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FEDERAL RESERVE BANK

MISC. 1. I-20101-7-21

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

February 8, 1927

Mr. Snyder

SUBJECT

You may have seen the absurd account in the Times of the little

talk I made laet night at the Retail Dry Goods Association, and as

Governor Crieeinger this afternoon called up about it, I should like to
enclose copy of my note to Governor Crieeinger regarding it.




192__

FEDERAL RESERVE BANK

IISC. 4. 1-20QM-/-24

OF NEW YORK

>FFICE CORRESPONDENCE
ZOM

governor Strccqg & Mr. Case

DATE_7eb_ruary_414127_
SUBJECT:

Mr. Snyder

In view of a simply absurd account in this morning's Times of

a little talk which I gave to a small group of the Council of the Retail
Dry Goods Association, last night, I should like to draw yotention to

the attached item in the blue sheet.




1 92

-1114MC.

FEDERAL RESERVE BANK

4. 1,0u14-1-24

OF NEW YORK

FFICE CORRESPONDENCE
Governor Strong_
tOM

DATE

January 3, 1927

AdctrRss

SUBJECT: Lord d'Abernon's

Mr. Snyder

You may like to read in detail the extremely interesting
presidential address of Lord d'Abernon, on the German currency
It is written with his

MEMO. FOR MR. SNYDER:




collapse.

usual incisiveness.
Returned with thanks.

Very interesting indeed.
- B. S .

192_

Misc. 3. 1.50M-8.25

FEDERAL RESERVE SANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

Mr. Snyder

DATE_

SUBJECT:

February 15, 1927

192_

Gold Movements and the Rediscount

Rate

attach herewith a chart comparing gold movements in the last eight
years with the course of interest rates and the rediscount rates, which has
interested me very much in that it seems to show gold movements as more
closely associated with changes in the discount rate than in the general interest rate.
This association may be rather accidental, but it is none the less
striking.
As you will observe, the rise of the rate at the end of 1919

seemed to check sharply the great outflow of that year, which was a little
later turned into a heavy inflow When the rate was again raised.
The beginning of the rate reductions of 1921 seemed correspondingly to
bring a check to this inflow, so that the amount dwindled to a low point in
In turn, even a slight rise in the rate in 1923 was followed by an
1922.
increase of the imports, and these began to be checked by the reductions of
1924, and to bring about a considerable outflow.
This, in turn, seemed to be checked when the rate was raised, and. Alen
it was raised again at the beginning of last year, to bring about a renewed
inflow.
The rest of the year seemed not so clearly defined.

Since the beginning of the year we have hadret imports exceeding
50 millions.
I had thought to make this a matter of a brief memo, for the Business
Summary, but in view of some impending questions it seemed better to defer
I know these are matters to which you have given deep attention, but
this.
it seemed of interest to put the relationships in black and white, especially
in view of the extreme difficulty of compiling any satisfactory balance sheet
of our international payments.
Of course there are many other potent factors which determine the extent
of tnese gold movements, but, on the other hand, I get the impression that the
amount of foreign loans and balances in this market, especially if we include
Canada, has risen very considerably in recent years and the fluctuations in
this amount may be of importance. A visitor from the Royal 3enk of Canada,
the other day, eold ee that the Ganaelen beaks alone had loans and balances
in New York now exceeding 800 millions.




This article is protected by copyright and has been removed.
The citation for the original is:
Snyder, Carl. “Industrial Growth and Monetary Theory.” Economic Forum, Summer, 1933.




Misc. 3. 1.504.8-25

FEDERAL RESERVE BANK
OF NOW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

February 18, 1927

Woll_ery-klaugen_Bill

I.

SUBJECT:

As the McNary-Haugen Bill neared its passage I have been thinking
about it a little, and with a feeling that possibly, under fav)ring amineBut I fear that
stances, the scheme could have a fair measure of success.
the proposed set-up, of an unwieldy board of twelve members, nominated by
I was
conventions of cooperative associations, etc., would prove fatal.
wondering a little if one way out might not be if the President could make
his veto on the ground of the kind of organization proposed.
Would not such a board of twelve men, probably not unattracted by
the salary, almost inevitably foredoom it to failure?

But if the direction of the whole plan could be in the hands of
one man, or, say, three men, all just the right type, I am not sure that it
I have watched with a good
might not achieve some interesting resulte.
deal of interest the workings of the Stevenson Committee on rubber, the
Brazilian valorization of coffee, and the controlling of sugar grinding in
Cuba, and while without doubt the winds of fortune have favored each of
these, it is always true that the skillful mariner may do fairly well even
when the winds are not so favoring.
At least it seems as though there might be a fair chance as to
It looks as if wheat would be hopeless without the
cotton, corn and hogs.
Rice I know nothing about.
cooperation of Canada, and perhaps Australia.

But if there could be a reasonable control of expectations, would
It was clearly 50-cent cotton end
not the problem be nearly half eolved?
low-priced corn that wrecked the South and made it plant 17 million more
I suppose there would be a wild outacres of cotton in 1926 than in 1921.
cry at the thought of limiting the price of any particular commodity, or
keeping it near to some given figure; but prpbably that would be the only
possible means of keeping down too high expectations and preventing overproduction.
I wish the President could have been advised to center his efforts
The country
on getting the measure into a more workable and practical form.
would certainly go with him on that.
Possibly the political side would wreck the whole scheme anyway.
But you will remember that there was a good deal of that feeling about the
original Federal Reserve Act, and if the present scheme could have the same
kindly fate that the other had, to come, as I see it, under the aegis of a
genius, it might likewise disappoint expectations.

I do not know if these are matters that interest you, but I am
sending it along.




192.__

WiCA.1-2WW.,24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DA-, February 19, 1927

192_

Mr. /Snyder

SUBJECT:

Prof. Commons' Testimony

Mr. Harrison may send you the report of Prof. Commons' testimony

on the

Strong Stabilization Bill, as it appeared in the United States Daily,

in case he thinks it is worth while.

Meanwhile, you may like to have this

very brief digest which Dr. Burgess suggests might be of interest to our
Directors and Officers.




Misc. 3. 1.50M-8.25

FSDSRAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE_Feb-_25_,_ 19_27

Governor Strong
FROM

SUBJECT. _Prohable_Gold_Pro

192

du oti on

Mr. Snyder

r

had today a very interesting conversation with Louis Huntoon, a

friend of Ed

Dodgess,and a mining engineer thoroughly acquainted with the
He is quite a student of gold production in

Ontario-Quebec gold district.

general, and it occurred to me that you might like to know of his conclusions.

These are, in brief,

that Canadian gold production will rise steadily

for a good while to come, and probably at the rate of about 5 millions a year
for the present.

Last year the total was a little over 35 millions and this year
should go well over 40.

The Ontario-Quebec mines

are generally

quiring a heavy expenditure of capital, and his

deep-mining propositions re-

belief is that this will prove

generally true of the numerous other prospects which have been opened up as
far west as the Red Lake district in Northern Manitoba.

year Canada would pass the United

made the prediction that by next
gold producer, and still

thinks

in 1929; in other words,

that Canadian mining is

manufacturing proposition, and

Three years ago he

that this may be realized or, if not, easily

that it is growing

essentially an industrial and
steadily.

Mr. Huntoon sees little prospects for any increase in
States,

States as a

and rather the reverse, a slow decline.

rise somewhat, bt not a great deal.

the United
feels may

He has much the same view, therefore,

that Prof. Lehfeldt gave us when he was here this fall, rather than that of
Mr. Joseph Kitchen, of London.
Bummed up, he thinks

gold production in

the next five years should

not vary much from the output of the last three years, or around 400 million



South Afr

Misc. 3. 1.50M.8.25

FEDERAL RESERVE SANK

OF NEW YORK

'FICE CORRESPONDENCE

DATE

Akmitimor_Strong

Feb. 25-, 1927

_ 1 92_

SuEuECT : _Probable _GoldPro du cti on

vi,,m__MrBnyder_

2

---

a year; that the industry is pretty largely on an industrial basis now, and
that one can calculate this production fairly well.

You will see, there-

fore, that he does not agree with the views of Mr. Kitchen, which were repeated by Prof. Cassel in a recent article.

Incidentally, Mr. Huntoon said that he investigated the ownership
of the Canadian mines, and found that they were owned almost wholly in Canada,

and that the total holdings of English shareholders were only a very few
per cent.

From 1911 Canada has produced well over a quarter of a billion of

gold.

He added that there had been little that was revolutionary in methods
of gold mining, and that there had been no such lowering of costs of extraction
as there has been,

for

example, in coal mining, which is the most spectacular,

and, to a lees extent, in

producing

copper.

So much for the production.
scramble

for gold" among

I find it difficult to foresee any such

other nations than the United States, such as

Prof. Cassel seems vaguely to anticipate.

So far from this, there might be

some, like Argentina or Japan, which would tend rather to reduce their stocks.

At any rate, it looks as if we might have a considerable amount of
new gold in the next five years, free for monetary purposes, possibly well
over a billion or a billion and a quarter.

This country needs no more

gold

and could well lose some.

Therefore,

does it not seem to you that the countries which may wish to add to their gold



Misc. 3. 1.50M-8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Gov ernor_Strong
FROM

PBb. 9% 1?
Production

Mr._ Snyder

6

stocks may be amply supplied from the available new production?
with

little prospect, so

the amount of

In fact,

it would seem, that India will take anything like

gold in the next five

years that

it has in the last five years,

does it not seem at least a possibility that this country will continue,more
or less, for some

time to

hold the bag?

We shall shortly have

ready a

study of pre-war interest rates and

gold movements, similar to the one for the period 1g19 to date.




192_

THIRTY THREE LIBERTY STREET
NEW YORK

March 2, 1927

My dear 3overnor Strong:
It is most reassuring to hear, and also to have such evidences,
that you are regaining your strength, and I deeply hope there may be no
interruption.

I said on the card at Christmas that the Reserve System

had great need of you, and it seems even clearer now.

I do not know just

what recent developments may mean, but I do devoutly hope that there may be
no interruption of the fine work of the lust five or six years.

It seems to me that in many ways the real Federal Reserve System
was born in 1917, amid pretty violent birth throes, and that it took four
or five years before it could stand firmly on its feet, and talk.

The

next five years saw a remarkable development, of what has seemed to me as
near to an ideal tradition as anything likely to be attained in this imperfect, and political, world.

It is good psychology, I believe, that the earlier years are

the

years of character formation, and that, once the imprint has been set, it
is difficult to change it.

But it seems deeply desirable that it may have

at least a few more years before the still plastic structure gets any very

rude jolt, in other words, that its character may be so deeply set that it
cannot be easily altered.

While I am writing, I should like to add, what I have wanted for
a good while to say, and that is that your vision in 1924, as to the proposals
for stabilization, was so much clearer than mine, as developments have so distinctly shown.




I had steadily opposed the recommendations adopted by the




It)

Hon. Benjamin Strong--2

Committee of which I was a member; but the divergent course of different
types of prices in the last two years has shown much more clearly how
very intricate and difficult the problem of stabilization is.
(.41

But I
.)

can't help thinking that some of the work we have done here has brought
out very distinctly, so that most thinking persons can see, the difficulty
and danger of taking any single type of prices as a guide to System policy,
and perhaps provided a needed antidote to overoptimism.

These two years or more have shown what few, I think, could have
foreseen, that ce could have mild inflation of a certain type of prices,

as wages and retail prices, without a corresponding effect, at least for
the time being, on commodity prices.

This seams to m

rience, and shows how great has been, and still is, the need for a real
statesman as the guiding hand in Federal Reserve policy.

Some day, if

the opportunity should come, I want to write a book about it all and make
clear what a great contribution your influence has been.

I somehow think

of it as close of kin to the critical time in the history of the Bank of
England, when Bagehot wrote his "Lombard Street."

I have written at length some thoughts on your last letter, which
Miss Fileecker will send to you.

Perhaps I should add that I see nothing

pressing in present developments, and that you may take plenty of time to
get back into the very best of condition, which I sincerely hope you may.
Please believe me, with very best wishes,
Always yo rs,

Hon. Benjamin Strong,
Stuyvesant
Biltmore Forest,
Biltmore, N. C.




Mmil.50W8-25

FEDERAL RESERVE BANK

,

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

March 2, 1927

DATE
SUBJECT:

192_

The Gold Situation

Mr. Snyder

Your note of February 27, regarding the future of gold movements,

raises

extremely interesting questions, and especially as to the tendency

of central banks to build up foreign

have wondered a good deal about
in some

balances

in lieu of taking gold.

this, and would like

here just to

I

indulge

thoughts or speculations.
You know that we have been great takers of gold for more than half

a century, and especially since our definite adoption of the gold standard

In 1896.

