The Project Gutenberg eBook of The Value of Money, by B. M. Anderson, Jr.

[466] I do not believe that we have sufficient agreement among the best students of the statistics of the precious metals to justify any statistical conclusions regarding the laws governing the industrial consumption of gold and silver. Even the facts as to the proportions of annual production of gold in recent years going to money and to the arts are in dispute. Thus, DeLaunay (The World's Gold, New York, 1908, p. 176), divides the annual output as follows: Exportation to the East, and loss, 16%; coinage, 44%; industry, 40%. The industrial employments are divided as follows: jewelry, 24% (of total annual gold production); watch cases, 10%; gold leaf, 2.25%; watch chains, 1.75%; plate, 0.75%; various uses, as pens, dentistry, chemical works, etc., 1.25%. DeLaunay's competence as an authority is attested by various writers, among them W. C. Mitchell (Business Cycles, p. 281). Mitchell, comparing DeLaunay's estimates with divergent estimates of other authorities, concludes that there is not sufficient evidence to justify definite conclusions. I do not think that anyone who has read the criticisms which Touzet has brought together (Emplois Industriels des Métaux Précieux, Paris, 1911, pp. 49-52) of the methods employed in the investigations by the Director of the United States Mint in 1879, 1881, 1884, 1886, and 1900, will have large confidence in the exactness of the results reached in those investigations. (See annual reports of the Director of the Mint for the years in question.) Touzet's careful and elaborate study employs the figures of these investigations as the best available, but with substantial misgivings. There are many indeterminate elements in the problem, as shown by both Touzet and DeLaunay, among them, the extent to which coin is melted down for industrial purposes.

The Director of the Mint would assign a much higher proportion of the annual output to coinage than would DeLaunay.

Earlier studies, by Soetbeer and Suess, seem quite out of harmony with these conclusions. (Suess, Eduard, The Future of Silver, Washington, Government Printing Office, 1893, pp. 51-53.) Suess thinks that virtually as much gold was going into the arts uses as was being produced, in 1892, and quotes Soetbeer (Litteraturnachweis, p. 285) as admitting that such a contention may not be demonstrable, but at the same time holding that it cannot be disproved.

In the face of what seems to be a really indeterminate statistical problem, I content myself with the theoretical conclusions in the text. Because I cannot find adequate grounds for confidence in the main source from which he has drawn his statistics, I refrain from a criticism of the theory and method underlying Professor J. M. Clark's ingenious effort to derive statistical laws for the elasticity of the arts demand for gold. (American Economic Review, Sept. 1913.)

[467] Cf. our chapter on "Economic Value," supra, and "Social Value," passim.

[468] F. A. Walker, International Bimet.

[469] See DeLaunay, The World's Gold, New York, 1908, p. 176. DeLaunay's figures indicate that the use of gold for gold leaf and plate is quantitatively a minor factor in the industrial consumption of gold. Jewelry and watch cases are the most important items.

[470] Capital prices of lands and securities might well be lower, if interest rates are markedly higher, and if land rents and "quasi-rents" suffer from higher wages and higher interest.

[471] Cf. chapter on "Dodo-Bones," supra.

[472] Among the writers who have treated this topic, I would mention especially Menger, "Geld," in Handwörterbuch der Staatswissenschaften; Laughlin, Principles of Money; Scott, W. A., Money and Banking; Knies, Das Geld; Walker, F. A., Money and Political Economy; Conant, Principles of Money and Banking; Seligman, Principles of Economics; Johnson, J. F., Money and Currency; von Mises, L., Theorie des Geldes und der Umlaufsmittel; Helfferich, K., Das Geld; Simmel, Philosophie des Geldes; Davenport, H. J., Economics of Enterprise. The difference between the standard of value (common measure of values) function, and the medium of exchange function is particularly well illustrated by Scott, loc. cit., ch. 1. The legal functions of money are especially treated by Knapp, Staatliche Theorie des Geldes.

[473] For discussions of the idea of measuring values, and the dependence of this on the conception of value as an absolute quantity, a common or generic quality of wealth, see Knies, Das Geld, I, 113ff.; Kinley, Money, 61-62; Merriam, L. S., "Money as a Measure of Value," Annals of the American Academy, vol. IV; Carver, "The Concept of an Economic Quantity," Quart. Jour. of Econ., 1907; Laughlin, Principles of Money, 1903, pp. 14-16; Davenport, Value and Distribution, p. 181, n.; Anderson, Social Value, chs. 2 and 11, and "The Concept of Value Further Considered," Quart. Journal of Econ., 1915; Helfferich, Das Geld, 1903 ed., pp. 470-478; Scott, Money and Banking, ch. 1.

