relaxing of the heavy strain on the money market incident to the accountings and settlements of January 1st. The end of the year is a time of considerable "window dressing" in preparation for January 1st statements and reports. Furthermore, large accumulations of funds in New York City are necessary in December to meet annual, semi-annual, and quarterly disbursements, such as interest on bonds and mortgages, dividends on stock, principals of maturing obligations, and the like. Of 887 bonds listed by the Commercial and Financial Chronicle (January 2, 1909, pp. 42-45) for which interest periods are given, 290 call for interest payments on January 1. Mr. J. H. Brookmire of St. Louis, a high authority on such matters, estimates that interest and dividend disbursements on bonds and stocks for January, in New York City, amount to approximately $225,000,000. The payment of these obligations releases the strain upon the banks and throws funds on the market seeking reinvestment. (2) A second cause is the return flow of cash to the New York banks which has been withdrawn in considerable quantities for holiday purposes. (3) By the first of January the crop-moving demand for money in the West and South has spent its force. The latter part of December, January, and the forepart of February, is normally a period of relatively high exchange rates on New York in Chicago and St. Louis, and the period in which the return flow of cash to New York City from the West and South principally takes place. This flow of cash is caused to a considerable extent by the practice of certain New York banks of paying two per cent interest on bankers' balances. The strongest net movement of cash from the interior toward New York City, of any period of the year, normally takes place during the first five weeks. Computing index numbers in the manner previously described and designating the week of maximum net movement into New York banks for each year by 100, that of the maximum net movement out of New York banks by 0, pro-rating the figures for the other weeks, and then taking the average figures by weeks for the ten year period 1899-1908, we find that the average index numbers for the first five weeks respectively were 87.2, 84.9, 90.7, 87.6, and 77.0 (Chart I, curve B). Of total receipts from points outside New York State, reported by the New York City banks to the Monetary Commission for the four years 1905-1908, amounting to $649,671,000, January receipts claimed $114,354,000. January had the largest receipts of any month in every one of the

four years.10 Large bank reserves are piled up as the result of this eastward movement of cash, the banks' supply of loanable funds increases rapidly, and interest rates naturally decline. (4) A fourth reason is found in the fact that January and February are months of relatively small freight traffic. The holiday trade is over. Traffic on the Great Lakes and other inland waterways is tied up because of the ice, while the cold weather and snow interferes with railroad traffic. (5) A fifth reason is found in the seasonal tendencies of our foreign trade.11 The four months of largest export trade in their order of importance are December, November, October, and January. There is normally a striking decline in our exports in February and March. In the United States exports are ordinarily paid for by dealers in foreign exchange at the time of shipment of goods so that the heavy exports for the four months ending with January have made large demands upon banking capital-demands which fall off rapidly in February. The import trade during recent years has normally been large in October, November, and December; and as bills for imports are ordinarily settled sixty or ninety days or longer after shipments are made, the banks normally receive in January and February considerable funds in settlement for goods imported during the last three months of the year. During January and the forepart of February sterling exchange, which ordinarily dominates the foreign exchange market, tends upward12 and gold movements tend to be relatively small.

The second important seasonal movement in the New York money market extends from about the middle of February until the forepart of April. During this period the relative demand for loanable capital advances rapidly to a high level which is maintained during the latter part of March and the forepart of April. This period is known as that of the "spring revival". From 2.5 per cent for the 7th week, the average rate on call loans (18901908) advanced to 4 per cent for the 14th week (forepart of April), while the average index number advanced at the same time from 9.8 to 23.8. The 14th week was higher than the 7th week in thirteen of the nineteen years; in four years the figures for the two weeks were the same, leaving only two years in which

Report, 124-129. "Ibid., 138. "Ibid., 138.

the 14th week was the lower.13 The average ratio of reserves to deposits declined from 30.3 for the 4th week to 27.7 for the 11th (latter part of March), and continued at approximately this level until the 15th week (middle of April); the average index number declined from 86.9 for the 4th week to 37 for the 11th week, and to 35.7 for the 14th. In sixteen of the nineteen years the ratio of reserves to deposits was lower in the 14th week than in the 4th; and in the three exceptional years (viz., 1898, 1907, and 1908), it was only slightly higher.

