Los Angeles herald., 1907-12-12
COOPERATION is
VERY GRATIFYING
MONEY MARKET WORKING BACK
TO NORMAL CONDITIONS
Henry cIeWs in His Weekly Letter
Outlines the Currency Reform
Which the Country
Should Adopt

Should Adopt
Another weel. of gratifying recovery has been
experienced, says Henry Clews, under date OF
December 3, and since the panic security values
show an advance Of 10 points and over on the
leading issues. In bonds, as we'll as stocks
there have been substantial gains, and the
whole drift of the financial situation shows
genuine recuperation The premium on cur
rency is gradually disappearing and call money
Is becoming more and more easy, rates having
touched as low as per cent during the week
Time money continues scarce at 10 to IL per
cent for short dates; not much from any
deficiency in supply, as from the conservative
attitude of the banks, which are still Obliged
to exercise caution in the granting OF creoit.
Gradually, but surely, the money market Is
working back to normal conditions. The dis
position to hoard is abating and bank reserves
rising, havin.. been materially assisted Dy
the engagement OF about $780, 200, 900 OF gold
the bulk of which has already arrived. For
tunately our interior banks are rapidly get
ting over their fright now that the situation
in New York is improving, and within Few
weeks money will probably be as abundant
and much easier than at present. There is no
lack of currency The amount of circulation
on November 80 was S2,S76. 100000, an increase
of nearly s132,000,000 within the month, and
$3.50 100000 within twelve months. This Is a
circulation per capita of SAIL compared WIN
$32.42 a year ago. OF the increase In circu-
lation during November S66, zoo, 900 was in gold
coin and s53,OO0,0On in bank notes. November
was thus mentb of unusual expansion IN
currency. Considering the lessened volume OIL
business and thu lower prices at which 1t is
being transacted it is evident that we are
rapidly running into a condition of monetary
redundancy; a fact which has been wisely
recognized by the government and is reflected
in its decision tC modify its recent relle1
measures. 1t is now believed that Mr.. Cor
telyou will not issue any more than s3,OOouUo
- hat f1C iGql n
certificates will not exceed s15,o 900, or a
total of about $4,000 900 for both classes OF
securities, instead of S150O0o.0OO as originally
intended. From al parts of the country there
come reports of steady improvement in the
money situation, and 1t is confidently believed
that the complete resumption of specie pay
ments is only matter of comparatively snort
period.
Stock Exchange Hopeful
There has been a distinctly more hopeful
fcellng in stock exchange circles; although,
following the RAPID advance last week. more
or less realizing is about due. speculative op-
erations are, of course, restricted and hkely
to be until interest rates decline to more
normal level Thus far the revival has been
quicker and morS complete than was antici-
pated Buying power is of necessity limited
and time will be necessary for further recu-
peration. Now that the disturbance has sub
sided in Wall street, general business is also
recovering from the shock administered last
October. Mills temporarily shut down owing
to the monetary StflnSenCy are TestdIllHS' ttiiui
merchants are conducting their operations
extending into the future with visiby greater
confidence than month ago. 1t Is not 10 pe
expected that business will go back to the old
scale of activity and profits Nevertheless,
business conditions generally sound;. and
we now see reasons for serious apprehen-
sions in this respect Quite possibly some fur-
ther decline in the commodity markets Will
have to be experienced and this will prove
inconvenient to concerns already overextended;
hut no serious curtailment in the consumption
of the necessities of life seems probable ana
the reaction vii fall chiefly upon what may
be cAssed as luXuries which are largely op-
talned from abroad and already show marked
decline in importations. shrinkage IN I'M
ports, however under present conditions Will
not be harmful since it promises to be ac-
companied by free exports and will, therefore,
assist US in retaining as much OF the foreign
gold recently imported as seems desnapie'
We have still as q backbone an unusual de-
gree of prosperity amongst out farm classes.
Corn cotton and nearly all agricultural pro
ducts continue to bring good prices to the
grower and this 1t should not be forgotten,
is a strong element of support There is lit
tie doubt but that the strong financial condi
tion of our agricultural sections resulting from
q long series os profitable harvests not only
had much to do with the boom which recently
collapsed but is now protecting us from eX-
treme effects OF that collapse. Secretary
Wilson estimates that our farmers produced
crops this year valued at sI12'oOo ooo, an
amount 10 per cent greater than the total Tor
1906; II per cent greater than 1900; 20 per cent
greater than 1904, and 81 per cent above 1899.
These records are, of course, III Values ana
not quantities Nevertheless, they show that
the American farmer is in exceptionally strong
financial condition, and this has unquestlon-
ably greatly mitigated the effects of the
panic.
Advises Elasticity
My preference is for a scientific and elastic
currency system. based upon bank assets, or
something like the following. to provide for
periods of great money demands Authorize
national banks to increase their circulation, TO
he called emergency circulation, to the extent
of say 20 per cent of their paid up capital, to
he issued upoE approved savings bank securl-
ties, to be deposited with the comptroller OF
the currency, and TO be taxed to such an eX-
tent as to compel the speedy return ana can
collation. OF such notes when the business
needs no longer exist for the additional cur
rency In the event Of congress failing to pro-
vide an elastic quality to our currency system
as an alternative suggest the following:
The government to issue emergency notes,
not TO exceed S1C0, 900 during periods OF
great panics, ar1 to banks only, TO be held py
Then, as reserve these emergency notes 10
draw . per cent interest and have six months
to run subject TO renewal for an additlonal
three to six months at the discretion Oh me
secretary of the treasury, by consent OIL the
president. Such a measure of relief would
work like the Bank of England's back log
method. Whenever great panic occurs Ill
England the Bank Of England is authorized to
suspend its charter act, which admits or tssu-
ing increased Bank of England notes without
recurring corresponding amount of gold to
he held against same. This has always been
found to end panic at once. The above plan
wound supply what is now very much needed
in our currency--an automatic movement at a
time when most needed. AS a matter OF fact,
1t being known that relief would be always
Forthcoming would be bar against panics oc-
curring in this country, such as the recent
one and that of 1878, when money was almost
unobtainable on any terms. This plan OF
issuing emergency elastic national bank re-
~ la tfwv nf n
central national bank, which is now being
agitated to a considerable extent Such bank
will never be acceptable TO the national banks
now existing, as it would diminutize all of
them. The jealousy OF bank officials would
cause them to exert their influences against
such measure meeting with congressional
favor
Nnu Xork ctocka