The minutes of the last monthly meeting, held June 7th, were read and approved. REPORTS OF STANDING COMMITTEES. J. EDWARD SIMMONS, Chairman of the Executive Committee, reported the following-named candidates for membership and recommended their election: These gentlemen were, on one ballot, unanimously elected members of the Chamber. Mr. SIMMONS further reported the following resolution: Resolved, That the President be and he is hereby authorized to appoint a Committee not to exceed seven members with power to make the necessary arrangements for the One Hundred and Thirty-Eighth Annual Banquet of the Chamber, to be held in November next, at such time and place as the Committee may decide. The resolution was unanimously adopted, and the President appointed as the Committee: J. EDWARD SIMMONS, CHARLES S. SMITH, JAMES STILLMAN, CORNELIUS N. BLISS, JOHN S. KENNEDY, JOHN CROSBY BROWN. A. FOSTER HIGGINS, Chairman of the Committee on the Harbor and Shipping, reported the following preamble and resolution: Whereas, The Secretary of Commerce and Labor has appointed a Committee to revise the anchorage rules, and, if necessary, change the limits of anchorage grounds in New York Harbor, and such Committee is now considering whether or not the anchorage ground in the Hudson River known as the South Anchorage, and occupying the westerly half of the river from about opposite Twenty-third Street, New York, to above Forty-second Street, should be abandoned; and Whereas, The piers in the Chelsea District, between Thirteenth and Twenty-third Streets, are about to be occupied by TransAtlantic Lines, and will shortly be used for the accommodation of the largest ships afloat, and other Trans-Atlantic lines occupy piers to the northward of the Chelsea District, while four separate ferries land at or near the foot of West Twenty-third Street; now, therefore, be it Resolved, That in the opinion of this Chamber the continuance of the South Anchorage exposes vessels engaged in foreign commerce to unnecessary danger, and that the interests of the commerce of the port require that the South Anchorage be abandoned. The preamble and resolution were unanimously adopted. REPORTS OF SPECIAL COMMITTEES. JOHN CLAFLIN, Chairman of the Special Committee, appointed in March last to consider the subject of currency reform, submitted the following report: MR. MORRIS K. JESUP, President of the Chamber of Commerce of the State of New SIR: The Special Currency Committee appointed by you in March, 1906, to inquire into the condition of the currency and to suggest desirable changes, beg to submit the following report: The Committee held their first meeting on March 14th, 1906, and met at frequent intervals from that time up to the date of this report. Suggestions were sought by circular letter from members of the Clearing House Committees of principal cities, consultations were held with leading bankers in the United States and the experience of the heads of the chief European banks of issue was sought by letter and by personal visits of one of the members of the Committee, and is embodied in letters printed as an appendix to this report. The gold supply of the United States on July 1, 1906, amounted to $1,475,841,821. In addition to this gold, the country contained on that date $1,594,048,919 of other currency, as follows: United States notes $346,681,016, Treasury notes of 1890, $7,386,000, silver dollars (or certificates) $560,864,855, national bank notes $561,112,360, subsidiary silver $117,998,588- The total stock of currency was $3,069,884,640, of which $2,744,483,830 was in circulation, the remainder, $325,400,810, being held in the United States Treasury. The representative money is kept at par with gold either through direct redemption or through limitation of the supply. In view of the measures taken to maintain its equality with gold by the Act of March 14th, 1900, we do not think it necessary to recommend any further steps in this direction at the present time. One Important Defect.-We find, however, that the monetary system is defective in one most important respect, namely, flexibility, and that in consequence the country's business interests are at times seriously hampered. This defect is due to restrictions which are unnecessarily placed by law upon the use of bank credit. Nearly fifty per cent. of the people of the United States are engaged in agricultural pursuits, and the fruits of their toil are harvested in the autumn. These harvests and the marketing of the crops bring to bear upon the banks a two-fold strain, one for capital, the other for currency. The demand for capital comes from the buyers and shippers of agricultural products and is in the main satisfied by an expansion of bank loans and deposits, most of the payments being made by check and draft. The demand for currency comes principally from the farmers and planters, who must pay their help in cash. In the satisfaction of this demand the banks are unable to make use of their credit, but are obliged to take lawful money from their reserves and send it into the harvest fields. As a result, the money reserves of banks are reduced at the very time when the demand for loans is increasing, and in consequence the rate of interest is advanced. The Harvest Demand for Currency.