Among the principal causes for this "spring revival" may be mentioned the following: (1) There is the natural reaction— stimulated somewhat by the psychological buoyancy of spring time from the abnormally weak market which characterizes the latter part of the previous period. The low interest rates and high bank reserves encourage investment and speculation. Greater activity pervades the security market.14 New capital flotations are frequently held for the "cheap money" which is generally expected for February. (2) A second reason is found in the demands of agriculturists for the planting of crops. (3) A third is found in the increase in certain lines of trade activity, which normally takes place at this time of the year. Inland waterways are opened to traffic during the latter part of this period, and railroad traffic is released from the incubus of cold weather and snow. (4) A fourth reason is found in the comparatively large demands for funds for the settlement periods of March 1st and April 1st. One of the most striking temporary movements of the year in New York clearings (chart I, curve D), as well as in those of the country as a whole, is the sharp increase followed by an almost equally sharp decline about the first week in March, due primarily to the fact that March 1st is the common settlement day throughout large sections of the country, particularly the Middle West, for farm mortgages, and farm sales. 15 Dividends, moreover, are payable about this time on a large number of important stocks.16 April 1st, marking the beginning of a new quarter, is an important settlement day for which preparations must be made. Of the 887 bonds listed in the Commercial and

13 The years were 1896, in which the rate for the 7th week was 32 per cent, and that for the 14th was 34; and 1907, when the rates for the two weeks respectively were 434 per cent and 3 per cent.

Financial Chronicle (Jan. 2, 1909, pp. 42-45), for which interest periods are given, 162 call for interest payments on April 1st. (5) A fifth though minor reason is found in the flow of currency from New York to New England at this time. March and April are months of large shipments of cash from New York City to New England, as a result principally of heavy payments being made at this time through New York City by western and southern jobbers to New England shoe manufacturers,17 and, to a lesser degree, probably to the spring demands of New England farmers. The following figures show for the years 1905-1908 the shipments and receipts of cash reported by New York City banks for the months of February, March, and April, and the four years collectively, to and from New England States.18

92,492,000

Total 4 years During the entire period under review (7th to 15th week), the net interior movement of cash is toward New York City,19 but nothing like as strongly as during the preceding period. (6) A sixth cause, though a relatively unimportant one, is the fact that receipts of cash by the Federal Government are normally large in March and April,20 and during these months the sums tied up in the subtreasury are considerably larger than in the preceding two months. The average figures (1890-1908) for net balances of public moneys in Treasury offices for the first four months were as follows:

We may now pass to the third important seasonal swing in the New York money market, that is, a rapid weakening of the market beginning about the middle of April and ending with a very weak market in June and July (except for a strengthening at about the time of July 1st settlements).21

Call interest rates show a strong downward tendency from the forepart of April (14th or 15th week) to the latter part of June (24th or 25th week). They advance sharply about the time of July 1st settlements, and then return to the low summer level the latter part of July. The average rate fell from 4 per cent in the 14th week to 2.5 per cent in the 25th, while the average index number fell from 23.8 to 8. A reference to the figures for the individual years shows that the decline is a fairly regular one, the 25th week being higher than the 14th in only two years out of the nineteen. From the 25th to the 26th week (about first week in July) the average rate advanced from 2.5 per cent to 3.6 per cent, and the average index number from 8 to 16.4. In only one year (1900) of the nineteen, was the 26th week lower than the 25th, and in this year the difference was only that between 15% per cent and 13% per cent. A sharp decline takes place in the next three weeks in July, the average rate dropping from 3.6 per cent in the 26th week to 2.3 per cent in the 29th, and the average index number from 16.4 to 5.3. In thirteen of the nineteen years, the 29th week was lower than the 26th, in two years higher, and in four years the rates for the two weeks were the same. Turning to the movement of bank reserves we find that beginning the forepart of April the ratio of reserves to deposits moves upward, with minor interruptions,22 until the last of July. The average ratio advanced from 27.8 per cent for the 14th week to 28.7 per cent for the 30th week, the average index number rising from 35.7 for the 14th week to 65.4 for the 30th week. In fourteen of the nineteen years the percentage of reserves to deposits was higher for the 30th week than for the 14th.

The causes for this late spring decline in the money market, and subsequent summer depression are too familiar to require more than brief mention. Aside from the natural reaction from the

21

"July 1st interest and dividend disbursements in New York City are about as large as those for January 1st, and are estimated by Mr. James H. Brookmire to amount to about $225,000,000. Report, 28.

There was a sharp and temporary decline about the first week in July due to the demands for semi-annual disbursements.