Pittsburg dispatch. [volume] (Pittsburg [Pa.]) 1880-1923, 1892-10-24
VARYING INTEREST RATES.


The notable financial event OF the week
has been the raising by the Bank of England
of its rate Of discount to per cent per
anuum from the per cent at which it had
stood during the previous six months. Four
weeks ago I called attention to the ex-
traordinary ease of money then prevailing
in London, and to the fact that the rate Of
discount IN the open market there was
barely per cent per annum, while call
money was to be had so cheaply that the
hire Of $4,000 or $4,000 over night amounted
to only about go cents. Since that time the
London open market rates have risen to
over per cent per annum for bills and to
per cent for call money. The Bank of Eng
land, always keeping little above the mar
ket, has, accordingly, fixed its rate at the
figure mentioned.
Here, in New York, the rates Of interest
have likewise recently increased, and to a
much greater extent than they have in Lon
don. All through the summer time money
could be borrowed at per cent and less,
and conservative trust companies declined
to receive deposits on call from new Gus
toners at any rate whatever the little
commercial paper in the market was dis
counted at 8 or per cent. Now, call money
commands easily per cent, with an occa-
sional squirt which seat it above. 6 per cent
Time money is per cent, and mercantile
paper Is not discounted at less than per
cent.
Nothing Unusual at This Time.
This increase in the rates of interest for
money, both here and in London, Is usual
occurrence at this season of the year. The
hire of money, like rents and wages, varies
according to supply and demand. 1t goes
up when either the demand becomes greater
or the supply smaller, and goes down when
tha 81, Ia in.
creased. In this country the annual har-
vesting of the crops requires large guam
tity of currency. whieb is drawn from the
stozk OF this city, white in Great Britain q
cause, produces a similar drain upon the
reserves of London. The loanable funds OF
the banks and money lenders In both cities
being depleted, while the demand for them
continues undiminished, the competition
for their use compels borrowers to pay
higher rates.
This is an illustration of an elementary
ca e9eeps for the purpose Of
pointing out that our present experience
differs somewhat from that of previous
years and deserves special notice. The
autumn stringency, which usually begins to
show itself with us early in August, was a
month late this year, and its effect has been
much less severe than on any former oc-
casion; In London, too. the rise in the bank
some weeks ago, and its postponement has
excited considerable remark.
Reasons for the Perturbation.
Special forces have evidently been at
work, causing perturbation of the regular
course Of events. With US the principal
pertubing force has unquestionably been
the usual increase of the supply of currency
resulting from the disbursements of tine
United States Treasury for the redemption
of maturing bonds and other purposes, as
well as from the monthly issues of coin
notes under the act of July. 1890. The cash
balance of sleo ~ ,ss4 which the Treasury
held August 81, 1891. had been reduced by
September 80 last to $l31, 1,s95.9ls, making an
increase of the money in the hands of the
people of $2s, ,37s, ,476, while the monthly out
resulted for the 13 months in q further in
$50, 60, ,976.
Against this might be Offset an excess of
ing to $l5.073, 53l were it not that this excess
merely represents the product of our mines,
and did not, therefore. come out of the
amount in circulation. In round numbers.
therefore. the increase in our circulating
medium from September l, 1891. to October
of this year has been $50. 600 600, which is
about what the official statement of the
Treasury Department makes it.
The Demand and Supply Unequal.
Concurrently with this enlarged supply
of currency there has been no marked en-
larged demand, so that the usual require
ments of the agricultural sections failed
this season to exert their natural influence
either so promptly or SO powerfully as they
stances. Still the si55, ,ooo, 900 and more of
gold and legal tender which the banks of
this city held on August 6 fell to less
than sl4o,ooo,ooo BY the end Of that
showing an absorption by the public of
s37, 500, 000 which, unless the supply had been
augmented from the sources have men,
toned, must inevitably have produced a
serious effect upon the money market.
In Great Britain the unusual ease of money
was caused not SO much by an increase of
supply as by decrease Of demand. Under
Barring failure, the London banks have,
indeed, lately been Strengthening their gold
reserves, and the supply Of the metal let
loose by our Treasury disbursements and
by our expanded paper currency has come
in very inopportunely for their wants.
Still, the amount they have taken has been
small. The Bank of England,
which acts as banker for the other banks OF
in specie, against f23660 ,3e3 year ago,
showing an increase of only ss,22s.627, which |
Is about all that London has gained.
Why Money Is Plenty in England.
If the English demand for loans had been
is large as usual this increase of gold would |
not have sufficed to make the rates of dis /
count so phenomenally low in London as |
hey have been, but. as I pointed out four |
weeks ago, business is very dull in Great |
Britain. and hence money can be borrowed |
here very cheaply.
It is often said, and 1 think it is generally |
believed, that the Bank of England, when /
'ver there is a likelihood Of its losing gold,
'aises its rate OF discount In order to pre-.
rent the loss and lowers the rate again when |
he danger is averted. This is very much
ike saying that we make fires in our dwell
ngs when the thermometer falls in order to |
,eep it from falling and let them go out
vhen the thermometer rises to the point at
which we desire to see it.
An outflow of gold from any one country
o another indicates that it can be more
,rofitably used in the country to which it
,oes than in that which supplies it. The
endency of the movement is, therefore, to
aise the rate of interest in the country
osing the metal and to lower it in that
which gains It. Hence sagacfOus banker, |
eeing gold go away from the field of his
'perat tions, infers that he will be able to get
ligher rates OF interest for his money as
esult of the diminished stocks at the dis
losal of borrowers, and, vice versa, he
'repares to accept lower rates when, by
mportations from other countries, the
tocks competing with his increase.
Money Left In America by Choice.
The governors of the Bank of England
< their rates Of discount to conform to the
ecreaseo supply OF Sold, not LOT tne puf-
ose of increasing the supply, but for that
( increasing their revenue. When the
upply increases they stop increasing the
ates of discount, just as we let our fires go
own when the thermometer tells us we
hall be too warm If we keep them up. and
hey reverse their action when the supply
just as we put on fuel when the
warns US that our houses are
rowing cold.
The long con tinued dullness of busin ess in
Ireat Britain has also helped to keep down
he rates of interest here by stopping the
rain upon our gold supply, which one time
threatened seriously 20 impair our ability to