others on our present tariff list, the combination of specific and ad valorem rates conceals, and at the same time achieves, duties of from 75 to 100 per cent. Where the domestic producers ask for so great a handicap on their foreign competitors, the presumption is against them. Either they are trying to do work for which our resources and our ways are not fitted, or else (as seems here to be the case), they are not abreast of progress in their own industry.

Returning now to such cases as were first considered-structural steel, cotton gloves, nippers and pliers-we have two questions to consider. The first relates to the expediency of the advances in duty; the second to the methods by which the advances were brought about.

On the first question, the answer must turn chiefly on one's opinions regarding the advantages or disadvantages of protective duties. The convinced protectionist will believe that the domestic production of these several articles is desirable per se. A check to imports always brings advantage to the country. Whatever duties are necessary in order to "acquire" a new industry are justified.

And on the second question also, one's attitude toward the fundamental question affects the answer. The protectionist will be likely to say: This is simply the way of the world, or at least the way of the world in the United States. Our legislative methods are in every direction unsystematic and irresponsible. Tariff bills are inevitably dealt with as are river and harbor bills and general appropriation bills. The only way in which a desired result can be brought about has been through the influence of individual legislators and in the traditional ways. We cannot escape log rolling, private interviews with influential politicians, settlement of details in quiet committee meetings.

The opponent of protection, on the other hand, will smell corruption. Probably he is mistaken in this score. The legislators have a pecuniary stake in the rarest of cases. The only sort of "corruption" that plays any considerable part is that of contributions to party chests; and the persons who make such contributions, as well as those who receive them, may maintain in good faith, that the funds are used in the promotion of a policy believed to be sound, not only by themselves, but by the majority of the voters.

None the less, and quite apart from any questions of private interests, there seems now to be a conviction that our legislative methods should be changed so far as the tariff is concerned. Whatever may have been the inevitable methods of the past, a more open and deliberate procedure should be followed in the future. It may be a question how far the reaction against protectionism which seemed to show itself in the recent elections, stands for a permanent change in the public's attitude. Very possibly it is only a blind revolt, holding the party in power responsible for high prices, depression in business, and all other things unwelcome. But there is a general belief that the country should know more about the details of tariff legislation, and should know about them in advance. If increases of duty are to be made, let them be made openly, and let the reasons be stated. If a domestic producer is to be helped by a handicap on foreign competitors, let it be made clear from the start just what is to done for him and just what a given tariff provision means. Let there be no more jokers.

Further, there is a strong conviction that inquiry should be made and publicity should be secured through some agency other than the House and Senate committees. These have an extraordinary multiplicity of details to consider. They are so wearied by prolonged and repeated hearings, crowded into a few weeks, that it is impossible for them to give serious attention to all the matters presented. It is not to be wondered at that the Senate committee refused to have public sessions. The House committee, which had much more time for preparation, was almost swamped by its hearings. The Senate committee, which of necessity had less time, naturally felt that it would be swamped once for all. But this situation, perhaps making star chamber procedure inevitable gives opportunity for covert changes, for concealed pressure from private interests, for irresponsible legislation. Hence the demand for some permanent body, equipped to make investigation, and to make a judicial report as to the significance of proposed changes. Such cases as have been considered in the preceding pages show how tariffs should not be made.

Harvard University.

F. W. TAUSSIG.

SEASONAL VARIATIONS IN THE NEW YORK MONEY

MARKET

It was nearly a half-century ago that W. Stanley Jevons read before the Statistical Society of London his classic paper on the Frequent Autumnal Pressure in the Money Market, and the Action of the Bank of England. Since that time several others have made careful studies of the seasonal movements of the London money market.2 The subject of seasonal variations in American money markets, however, has been largely neglected by economists, although the fact that the United States is to such a large extent an agricultural country makes the subject one of great importance on this side of the Atlantic.

About two years ago the writer undertook the preparation of a report for the National Monetary Commission on the subject of Seasonal Variations in the Relative Demand for Money and Capital in the United States. The object of the report was to throw light upon the regularity and the extent of these seasonal variations, upon the degree to which our currency and credit system responds to them, and finally upon their probable influence upon the country's economic and financial life. This reports has recently been published and the present paper is largely based upon data which it contains.

The seasonal swings of the money market are quite varied in different parts of the country, and as limits of space prevent a consideration here of more than one city, we shall confine ourselves largely to New York City, the country's principal money market.

