The semi-weekly messenger., 1907-12-03
The Flood OF Gold.

1
in the way Of coming without further
negotiation.
In the current engagements there
does not appear TO have been any ar
tificial stimulus applied, such as the
payment OF premiums over standard
i value in London Or relief from inter-
/ est charge in transit Apparently
| they are the result of exchange condi-
lions, though the so-called premium
CT cur1 ency here may have had some
| little - auence on account Of the pos
siDiIity OF bankers turning an extra
profit from what is really a discount
on bank deposits.
This seems to be disappearing and
can hardly be counted upon in fur
ther importing gold
! What still makes il profitable is the
rates for money due to Stringency and
large volume of commercial bills
of exchange drawn against consign-
mems Of exports while there is a fall
| ing off in imports.
One thing that facilitates this move
ment is the departure during the past
season from the ordinary custom OF
exchange III providing credits abroad
tupOn which to draw during the pc
riOd of active exporting in the fall II
| has been usual for the bankers in the
summer to draw finance bills on Lon
| don, which were accepted and credited
up in anticipation of the time for
| Uhn
| these could be covered by CONNER
cial bills drawn against actual mer-
chandise values in cotton, grain,
etc
This had the effect of preventing un~
necessary fluctuations in exchange.
which is in the interest of economy
and profit for all concerned. Securing
credits by bankers bills was in the
nature of borrowing, but was borrow
ing in anticipation OF commercial
transactions which would make it
profitable and facilitate the operations
of trade.
This year on account OF the disturb
ance of confidence and of financial
conditions abroad as we'll as here, this
preparation for the export season has
been greatly restricted. Exports have
also been held back IN the earlier part
Of the season from one cause and an
other, among which difficulty in bank
accommodation has figured prominent
ly.
Now with the increasing pressure Of
demand abroad for on, leading exports
the pressure here for realizing upon
hem and the pressure for gold to re-
lieve a strained financial situation,
strong impulse has finally been given
to the export Of commodities and as
consequence commercial bills are cont
ing into the exchange market in large
volume to facilitate the import Of gold.
So long as this is profitable to those
engaged in it as a banking operation
little heed will be given to the after
effect of such a food of the metal,
which promises to exceed 500, 100000
III a single month. It will have the
effect of relieving stringency for the
time being and helping to restore con-
f7dence and the normal movement OF
currency. But when these conditions
are established the banks will be gut
ted with money, while the demand
| for it will be much less than before
the disturbance and interest rates will
be low. The less imitation we have
lin other forms of currency than gold
coin in the meantime the better it will
he.
| There is one advantage that ought
| to be taken of the plentitude of gold
before the tide of exchange is reversed
tut there is danger that the foresight
necessary to profit by it will not be
exercised. 1t will afford an oppor-
tUnity for Strengthening bank reserves
not by merely filling up depleted re-
serves under present requirements and
putting all banking institutions on an
equal footing in this respect. It will
give a chance for building up reserves
for trust companies doing a banking
business and widening and strength
enlng the basis of credit generally. II
this is not promptly done, little if any.
|
main in the country when redundancy
follows stringency, as it is sure to do
before next summer. If in the mean
time our bank currency has been ar
tificially expanded, it will exclude
SO much more of the gold, for thar
can be easily drawn abroad while the
bank currency will not be readily con-
tracted- The gold importation now.
like other factors in the situation,
is abnormal and far from being an un-
mixed blessing. 1t will afford relief
to an acute condition, but the relief
will have to be paid for in due time
by an a@gravation Of the condition
when it has become the opposite Of
| acute -INllrnal Of Com rnnoroo