You will remember the calculation

no war and we had

century,

gone on gaining gold at the

our present

holdings would not

we made that, if there had been
same

rate as in the last half
than now.

be so very different

In other words, doesn't it seem as if we were kind of predestined
to hold the bag, and
fore the War might

that

what was going on for fifteen or twenty

probably go

on more or less in

he future?

years be-

In other words,

are we likely to lose very much of our present gold stock, desirable as that
might be, and isn't it the paobability, rather, that we may gain instead of
lose?

Looking at the chart which I enclose, one sees that we were
gold relatively at the expense of other
fact which was dimly bac

countries.

May it not have been that

of the resolutions of the Genoa

their apprehension of a "scramble for gold?"

gaining

Wasn't

the

Conference, and
apprehension

really

of us?

May it not be, therefore, that their indisposition
their tenaency
quantities of gold now, and/to build up foreign balances, is

to take large

a kind of natural

development that might have come if there had been no great international upset?



Mum. 3. 1.50M-8.25

FEDURAL RESERVE BANK

OF NEW YORK

.OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

March 2, 1927

192_

The Gold Situation

SUBJECT:

Mr. Snyder

And if so, is not this policy likely to continue

and even to

be

extended?

And this brings me to the next question, and that is whether, on the whole, it

Isn't a good thing.

And whether it does
country

more or less inevitably, this

not point the way to the role which,

must accept.

There seems to have been little in
gest any very

unusual growth in the future

the

fallen a little below what was their

In spite of this we go on gaining

or six years to sug-

of our foreign trade.

the tremendous impetus and the incidental advantages

ruption of the War, our exports, so nearly

five

last

Even with

derived from the inter-

as they may be calculated, have even

pre-war normal or average rate of growth.

gold, so that we now have

pretty nearly

half

the visible monetary supply.
But isn't this more

business?

We now

the world, and
been

or

need it, so to speak, in our

less because we

in the last five years the growth

very distinctly above the

immediate

of these, as you know, has

pre-war rate.

This has inevitably meant some inflation

of the price
so

it did before the Var.

But it has

not been sufficient/to

our exports of manufactured goods, which
But the indications are that

trade
and

of the

seems to me the

world

Continent, has been advancing steadily in

twice the rate of population

check the growth of

real test.

these five

or six years,

trade was now back to its

war rate of growth, or even temporarily above it.
cent per annum, or doubling about

level, just as

IhT

trade, and especially the foreign

l should not be greatly surprised if world




resources of

have, likewise, pretty neaOy half the banrng

This rate was about 5

once in fourteen years, which was nearly

growth in the countries concerned.

pre-

per

Misc. 3. 1-50M.8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

SUBJECT

March 2, 11427

The Gold Si tuati_ore

Mr. Snyder

It seems clear, then, that we can count on the steady growth

trade, and that the United States will be, as in the past, not
in this growth.

of world

a great factor

Does not this suggest, then, that the other countries who

are the large participators in world trade will really need to find some way
to "economize" on gold?
And are we not

And is not foreign balances the answer?

now rich enough and strong enough

more or less to

shoulder the burden which this would probably involve, i.e., impounding very

large sums of gold and continuing to absorb a major
monetary supply?

Whieh would mean also, I suppose, that from an enlightened

self-interest we should have to

what with

reference to world

adjust our banking and

conditions, as

that the rate of expansion of our own

economic needs, i.e.,
or the gain ih

portion of the available

should

those gold

in the past few years; and also

banking credit should not

continue not to

holdings (I

credit policies some-

exceed our

be determined by our gold holdings alone

an not quite

sure as

to this latter, i.e.,

whether the actual gain of gold in the last five years has not pretty well
termined our rate of

credit

true

de-

expansion).

There have been many

suggestions that, with the great increase of our

foreign loaning, our own interest rates would tend to fall; but if our indus-

trial profits continue at

anything like their normal pre-war rate (and

in

the

last two years they
tend to check any

have been considerably in excess of this), will not this
likewise
serious decline in interest rates arefoontinue to attract

heavy foreign investments in this country?




And in view of all these possibilities are not foreign balances, and

Misc. 3. 1.50M 8.25

FEDERAL RESERVE BANK

OF NEW YORK

-OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

ilz._Slayder

Su BJ ECT

March 2, 1907

1 92_

The Gold Situation

4

especially heavy balances in thie country, and likewine large American balances

abroad, likely to be a real stabilizing influence, especially of interest rates,
and therefore, I take it, also of the gold flow?
As you will see, these are just thoughts, rather than views.

And

many times in the past 1 have found that your own view was much wider or clearer than my own, so I would ask that you would regard this simply as materiel

for reflections.

As you will see, it is more or less continuing an old idea

that almost inevitably the United States seem destined to become the great

central gold reservoir of the world, and that our credit and economic policies
would necessarily be more or less adjusted to this condition.

large subject.




But this is a

Misc. 3. 1.5031.8.25

FEDCRAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
'e--___Governor Strong
FROM

11114., Snyder

SUBJECT: _Gold Movemeata_and theeInterest

Rate

Charting up the pre-war gold movements from 1890 was delayed by the
does not show quite
As you will see,
Monthly Review and a short force.
as clean and crisp a picture of relationships as did the chart from 1919,
which I sent you.

it

Nevertheless, something of the same relationship seems generally to
prevail, i.e., that a turn of the interest rates tends to precede the gold
But in the pre-war as in the post-war period there is no quantitamovement.
tive relationship between the two, but simply as to the direction of movement.
From this it is clear, as in the other chart, that the conditions or
which determine the extent of the gold movement are outside of the inforces
terest rate, but it is none the lees striking that a rise of the interest rate
But,
seems clearly to stimulate imports or check exports, and vice versa.
relationship was
as you will note, there were distinct periods when even this
not overly clear.
This seems to have eeen espe-ially true in the middle Nineties, and
But it seems fair to conclude that, in general, a
the interest rate coincides with or precedes an inflow of gold, and
v.v.; and, for the most part, the interest rate tends to change ahead of the
there

were other periods.

rise in

gold movement.
This has seemed to me of interest, especially in view of the fact
that there might be times, as you suggest in your note, when other considerations would outweigh the desirability of attempting to check a gold inflow.
It, of course, interested me very much that you should have this feeling.
In view of the possibility, at least, that considerably further quantities of
gold might come to us in the absence of some definite endeavor to check this,
it had seemed to me that this might be a continuously important question in
Federal Reserve policy in the next year or so, if not longer.
The answer
is, to me, none too clear, and I should be much interested to have your view.




Misc. 3. 1-50M-8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE

March 8,

1c1P.7

SUBJECT: Gold bilovemente and_GurrenqT Needs

Mr. Snyder

Continuing the consideration of probable gold movements and banking
expansion, I should like to add the following:
For any close calculation, we should, I think, also take note of the

very curious changes in the amount of money apparently required for actual
circulation outside the banks and the Treasury.

As you know, we keep a

regular compilation of this, which means simply subtracting from the nominal
amount of total circulation the amounts held by the banks and the Treasury,
as nearly as this can be calculated.

These estimates from 1919 on run as

follows:

June 30, 1919
1920
11
11
11

ty
11
11

1921
1922
1923
1924
1925
1926

$3,686 millions
4,331
It
3,911
11

3,558
3,951
3,852
3,796
3,859

11
11

11

11

11

As you see, there has been nothing like the increase of money in
circulation as the increase.of bank loans and investments or, what is practically the same thing, the rate of increase in demand deposits.

This means, of course, that the ratio of demand deposits to money in
actual circulation has been steadily rising from about 5.15 in 1919 to 6.63
in 1926.

This ratio has been rising by rather uneven stages for the last

thirty years or more, as you will see by the attached chart.
In the five years from 1922, especially, there has been no such in-

crease in the demand for actual currency as the expansion of bank credit
(around 33 per cent) and a rise of something like 10 per cent in the general
average of all kinds of payments, would suggest.




1 92_
-

Misc. 3. 1.50M-8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong

March 8, 1927

92_

SUBJECT: Gold Movements and currency Needs
1

FROM

Mr. Snyder
2

This would seem to indicate that, outside of the banks' demands for
till money, currency demands in the near future would not be heavy, unless we
should have a very rapid expeneion of bank credit, which would, in turn, imply
a further rise in the General Price Level.

According to our calculations, a

4 per cent rate of bank expansion would probably keep the price level about
steady.

(It has averaged about 6 per cent from 1922.)

This would suggest that the banks might require about 125 to 150 millions a year for increased reserves, till money and circulation outside the
banks (the varying demands of trade being pretty well accounted for, apparently,
by the variation in the rate of turnover of bank deposits).

And we might read-

ily gain something like this amount in gold imports if conditions did not greatly change.

If we estimate that gold production does not greatly change in the
next five years, this would mean around 2 billions of new gold, with from a
billion to a billion and a quarter available for monetary use.

If the United

States gained only half or a little more of this, would not that about suffice
for our needs, and leave sufficient for the rest of the world?

Of course India is the big X in the equation, but its takings of
gold in the last five years were so phenomenal that this does not seem likely
recur soon.

In other words, I find a difficulty in seeing any nearby

prospects of a serious gold shortage.

\to
As to whether, outside of this, and especially from foreign balances,
we should likely gain or lose any considerable amounts of gold, you could estimate this far better than we could here.

ably influenced
http://fraser.stlouisfed.org/
sort of
Federal Reserve Bank of St. Louis control?

But would not this be very consider-

by relative interest rates here and therefore be capable of some

RATIO of BANK DEPOSITS
TO GOLD &MONEY
r

9

8

7

5

DEPOSITS

DEPOSITS
÷ BY MONEY




1880

'90

1900

'10

'2.0

'30

Misc. 4 A

FEDERAL RESERVE BANK
OF NEW YORK

180 M 1-26

LOFFICE CORRESPONDENCE

DATE
SUBJECT.

192_

Bank debits in 140 cities and

cumulative totals f or

FROM




March 7, 1927

1926 and 1927
Per cent Increase
over a year ago

Four weeks ended
March 1 1926

Four weeks ended

$ 20,310 millions

$ 20,842 millions

2.6

Year 1726 to date

Year 1927 to date

Per cent Increase
over a year ago

(9 weeks)

$47,859 millions

.11421:2L-3

12.11

(9 weeks)

$ 48,786 millions

Level ,January 1926 = 158
January 1926 = 112
Volume of Trade ,

General Price

1.9

January, 1927 = 185
January , 1927 = 108

MISC. 3. I

60M 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

To

March 7, 1927

Bank debits and

SUBJECT.

Velocity of Bank Deposits

FROM

NEW YORK CITY

Feb. 1927*
Monthly Bank Debits - In millions

$ 27,439

Average daily bank debits - In millions
Seasonal Index
Average daily bank debits (Seasonal Removed)

$

1,247

$

$

1,223

1,250

Feb. 1926

$ 24,813
$

1,128

$

1,106

104
$

1,202

102

134

132

124

73.7

Velocity of Bank Deposits (Seasonal Removed)
pc: cent of Normal

Jan. 1927
$ 31,258

102

69.7
126.7

64.7
117.6

Index of Bak Debits

(1919-1925

Average)

134.0

OUTSIDE NEW YORK CITY

Feb. 1927

Monthly Bank Debits - In millions
Average daily bank debits Seasonal Index

In '''illions

Jan. 1927

Zeb. 1926

$ 20,742

$ 23,426

$ 20,079

943

$

$

100

Average daily)" bank debits (Seasonal Removed)

943

$

Index of Bank Debits

937

$

102

$

937

913
100

$

913

116

115

113

35.2
107.6

Velocity of Bank Deposits (Seasonal Removed)
Per cent of Normal '11919-1925 Average)

35.3
108.0

34.1
104.3

141 CITIES
Feb. 2927

Monthly Bank Debits Average

Per

cent

In millions

daily bank debits - In millions

Velocity of

192_

Bank Deposits (Seasonal Removed)

of Normal (1919-1925

Average)

Jan. 1927

Feb. 1926

$ 48,181

$ 54,684

$ 44,892

$

2,190

56.7
118.9

*February 1927 figures are preliminary




$

2,187

55.7
113.2

$

2,041

52.4.
109.9/

Misc.

1441-25

FEDERAL RESERVE BANK

OF NEW YORK

Oi

_

..:EZ CORRESPONDENCE
Governor Strong

FROM

DATE
SUBJECT:

March 8, 1927

Current Volume of Trade

Mr. Snyder

As one can read such curious reports in the newspapers, you may like
to see the attached which gives outside bank debits in actual figures, week by
week; and also our monthly calculations of relative position, making allowance
for seasonal, etc.