For expressing and comparing the seasonal movements of various money market phenomena, index numbers computed by the following method1 have been employed. Each year is taken as a unit; the average rate (or amount, as the case may be) for

5

Journal of the Royal Statistical Society, XXIX, (June 1866), 235-253; reprinted in Jevons, Investigations in Currency and Finance (London, 1884). 'Cf. for example, G. Clare, A Money Market Primer, 2nd edition (London, 1902), chap. 8-11, and charts between pp. 140 and 141; also R. H. Inglis Palgrave, Bank Rate and the Money Market (London, 1902), chap. 11-20. Senate Doc., No. 588, 61 Cong., 2 Sess. This report will be cited in future references in this article merely by the word Report.

*For a fuller explanation of the method of computing these index numbers, and discussion of their merits and defects, see Report, 13-15.

⚫ Ibid., 22.

the lowest week in each year is designated by an index number of 0, that for the highest week in the same year by an index number of 100, and the others are pro-rated. The weekly index numbers so obtained for each of the nineteen years, 1890-1908, covered by the study, are then combined by averaging together those of the nineteen first weeks, then those of the nineteen second weeks, and so on throughout the fifty-two weeks of the year. The resulting composite is treated as the criterion of the regularity of the seasonal variations during the period.

For each of the phenomena studied simple averages of the rates (or amounts) themselves are also given, along with the index numbers. These averages are more satisfactory evidence than the index numbers concerning the extent of the seasonal swings.

The seasonal movements of some of the more important money market phenomena are summarized in the accompanying table, and expressed graphically upon the two charts. Chart I shows the movements of call interest rates, discount rates on 60-90 day two-name commercial paper, percentages of bank reserves to deposits of the New York associated banks, and the circulation of deposit currency as evidenced by New York clearings-all phenomena relating to New York City considered by itself. Chart II is concerned with phenomena showing the relations of the New York money market with the money markets of other places, i. e. domestic exchange (Chicago), internal currency movements, sterling exchange, and gold imports and exports. There is also added to Chart II a curve (logically belonging to Chart Io) showing the seasonal movements of bond prices.7

The best two criteria for seasonal fluctuations in the New York money market are probably call interest rates on the New York Stock Exchange, and percentages of reserves to deposits in New York associated banks. These figures are crucial figures in the money market, they are very responsive to changing conditions, and reflect the immediate situation more correctly than do interest rates on time obligations whch involve to a greater extent the anticipating and discounting of the future. On the other hand, rates on time obligations, being less susceptible to minor and temporary influences, bring out more clearly the broad seasonal "The placing of this curve on Chart I would have unduly crowded the chart. See below, 47-48.

swings, although the varying degrees to which such a rate discounts the future renders it an unsafe guide for marking the beginning and ending of seasonal swings. A comparison of the curve for call rates (curve A) in Chart I with that for interest rates on 60-90 day two-name commercial paper (curve B) will show this distinction. In the following discussion the criteria used will be call rates and bank reserves.

Ignoring minor flunctuations, we observe the following five seasonal swings which occur with a high degree of regularity.

The first swing is a pronounced easing up of the money market beginning about the first of the year and extending until well along in February, making the latter part of January and the forepart of February normally a period of "cheap money". For the nineteen years, 1890-1908, the average call rate fell from 6.4 per cent for the first week of the year to 2.5 per cent for the seventh week, and the average index number from 43.4 to 9.8. With the exception of the year 1895 the seventh week was lower than the first week in every one of the nineteen years. The figures of the New York bank statement normally show a progressively easier money market during the first few weeks of the year, although they reflect the subsequent reaction earlier than do call rates. From 28.6 per cent for the first week, the average percentage of reserves to deposits rose to 30.3 (the highest point in the year) for the fourth week, while the average index number rose from 44.3 to 86.9. Every year showed a higher percentage of reserves for the fourth week than for the first.

The causes of this easing up of the New York money market during the first few weeks of the year, like those of the other seasonal movements to be studied, are found partly in local conditions, and partly in conditions outside of New York. Among the causes for this first movement may be mentioned: (1) The natural reaction-in part psychological-which results from the

The Report gives also the figure for four months time paper. One of the most interesting and difficult problems suggested by the investigation, is that of the correlation in time among the seasonal movements of different money market phenomena.

The seasons vary so from year to year, i. e., in some years they are earlier and in some years later; and the testimony of different indexes to money market movements so frequently differ by a week or so with reference to the beginning and ending of these seasonal swings, that it seems best not to attempt to mark them off with precise dates—a procedure which would suggest a false idea of their accuracy.