The Cairo bulletin., 1908-08-17

huential factors in the late rise in
the stock market. It furnished the
big operators with an unlimited sup.
ply of funds with which TO carry
tstocks at low rates; and cheap money
always means dear stocks sooner or
later. Our banks are literally glutted
with idle funds and although crop
moving demands have commenced the
New York banks show a surplus re-,
serve of about 100000, 600 which is
Inear If not exceeding the record This
phenOmenally plethoric condition Of
the money market is attributable to
two influences: first, the diminished
activity OF business; and second, an
excessive and unwhOlesome eXpan-
sion in our currency. As to the first
cause the facts are unpIeasantly IA.
miliar. Business in general is run
ming between 10 and 20 per cent be
| low last year in volume, and in some
cases the shrinkage is even greter.
/ the iron trade for instance running
less than 60 per cent of its capacity.
| The lower range Of prices established
| for many commodities also lessons
| the requirements for money Happi-
| ly these depressing elements are grad.
ually passing away; and surely. If
slowly, we are recovering from the
disasters of 1907. The great eXpan-
sion of our currency however has not
| receiyed the attention il deserves. Ac-
cording to the last statement issued
by the Treasury Department the
amount OF circulation in the United
States was $3,045 100000 or 1864 ,0G0,-
GOO more than a year ago. This Is a
huge increase and comes at a time
when the supply of currency should
contract rather than expand. OF
this enormous circulation Sl,399 ,900,-
600 was in gold coin, bullion or GER
tificates, which is $2l9,500,000 more
than August /, 1907. Here is inna-
ton OF the most pronounced type, eSy
pecially if the banks are TO grant
credit on the usual basis of to | orr
|
tgC,d come from? Wen, the United
Gtatoe. ia addition to an already large
SO K II the precious metal, Is pro
.uclng annually at the rate of $500
10000 and over Last fall we In
lported more than $130,000,00e Of
which we returned only about half.
Much less is now being consumed III
thC<arts for adornment than formerly
owing to business depression, ana
considerable amounts have been re-
turned from boarding since the panic,
In ordinary times we should reduce
such a swollen surplus by exporting
| It TO Europe. But the foreign banks
already hold about 100000 more
gold than a year ago and have no
present need to call upon us, with
South Africa breaking all records in
OUTPUT. In July the Rand district
produced $50, 600 ounces Of gold, com
pared with $4,000 ounces in Deem
Der. This world wide ease in money
and surfeit of gold must exert an in
aationary effect upon values. When
not wanted for purposes of legltimai
business it will surely be used for
speculation. Such a state of affairs
may be undesirable, because reaction
will surely follow, delaying rather
than accelerating genuine recovery.
| But these are the facts and no re-
! straints upon oXcesses are likely to
be found except those exercised by
prudent bankers and the common
sense of the community. Those who
accept the theory of gold imitation will
undoubtedly attribute the present
era of high prices tothe large pro
duction OF gold. The latter undoub;-
edly has an important effect upon val
ues. but less than is often supposed.
Ia large gold surplus is an undoubted
stimulus to values, because when
fused as a basis of credit it impar's
fresh vigor to all sorts of enterprises
but there also are other factors OF
. more weight in the establishment OF
values. notably that of supply and de
Inland. Only let us have larger sup
\ plies of wheat corn or cotton or any
other products than required, and
!. prices would quickly drop regardless
of any increase in the gold supply
which can be considered as an indi
| rect stimulant but not close regulator
of values. An additional element OF
r imitation is the increase in national
! bank note circulation OF Sl1.00000t
| over year ago. Under well de
: vised elastic currency system thes'
notes would be gradually withdrawn
but. as they are based upon govern
b menr bonds which have lately de
clined. bankers are indisposed 10 r5
tire them. thus aggravating the gener
: al redundancy
4 good deal of realizing has take
place during the past week, and price
often reacted sharply. As stocks arr
steadily passing from stron int
weaker hands, the technical situation
of the market is less strong than on'
or two weeks ago; and thus far tn
> decline has not ben sufficient to in
duee the big operators to take bacl
!. the stocks recently parted with. Tn
10 4