Evening star. [volume] (Washington, D.C.) 1854-1972, 1905-09-25
HIGH MONEY. RATES
ALL OVER THE WORLD
Special Cablegram to The Star.

LONDON September 25.-There has been
a general rise in money rates recently IN
all of the great money markets OF the
world. This tendency has been especially
pronounced throughout Europe. ana Is to-
day the most important factor with which
foreign markets have to reckon. LONDON
has been forced to raise its rate SO as 10
protect its gold supply from withdrawal
for Argentina and offset the higher bid
of continental markets, which are recalling
funds long employed at the British capital.
Before peace was declared however. the
market had to reckon with the possibilities
of huge indemnity loan, and 1t was said
in European banking circles that vast
amount of idle capital was being held IN
abeyance until the exact amount OF Rus
sia's burden was definitely known. After
the conclusion of peace it was the unex-
pected that happened, and the BANK OF
England rate was marked UP unexpectedly,
but in the usual decorous manner.
The belief that a heavy indemnity would
be exacted by Japan. and that the markets
Of Paris, Berlin and London would be IN
a measure tied up pending the readjuSt-
ment that the fiotation of a loan for Rus
STA would entail. was given as the cause
for the unwillingness of business interests
to engage in new undertakings until the
terms of the settlement were clearly de-
fined. 1t was also reported from Paris that
if Russia should be relieved OF the In,
demnity a large amount of capital would
be Immediately available for other invest
ments. Now that the ENJOYS have finished
their peace arrangements at Portsmouth
and Russia has no indemnity to pay the
question is asked why money rates are
hardening throughout Europe and the
world
Just One Explanation.
One explanation is found in the large
sized peace borrowings that the markets
will have to provide for, even without an
indemnity loan. Although Japan may not
apply to foreign markets before the end
of the year, she will have to refund her
Internal loans. which now amount to $780,
100000. A foreign loan may be deferred
till spring If the markets continue I'M
settled, although bankers connected with
the fote..ion of the previous Japanes Issues
frankly admit that fifth issue will be Of
fered in this market as soon as the task
Of clearing up the war expenses is really
begun. Because Of the large profits cleared
by subscribers to the various loans, and
the active trading In the various japanese
issues. the bankers feel that when the
time comes for Japan to refund her do
nestle loans Investors Will bid for the
bonds.
the money marts OF the world the London
Times in leader says
"a little more than five years ago the
United States adopted a measure affect
1 ing the issue OF notes Dy the ndtiOnal DdukS
which has added greatly to the volume of
those notes In circulation, as ii was In
tended to do. For many years before
March, 1900, the national bank note circu-
lation had been perishing for lack of susie
nance; no notes could be issued except
against deposit of government bonds. and
notes could only be issued up to ninety
per cent of the face value of the stock.
AS all government bonds had for many
years been much over par. owing to the
redemption of many issues. with conse-
auent scarcity OF the bonds as whole,
and also to the general prosperity OF the
country, ii was losing business to issue
notes under these conditions.
Circulation Supply.
'The national banks accordingly drop
ped' a considerable proportion of their cir
cuIation, and, though an issue Of Az per
cents was reduced to 2 per cent In 1891, and
a fresh supply Of available security came
into existence In 1898 when a $200. 900
per cent loan was issued. the banks would
not have begun to increase their note issues
again unless some such law as that or
March IA. 1900, had been enacted. what
that law did was to create large amount
of United States bonds with only per cent
interest. to reduce the tax on note circula-
ton and to encourage the formation or
small banks with minimum capital OF
sos 600. The results of this legislation were
set forth in the New York Financial Chroa-
icle for August IL. They are startling. The
number OF banks mas increased from 1911
in March, 1900. to 5.722 at the end Of July
this year and their capital has expanded
from $616. sos, 600 to $S07. 622. 600. This be-
ing the case II Is not surprising to find
that the national bank note circulation has
risen during the same period from $216,-
$4,000 to SAT- .6l5.000.'
Present Policy Responsible.
The Chronicle attributes part Of the ex-
pansion to the policy of the present Secre-
tary Of the Treasury. Mr.. Shaw. who has
$50 construed the statutes as to find per-
mission to accept other classes of bonds as
security for government deposits in the
banks" provided that the United States
! bonds, which the banks would but for this
permission have had to put up" IS Sc
curity for the deposits, are used as the ba-
sis for fresh note circulation. The supply
of bonds available for deposit against cir
culation has been further increased, owing
to the treasury's having been compelled by
recent budgets deficits. due to diminished
revenue and heavy expenditures authorized
by Congress, to call In deposits from the
banks
The New York Financial Chronicle Is not
an alarmist newspaper. It has always had
and deserves. the reputation OF being we'll
informed. For the last two or three years.
It Is true Its conductors appear to have
been little carried away by the flood of
enthusiasm for American hustle and en-
terprise which has swept over the United
States. But this makes it all the more