As you will note, the Volume of Trade, including financial activity

of all sdrts, continues at the same high levels of last year and even slightly
above.

Very much the same story is told by car loadings and other current

barometers.

Allowing for a slightly lower general Price Level, bank debits indicate a volume of

business

activity about as high as anything we have had,

and something on the same order as for the last year and a half.
What seems to me very impressive is the way in which bank debits move
up and down, week by week, in almost exactly the same way as in the year previous, and very often the same as for two or three years previous.
regularity is slightly affected

This

by calendar displacements of holidays, tax days,

etc., but, allowing for these, the

gambling

chance is about 25 to 1 that the

weeks' movements will be the same as in the year preceding.

This is to me one of the most extraordinary things 1 know of and
seems to suggest a regularity in trade movements beyond anything we ever dreamed of
Also that outside debits are not greatly affected by the gyrations of
the stock market.




5 ! 34*

WEEKLY BANK DEBITS IN 140 CENTERS (OUTSIDE OF NEW YCRK CITYB FOR l/?6_, COLTARED WIT}? THE CORRESPONDING WEEKS OF 1923. 1924 AND 1925

BILLION) of DOLLARS




B/LLI0N5 ofDOLLARS

6.3

W E E K Ot

O SC O tZA H O N
DAY

BA:IK DEBITS OUTSIDE OF
NEW YORK CITY







BANK DEBITS OUTSIDE OF
NEW YORK CITY.

USG. 9.1

,60M 7-26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
.0

Governor Strong

FROM

DATE_April_4_1227

Mr. Snyder

Trade in February

SUBJECT.

You may have noted the Board's report on trade
February

conditions in

and, as an instance of the comments thereon, the Times!

this morning.

editorial

In contrast to this supposed decline, a very large majority

making proper allowance for the short

of all our trade indexes show, after

month in February and the usual dip in many lines in that month, the high-

est

February level sinoe the close of the War, and about as high comparative

level as anything that we have

had in the present great expenaion of business.

Our composite of 56 series gives an index number of 14 or 15 per
cent above the estimated normals, and

Likewise, our

our

debits index is still higher.

index of the turnover of bank deposits was very high.

brief, there seems every indication

that

In

February was a month of unusual

business activity--and anything but a decline.
Themp,happily, are matters capable of measurement and verification,
and this seems to me to afford an excellent

illustration of

the difference

between what I should call a very comprehensive survey on the broadest lines,
and the old-time methods.

Personally, as I indicated to you in
of bank debits, I have come to the feeling
constitutes perhaps

the best

a little memo.

that the

on the

subject

volume of checks drawn

single measure of trade that we have, and it

is noteworthy that, in the great majority of cases, the testimony of the index derived from outside bank debits and our broad composite of the Volume
of

Trade, is

practically the same.

There has been a curious tendency to

a kind of see-saw of movement in successive months, that is, that the two indexes may move in opposite directions in a given month (usually in very
degree), and then exactly reverse this the next month.



slight

Just what this is due

1ISC. 3.1

601.1 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
,b

Governor Strong

FROM

DATE

41'11 1, 1927

192

Mr. Snyder

SUBJECT.

to we have not yet been able to discover.

Triad@ in Fehruary

It is as though the debits index

was just a little ahead of the more comprehensive composite.
Barring these occasional see-saws of movement between the two in-

dexes, there have been but five instances out of 98 months now available for
comparison in which the debits index and the Volume of Trade index have shown

a different direction of movement, and these usually of two or three points.
In view of the fact that the movement of debits is nearly the same
whether we take all reported debits or those outside of New York, or out out

also the three other large financial centers, Chicago, Boston and Philadelphia,
and take only 187 reporting centers, one gets the feeling that we have here
an extremely sensitive and reliable index whose testimony is nA to be gainsaid.
It may interest you to observe how closely theee movements synchronise

in the enclosed chart,




ISC._ 9.1

FEDERAL RESERVE BANK

601.1 7.26

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
ROM

DATE
SUBJECT:

April 14, 192T__192__

Business Conditions

Mr. Snyder

There seems little to indicate any considerable accumulation of

manufacturing or

retailers'

inventories.

Retail trades,aa expressed in

department store, chain store and mail order sales, and consumption of
electricity have all been at a high level.

And reports of falling prices,
do not
together with perfect transportation service,/tend, of course, to promote
such accumulations.

There le a surplus of crude oil and of grain products and cotton
and some other basic commodities.

All these are registered in declining

prices.

There seems no reason to doubt that the volume of production and
the volume of trade have been pretty

steadily

above the usual

rate

of growth.

For this we have:

Quantity production figures for almost all the chief basic
commodities.
Railway transportation and oar loadings.
A great variety of reports dealing with wholesale, retail
and general trade.
All of these make the same broad Snowing.

It seems difficult to

discover whether it is any less ',real!, than in any other years.

But we have had now five full years of pretty general prosperity,
and, in the last two years, of unusual prosperity.

If the experience of

the last fifty years could be used as a guide, the last half of this year
might show some falling off and the next twelve or eighteen months perhaps
a decided decline, equalling or exceeding that of 1924.

Produotion of the pig iron or basic type is now at a hig0 level and
so, of course, is speculative activity, both of which often precede such a

http://fraser.stlouisfed.org/
decline.
Federal Reserve Bank of St. Louis

11SC. 9.1

6011.1 7.26

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
na)

Governnr Strong

FROM

April isk

DATE

192T

192_

Mr._Bnyder

Business Conditions

SUBJECT

2

An especially

sensitive index of commodity prices, containing no

crop prices, has been slowly downward since last October.

of outside debits over the

year end

showed a smaller increase than in the two

years,which,han usually indicated some business recession.

preceding

The big

X in

building situation.

the situation now, as for two or three years, is the

Here the contracts of the first

quarter show but very

slight decline from the very high levels of a year ago.

the attaohed statement that there
this has

And the volume

You may have seen

is now considerable over-construction.

been strenuously denied by others in

But

the trade.

The volume of bank loans and investments in the weekly reporting banks

shops an increase nf 4 per oent over a year
apparent decline of around 4 or 5 per

cent

including, of course, commodity prices at
Nearly

course,

is

half this increase/in

ago, aad this is in the face of an

in the general average of prices,
Wholesale.

bank investments, which indicates, of

very heavy demand for accommodations.

no

And interest rates tell the

same story.
If interest rates were rising rapidly and credit resouroes were
strained, we might reasonably

expect a severe

absence of this, it mould seem to be, as you suggeat, a

the balance of production and

In the complete

recession.

consumption is being

question as

to Whether

well maintained.

Of course a slump in building construction, which would carry with

motor

it, n, doubt, a sharp ourtailment of

oar production, since the two seem

to run together so Olosely, might quickly result in such a lack of balance.

But the three usual wecursers of a
interest



depression, rising

I

commodity prices, rising

rates, and/labor strikes and unrest, are absent.

IISC. 2.

I

6064 7-26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATF

April 1F, 1921_

To

Governor Strong

SUBJECT.

CRUM

My. Snyder

lga__

of Production and Trade

Growth of Bank Credit and Growth

We have been making some computations which may be of interest to

you as bearing on the problem of adequate credit expansion, as follows:
The average of total loans and investments in all Member Banks of
the System for 1919 was

billion dollars, and for 1926

billion

This was an increase of 33 per cent, or an average of 4.2 per cent

dollars.

per year.

If the general price level, or average of all kinds of payments, was
about the same in 1926 as in 1919, this would imply that the expansion of
bank credit had been just about in balance with the expansion of production
and trade.

And this is just what our several attempts to compute an index

of the General Price Level suggest; i.e., they all come out at nearly the
same for these two separated years.

But if, between these two years, credit expanded much more rapidly
at any time than trade, or less, one might suppose that the price level would
rise or fall.

The attached chart shows how closely the correspondence

actually was.

The one line shows the percentage deviation of bank credit above or
below a straight line growth from 1919, of 4.2 per cent, and the other is
our computed actual General Price Level, likewier, on the base of 1919.

The widest deviation, you will note, was in 1920, by about 5 or 6 per
cent.

But we had already come to the conclusion, from a number of other

studies, that the Index of Prices in 1920 was perhaps 10 per cent too high.

This was because all the indexes of commodity prices, like the Bureau of
Labor, Bradstreet's, etc., were in that year largely indexes of quotations
and not of actual sales prices.



And yet we could not, o

IISC. B.

601,4 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FIR6i1

DATF

Mr. Snyder

SUBJECT.

April 15, 1926

192_,

Growth of RAnk Credit_snd Growth

of Production and Trade

2
commodity prices out of a calculation of the general price level.

But from the end of 1920 you will note how close the correspondence
was.

Take one instance:

All the increase in the volume of bank credit has come since the
beginning of 1922, and the expansion of 33 per cent took place in the next
four years.

Very slight increase in 1926.

In these four or five years the actual increase of production could
not have been much over 20 per cent.

Allowing for the slow, steady growth

in the use of bank credit, this would leave a difference between the expansion
of credit and the expansion of business of about 10 per cent.

And this is

just the increase from 1922 to the end of 1925 in our Index of the General
Price Level.

And still further:

Last year the increase of Member Bank credit was

less than 4 per cent and our Index of the General Price Level, like the
commodity price level, though in a lesser degree, tended to decline.

These curious results would have been impossible, of course, if it
had not been for the fact which we had previously discovered, that the fluctuations in business, from its usual line of growth, were of

closely the same

order as the variation in the velocity or rate of turnover of bank deposits;
i.e., that the amount of work done, or volume of business carried on by a
given amount of bank credit, varies closely with the degree of business
activity.

In other words, when trade is very brisk, "velocity," or rate of
turnover, is high; and when business is dull or depressed the turnover is




11SC. 9.1

FEDERAL RESERVE BANK

6054 7.26

OF NEW YORK

OFFICE CORRESPONDENCE

DATF

April 15, 1927

To

Governor Strong

SUBJECT.

FROM

Mr. Snyder

192_

of Production and Trade

Growth of Bank Credit and Growth

3

correspondingly low; and, according to our measures, the percentage change
in each is closely on the same order (some difference when bank deposits
expand very quickly, as in the latter part of 1924).
I know it seems to many (to some of our good friends in gashington,

for example) absurd to think that such things can be measured closely; and
probably I should not either if it were not for the fact that all these different measures, of production, of volume of trade, of turnover of deposits,

of increase of bank loans and investments, and several different computations
of the General Price Level, did not all seem to fit together in this curious
and striking way.

But does not one phase of it, at least, seem quite probable and
reasonable?

That is, that we could scarcely have an expansion of bank loans

and investments by 33 per cent in four years and still have a real decline
in the average purchasing power of the dollar; i.e., that indexes of commodity
prices at wholesale, heavily weighted as they are with food and farm prices,

cannot be taken as a trustworthy measure of the General Price Level, and that
a Reserve Bank policy based upon, or guided by, such a supposition might
prove disastrous.







THIRTY THREE L'BERTY STREET
NEW YORK

April 19, 1927

My dear Governor Strong:

I think you make a very strong point as to one of the potent
forces making for business disturbance, and one to which too little
attention has been given.
I should rather think of it as one of the strong, precipitating
forces--perhaps usually the very strongest; and its presence or absence
perhaps the determining factor as to whether a serious panic or decline
Is to develop or not.
It happened that, shortly after reading your note, Prof. Mitchell
was on the 'phone, and I told him something of your idea.
I should, of course, agree, that there was very little doubt that external
repercussions, as Dr. Miller might put it, from new and undeveloped
countries, had often been a pronounced feature of4ycles and depressions
in the past, and were strongly contributing if notAdominating factors.
You might say that, in a way, our rapidly growing West was external to the then industrial part of the United States; and that our
land booms and their collapses were potent features of our business
cycles and that these in turn reacted upon Great Britain, with her huge
investments in this country.
Also you might cite the Panama "craque," following the loss of
1500 million francs of French capital in the Panama venture, a very
large sum for those days.
There is little doubt also that unstable
currencies and banking systems, as you suggest, have also had their influence.
Personally 'I think the evidence is pretty clear that, for ex-,
ample, in this country, and quite possibly in others, the'business cycle
grew greatly in intensity or violence of swings, and that this has since
been declining.
Is it not evident that there could not have been
much of a "business" cycle a century or more ago when there was very
little transport of goods and therefore very little trade?