[474] See Scott, Money and Banking, ch. 3.

[475] A further reason for preferring "common measure of values" is that expression carries dearly the connotation of absolute values. "Relative values" cannot be "measured," Social Value, pp. 26-27.

[476] Current text-books, following the Austrian doctrine, define production as the creation of "utilities." This is incorrect. Production is the creation of values. Cf. Social Value, pp. 119 and 189.

[477] This is the view of H. J. Davenport (Economics of Enterprise, pp. 301-302).

[478] Kemmerer has shown this to be true of bank reserves. As we shall see, the reserve function is merely a special case of the "bearer of options" function. For Kemmerer's discussion of business distrust, see Money and Credit Instruments, pp. 124-126, and 144.

[479] "In New York, for instance, loans by banks 'on call' are subject to repayment within an hour or two after notice is given that repayment is desired." Conant, Principles of Money and Banking, vol. II, p. 56. In general, the banks are content if the loan is repaid by 3 o'clock on the day it is called.

[480] E. g., Cairnes, J. E., Leading Principles of Political Economy.

[481] One "pure rate" is a myth, but the notion has some significance, as setting off a body of causes distinct from the money-market factors under consideration. Cf. supra, the ch. on "The Capitalization Theory."

[482] See von Mises, "The Foreign Exchange Policy of the Austro-Hungarian Bank," British Economic Journal, 1909, pp. 208-209. An able Boston broker, in Feb. 1917, calls attention to the growing difficulty of placing long-time bonds, without very high yield, in view of the scarcity of real capital, despite the exceedingly low "money-rates." I venture to predict an increasing "spread" between "money-rates" and the yield on long-time investments, the longer the War lasts. The view of Davenport and Schumpeter (Annalist, Feb. 28, 1916, and Theorie der wirtschaftlichen Entwicklung), which would deny the validity of the distinction between money-rates and interest rates, and would make the money-market phenomena the primary cause of all interest phenomena, seems to me indefensible, alike in theory and in fact.

[483] Cf. the analysis of bank-loans in the United States, infra.

[484] Mitchell, Business Cycles, p. 146.

[485] Journal of Political Economy, XVI, May, 1908, pp. 273-298.

