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Is There money Enough We Shall Never Have Enough While Bank Reserves Are Invaded QUEST!* >NS relating to the con tinuance of our prosperity have recently, to a very great degree, been closely relate to considerations affecting the money markets. We have just |>assed through a year in which the aver age rate for money has been higher the ivorld over than in any year before in a generation. In this year there were thirty three weeks in which the New York call money rate was six per cent, or higher; at one time it touched sixty per cent. High rates for money have by no means been confined to loans in speculative markets. Through a considerable portion of the year mer chants and manufacturers have been forced to pay six percent^ and sometimes even well above that rate. Money rates have been so high that the ordinary market for investment securities has been much restricted. Corporations have found it ditn cult to put out new bond issues, and financing by meant of issues of stock promising high dividend returns has been resorted to by corporations of the first order of credit. Such a state of affairs naturally raises the ques tion as to whether or not we have money enough. Do our universally high interest rates and disturb ingly low cash reserves indicate that the supply of money is now inadequate to support the abounding prosperity and unexampled industrial activity that characterizes the present period? The question is one of universal interest, for it touches every man's welfare. Belief About the Supply UNFORTUNATELY it is a problem about which there is much confusion of thought concerning the fundamental data. With the well nigh universal desire for money, it is nr »t surprising that there should, at all times, l>e a wide spread belief that the supply i> inadequate. In times when normal conditions as t'. interest rates have given way to periods where most extravagant percentages are current, and in limes when there is deep concern in regard to the adequacy of the cash reserves, it is not unnatural that there should be many who would hold to the opinion that there is not money enough to do the business that is waiting to be done. The first requisite in considering the question i^ a clear comprehension of the functions of money. It is not necessary to make all those fine distinctions v.hich are made by the economists, but it is ab solutely essential to have clearly in one's mind the practical fact that the two Treat uses of money are, first as a circulating me dium, and second as bank reserves. In this country, frith its system of sub treasuries and its practice of withdrawing the Gov ernment receipts from the channels of trade and lock ing the money up in its own vaults, there becomes a third use for money, or rather a third purpose to which money is devoted Practically speaking, all of our money will !>«■ found in one of these By F. A. VANDERLIP !t is either in circulation, in bank vaults, or 111 the treasury •■! the Government. The small hoarded, th ii is used, as the econo mists would put it, "as a store of value," is « I ni ordinary times s<> insignificant as to !><.■ negligible. A secon i i leratioi great importance in ;i ; iv is to untlr: » ey ni circulation is deter people a 1 I financiers, ban and i . • • uch, if anj i »n1 rol, . men carry ii II vary in re a-^ tim« . . . h man's h and ju it ai ... litl A man « :!1 carry ■ . bank or it that ii nto hank d In a d ■ ■ ■ are foi I vol ■ ;;itry, . ■ ■ large] ■ ■ ■ | resen A Strain Upon the Bankers Tl I E enormous increase in bank deposits in the last ten years has put an exceptional strain upon bankers in the direction of securing sufficient reserve to sustain the deposits. Deposits in national banks in that period have increased from two thou sand one hundred and forty-two million to sis thousand eighty^eight million dollars. These K>tf-"i tic figures take no account of four or five- thousand millions of deposits in other than national banks. On the other hand, it is true that we have had very j:reat increases in this same period in our money stock. The total circulation has gone uj> from fifteen hundred millions to two thousand seven hundred and fifty millions. National banks have issued three hundred and twenty-five million dollars' increase of bank notes, while the gold stock in the country is about one thousand million greater than it was ten years ago. This marks a per capita increase from twenty-one dollars and seventy-one Cents to thirty-two dollars and thirty-two cents at the present time. Nevertheless, the lawful money reserves held by national banks were eighteen and one-fourth percent, of their deposit liability ten years ago, while at the date of the last statement the percentage was less than eleven The percentage: referred to do not take into account that portion of reserve which it is permitted banks to hold in the form of deposits in other national banks. A factor that has been of world wide importance affecting the money supply of every country, hat been the enormous increase in the production of gold. More gold was produced in 1906 than would equal the entire gold holdings of all the national The Circulation Is Fixed by the Habits of the People Jks ;n ihis country at the close <>f tlu ere is every indication thai th. 1 production for the present year will h four hundred and twenty-five million ars. The important relation thai nn as • \\<>rltl issufficeni I t great part the question as to whether or nol th« ply of money is sufficient. It /en "i" rai ing the quesi •• supply may n« >t l>ec ■• to cau: <■ .1 di .turbing chanj ■ :■ ■ ins tell us 1 tro bartxu wasteful of money under ling banking tetn. Th< I I item of I ited bunking • ■ ns, we are like it rmy 1 m> centralized i I man is !i.- ting as he it with no one 1 noral orders f"i advan< c. 1 ■ sion ■ as coi there >\tn \»- > ml ntly 1 of money us in any 1 f sti ■ own vaults, at i • The Value of Hank Notes THE direction where wean- most extravagant in our employment of money, however, is in tht restriction which we put upon the issue of Lank note-,. Most of the countries of the world have dis covered and thoroughly proved that the properly safeguarded hank note is, fi»r the purpose of general circulation^ for the hand to hand, daily iise of the public, an almost ideal form of currency. The ain->unt of circulation needed at one season, com pared with the amount needed at another, varies more widely with us than with almost any t.tlu-r nation. In the fall we require at least one hundred and fifty million dollars more circulation than we do at other seasons of the year, and under our pres ent system that circulation is ruthlessly drawn from the reserves of the Lank vaults. Hankers have no power to resist the drain, and can keep a legal relation Let ween their de posits and reserves only by a great contraction of credit. They do their Lest to make this contraction as small as possible by importing gold, while the Treasury in the last few years has helped most materially by various de vices for increasing the money supply It is the opinion of many students of the money question, however, that no matter what the supply of money in the country might be, we should still have periods of tight money as long as the sea- requirements for hi be, we should still c |>eriods <>f tight ley as l"ii^ as thi ible requirements foi hand to hand circulation vary and there is no means of utilizing bank credit to satisfy that variable de mand. It in any season