused the demand to increase for iron and consequent over expansion in this industry and the rise in price of iron and railway material. Consequently, an estimate made in 1866 would be greatly under the price that would actually have to be paid in the years 1871 and 1872. These were the conditions that Holladay faced during 1871 and 1872. When he negotiated the loan for ten and a half million dollars money was easy to obtain, especially from Germany. The realization that conditions were un- stable and that men had invested beyond their ability to pay back brought on the panic of 1873, resulting in a depression of industry for several years. This meant the earnings of the railroads would be lessened. A rail- road built during the period of inflation was forced to try to pay out during a period when earnings were low. Moreover, in Holladay's case the railroad had not been completed to the state line, so he could not depend upon through traffic which had been considered in the estimates. 2. Earnings and Rate Questions. In the second place the failure the railroad made to bring in the estimated returns predestined the road to be a failure. At the time Holladay gained control of the rialroads, the opinion that the mines would be a great source of revenue to the railroads had not been entirely exploded.