[486] Leipzig, 1905. This book has had wide influence on German thinking on money. It is typical of the tendency in German thought to make the State the centre of everything. Recognizing the historical fact that money has originated in a commodity, it holds that the commodity basis is a phenomenon of historical significance only, that modern money is a creature of the State. The money-unit is not definable as a quantity of metal, of given fineness, but rather is a "nominal" thing, present monetary standards being defined by legal proclamation in terms of past standards. The necessity for this reference to past standards grows out of the existence of past debts. The State must preserve the continuity of juristic relations, between debtors and creditors as elsewhere. Knapp holds that the Zahlungsmittel (legal means of quittance, legal tender) function is the primary function of money, and that it is not a concept subordinate to Tauschmittel (medium of exchange). It is not necessary for our purposes to take account of Knapp's theory in detail. He really has little to say about the value of money. Indeed, he confesses, in a later discussion, that his theory is not concerned with that subject! (Schriften des Vereins für Sozialpolitik, No. 132, 1909, pp. 559-563.) The amount of economic analysis in the book is not great. It is a striking illustration of the fact that legal thinking is largely concerned with qualitative distinctions, rather than with quantitative causal conceptions. (Cf. my discussion in the chapter on "The Reconciliation of Statics and Dynamics," infra, of the "statics" of the law.) Knapp's book has a forbidding appearance, because of the large number of new terms, based on Greek roots, which he has coined. The German language is inadequate to express his ideas! The Germans themselves have complained much of this. Careful reading of the book discloses, however, that the new terms are admirably adapted to express the distinctions he draws. I think, too, that English readers of the book, who remember enough of their Greek to recognize an occasional Greek root as vaguely familiar, will find less difficulty in giving fixed meanings to his new terms than would be the case with new German compounds. One who takes the trouble to master Knapp's vocabulary will find the effort worth while. Knapp has a high order of dialectical acumen. But the main part of the book has little direct bearing on the problem of the value of money, whether one understand by "value of money" the absolute social value of money, or the reciprocal of the price-level. The main points to be drawn from his discussion are (1) the fact that past debts may tend to sustain the value of an otherwise worthless money; and (2) that the State's willingness to accept money for taxes, etc., may also contribute to its value. Knapp lays heaviest stress on this last point. He seems to concede, however, that the rôle of the State here is not different from that of any other big factor in the market, and that the State's power in this particular is a function of the magnitude of its fiscal operations. Both of these doctrines fit readily into my social value theory. Knapp's discussion of methods of regulating the international exchanges by methods other than gold shipments is interesting, and might well be studied by those who are concerned with the exchange situation in the present war. His thesis that the value of silver depended on the course of the exchanges between gold and silver countries, instead of the course of the exchanges depending on the values of gold and silver, seems to me an absurd exaggeration of a minor qualification into a main theory. His doctrine that international relations alone make the purely legal money, without commodity basis, unsatisfactory, I do not accept. I have discussed this general topic in my chapter on "Dodo-Bones," however, and may content myself with now referring to that chapter. It is not true, as a matter of fact, moreover, that the money-unit is no longer defined as a quantity of metal. Our own American practice is sufficient evidence on this point. Knapp has sought to generalize his own interpretation of the history of Austrian paper into universal laws of money! That his interpretations meet authoritative dissent in Austria is sufficiently evidenced by von Mises' discussion, in his Theorie des Geldes (ch. on "Das Geld und der Staat"), and in his English article on "The Foreign Exchange Policy of the Austro-Hungarian Bank," British Economic Journal, 1909. The notion that the legal tender function is prior to the medium of exchange function I regard as quite indefensible. It is doubtless true, in certain cases, that a government may debase its money, defining the new debased money in terms of the old, and that people who have debts to pay may, for a time, accept the debased money as a medium of exchange. But the limit of this is reached when the old debts have been paid. Unless other factors (not necessarily redemption), then come in to sustain the value, the value will sink, to a level commensurate with the debasement. The value would generally sink to a considerable degree, in any case, if only the legal factors worked to sustain it. I have gone over this in the chapter on "Dodo-Bones," supra. It was only by being a valuable object, and commonly only by being a medium of exchange, that the money could have become a means of legal quittance in the first place. Men would not have made contracts in terms of it, otherwise. And men would cease making contracts in it as soon as it (or other things tied to it in value) ceased to be an acceptable medium of exchange.

Knapp finds a good many phenomena in the history of money for which the quantity theory, and the metallist theory, can give no explanation. He has an exceedingly poor opinion of both theories, and makes many telling points against both. In so far as his doctrine asserts that the phenomena of money are matters of social organization, psychological in nature, I find myself in harmony with it. My dissent comes when he seeks to erect the abstractions of the jurist into a complete social philosophy! Law is only a part of the system of social control, and economic values, while influenced by legal values, are far from being explained when legal factors only are taken into account. Legal factors often play a more direct part in connection with the value of money than in connection with other values, but they do not dominate the value of money.

Recent German literature on money (e. g., Fr. Bendixsen, Geld und Kapital, Leipzig, 1912) has been a good deal influenced by Knapp, and there is a fair chance that American students may have to read his book if they wish to understand the next decade of German monetary history. It will be well for Germany if this is not the case!

[487] Economics of Enterprise, p. 257.

[488] Cf. Böhm-Bawerk's Capital and Interest, passim, particularly his discussion of Hermann, for an exposition and criticism of the "use" theory of interest.

[489] Cf. Clark, J. B., The Distribution of Wealth, pp. 210-245.

[490] This is not necessarily true among Asiatics, or on the East Side in New York City.

[491] The adherent of the Ricardian analysis who would deny this may fight it out with Clark, Fetter, and A. S. Johnson!

[492] A friendly critic—with a radically different theoretical point of view—feels that I am here playing fast and loose with the word, "value," meaning sometimes "total utility," sometimes "marginal utility," sometimes "relative marginal utility," and sometimes "price." I never mean any of these things by "value," when used without qualification, in this book. I mean always social economic value, conceived of as absolute.