My feeling was that we could more or less develop the curve of
intensity of the business cycle--that this rose to a peak in the depressions of the Seventies and Nineties, and has since distinctly been
Would not this correlate with your own impressions and with the
waning.
I have sought to give evidence for
thought you developed in your note?
this in the small volume which is soon to be out, and you may like to
I came to the idea from the attempts to
look over this brief summary.
measure the actual swings of business of the last fifty years or so from

Hon. Benjamin Strong--2

4

the variations of bank clearings from their steady and insistent line of
Mitchell was, I think, inclined to doubt this idea of a decline
growth.
in intensity, and sent Prof. Macaulay down to go over our work and see
if there were any flaws in it.
I think the facts are pretty clear, and I see no reason why, as
your note suggests, this progressive amelioration should not go on; in
other words, that we should have no recurrence of the old-time, prolonged
depressions and periods of unemployment like those of thirty and fifty
years ago; especially if we can have as astute and clean-sighted banking
policy as we have had in the last few years.
I do not mean by this latter that I would go with the extremists,
like Hawtrey, and say that the business cycle is purely a credit cycle,
but I imagine almost everyone would concede that the credit factor is a
And gold.
I have always
very powerful influence for good or ill.
thought that one determining factor as to whether a depression is to be
At least,
short or long was whether gold was coming in or going out.
as you will recall, this seemed to be one of the main differences between,
say, the Nineties and 1907 or 1921.




You raise some very interesting questionE, and I am hoping that
the next few years may give a pretty definite answer to some of them.
But would you not expect that any period of quite unusual activity, as,
for example, in building and in speculation, as in the last several years,
would still be followed by some recoil, just as it has always been in
the past, as in the great days of railroad building, etc.?
Prof. Mitchell asked me to convey to you his very best regards
He feels, as of course I do, that it
and beet wishes for your health.
is a very unusual and very fortunate thing that this bank can have a
Governor who can give serious thought to such questions.
Very sincerel

Hon. Benjamin Strong,
Hotel Brighton,
Atlantic City, N. J.

yours

WS.4..W14-7-24

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
T

Governor Strong

FROM

DATE

April 27,

Mr. Bluth"?

SUBJECT

Course at Maw School

I have teen invited to give some lectures on Business Cycles at
the New School of Social Research next winter; very much the same material
as in the course I am giving again at Columbia this summer (approval given
by Mr. Case in your absence).
Thie course at the Aew School was for some years given by
Dr. Etewart also gave a course there on Banking, last

Wesley Mitchell.
winter.

objection?




This course would be out of business houre.

Would there be any

92L

!SC. 9.1 6061 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

DATF

SUBJECT

May 1, 1927

Five Years' Progress

Mr. Sny_d.er

I have been trying to put together some of the chief items which
would give some sort of a picture of what the growth in some lines has
been in the last five years.

I have chosen the more salient items, and

they seem to me extremely impressive.
Possibly you would like to run over the percentages of increase.

Considering that, over a long period, the characteristic rate of growth of
total production and trade appears to have run very close to 3i per cent per

annum, which would mean an increase in four or five years of 15 to 20 per
cent, some of the increases shown, especially in the line of luxuries, are
rather startling.

And there seems no let-up in this swelling tide.

Bank

debits, merchandise car loadings, building construction, and many other
things, so far this year, are up to or above the same period of last year.

You recall the old saying that prosperity is always behind us or
ahead of us; never here.

I wonder if we shall not look back upon these five years as one
(
" 40 0-1/14f1)
of the greatest periods of prosperity this country has known.




192_

3

Unit
/.

Increase

Rate
per
Year

1922

1926

4,436

6,034

36.0

8.0

It

2,949

4,574

55.1

11.6

It

897

1,355

257

451

2,483

3,512

41.4

9.1

3,346

5,403

61.5

12.7

198

312

57.3

New Securities Issued:
Millions of $

Total Domestic
2.
3.

--

It

- Domestic Corporate
Foreign

Shares Traded, A. Y. Stock
Exchange

Millions of Shares

5.

Building Permits

Millions of t

6.

Building

7.

Large Industrial Contracts
(Engineering News Record)

8.

Real Estate Transfers (41 cities) Thous. of Transfers

1,319

1,841

39.6

8.7

J.

Corporate Profits (403 id.)

1,110

1,917

72.7

14.6

18,160

25,388

39.8

8.7

98.9

152.3

54.0

11.4

14,771

19,625

32.9

7.4

439,364

607,655

38.3

8.4

4.

(158 cities)

It

Contracts (Dodge)

10. New Incorporations, N. Y. State
11. Stock Price Averages (201

stocks)

12. Loans and Investments, all Reporting Member Banks as
of Jan. 1
13. Debits, 141

Cities

It

Millions of $

Number
1917-1921 = 100
Millions of t

It

15.1

14. Automobile Production
(Cars and Trucks)

Thousands of Cars

2,547

4,219

65.6

13.4

15. Gasolene Production

Millions of Gallons

6,202

12,589

103.0

19.4

16. Cigarette Consumption

Millions of Cigarettes

67.0

13.7

17. Silk Consumption

Thousands of

18. Diamond Sales (2d District)

Thousands of $

19. New Life

Millions of t

Insurance Written

Bales

20. Deposits, Savings & Time,
Millions of $
(all Banks)
21. Total Savings, in Bank Deposits,
Building & Loan, & Ins. Co's Assets
22. Car Loadings, Mdse. & Misc.
Thousands of Cars
23. Population, Urban
24.

It

Farm


http://fraser.stlouisfed.org/
*Decreare
Federal Reserve Bank of St. Louis

Thousands (1920440
If

53,581
368

502

36.4

8.1

10,377

14,287

37.7

8.2

52.6

11.1

8.9

5,512

17,579

24,696

40.5

29,122

43,671

50.0

26,751

32,934

23.1

5.3

54,305

62,846

15.7

3.0

31,614

29,023

-8.2*

(")

FEDERAL RESERVE BANK
OF N EW YORK

Misc. 4 A 180 M 1-26

OFFiCE CORRESPONDENCE

May 164 192!

192_

Bank_debitt_in 140 cities and
sumulativo totals for 1926 and 1927

To.

SUBJECT:

FROM




DATE

Four weeks ended

Four weeks exiled
May 11, 1927

Per cent Increase
over a Lailljaza

0 20,44 millions

$ 21,540 millions

5.2

Year 1926 to date

Year 1927 to date

Per cent Increase

May 122 1926

1.19 weq.11

121,222,LIce.

$ 99,383 millions

0.02,49.5 millions

General Price Level, March
Volume of Trade,
March

1926 = 186
1926 = 113

ov4r

ear ago

3.1
March
March

1927 = 184
1927 = 113

II9C. 9

I

60M 7-26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATF May 17, 1927

To

sueCT,

FROM

Markets

Study on Money Rates and Money

One difficulty I found in reading this is that very often the charts
lack an explanation of just how they are derived and, furthermore, that
there is not alwaps a close connection between the charts and the text.
It would surely gain, in readability at least, if a short, clear explanation was given underneath each chart.
It seems to me, also, that the use of the word "determination" in
connection with the construction of an index of factors influencing money
rates implies a definite causal relationship when it is by no means clear
And, in particular, the
that it is more than a coincident relationship.
For
connection between this index and bond yields seems none too clear.
example, as shown in Chart 8, bond yields have been steadily falling since
the latter part of 1923, but the "index of factors" does not begin to fall
until a little later, and then turns about abruptly in the middle of 1924,
Surely this is not a "determining" relationship.
and haa since been rising.
One is the supposed
There are many other matters that might be noted.
relationship between interest rates and the amount of money in circulation.
This latter has varied little in the last four years, while interest rates
Here as in so many other cases it seems that the exhave varied widely.
planations are often strained or confused.
For the rest, the influence of changes in the price level, or in the
relative value of money, and likewise the relationship between the volume
of credit outstanding and the volume of trade it sustains are almost wholly
neglected.




192__

1ISC. 9. I

60M 7.26

FEDERAL RESERVE BANK
OF New YORK

OFFICE CORRESPONDENCE

7"-\

Governor Strong

FROM

DATE

May 18, 1927

192_

Mr. Snyder

SUBJECT.

We are obtaining more and

Price Indexes

re evidence that there must be something

distinctly wrong with our familiar price indexes, like the Bureau of Labor,
Bradstreet's

etc.

Attached are the latest bits.

The weighted average of the actual prices paid for raw materials by
one of our largest farm implement companies (practically all wholesale prices)
was, last year, 25_22E_Reat above 1915.

The larger part of these materials

is steel and iron, mostly in billets, sheets, and the like.

Labor's weighted index of

The Bureau of

guataLtiolas on various iron and steel products is

around 30 per cent above 1915.

Again, the average of the actual prices paid (wholesale) by hardware
dealers, as per attached, was, as

you will see,

practically the same in 1926 as

in 1919, while the Bureau of Labor index of metals and metal products was some
22 per cent lower.

Likewise, the hardware index of actual prices paid showed

no such decline in 1926 as the Bureau of Labor general index, or even the nonagricultural half of that index.

You will note how strikingly both of these two contributions go to
confirm our computations as to the General Price Level; first, that it is something like 70 or 80 per cent above pre-war, and not under 50 per cent, like the
Bureau of Labor, and, second, that the average of prices in 1926 was just about
the same as in 1919, and not 20 to 30 per cent lower, in 1926, like the B. of L.

This latter has an important bearing on the measurement of credit

expansion

since the aar, as I should like to take up with you some day.
It looks as if Mr. Hoover's next job is to get somebody in charge of

that work who has some understanding of the nature of price indexes.
 sometirre


you

might have opportunity to take up this question with him.

Maybe

C. 9. 1

FEDERAL RESERVE BANK

601.1 7-26

OF NEW YORK

JFFICE CORRESPONDENCE
To

Governor Strong

DATE

1 92_

May 19, 1027

SUBJECT:

PRom______Mr. Snyder

I am told that the General Electric has an average sales price index
of some of their products, which would be very desirable for us to have.

If

occasion offered, you might ask Mr. Young.

The same might be true, also, of Mr. Woolley's and Mr. Woodin's
companies.

We shall have the index of railway equipment, and farm implements,
and probably one or two others, which we could combine into a weighted index
of "Equipment and Machinery."




These would be the prices paid by the consumers.

IISC. 9.1

6016 7.26

FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong.
FROM

DATE
SUBJECT.

The State of

May 19, 1927

192__

Things

Mr. Snyder

The dilemma--if there be one--would seem to be that:
Any procedure intended to moderate a little,undue enthusiasm
in the stock markets, and now making itself felt in a number of lines, would,
of course, meet with the objection that agricultural prices, especially,

have had a severe fall, that the farmer has not been overly prosperous, and
that an attempt to moderate speculative enthusiasm might react as strongly
upon him as anywhere else.

But:

Any efforts designed to check the fall in commodity prices
would apparently, under the circumstances, give a further fillip to the spec-

ulative fever, already going pretty strong and, if continued, likely to bring
about a very severe reaction, with possibly real effects upon the general
business and trade of the country.

As regards the farmer, it seems to me that the day of his deliverance
cannot be far distant.

Since the close of the Tiar we have had an increase

in the total population of the country of a little over 10 per cent, and a decrease in the farm population estimated by the Department of Agriculture at
a full 10 per cent.

A real increase in farm efficiency, such as Mr. Henry

Wallace and other practised observers hold has taken place, may, with harder
work by the individual farmer, meet the increased demands of the urban population successfully for a time; but I do not believe indefinitely.
And I find others of the same view.

A recent visitor expressed the

view that we should see our Bureau of Labor index above 200 inside of five
years, or less.

This is perhaps extreme; but before the War farm prices were

rising steadily, and I cannot see why, with the steady increase in urban pop-

ulation, which is true not merely in this country and in England but even in



.ISC. 3* 60M 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

PROM

Mr, Snyder

DATE
SUBJECT:

May 19, 1927

192_

The State of Things

2

such countries as Italy and Denmark, this rise in the relative cost of food
should not continue.

You know the recovery in farm prices after the slump of 1921, and
up to the middle of 1925, was the sharpest of any group of prices.

It seems to me that the country is "sitting pretty," as your
Southern friends say, if it ever was; and the only thing seriously to fear,
so far as I can see, is our natural and ineradicable tendency to overdo things.

n4,0
We have a,,,tendency to falling rather than rising commodity prices

(though I am sure the extent of this decline has been greatly misrepresented
by our price indexes).

We have highly efficient labor, a relatively low rate

of turnover and, finally, moderate interest rates and credit so abundant as

to finance with ease one of the greatest periods of industrial development
that this country has ever known.
Of course this happy era may not continue indefinitely.

We might

get too much gold and it would then be highly desirable that we have a larger
portfolio of securities to eell against it.

Barring this

that would disturb my own natural propensity, in the absence of definite pressure otherwise, to pursue the middle of the road.




FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
1_

Governor Strong

FROM_

DATE

June 1, 1927

Mr . Snyder

SUBJECT:

Growth of Time Deposits

I have summarized the findings as to the growth of time deposits,
so far as we have been able to go, in the attached.
But I have been
puzzled to explain why it is that the proportion of required reserves to
total loans and investments should remain practically constant, at least
since 1919.
I thought at first it was due to the more rapid increase of the
city banks; but
this does not appear to be the case.
But in any event it does seem clear that the growth of actual
savings accounts in National banks, and presumably in non-National member
banks, has been quite phenomenal and accounts for very much the larger part
of the growth in time deposits.
There may be other aspects of the subject you would like to have
us investigate.




192_

11SC. 9.1

60.1 7.26

FEDERAL RESERVE BANK
OF NOW YORK

OFFICE CORRESPONDENCE
To
FROM

Governor Strong

Snyder

DATE
SUBJECT:

June 3,

1e21

arcurth of Time_Dsposite in Tauber__

Banks

We have made several calculations as to the effect of the increase
in time deposits on reserves, and I should like to send you up two of these
They are based upon
to see if they are along the lines of whet you wish.
June 50, 1919, which was about the earliest date on which the figures as to
required reserves were obtainable without further calculations.
These show that, based on the relation of time and demand deposits
in 1919, present reserves would support a total of 26 billions of deposits,
in lieu of the actual 30 billions of June 50 of last year.

Or, put in another way, on this same base, present deposits would
require some 300 millions more of reserves than the actual of last year.
But you will note from the attached chart that time deposits in both
country and city banks went up much more rapidly from 1919 to the middle of
1922 than since.
So that the choice of this base was somewhat arbitrary.
Of course if we went back to relations in 1914 the disparity at the present
time would be much greater still.
You will note that, of total time deposits, near to one-half are
still in the country banks, or in banks in cities having less than 100,000
population.
It is evident that the rapid growth of time deposits in Member Banks
expense of savings and other banks, since the increase
has been 157.2 per cent, while, according to the
A. B. A. calculations, the total of time and savings deposits in all banks in
the country have increased only 89 per cent.

has been somewhat at the
from 1919 for Member Banks




II9C. 9

I

60M 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

June 13, 1927

Mr. Snyder

SuBJEcT

Expansion of Trade

There seems little doubt of a real expansion of trade and a deceidedly different trend, within the last few months, as is set forth in
the two attached charts.

Towards the end of last year debits tended to fall below the
level of the same period a year previous, which in former years was a fairly good indicator of a declining tendency in trade.
months and more this trend has been reversed.

But in the last two

All through last year the

ratio of debits to the previous year was narrowing; this year, and especially in the last two or three months, the reverse is true.

The especial interest of this reversal of trend is that it is in
the face of the supposed "decline" in prices.

Does it not seem fairly

evident that this "decline" could not be so very serious, or real, with such
an actual expansion in the dollar values of trade?

This same expansion of trade is indicated in the similar sharp increase in merchandise car loadings over last year.




IISC. 3.1 60M 7.26

FEDERAL RESERVE BANK
OF NEW YORK

-)FFICE CORRESPONDENCE
To'FROM

Governor Strong

DATE
SUBJECT-

June 15, 1927

192_

Growth of Time Deposits

Mr, Sayder

Attached is a study by Miss Bagwell, which seems to shed a considerable light on what is behind the growth of time deposits.
We have figures on "savings accounts" in National banks between 1909 and 1914, and also
the number of these accounts.

The interesting thing to me was that, if you would prolong the
line of growth in savings deposits from 1909-114 to the preeent time, you
might get a total now not very different from the actual present amount of
these deposits.
This is still more strikingly true of the number of these savings
accounts in National banks, as you will see by the chart.
After 1914 savings deposits were not separately reported for seven
years, but they appear to be nearly identical with time deposits other than
municipal,postal,certificates of deposit, etc.
clearly the growth.
You will see that even back as far as 1909 these
savings deposits form, as now, a very large proportion of the total time
deposits (since 1921 about 80 per cent).

So that w

Dr. Burgess suggested that if these "savings deposits" really
represented a considerable transfer of inactive demand deposits to time deposits, this would mean automatically an increase in the celocity or rate
of turnover of the demand deposits.
Here are the actual
turnover as computed for 140 identical cities from the earliest date available:

1919
1920
1921
1922

1923
1924
1925
1926

33.5
34.8
50.7
30.8
32.5
31.5
32.7
33.7

You will see that, even in the vary active year of 1926, this average rate of turnover was the same as in 1919, and less than in 1920.
I have been puzzled to judge to what extent the growth of time deposits in the Member Banks is inflationary.
This growth, as you will see,
has been much more rapid in Reserve citkeMember banks than in the so-called
country Member danks; but it still remains that nearly half the total time
deposits in all Member Banks are in these country banks.
some reason to think that the more rapid growth of these time deposits in
the city banks is due in large part to very active development of their
savings bank departments.




.

112C. 2

1

6064 7-26

FEDERAL RESERVE BANK

OF NEW YORK

-)OFFICE CORRESPONDENCE
Tc
PROM

DIATF

SUBJECT.

Governor Strong

JIM, 15, 1027

Growth of TimeDeposits

._flJ4I
2

As to the inflationary effect: In the last twelve months the increase in demand deposits in all Member Banks has been zero in place of a
At the same time, we have
usual or normal increase of around 3 per cent.
had a slight decline in the general price level, and especially in commodities
I doubt if this is an accidental association.
at wholesale.

But the growth in time deposits in these twelve months was 8 per
With the rate of turnover of demand deposits about the same as in
cent.
other active years, it seems clear that the increase in time deposits has
not affected the price level, which is, of course, in conformance with
theoretical considerations.
I should be glad to have any suggestions as to
method of attacking the problem.




any different

FEDERAL RESERVE BANK

MISC. 4 A 126M-4-27

OF NEW YORK

OFFICE CORRESPONDENCE

DATE
SUBJECT:

Tc
FROM

SAVINGS DEPOSITS AND TIME DEPOSITS
In view of the steadily increasing proportion of time deposits to demand
deposits in the Member Banks of the Reserve System, the Federal Reserve Board has
instituted inquiry as to the character of these time deposits, and the attached
study was forwarded to the Board as a part of this inquiry.

Because this problem

involves important considerations for Federal Reserve policy, and may be of interest
to our Directors, copy of this memorandum is herewith sent.




MEMORANDUM
TO GOVERNOR STRONG ON
TIME DEPOSITS AND RESERVE REQUIREMENTS
June 27, 1927

By Carl Snyder

THE GRO.:ITH OF TIME DEPOSITS.

One of the most striking developments since the founding of the Federal

Reserve has been the rapid growth of time deposits as compared with demand
posits and likewise, as we shall see, as compared with ordinary saving d bank deposits.

The comparative figures for the first year of the System, the first

year after the dar's close, and for the latest available date, for all Member
Banks, are as follows:
Increase
1915

1926

1919

19196.'26-

157.3

(Millions)

Demand Deposits
Time Deposits
f. of Time Deposits

4,976
1,264

13,195
4,343

17,380
11,173

20

25

39

31.7

But this rapid growth.of time deposits has not been confined to the
Member Banks of the Reserve System, but has been generally true of commercial
banks, other than savings banks.
deposits for

all

Thus the reported totals of time and s

State banks and Trust companies, for the corresponding years,

were as follows:
(Millions)

1915
1919
1926

Increase over 1919

3,504
5,498
10,945

99.

CHARACTER OF TIME DEPOSITS.
It has been a nature./ inference that this growth of time deposits, in

http://fraser.stlouisfed.org/
the Reserve
Federal Reserve Bank of St. Louis

System especially, has in large part been due to the conversion

Sp. 1431.

711.1.101115 of DOLLAR 5

30

20

.

_

TOTAL
DEMAND Of P0.51T5
tn. ALL I3ANK5
41...

/
10

/
i

.

'

.

t

DEMAND DEPO5/T5 in
ii(ALL MEMBER BANKS

IPPIV
TOTAL

8

SAVINGS & TIME DEP.

:

7

6

5

14

all.

A
411M

r

DEPOSITS inlIUTUAL
5AVINGS DANK5

T/tir D[P05/715 in
ALL 1'IL-M5LW BANKS

1111
1910

i

1915




1111 1920 1111

192,5

ill!

Gonpbra.tive Growth of Tine and Demind Deposits in All Bans and in
ks.4.4ud of Deoo8its in fv.utual Sviiit Ranks_

1930

2

of inactive demand deposits to time deposits
lower reserve requirements against the letter,

in order to take advantage of the

There is little doubt that in many

banks, and especially in the larger cities, this has been conspicuously trues and
presents a real problem.

Examination reveals, however, the following:
That this more rapid growth of time deposits had begun before the
Federal Reserve System was established, when there was no difference in the reserve
requirements as to time and demand deposits; and information available does not
disclose completely to what extent the growth has been affected by the lowering of
reserve requirements on time deposits, first in 1914 and then in 1917.
That 80 per cent or more, in the National banks at least, of these
time deposits are in the form of savings deposits.

That these savings deposits are distributed through an immense number
of accounts....120

accounts in the 6400 National banks which separately re..

port these savings accounts.

That the number of these savings accounts in National banks now GX,
coeds the total number in all mutual savings banks, and that the average for each
account in these National banks is under 400 dollars, while in the mutual savings
banks it is just under 700 dollars.

That the larger part of these time deposits are in the smaller
cities and in what are classed as country banks, and that

in general, as the size

of the city decreases the proportion of time deposits and of savings deposits
rises.




SAV I NG5 ACCOUNTS

thlltons cjcIOlZar5

16
5

Amouni
5AVI NG5

ACCOUNTS
'n5/II/sons of-Doars

TOTAL.
IC

9
8

NUMBER OF

.9

NATIONAL BA K5

-

(la Thou.5ancls

.8
.7
.6

illumber
54VINGS ACCOUNTS
I

(In

on5)--e

TL.

NUMBERci

BANKS REPOR. N

4

SAVINGS ACCO NT5
(in MO assands)

3

1908

1918

l`J13

1_
1923

Number of National Banks Reporting Su,vings Accounts Compu.red with
Number of National Banks, and Growth in Number and Amount




-

- n..nelflite in Nb,tional Banks.

_1j

j

1927

Total

3

(6)

Finally, that in spite of the intensive campaigns carried on by

banks for savings accounts, the proportion of all time and savings accounts
in all banks in the country, both commercial and savings banks, to the total of
individual deposits, has not materially changed since 1910, the year of the
first A. B. A. compilation;

that is, the greater gain in these deposits in com-

mercial banks appears to have been at the expense of the regular savings banks.
SAVINGS DEPOSITS IN NATIONAL BANKS.
Our chief source of knowledge as to time deposits are the reports on
savings deposits in National banks.

These reports go back to the

end of 1908.

There were then 6,865 National banks, and of these 2,001 reported separately
"savings" deposits.

There were, even then, near to two million of these

savings accounts in these 2,000 banks, with a total of well over 300 millions
of savings deposits.

These reports were continued to the end of 1913 and then ceased.
Even before the Tar the growth in these savings deposits was large, as appears
from the following:

Number of National
Banks Reporting
Savings Deposits

Number of
Savings
Accounts
(000)

1908
1909
1910
1911
1912
1913




2,001
2,161
2,821
2,991
3,220
3,416

Amount of
Savings
Deposits

Average
Deposit

(000)
41331,563

2,088
2,342
2,601
2,966

380,495
580,890
637,070
719,640
824,477

4.,278.20

272.02
276.72
278.07

4

GROWTH SINCE 1921.

:These reports were not resumed until 1921 when, out of a total of
8,154 banks, 5,620 separately reported savings,

The growth since then has

compared as follows:

Number of National
Banks Reporting
Savings Deposits
1921
1922
1923
1924
1925
1926

5,620
5,785
-6,083
6,380
6,377
6,428

SAVINGS DEPOSITS AND TIME

Number of
Savings
Accounts
(000)
8,109

8,875
9,901
11,070
11,868
12,573

Amount of
Savings
Deposits

Average
Deposit

(000,000)

02,957
3,046
3,64$
4,239
4,558
4,963

$364
343
368
382
384
394

DEPOSITS.

The interest of these reports as to savings accounts is that, for the
latest year, the amount of these deposits, in the 6,400 banks separately reporting
such deposits, alone represented 7$.6 per cent of all time deposits in all National
banks.

It is difficult to gain from the Comptroller's reports closely compare
able figures prior to the formation of the Federal Reserve System, that is, from
1908 to 1913 inclusive, since the proportion of National banks reporting separately
these savings accounts was very

much lower, from less than a third in 1908 to con-

siderably less than a half in 1913.