-This harvest demand for currency and capital is first felt in July by the reserve cities of the southwest, as the winter wheat of that region ripens. At that time the country banks of Oklahoma and Kansas and the banks of the reserve cities in that region, especially those of Kansas City and St. Louis, are pressed for loans by the buyers of grain, and for currency in small denominations for the payment of harvest hands. Their surplus stock of currency being soon exhausted, these banks draw upon their balances in Chicago, New York and other eastern cities. Then, as the season progresses and crops in various sections of the country are harvested, a flow of currency from the East to the South, to the West and to the Northwest sets in and does not cease until the cotton, corn and wheat of the country are all marketed and the farmers' work for the season is over. This No statistics are available showing the total of this periodical movement of currency. The increase in the demand for loans on account of the crop movement cannot even be conjectured, but the shipments of currency from the banks of the cities into agricultural regions might easily reach $150,000,000. The amount passing through six Chicago banks last year reached $92,000,000. currency goes in the form of gold certificates, silver certificates, United States notes and national bank notes. All these except the bank notes, which form only a small proportion of the whole, are "lawful money," and their shipments, therefore, causes a corresponding reduction of bank reserves. Contraction in the Fall.-Since experience has proved that a dollar in a bank reserve is adequate protection for an indebtedness of four dollars due to bank depositors, it is evident that the withdrawal of $100,000,000 from the banking reserves of the country might lead to a contraction of bank loans and deposits by an amount four times that sum, namely, $400,000,000, such contraction being the result of the efforts of banks to increase their reserves by calling loans. Thus at a time when the legitimate demand for loans is increasing in order that the great agricultural yield of this country may be brought to market, the lending power of our banks is actually curtailed by several hundred million dollars. As a result, borrowers of all classes are forced to pay unusually high rates of interest, many business men are unable to secure customary accommodations from banks, and the prices of many articles of commerce suffer, the buying demand having weakened. Inflation in the Spring.-Unfortunately these evils are not the only ones that result from the defective character of our monetary system. During the winter and spring there is a return flow of lawful money from the country to the cities, and the surplus reserves of the banks in financial centres are increased as rapidly as they had been diminished in the fall. As the city banks pay interest on this money they cannot suffer it to lie idle in their vaults; hence the rate of interest is lowered, and speculation is thus unduly encouraged. Bankers are aware that the country will again call for this money in the fall and are careful not to lock it up in long-time paper. Most of it, therefore, is put out on call, and so finds its way into the hands of men whose interests are largely speculative. Here we have the secret of our so-called "spring boom" in speculation. It is the product of inflation, just as our autumnal stringency is the product of contraction. So long as reserve money to the extent of $150,000,000 is being shipped about the country, now lying for a few months in the vaults of banks, now circulating among the farmers and the planters of the West and the South, these alternate periods of excessive speculation and depression are inevitable. Due to Restriction of Bank Credits.-This condition of affairs is the product of legislation which the country has outgrown. By the National Bank Act our banks, while permitted to utilize their credit in the form of deposit accounts, thus rendering available many hundred millions of capital, are restrained from any natural or free use of that credit as a common medium of exchange. Between a bank note and a bank check there is no essential difference. The depositor, to be sure, is a voluntary creditor of a bank, and the checks written by him do not circulate widely without endorsement, whereas a bank note is an acceptable substitute for money among people who have little or no knowledge of the issuing bank. Nevertheless both the check and the note are representatives of money and both must be redeemed on presentation. They have, however, different fields of usefulness. The home of the bank check is the town and the city, where people keep their funds in banks. The bank note, on the other hand, properly belongs in the country, among people who have no bank accounts, with whom it is quite as effective as money itself. our banks were permitted during the crop-moving season to increase their issues of bank notes by from $100,000,000 to $200,000,000, these notes would go into the harvest fields and do the work which now absorbs legal tender money. Since the banks under such circumstances would not be obliged to pay out lawful money from their reserves, they would be under no compulsion to contract their loans as at present. If National Bank Notes not Available.-Unfortunately, the conditions governing the issue of national bank notes are such as to prevent there being availed of to meet the harvest demand for currency. National bank notes can be issued only by banks which have previously deposited with the Treasurer of the United States Government bonds of a par value equal to the face of the notes to be issued. A bank, therefore, before increasing its circulation is obliged to buy Government bonds. The experience of forty years since the enactment of the National Bank Act has proved that a bank note based upon bonds cannot be relied upon to take care of temporary fluctuations in the country's need for currency. In no single year since the passage of the National Bank Act has the volume of bank notes shown more tendency to increase in the fall than in the spring, nor has their volume ever shown any tendency to decrease when the currency was redundant. Their issue and retirement appear to have been regulated entirely by investment conditions in the bond market absolutely unrelated to the country's need for currency. |