[493] I have been unable to satisfy myself that anyone has made a sufficiently thorough study of the course of the gold premium on the Rupee, the agio of the Rupee over its bullion content, or the course of prices in India, during the period from 1893 to 1898, to justify confident statements as to the comparative strength of different elements in the explanation of that history. Kemmerer states (Money and Credit Instruments, p. 38) that he can find no evidence at all to support Laughlin's view of the matter. (See Laughlin, Principles of Money, pp. 524 et seq.) J. M. Keynes, however, in his Indian Currency and Finance, p. 5, says: "The Committee of 1892 did not commit themselves; but the system which their recommendations established was generally supposed [Italics mine.] to be transitional and a first step toward the introduction of gold [italics mine.]." In the arrangements of 1893, moreover, a ratio between English gold and the Rupee was established, of 16d. to the Rupee, even though provisions for holding the Rupee to this ratio were left till the establishment of the "gold exchange standard," several years later. Keynes, on p. 3, discusses the arguments of the silver party against the introduction of gold, which is further evidence that the action of the Committee was understood as looking toward a gold standard. There is some evidence at least for Laughlin's view. That his view offers a complete explanation, I think unlikely.

Kemmerer's admirable Modern Currency Reforms (Macmillan, 1916), is at hand while the proof sheets are being revised. It is interesting to note that he finds the statistical evidence regarding Indian prices, trade, etc., far too scanty to justify positive conclusions as to the causes governing the course of the rupee. He prefers, rather, to rest the case for the quantity theory on a priori reasoning and statistics for the United States. Loc. cit., pp. 70-71. In the chapter on "Dodo-Bones," I have suggested that India might come nearer than other countries to actualizing the assumptions of the quantity theory. On Kemmerer's showing, however, it appears to be a liability, rather than an asset!

[494] This is a national bank. In the same community, the writer asked the president of a State bank about his gold reserve, and was told that light-weight gold coin could not be used, since the State bank examiner made a practice of weighing the gold of State banks.

[495] Legal tender can add to value of money only when it confers an option on the debtor. In the case discussed, it is the creditor who has the option. But options are not necessarily valuable.

[496] As Davenport has pointed out, money is really moneys—there is a hierarchy. Cf. Economics of Enterprise, pp. 256-259.

[497] The restricted legal tender of small coins, where the coins are limited in amount to the needs of retail trade, is virtually an unrestricted legal tender, in practice, and amounts, in fact, to redemption. The coins are capable of being used where large coins, of standard metal, would otherwise be used, or where checks, redeemable in standard coin, would be used. Legal tender is vastly more effective with reference to a small part of the money system than it would be with the whole of the money supply. The same is true of the privilege of using a particular form of money in paying taxes. Cf. W. C. Mitchell's discussion of the "Demand Notes," History of Greenbacks, passim.

[498] Cf. Mitchell's account, (Ibid., pp. 166-173), of the premium on minor currency, during the Civil War. Pennies were used in rolls of 25 as a substitute for silver quarters, which had left the country under Gresham's Law. The premium was due primarily to the need for small change, rather than to bullion content, though the latter was a factor even for coins made of baser metals, in 1864.

[499] Cf. my article in the Annalist, Feb. 7, 1916, "The Ratio of Foreign to Domestic Trade," and the chapter, supra, on "The Quantity of Money and the Volume of Trade."

[500] Kinley's figures show a much lower percentage of money than this. He is anxious not to overestimate the extent to which checks are used, however, and so gives the figures of 50 to 60% of checks as a safe lower limit.

[501] Cf. Social Value, 183-184.

[502] Cf. Carver's contention that "the demand for money is a demand for value." "Concept of an Economic Quantity," Quart. Jour. of Econ., 1907.

[503] Cf. Laughlin's Principles of Money, p. 73.

[504] The main modern type of loan for non-business purposes is the public loan for war purposes, or to meet fiscal deficits. In the case of war loans, the emergencies are often so great that the rate of interest makes little difference.

[505] No longer true of Europe, probably, since the huge war debts have been incurred.

[506] The interest so defaulted is cumulative, like a preferred dividend, for years after 1909. Wall Street speaks of this issue as a "half-bond."

[507] Supra, chapter on "Origin of Money."

[508] "It is needless to say that Government bonds always rank as the very highest class of collateral, and the banks require no margin on such security." Pratt, Work of Wall Street, 1912 ed., p. 287. This, it need not be said, is not always true!

[509] Veblen has elaborated the doctrine that stocks and bonds are much the same. Cf. the discussion in Meade's Corporation Finance of the relation of junior bonds and preferred stocks in reorganizations.

[510] I do not accept the imputation theory, or the capitalization theory, without qualification, except as static first approximations. Values of "factors of production" may easily become, and do become, in large part independent of their "presuppositions," Cf. the chapter on "Dodo-Bones", supra, and the chapter on "Economic Value."

[511] This would seem to be Davenport's view. See his article in the Quarterly Journal of Economics, Nov. 1910.