But in

these years the rate of increase of

these savings deposits was considerably higher than in time deposits,




as reported.

/416

Increase in Time Deposits in National banks, Showing Relatively Slow
Growth of Certificates of Deposit, and Rapid Orowth of Other
Time Deposits which Follow Closely the Increase
in Savi nes Depoei ts.
BILLIONSopOLIARS
7

6

-/

5

TOTAL
77 E DEPOSITS

3

,-/-1

/

/
/,

/

./

//

..

___.-

/'

,

,- ,

,

, '

7/-

SAVINGS
DEPOSITS

OTI-TER

T ME DEPOSITS

CEI?TIF1CATE

of DEPOSIT 5

0
1917



1918 1919

1920

1921

1922 1923 1921

1925, 1926

S

From 1921 onwards the reported "savings deposits" in National banks
Corresponded closely with the item of "other" time deposits, reports for which
are available in earlier years.

The growth of these "other" tine deposits from

1915 was at first much more rapid than the pre-war rates; but this was true of
total deposits, due to the War's inflation.
After the reduction of reserve requirements from 5 per cent to 3 per
cent, in June of 1917, this rate of growth was much lower than in the three pre.
ceding years, and has been still lower since the end of the inflationary period
in 1920.

It is also of some interest to note that if the pre-war line of growth
in the number of these savings accounts be continued across the gap of seven years
in which they were not reported, it would thereafter coincide closely With the
number reported from 1921 onwards to date.
COMPARISON WITH OTHER SAVINGS BANK DEPOSITS.
If now we compare this growth of time and savings deposits in National
banks with those of mutual savings banks we find that, both before and during
the War, but not so conspicuously since, the rate of growth in the National banks
has been higher than in the mutual savings banks.

This is true alike as to the

amount of these deposits and the number of separate accounts, or "depositors."
Furthermore, the number of these savings accounts in National banks now
exceeds the number in the mutual savings banks, 12 1/2 millions against 11 millions in the mutual banks.

In pre-war years mutual savings banks held nearly one-half of the total
of time and savings deposits in all banks of the country.




In 1926 this proportion

s e.

PER CENT

HUNDREDS 0/DOLLARS

30

,300

20

200
GenerallPrice
_Level

--100

10
9

90

a
-AVERACTE-AMOUNT-elea

7

SAVINGS ACCOUNT
MUTUAL SAVINGS
RA

6
5

4
hte

AVERAGE AMOUNT01
eac,fi SAVINGS ACCOUNT (n

NATIONAL 5ANK5

1910

1915

1920

1925

Average Amount of Savings Accounts in National Banks and in Mutual
Savings Banks; Increase since 1910 Compared with
Change in t'ne General Price Level.




1930

6

had fallen to considerably under one-third.

The computation of Mr. Albig,

of

the American Bankers Association, is as follows:

Mutual
Year

Savings

"State"
Banks

Trust
.._:_icouaL211

Private
Banks

National
Banks

Total Time and
Savings Deposits

(In millions)

1011
1926

03,459
7,525

02,009
7,675

0

964
3,270

051
47

0 7,963

e
01):'g

24,696

It appears, then, that the more rapid growth of these accounts in the
commercial banks, and especially in the National banks, has beenirs noted, at the
expense of the

mutual

savings banks.

This is in spite of the fact that, in a

large number of states, there are no fixed reserve requirements for savings
banks.

AVERAGE SAVINGS DEPOSIT ACCOUNTS.

It is of further interest to note that the average of these savings
accounts in National banks is very much lower than in other savings banks,
394 dollars for each dePosit against 685 dollars in the mutual savings banks and
492 dollars per deposit in the.stock savings banks.
practically no

limit

Inasmuch as there is

on the amount allowed in these savings deposits in National

banks, while in most of the savings banks there is a
or less, one might be led

to

limit

of about 7,500 dollars

the conclusion that the reverse of this position as

to average deposits would be true.
LOCATION OF SAVINGS DEPOSITS.

As between the larger cities and mailer cities and towns, it appears
that, of the 5 billions of savings accounts reported in National banks, over




nmount of Sb.vine,s and Other Time Deposits in Autiond.1 Banks in Central.

Reserve Cities dnd Other Reserve Cities, and in
"Country" No.tioLtd Bunke
(In millions
of dollars) .

ri Other Time
11111 -Saw rzyS

2,677
568
362.6

1,475
331

2303

686
I

Jo'

1141

585
1921.

1g26

CENTRAL RESERVE



CITI ES ,
Nzy
e York &Cincayo)

1921

1926

OTHER RESERVE

CITIES

(60 Ctlzes)
IMMY11111..=i

1921
192.6
COUNTRY

7

two-thirds are outside of banks in the 62 Reserve cities, that is, are in the
so-called country banks.

In the two Central Reserve cities, New York and Chicago, where the
amount of time deposits compared with demand deposits is relatively small, the
savings accounts are still smaller.

Thus, out of 404 millions of time deposits

in these two cities, only 193 millions are reported as savings deposits; but a
number of National banks in these cities do not report any separate savings
accounts.

In the 60 other Reserve cities, a much larger percentage of banks
reported these savings accounts and the total so reported makes up 77 per cent
of all time deposits in all National banks in these cities.
In the National banks outside of the Reserve cities there are 6,000
or five-sixths of the whole number, reporting savings accounts, and here the
proportion of savings accounts to total time deposits, in all National banks in

this group, is 82 per cent.

Number of National
Banks Reporting
Savings Deposits

All of which is set fo

Number of
.Savings

Accounts

kmount of
Savings
Deposits

Average
Deposit

Per cent
"Savinge"to all
Time Deposits
in Group

(1 000)
26

576,959

193,071

034

47.7

Other Reserve
Cities, 1926

333

2,793,078

1,144,140

409

77.6

Country Banks,

6,069

0,202,964

3,625,653

393

81.8

Central Reserve
Cities, 1926

1926




8
411

DISTRIBUTION BY NUMBER OF ACCOUNTS.

The immensely larger part of the 12 1/2 million savings accounts in

National banks are in the smaller cities. Thus, in Now Ycrk and Chicago the
total number of these savings accounts is only 576 thousand; in the 60 other
Reserve cities, 2,793 thousand; while in the country banks the number of these

accounts is over 9 millions.

In other words, the larger part of these time deposits appear to be
located in areas and in banks where competition with savings banks is the keenest.
INCREASE IN SAVINGS ACCOUNTS.

In the five years from 1921 to 1926 the increase in the amount of

deposits reported in these savings accounts was distributed as follows:
Central Reserve cities

123 millions

Other Reserve cities

560

Country banks

1,323

2,006

This two billions of increase in savings made up nearly four-fifths

of the 2,618 millions of gain in all time deposits in all National banks in
this period.
NON-NATIONAL TIME DEPOSITS.

We have no such definite information regarding the character of time

deposits in non-National banks of the System, but it is at least interesting
to note that the proportion of time deposits to combined demand and time deposits in these non-National Member Banks is at the present time about the same
as for National Banks.



9

in

Further, as the growth of these savings accounts

National banks

has closely paralleled the growth of time deposits, and as, in turn, the growth
of total time deposits in National banks has been in recent years on about the
same order as in non-National Member Banks, the inference would be that the
character of these time deposits in these two groups does

not

greatly differ.

DISTRIBUTION OF ALL TIME DEPOSITS.
Taking all time deposits (savings deposits and other) in all Member
Banks, we have the following distribution, at the latest reporting date,
March 234 1927:

Central Reserve City Banks
(New York and Chicago)

1,341 millions

Other Reserve Cities (60 cities)

4,368

Country Banks

6,107

11,816

Classified as to size of cities in which banks are located, we have
the following proportions:




Towns and Cities of less
than 5,000

1,844 millions

Towns and Cities, 5,000 to
14,999

1,211

Towns and Cities, 15,000 to
99,999

2,316

Towns and Cities, 100,000
and over

6,478

0

IT

10

It is evident from this classification that a full half or more of
time deposits in all Member Banks are in the so-called country banks
in cities outside of the largest 62 cities of the country.

that is,

Put in another way,

the larger part of these time deposits appear to be in cities of less than
200,000 population, and the proportion seems to rise as the size of the cities
decreases.

Nevertheless, one-half of these time deposits are contained in the
four northeast Reserve district, of Boston, New York, Philadelphia and
If we add in the Chicago district, so as to take in the chief in-

Cleveland.

dustrial or manufacturing area of the country, the proportion would rise to
two-thirds.

SAVINGS GROWTH IN ALL BANKS.

Another fact of some interest is that brought out by the computation
of the American Bankers Association, that, if all time and savings accounts in
all banks of the United States, both commercial and savings, be combined, they
represented, in 1926, over 24 billions out of a total of 47 billions of reported
"individual deposits," that is, 52 per cent.

In 1911, the first year in which a complete summary was made, the prow
portion of total time and savings deposits to total individual deposits was
51 per cent.

In other words, taking all the banks of the country, the increase in
both classes of deposits, demand deposits and time and savings deposits, in the
intervening fifteen years was practically the same.




It seems, therefore, to

19%

DEPOSITS

48%

22%

DEMAND

16%

TIME &SAVINGS
IN OTHER BANK5::...-,.

SAVINGS IN
MUTUAL BANKS




1911

1926

.Percontage Distribution of Total Individual
Deposits in all Banks 1911 Lnd 1926.

11

follow that, as suggested, the gain in these time and savings deposits in the
National banks and the non-National Member Banks of the System has been at the
..expense of the savings banks and non-Member Banks generally.

THE TRANSFER OF DEMAND TO TIME DEPOSITS.
The rapid increase of time deposits, as compared with demand deposits,
in Member Banks has naturally given rise to the supposition that, in considerable part, at least, this represented simply a transfer of inactive demand deposits to time deposits, and a number of striking instances have been cited
where large corporations have actually made such transfers.
It seems impossible to ascertain how far this has gone.

But we may,

to some degree, test the extent and effect of such transfers by the rate of
turnover or so-called "velocity" of demand deposits.

Presumably, if there

WRS

a really large transfer of demand deposits to time deposits, other things being
equal, that is, business and bank debits continuing their usual rate of growth,
the computed rate of turnover of demand deposits would automatically rise; that
is, debits would grow faster than demand deposits, and the ratio between the
two would increase.

Since time deposits in New York City are of negligible amount, New York
may be excluded from this calculation.

Extended studies by this Department

have shown that debits in 140 centres outside New York City may be compared with
out substantial error with the average demand deposits for each month in the
weekly reporting banks,

The annual averages of these computed rates of turn-

over, since 1919, compare as follows:




12

Annual Average

Annual Averas;e

1919
1920
1921
1922

33.6
34.8
30.7
30.8

32.5
31.5
32.7
33.7

1923
1924
1925
1926

It will be seen that, in the very active year of 1926, this rate of
turnover was practically the same as in 1919, and less than that in 1920.
We have also carried out somewhat similar calculations for National
banks for the fifty years back to 1875, and these show that, with minor and
slow oscillations, these rates of turnover have varied little throughout the
entire period.

The variations shown were of a cyclical nature and corresponded

closely to our measures of the oscillations of trade;
periods

and, taken in ten-year

at least, represented little change in the average;

and were apparently

in large degree independent of changes in price levels.
INCREASE IN ALL TIME DEFOSITS.
It is true that the proportion of time deposits to demand deposits was
rising much more rapidly in the city banks (the 62 Reserve cities) than in the
country banks, up to about .1924.

much more nearly equal.

But since then the rate of growth has been

It seems, therefore, not very clear that the present

regulations, at least in the last three years, have stimulated the relative increase of these deposits in the larger cities more than in the smaller cities and
towns.

It might be added that this is further information as to the extent of
the conversion of inactive demand deposits to time deposits.




It seems probable

3

13

that such conversions would be largest

in

the 62 largest cities of the country,

in which by far the greater proportion of large corporations have their seats
of business, and in the banks of which their surplus funds are largely held.

COMI-ARATIVE TOTAL RESERVES: 1919-127.
It is of interest to note how far this increased proportion of time
deposits has reduced the percentage of total reserves to total not demand and
time deposits.

The computation was as follows:

ALL ,MEMBER BANKS

(In millions of dollars)
1919

1927

Cash in Vault

---Total Reserves
Total Net Demand and Time Deposits

---% of Reserves

0.,726

0,321

560

Reserves held in F. R. Banks

538

2,286

2,859

19,044

30,334

12.0%

9.4%

It is extremely difficult to make comparison of the reserves held in
this country with those of other countries, but it is interesting to note that
the percentage of reserves held by the Member Banks in our two largest cities,

New York and Chicago, compares favorably with the reported reserves in the ten
clearing house banks of London.

