The sun. [volume] (New York [N.Y.]) 1916-1920, 1918-09-05
CANADA ACCEPTS
~ : 81
SHORT TERM LOANS
Dominion Banks to Advance
About $4,000, 900 a Month
Indefinitely.
ADOPTS McADOO IDEAS
Note Circulation Increases to
$4,000, 000-American
Exchange Rate Firm.

~
>, Special Despofch to TIE SON.,
roRoNro, Can, Sept 1.-THE July 81
statement of Canadian banlus. published
recently at Ottawa. shows the effects Of
the special short date loans to the Do
miniop Finance Minister which the
banks began to advance in that month.
No definite announcement was made
as TO tho exact amount to be advanced
each month, but the general impression
has been that 1t was in the neighbor-
hood Of 100000 or &4o.ooo.ooo; and
the figures Of the bank statement ap-
pear to confirm the correctness Of that
view. Tho banks total holdings of Sc
curitiss rose in July from $424,0oo.oo0
to s466. 200, 000-the net increase being
$32.0o0,0 900. However, the increase for
the month IN their holdings OF Domin-
lon and provincial Government securi-
ties was S4s, 0e0, 900, while the class OF
securities under which the holdings Of
British Treasury bills are reported
show decrease of $11.000.o00. This
apparently indicates that the banks
methods of financing short date loans
10 the national Treasury are similar In
some respects to the methods used by
banks in the United States.
Ono might read the figures OF the Ca
madam statement as indicating that the
loans to the Dominion Government In
July, amounted TO something over $780,
900 900, and that the banks redis-
counted at the Dominion Treasury
part OF this amount in British bills or
.other approved securities. In the United
States, when paper 10 rediscounted In
this way at the Federal reserve banks.
credits are created in the books OF those
banks, or an increase occurs In the cir
culation of Federal reserve bank notes
In Canada. the rediscount OF British
bills. or other securities at the Domin-
ion Treasury directly causes expansion
of the Dominion note circulation.
Dominion Note Expansion.
On referring to, the monthly returns
of Dominion note circulation II IL seen
that the total rose In July from $2sl,3oo.-
900 to 1881, $1,000 and a footnote to
the return states that the amount out
standing against deposits of approved Sc
curities was 100000 on July 81, as
against S10S.000,000 on June 80. 1913.
This increase OF, approximately $6.SO0,-
900 in Dominion circulation points to
Yediscounts of about that. amount by
the banks: and probably the remainder
of securities above. referred to would
be- represented by sales Of municipal
or other bonds AZ in case OF similar
transactions in the past the whole OF the
increase In Dominion note issue passes
into the hands OF the banks and stays
there-practically none OF It reaches
the general public. However, the banks
utilize a part Of the increase as de-
posits In central gold reserves against
- hal has
the July increase Of $6.S00.o00 In
Dominion notes outstanding 10 re-
Elected in the bank statement by al,
increase of s2.700.000 in Dominion
notes held by the banks themselves. and
an increase OF $4,000. 900 in the balance
OF Dominion notes deposited by the
banks in central reserves.
Altogether. in their own vaults and ir
central reserves the banks now contro
$2s2.1Se.o00 Of the total Dominion note
issue Of s2s7 100000. leaving only 6
little more than SIS. 900. 900 In the hand.
of the public. mostly in 81 and 81 de-
nominations. ....
At the commencement of the war TIT
banks all told held only ss0.000.000 o.
these Dominion legal tender notes-st
the increase of their holdings during tn,
war has amounted to $4,000, 900. Thi.
will undoubtedly constitute one of tn,
important matters for arrangement be
tween the banks and the Dominion Gov
eminent after the war. Against the'S2s7.
500, 900 notes outstanding the Dominion
Treasury holds a gold reserve Of Sis,
1000. and about the same amount II
approved securities. leaving about $5S.
900, 900 uncovered. While II might an
pear TO be a difficult proposition to ar
range for redemption or cancellation o
the unrequired issues. nevertheless
- expected tho liquidation of British
Treasury bills after the war will ena bi
the Dominion Government TO rectify th
situation and return speedily to a spe
clio basis.
Exchange and Foreign BALANCED
Some light is thrown on the exchang
situation In July and August by tn
movement Of the foreign balances an
call loans OF the banks in July. TIL
exchange rate in Montreal and Toront
for American funds held pretty frml
around the per cent. premium through
out the last two months. The ban
statement shows the bankers in Jul
were obliged to draw upon all tire
departments of their external reserv,
Net balances carried with London bani
were drawn down by $3,S00,oOo; ba;
ances in banks elsewhere than Cana,
end Great Britain (meaning mostly
New York; were reduced $4,000
and call loans in New York and Lond
decreased s2.900.o00. Altogether the
duction effected in the external reseI ;
X, amounted to sl1.400,000. and the
gregate fell to $216,000.000. which,
the lowest figure since February. i
Notwithstanding the reduction the II
ance appears to be quite sufficient
enable the Canadian bankers to
care of the commitments Of their
toners IN foreign markets. Apart
the $4,000, 600 of specie holdings
ranks as the best reserve the Cana I
banks have for international purT,
and the bankers are apparently resi
that 1t shall not be depleted a
dangerous extent. The indlcatione
that In the course of the nexto
months the banks will have the e.
tunity of rebuilding the externe-
serye. and also improving the exese
situation as a result OF exports OLA
dian grain. Export bills make th,p-
pearanco In the market during Sn-
her. but II is not until Octobsnd
November that they produce th'ull
nfYect |