[512] To a high degree, "good will," trade-marks, etc., are bankable assets.

[513] Social Value, 1911, passim, especially ch. XIII. Cooley, C. H., "Institutional Character of Pecuniary Valuation," Am. Jour. of Sociology, Jan. 1913.

[514] Cf. my article, "Schumpeter's Dynamic Economics," Political Science Quarterly, Dec. 1915, and the chapter on "Marginal Utility," supra. That the new bank-credit, without the painful preliminary "abstinence" which the classical economics has stressed, is enough to provide capital for a new enterprise is, as Schumpeter insists, true. Schumpeter has made an important contribution in his emphasis on this too much neglected point. But it should be noted that this does not dispense with curtailing of consumption, and "abstinence." It merely shifts the necessity for curtailing consumption to some one else. The new plan of the dynamic entrepreneur, by means of bank credit, draws labor and capital away from the existing static enterprises. That curtails their output. That leaves less goods of the old kinds for people to consume. That means higher prices for consumption goods, in the interval between the starting of the new enterprise and the time when its finished products are added to the "real income" of the community. Extensions of bank credit, there, shift the burden of "abstinence" to the consumer, and to the static producer. "Saving" is still the source of capital, but it is involuntary saving.

[515] In 1912, the First National Bank of New York owned 43 millions of bonds, but no stocks. Report of Pujo Committee, Feb. 28, 1913, p. 66. The National City Bank had 33 millions in bonds, but no stocks. Ibid., p. 72. State banks own few stocks; trust companies own a good many.

[516] Cf. the chapter on "The Origin of Money," supra.

[517] In March, 1916, one of the largest banking houses in Boston informed the writer that over one-fourth of its notes and discounts (including all forms of loans) had been bought through note-brokers.

[518] Cf., e. g., pp. 135ff. of Scott's excellent Money and Banking, Rev. ed., New York, 1910.

[519] The year 1909 is chosen, in order that comparison may be more readily made with the figures of Dean Kinley's investigations based on reported deposits made on March 16 of that year. The figures quoted are taken from p. 39 of the Report of the Comptroller for 1913.

[520] Even excluding the item "due from other banks and bankers," as representing duplications, the item "other loans and discounts" remains approximately only one-fourth of total banking assets.

[521] Almost all agricultural processes require more than six months from their inception to the marketing of the product.

[522] This view would seem to correspond with the view of Babson and May (Commercial Paper, 1912), and of W. A. Scott ("Investment vs. Commercial Banking," Proceedings of Investment Bankers' Association of America, 1913, pp. 81-84). Both of these discussions appear in Moulton, Money and Banking, Pt. II, pp. 70 and 75-77. Dr. J. E. Pope considers the view correct. On the other hand, Professor O. M. W. Sprague thinks the "other loans and discounts" of large city banks are more liquid than my statement would indicate.

[523] Principles of Money and Banking, II, p. 52.

[524] Report of the Comptroller of the Currency, vol. II, pp. 145 et seq.

[525] Total collateral loans in New York City on that date were $719,327,596. This is for national banks alone. Report of Comptroller, 1915, II, 144. There is every reason to suppose that if trust companies and private banks were included, the proportion of stock exchange collateral loans would be very much higher.

[526] I am very fortunate in having the views of Dr. J. E. Pope on this question. I know no one whose knowledge of agricultural credit, whether of American or of European conditions, is so thorough and extensive.

[527] This table is constructed on the basis of data in the Report of the Comptroller for 1913, pp. 774-78.

[528] A single observation does not justify very confident conclusions, and figures for subsequent years may alter this. There is reason for supposing that commodity collateral was unusually large in proportion in the Comptroller's figures for national banks in June, 1915, (1) because the banks had been trying to reduce stock collateral loans, following the collapse of the outbreak of the War, (2) because they were aiding cotton owners to tide over a period of stress, and (3) because of great grain speculation. Later: 1916 figures show this. Comptroller's Report, I, p. 30. Stock loans increase from 66% to 71.2%, of collateral loans.

[529] The preceding argument would indicate that it is much too high.

[530] The figures for 1909 are fairly typical of the proportions of these items in the assets of the three classes of institutions for the ten years from 1904 to 1914. Since 1900, there has been some increase in the percentages of real estate loans and "all other loans," at the expense of the percentage of securities owned, and collateral loans, as these years have been years of reduced activity on the Stock Exchange. The changes are not important enough, however, to modify any conclusions which we shall base on the figures here given. All classes of loans have grown, and investments in securities have grown, but real estate loans and "all other loans," particularly the latter, have grown somewhat more rapidly.