For our two Central Reserve cities the com-

putation for June 30, 1919 and for the present year, call of March 23, is as
follows:




14

CENTRAL RESERVE CITIES
(In millions of dollars)
1927

1919

Reserve held in F. R. Banks
Cash in Vault

---Total Reserves

Total Net Demand and Time Deposits
---% of Reserves

$

772

$

920

142

70

914

990

5,821

7,677

15,7%

12.94

In the last year or two the proportion of cash in bank and with the
Bank of England to total deposits in the ten clearing house banks has ranged about
12 per cent.

These clearing banks in London have, of course, branches all over
Great Bfitain and Ireland, so that the comparison is not exact.

It may be that,

on the average, the reserves in Member Banks in this country are

slightly beim

the average for all of Great Britain,
THE APPARENT INDICATIONS.
All in all, the result of this inquiry seems to be that, in the main,
the remarkable increase in time deposits in commercial banks has been in savings

deposits and that while these may, especially in the cities, represent a considerable conversion of inactive demand deposits, the extent and effect of this conversion is relatively small.
So far as the reserves against these time and savings deposits are con-

cerned, it would not appear that the more rapid growth of these deposits in commercial banks, and especially in Member Banks of the System, has resulted in a




15

decrease of average reserves, against savings but probably quite the contrary, a
considerable increase; that is to say, the required reserves in Member Banks seems
much higher than the average reserves in savings banks

proper.

If all this be true, it would seem that the required reserves against
these deposits, or at least the main part of them, is adequate so far
ience can suggest.

as exper-

It may be that, in the Member Banks of the larger cities,

these time deposits are to some extent only nominally such, and if so this might
well lead to some change in the regulations as to the classification of these
deposits.

But in general it would appear that, even in the larger cities, the

larger proportion of these time deposits is in the smaller banks which specialize
in savings deposits.

TIME DEPOSITS AND CREDIT INFLATION.
There remains the more vital question as to whether the great increase
in the proportion of time deposits has not, through the lower reserve requirements, led to an undue expansion of bank credit, beyond the needs of trade.

Our

main form of "currency," or circulating medium, is now bank deposits, and if
these rise much more rapidly than does the volume of production and trade, one

might expect that we should have the excess credit finding an outlet of some kind
and bringing about a rise in the level of prices in one form or another.
There is no question that banking expansion in the Reserve System has

been considerably greater than if the previous relations of time deposits and




16

demand deposits had been preserved.

We may take the difference even from the

close of the War,

If, since 1919, demand and time deposits had expanded at the same
rate, a calculation shows that, to reach the totals for 1926
330 millions more of reserves would have been required.

something like

Or, to put it another

way, on the basis of present Member Bank reserves the total of deposits of these
Member Banks would now be near to 4 billion dollars less than they are, that is,
around 26 billions for 1926 in lieu of close to 30 billions.

But if this extra three or four billions of deposits, resulting from
the larger increase of time deposits, represented an undue increase in the effective medium of exchange of the country,

it would seem that this would be re-*

fleeted in a general rise in price levels.

If we take the general average of all kinds of prices, retail prices
and consumers' prices generally, as well as wholesale prices, it appears that
the price level of 1926 was about the same as that of 1919; at least, such is
the result of several different computations which have been made by -this Depart-

ment, and another by the National Bureau of Economic Research.
If we take commodity prices alone the contrast is still more striking.

Almost all our familiar indexes of commodity prices at wholesale are markedly
below the 1919 level.




Taking the most widely used index, we have this result:

Bureau of Labor Index of All Commodities, 1919 average,
ft

11

Decline

1926

206

151

26,75

17

THE RELATIONSHI? BETVEEN BANK DEY0SIT5 AND TRADE.
All this does not at

all

imply that there is no relation between the

credit expansion and the volume of trade, but simply that time deposits do
not form a part of the active circulating medium of the country.

This appears

fairly clear from the following:

We have now very good measures of production and trade in this country,
and the evidence is that the average rate of increase, taken over a period of
years, is from 3 1/2 to 4 per cent per annum.

This would mean an increase since

1919, for example, of around 30 per cent.

The Federal Reserve Board's index of production since 1919 shows an
increase of just 30 per cent.

Taking the expansion of deposits in all Member Banks as a representative cross section of all the commercial banks of the country (they actually
form about 70 per cent of the total), we should then have the following comparison!

Estimated Increase in Ic'roduction

305

and Trade, 1919-t26

Increase in Demand Deposits

325,
11

Increase in Time Deposits

If time deposits entered into the equation, an increase of 157 per cent
would have quite upset this balance, and implied a marked rise

in

the price

.

level.

AN AUTOMATIC CHECK TO INFLATION.
The above calculations s..ggest that, in our present reserve require*

ments, we have, at least to a limited extent, a

kind

of automatic check or

balance which preir3nts any very serious expansion of bank credit growing out



18

of the low required reserves against time deposits.

If, for example, the re-

serve requirements had been such as to produce an equal growth of time and demand
deposits, the possible expansion, on the actual reserves would have been, as
noted above, considerably less,

As it stands, a large part of time deposits seems to flow into more
or less permanent investments, in securities, and thus become a part of the more
or less permanent or "fixed" capital of the country.

Their rate of turnover,

so far as we are able to judge, is extremely slow, and the total amount of turn.
over, as registered in bank debits, appears to be extremely small as compared
with the colossal volume of exchanges (from 600 to 700 billions of dollars per
annum) effected by demand deposits.
SAFETY OF TIME DEPOSITS,

There remains yet another question which may prove to be the most important of all, that is, the safety of these savings accounts in the Member
Banks of the System and in commercial banks generally.
Mr. Albigls tabulation gives the total number in all banks of the
country of these time and savings accounts, for 1926, as close to 47 millions.
More than a quarter of these are accounts in National banks alone.

Twenty-three millions of these time and savings accounts are in the
State banks and trust oompanies of which about one-half

according to resources,

are included in the non-National Member Banks of the System.

This mans that there are something like 35 million of these time
and savings bank accounts, outside of the mutual savings banks of the country,




19

and that of these something like 20 million are in the Member Banks of the
System.

Even if these time deposits continue their relative growth only at
the more moderate rate of the last three years

it is still only a ..-.question

of time when they will considerably exceed the total. of demand deposits.

In the socalled country banks, or banks outside the Reserve cities,
this condition has already been reached.

If, now, the, far greater part of these time deposits, threefourths
or more, represent the 3aving3 accounts of millions of small depositors, with
average accounts of not more than 500 dollars each, adequate protection of
these savings depositors is a matter of serious concern.

This question has become more urgent in view of the failure of 3,000
banks in the last six years, most of them small banks in the smaller cities.
MORE ADEQUATE PROTECTION NEEDED.

It scarcely needs mention at the present time that the demand depositor
In these banks may make immediate withdrawal of his funds while the time depositor
may be required to give notice.

In other words,

in case of trouble the demand

depositor has the first call on the quick assets of the bank,
must wait,

The time depositor

If time deposits are to become the more important part of the de-

posits, and already involve the immensely larger number of depositors, this is
a matter of real concern.
Perhaps the most obvious solution would appear to be the segregation.,

both actual and legal, of these savings bank accounts and the segregation, as




±.4.35

--

BILLIO/Y5o/DOLL.AR 5

BILLIONS ofOOLLAR5

20

2,0 r'

LOAN-5 &
DISCOUNT, 5 _---/

,,

- -- _

.----./

9

,

A /.

/\/......\.
.

.

IC

-.I DEMAND
DEPOSITS

Y-

8

LOANS
DISCOUNT

0)

7 -D
DEPO ITS

TIME
DEPOSITS

INVESTMENTS

CITY

COUNTRY
MEMBER B4N KS

MEMBER BANKS

L
1922,




1923

192zI

192.5

1926

192.7

1922

1923

1924 1925

Growth or Time Lepobite i%ompared with Investutentb, and or Demand Deposits
Compbsed with Lo,..ne bad Disecrinto, in City and country Member Banks.

1926

1927

20
I

well, of assets against these accounts.
would be needfully required.

It is not clear th

A reserve of 3 per cent, with additional till

money needed, would be considerably larger than the reserves now carried
example, in the mutual savings banks of the State of New York.

for

In these

latter the combined amount of cash and "due from banks" amounts to only about
3 1/2 per cent of the total deposits of these mutual banks.

The amount of actual

cash, or till money, is extremely small.
SAVINGS ACCOUNTS AND INVESTMENTS.

It has been noted that a large part of the gain in time deposits has
gone into the more or less permanent investments of the banks.

The total amount

of these investments in securities in the Member Banks of the System now amounts
to over 9 1/2 billions of dollars.

If 80 per cent of the time deposits in these

banks are savings accounts, the total amount of investments then just about equals
the total amount of their savings deposits.
The question is whether ',these stocks and bonds represent for the most

part safe and fairly liquid investments, and whether consideration should be given

to

the proposal that these investments be segregated and held as security for sav-

ings deposits.

Under such an arrangement the savings bank departments of the commercial
banks would then take on much more the character of true savings banks, with
corresponding safeguards.

Demand deposits are more typically created directly

as the result of loans than is true of time deposits, and the loans of the commercial banks might, therefore, be held more directly against demand deposits.




21

SUMMARY

It would appear from the foregoing:
That the larger part of the increase in savings deposits

(1)

in the last fifteen years or more has been going into such deposits in

commercial

banks rather than savings banks proper'.

That this great increase in savings deposits in commercial

:(2)

banks has resulted in a corresponding rise in time deposits in these
banks.

That the beginning of this increase in savings and

'(3)

deposits antedated the formation of the Federal Reserve System;

time
and,

It is not clear that the lowering of the reserve requirements has stimulated the

growth

of these savings deposits.

From the rate of growth of these savings deposits it is
obvious that these deposits will soon overtop all other deposits in commercial banks, and this is
of these banks;

resulting in a transformation in the character

that is, they are being converted from essentially loan

bureaus to savings and investment institutions.
Evidence from particular cases indicates that these savings
and time

deposits include in many instances excessively large temporary

deposits which should more logically be classified as demand deposits.
But the evidence. seems to be that these have been relatively a minor factor
in the increase in time deposits.




22

Under the present law it is difficult to correct this situation,
and at some future time when the Reserve Act is being amended it would be well
if the nature of time deposits could be more closely defined.

In the meantime..

Federal and State Examiners could do much to discover and correct more flagrant
abuses.

Much more important is a careful scrutiny of the nature of employment of these deposits in loans or investments, their profitability and
safety, to ascertain if savings deposits are being employed in such manner
that the security is inferior to that required of regular savings banks; and,
secondly,

A decision as to whether these loans and investments should not,
in whole or in large part, be segregated against savings and time deposits, with
a view to safeguarding the prompt payment of these latter in case of need.




Mi.I 1-.1.1-.4

FEDERAL RESERVE BANK

OF NEW YORK

iFFICE CORRESPONDENCE
To,
FROM

Governor

StrongSUBJECT

DATE_June_211_,__1222
:

Time Deposita_m_d_ SavingeDepoatte___

Sr. Snyder

This has required so much of digging and computation that it has
been very slow.

It has been worked out with Dr. Burgess, and, rather than

delay further, I am sending it up in the hope that you may find time to look
through it and give us any sgggeetions for further inquiry or any needed
changes that may occur to you.




192__

MISC. I. 1

601A 7.211

FEDERAL RESERVE BANK

OF NEW YORK

,)FFICE CORRESPONDENCE

DATF

Governor Strong
FROM

SUBJECT.

Mr. Snyder

July 18,

1922_

Districts

The State of Trade in Other

Reports of slow trade in the Boston, Cleveland and Chicago districts,
at the luncheon the other day, were of such interest that I was prompted to
take note of the figures.

For the last four weeks, taken up to last Thursday night, they were,

for the 140 principal cities of th-T-Mited State

5.3 per cent

above

the

corresponding period of last year; and, as you will note, these four-weeks
averages have been persistently above 1926 ever since last February.
This finding is confirmed by the averages for merchandise car loadings,
which have again turned up sharply above 1926, after being temporarily below

owing to

the very heavy increase of shipments in April and May.
For the three Federal Reserve Districts mentioned, debits in the last

four weeks have compared with the same four weeks of a year ago as follows:
,

Boston District
,Cleveland District
Chicago District

5.4
4-17.6

+ 5.4

It will be seen, therefore, that the volume of trade in the Boston
and Chicago districts has compared closely with the increase in the whole
country, while that for the

Cleveland

district has been far above.

This scarcely seems evidence of "slow trade," since the same period
for 1926 was much above any previous year.




