The sun. [volume] (New York [N.Y.]) 1833-1916, 1899-10-24
THE TIGHT MONEY MARKET:
SECRETARY GAGE THINKS HE MAS
PERMANENT REHEDT.

PERMANENT REBEDI.
u. says tho Cause of the Trouble Ia the
FIXED Volume of Paper Money Having
All tho Powers of Legal Tender and
the Remedy IL n Bank Note Currency.
WARRINGTON. Oct. 23-The recent stringent
state OF the money market in New York and
in other large money centres 10 Just now
being studied more earnestly than over by the
leading officials OF tho Treasury Department
with view Of providing some permanent
means OF relief With the small assistance
rendered by the Government In the advance
payment OF October and November interest on
bonds it 10 felt that the worst OF the embar-
rassment this year has been relieved. and that
the New York banks will now get along very
well until the next extraordinary demand
arises for money In the rural districts. The
experlence OF the last few weeks. however. has
led Secretary Gage to believe more strongly
than ever In the need OF such a reform OF the
banking and currency laws as will produce
more elastic movement OF money
In his forthcoming annual report to Congress-
he will probably use the experience OF the Now
York bankers this fail as an argument for
modifying legislation and he will emphasize
some OF the recommendations made in his re-
rort OF 1893. In his recent tour OF the North
west with President Mckinley. Secretary Gage
had an opportunity to see close at hand the
great agricultural Industries that at this sea-
son OF the year are making such heavy de-
mands on the money centres. In discussing
the money situation to-day the Secretary said
Tho agricultural districts Of the country
would undoubtedly he benefited by an ex-
tension Of bank note currency. The financial
movement as il has been going on during the
last few weeks forms striking contrast to
the movement as 1t would appear II the con-
dtion which / advocate should be fulfilled. II
il a familiar fact that during the period OF pay
ing farm hands. moving crops and meeting
other expenses tthe harvesting season. money
10 inevitably attracted from the centres OF
money to the farming districts. and subse-
uuently returns to those centres As is well
known. the movement OF moneys back to the
contres is for the purpose OF paying loans re-
sultng from it's use for other forms OF indebt-
edness and to yield interest payments to tho
country bankers for a part OF the funds which.
In dull season. would remain idle in their
hanks. This currency. under tho present
SYSTEM consists Of Treasury notes and legal
tender notes. money which 10 recognized as
legal reserve.
When the banks in the great centres like
New York receive this money from tho crop
districts it becomes a reserve for deposts in
the relation OF one to four. The embarrass-
ment in this system arises when the deposits
in the banks are expended 10y loans . tHr any
suits merely In transfer to another account
in the bank"
the inflow OF reserve funds from the farming
districts after the harvesting season. In tho
rearg Gage e the emnston to which tho
city banks are likely to yield. IN his annual
report Las. year h tn" ,Sat b
movement OF currency from the country occurs
at The time Of year when commerea activities
the use OF loans In the interior are the SIN Allest.
The efforts Of the banks at the centres to in
fall In the rate OF interest causes interest and
hvdend-paying securities to rise. The rise
The speculative buyer becomes tho banks
borrowing customer"
This results the Secretary said to-day. in
banker says. although he really does nothing
Of the kind Hike keeps his funds but sres
Of snIity This e5nHiton resprs every yesr
Is more strikingIy apparent than ever this
"A maximum OF loans and deposits and a
minimum in, cash reserves is always the re-
suit" he said.
used his checks and drafts on Eastern banks as
medium OF exchange. but he requires cash
rensees Of the harvesting season; The CORE
srondent at the money centre L. obliged hen to
mte the he hM as G
this Is a disturbing condition. The reserves
become depicted ana tho country banker is In
formed that money l. very close
in d's"utsing this year situation. which. he
says is only a mere emphatic repetition of
what has occurred in former years. Secretary
Gage said to-day That tn" cause OF the trouble
~ the fixed volume Of paper money having all
the powers of legal tender.
The remedy" he continued. lis to be found
in bank note currency. The inward move
ment OF money to the centres would then con-
aist largely OF bank notes-non-legal tender.
These notes would not form basis for eN-
pansiOn. because hey do not become n part
Of al hA mi
These notes would be sent home for redemp-
tion IN legal money and the effort to do this
wonld neutralize largely the effect desired.
Bank \ sending home the notes OF Bank Is
would bring forth. not payment in legal
tender. but as an offset by the presentation OF
the notes Of Bank b. This would result in a
mutual retirement OF these bank note liza
biities"
Quoting from his latest report. Mr. Gage
said The POWER to lend IL not thus lost but
1t il temporarily suspended " lio added that
the needs Of the interior OF the country each
autumn on account Of agricultural expendi-
lures will he conveniently met by the power
OF tho banks to issue circulating notes. and the
needs OF industry will coincide with the desire
OF the bankers to make their profits. and the
value OF the power to issue notes will be felt
in the interior where the farm industries are
going on and not in the usual centres OF money
ACTIVITY. where the bank currency is not needed
and will not circulate. Secretary Gage will de-
ye!op this argument in considerable detail In
his forthcoming report. and urge Congress to
take the action which he advocates.