[531] These figures are taken from Conant, Principles of Money and Banking, vol. II, p. 52.

[532] The term "commercial paper," as here used by Conant (whose source is the Comptroller's Report for 1904 and preceding years), doubtless includes a good many items which we have decided not to count as commercial paper. The item, "advances on securities," also includes some items other than stock exchange loans, but not a high percentage in New York City. In 1913 the figures for all reporting banks in New York City were: collateral loans, 1,070; "other loans," 658. Report of Comptroller, 1913, p. 779.

[533] Taken by Conant (Ibid., p. 51) from the Économiste Européen (April 29, 1904), XXV, p. 546.

[534] For the depositor who borrows from several banks, but deposits only in one,—as a stockbroker—the items deposited will, of course, substantially exceed the amounts borrowed at the bank where the deposits are made. But this will not affect our argument for classes of depositors from representative banks in the community as a whole.

[535] Supra, chapters on "Volume of Money and Volume of Trade," and "Statistical Demonstrations of the Quantity Theory."

[536] The relevance of comparing wholesale and retail figures with figures for "commercial paper" may well be questioned, since our conception of commercial liquid loans would include manufacturers' paper which represents raw materials, work in process, and bills receivable. However, we have found reason to conclude that Kinley's wholesale deposits include a large percentage of manufacturers' deposits. (Supra, p. 245.) The comparison here is in any case rough. We do not need precise figures for the argument.

[537] Pratt, Work of Wall Street, 1912 ed., p. 264.

[538] Returns from private banks in Kinley's investigation of 1909 are virtually negligible, so far as absolute amounts are concerned, for the whole country. For New York City, they are absolutely negligible. The "all other deposits" reported by private banks in New York City for March 16, 1909, are one thousand, nine hundred and eighty-four dollars, in all! The grand total, "all other deposits" for all classes of banks reporting in New York, is over a hundred and ninety-eight millions. The great private banks are, thus, clearly not represented. They are not represented in any form, since Kinley's figures exclude deposits made by such banks in other banks. How important they would be, if included, one cannot be sure, since they keep their affairs pretty secret. Some information, however, is available. Thus, the Pujo Committee reports (Report, Feb. 28, 1913, p. 145) that on Nov. 1, 1912, there was $114,000,000 on deposit with J. P. Morgan and Company, exclusive of $49,000,000 on deposit with their Philadelphia branch of Drexel and Co. It is understood to be the practice of J. P. Morgan and Co. to keep no cash on hand, and to deposit with other banks all their cash and checks. On this date, they had on deposit with other banks $12,094,000, "which presumably included all their own funds." It may be assumed, therefore, that the remaining 102 millions was loaned out. There can be no doubt at all, I suppose, that practically all they had lent out was on stock and bond collateral. They are known to be one of the biggest lenders at the "money post" on the Stock Exchange. They are not supposed to do much business with ordinary merchants in the usual discount and deposit way.

I have found no figures for Kuhn-Loeb & Co., for total deposits made with them, nor for their deposits in other banks. The Pujo Committee (Ibid., p. 73) states that for the six years preceding 1913 this firm held, on the average, deposits from interstate corporations amounting to over 17 millions. For J. P. Morgan & Co., this class of deposits amounted to about half of total deposits. (Ibid., p. 57.) There is, of course, no assurance that this proportion holds with Kuhn-Loeb's deposits.

These figures are very great, however. For the week ending April 3, 1915, for example, only three banks (the National City Bank, the National Bank of Commerce, and the Chase National Bank), and only two trust companies (the Bankers Trust Company and the Guarantee Trust Company), held deposits exceeding those credited to J. P. Morgan and Co., and only one of these, the National City Bank, very markedly exceeded the Morgan deposits. The majority of the New York Clearing House banks had less than the deposits of interstate corporations with Kuhn-Loeb.

As all the big private bankers deal chiefly in stock exchange loans and securities, and foreign exchange, and as this kind of business has been shown to be exceedingly active and to call for large checks and clearings, we may assume that Kinley's figures would be greatly increased if they were included.

The trust company reports for New York in Kinley's figures are also very incomplete. New York trust companies report less than twice as much as Boston trust companies, and an absurdly small amount as compared with banks. Cf., supra, the chapter on "Statistical Demonstrations of the Quantity Theory."