Mee. 4 A Ho M 1-26

FEDERAL RESERVE BANK
OF NEW YORK

-JFFICE CORRESPONDENCE
Tc

Governor Strong

FROM

DATE

August 4, 1927

192

Mr. Snyder

SUBJECT.

In acknowledging receipt of a very careful and interesting index
of production in Canada, from Prof. Xichel, I noted the vary high rate of annual
increase since the close of the War--rather above 5 per cent. per year.

His comment on this is of interest; and I wonder if we are not
doing something of the daMe thing in this country ourselves.




RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-28

3FFICE CORRESPONDENCE
Governor Strong

DATE

Aug. 8, 1g27

192__

SUBJECT:

Mr. Snyder

This was the brief summary which was finally agreed upon with

Dr. Burgess, and I should be very glad if you would let me know if this is
suitable and whether any changes or additions should be made.




FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-28

'FICE CORRESPONDENCE
To

Governor Strong

FROM

DATE _August 94 16,27

SUBJECTMeAO.-Ord

192_

Time and-aving3-Depoaib

Sx4yder

Dr. Burgers eugzests that, aide from copies of the memorandum
OD

"Time and Savings Deposits" for the Federal Reserve Board, the Directors

might also be interested to have this, and with your approval I am having
extra copies maue for this purpose.




f




"

FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-20

)FFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT.

Aug. 10

1927

192

International Trade Balance

Mr. Snyder

Mr. Grosvenor Jones will send me tomorrow the Commerce Depart-

ment's fina estimates of tae international trkde balsnce for 122e, end
I shall then be able to make up a comparative table of their estimates for
the last three or four yeare so that we may see how the items look.
From this it should be possible to make up a tentative budget
for the next two or three years.




FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-28

DFFICE CORRESPONDENCE
Tc

Govsrner Strong

FROM

DATE

Ang.

1921_192_

Ir. Snyder__

SUBJECT:

Memo .-00T1111,0

Depoeit

This carbon copy is the same, with a few minor revisions, as

that which you have.

The original, or first copy, Mr. Goldenweiser took back to
Washington with him last week, promising to return it with his criticisms
in a few days. I telephoned to him about it yesterday.

Shall I wait for his suggestions, or go ahead with a clean copy
of the revised text? .




FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-28

)FFICE CORRESPONDENCE
Tcr

Governor Strong

FROM

DATE

Aug-15,_1927

Mr. Snyder

SUBJECT:

Article on Poinoore

This little article on Poincare gives a verj different, viewpoint than most that I heve seen, as to his future hold.




192__

MISC. 9. 1

60M 7-16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor011MSt
FROM

DATE Aug
SUBJECT.

16, 1927

Price Indexes

_Mr._ Snyder_

A very interesting index of construction costs for electric
railway oars we have just obtained through the Philadelphia Reserve
Bank.

You will note that they figure their cost of materials at

100 per cent over 1914, While the Bureau of Labor group index of metals

and metal products ie only about 50 per cent above pre-war.

This seems

to me to set forth clearly the difference between the cost of raw materials
and finished and semi-finished goods, and to show whew the very misleading

character of our familiar indexes of commodity prices at wholesale (and
how worthless these would be for purposes of determining bank credit).

Also, you will note that this company figures its wagee at
160 per cent above pre-war.


144'4,
http://fraser.stlouisfed.org/
4461t."
Federal Reserve Bank of St. Louis

Which is going some.

192_

MISC. 3. I

60M 7.36

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
overnor

Strong

DATE
SUBJECT-

The Course

Aug. 15, 1927
of

Trade

. Snyder

You will note by the attached that the very strong bulge in

trade in the second quarter of the year, and through July, has tended
to flatten out since the first of the month.

This is in the face of very active stock speculation and very
heavy financial transactions; which illustrates anew, I believe, how
extremely well outside debits reflect real business conditions.

Just as confirming this, may I recall again how extraordinarily
each week's movements duplicate those of the same week of the preceding
year, az you will note by the chart of weekly movementsY

ot -VA/0 214pct




(

f1k

etA9-el\-ttJ2

192_

MISC. 3. 1

SOM 7.36

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

19 27
SUBJECT:

Governor -Strong
FROM

Mr. Snydsr

The Fisher syndicated article, usually in Monday's World, was

omitted this week, and I do not know of any other place to find it.
Perhaps something like the following would be an adequkte reply:
"Dear Sir:

"I have not se,m the article by Professor Irving Fisher, and
it was not enclosed in your note.

The sentence you quote, however, is

a correct statement of fact.




"I am not aware that Professor Fisher Is known as 'a notorious
"Sincerely yours,"

192_

FEDERAL RESERVE BANK

Misc. 4 A 180M 1-28

OF NEW YORK

)OFFICE CORRESPONDENCE

_Aug, le, 1927

192_

S UBJECT:Savings_and _Tint e _DepoEli

To._

FROM

DATE

Mr. Snyder_

We have been making a quite elaborate study for the Board of the

character of time deposits, and as our results were rather surprising, and,

felt, very interesting, you may like to look the report over.
herewith.




Attached

FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180M 1-26

JFFICE CORRESPONDENCE
Governor Strong

Tc_
FROM

,

DATE

Aug. 17, 1927

192_

SUBJECT:

Mr. Snyder

Attached is Mr. Goldenweiser's letter regarding the memorandum
on "Time Deposits and Savings Deposits," with Miss Bagwell's comments
thereon.made.

LL

NA,L0
()'\Ani

\




In view of the latter I see aathiag to chez e in the estimatee

H
KAAtA4'-j_

tAiti
6-t4-40,

0

MISC. 3. I 60M 7.16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

hug. 17, 1927

Mr. Snyder
FROM

SuBJECT:-Mr.Goldeweeisers-Comments_on

MISS Bagwell

1 92_

"Time and SavingsDeposits"

I. First of all, I agree that there is absence of reliable
statistics for earlier years. The figures 1 found for savings de-

posits were not in

the condition reports of National banks, but in
the classifications of individual deposits in all banks, or in some
remote part of the text or foot-note.
Time certificates, however,
were given rather consistently.
And I added these to the "savings"
deposits to represent total time deposits, 1909 to 1915.
After 1914,
with the inauguration of the Federal Reserve System, the report of
savings deposits waa dropped entirely and total time deposits seemed
to show something like a default.
The series of time certificates did
not seem quite continuous with "certificates of deposit due on or after
Hence, I do not think that Mr. Goldenweiser,s comparison is
50 days."
correct for 1909 and 1915, as regards relative increase of time and demend deposits.
The following tabulation, although none can be strictly
comparable, seems
% Increase
Ratio of Time to
Over
Demand Deposits Previous
Demand
Time
Increase
Deposits
Report
per Annum
Deposits
Apr. 28, 1909
743*
4,084
18
Mar. 4, 1914
1,451*
4,680**
31
72
11.5

fairer:

May 1, 1915
Apr. 26, 1921
Mar. 23, 1927

5,325
8,881
10,827

1,294
3,899
7,054

24

75
55

42
85

9.8
7.6

*Time certificates plus savings.
**Total individual minus time deposits.
Also, you did not make any absolute claim that growth of the relative of time to demand deposits in National banks for which the above
tabulation was made was as rapid before the F. R. System.
You said:
"That this more rapid growth of time deposits had begun before
with regard
the Federal Reserve System was established. . .1 p. 2.
to National banks, you said:
"Even before the War the growth of these savings deposits was
large," p. 5.

You have repeated that time deposits in National banks have grown
at the expense of savings banks proper, and that the total of time deposits
banks is not very
in
banks to the total individual deposits in
different from the proportion in 1911.




all

all

MISC. 3. 1 6014 7.16

.FEDERAL RESERVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Aug.

1.7_,_1111127_

Mr. Snyder
FROM

SUBJECT:

Miss_Sagwell_

"Time and Swinge Depositar_

Mr. GUI denweilterts_Comments on

2

With regard to the more rapid growth of time deposits
relative to demand deposits in city banks than country banks, you stated
that this was true up to 1924, and that since then the growth was more
nearly equal. (See p. 12) That one may see from the charts.
The question of the value of reported nek.vings deposits"
is more or loss a matter of personal opinion, but the number of benks
reporLing, and amount of deposits, seem fairly consistent, and the latter
compare well with "other time" deposits, the only important item of total
time deposits excepting "time certificates." The "savings" data seem to
be the result of a rather good questionnaire.

All together, there seems to be nothing in Mr. Goldenweiser,s
suggestions to refute any of your arguments.




192_

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

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DATE

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MISC. 3.1

FEDERAL RESERVE BANK

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OF New YORK

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SUBJECT

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MISC. 3,, 1

60114 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
00verncer_3treng
FROM

DATE

Aug. 17, i927

192_

SUBJECT:

______Nee_seeider

Mr. Sterrett gave us some rather interesting

details of the work

of the Transfer Committee, most of which you are doubtless familiar with-especially as to the cooperation which Gilbert

and the

Committee had been

able to secure from the members of the Reparations Committee, the degree

of unanimity which had been secured in the

date

that they have to

he meant,

iransfer Committee

itself

never made a decision, of any importance I suppose

with a divided vote.

As you may possibly know, Sterrett
become clear that the transfer

of

takes

the view that if it should

any such amounts in exohange as those pro-

posed for the fifth and maximum anhuity is impossible, negotiations will be
\

begun in sufficient time

to

avert any serious orieis and probably bring

about some Bert of modification of the terms.

won the confidene. Of

He thinks that Gilbert has

the different governments and the different members

of the Reparations ,Gosimittee to an extraordinary degree, and established
i

very fine relationOlwith Germany itself.

Mr. SteScOtt gave the history of the compounding, last year, of
the supplementary ptipeent for 1927 and/1928, of 500 million marks for
300

million oath,

Ils(401 instance

where Germany might well have pleaded

poverty and difflokatise and, imStead of that, made an advance payment in
,

,
.

order to secure aleavy discount.

He

looked upon

this as clear

evidence

of Germany's good intent to /decry out the agreement to the limit of its
ability.

He does not feel

apPiehensive of any

serious crisis and thinks

that time will bring about some reasonable compromise.

the



wonder if, from r ading Gilbertli last report, you did not get
impression

that

Gilbert

meelf has something of the same view or feeling.

0

FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-28

OFFICE CORRESPONDENCE
ar.ire 7110 r
FROM

trolls
Mr. Snyder




Ion 7it 1iki jU3t

DATE

Aug_ 18, 19P7

SUBJECT:

t..0

831 tb.ie.,

intere9ting bit.

( 7(

192

FEDERAL RESERVE BANK
OF NEW YORK

Misc. 4 A 180 M 1-20

OFFICE CORRESPONDENCE

cjet.'8,

Governor Strong

Tc-

SUBJECT:

Chris

--8Cl

jPIlr.Snyder

FROM

1927

ence 'Vida tor

4.4
al.?*

....

S

CJJ

I talked with Burgess about this letter relid,),14-a idea was that
an article of three hundred words, as part of an extended-aeries, was
hardly

worth

while.

or something you

But

possibly you had some special idea about it--

would like

to

see said?

r

14,9+-4w
4
_11




chAte
tutca,

/ow htuk,c,
gtf--

-

CC_

fro

MISC. 3. 1

6061 7.36

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE
SUBJECT.

October 3, 1927

192_

Rising Bank Debits

Mr. Keyser has estimated the last two days of September, and
here are the returns comparing New York City with the outside and then
cutting out three other large financial centres (Boston, Philadelphia and
Chicago).

You will note that relatively the upturni,was stronger in the
137 cities than in New York City.

Further: note that the contour of the week.to.week plottings on
the large chart are very closely the same, especially as last year--just a
difference in degree.

Much the same is true of the plottings of the four weeks' sliding
average on the other chart.
None

Lid

of us down here ape able to think of any "conjuncture" that

would especially influence the course of the last four weeks.

If there were

any such conjunction, would not the week-to-week plottings on the big chart
be apt to show a distinctly different shape, from last year?
The car loadings figures, which will be in in a day or two, should
be instructive.

4-19-4,0




ovd

7k1-7,,ftt

ars

!a1& gtC7Ji

L
Misc. 4 A 180 M 1-28

%,-Pia\

FEDERAL RESERVE SANK
OF NEW YORK

OFFICE CORRESPONDENCE
Tc

Governor Strong

FROM

DATE Oattther 8, 1927

Mr. Snyder

SUBJECT

Publicity

Here is another opportunity which you may like to consider,
of a rather more attractive character.




&nit?

ài'tT

192_

Ott National Affairs
IH

Valk

reklg - rrtinti of

atIg Nem
YALESTATION

NEW HAVEN, CONN.

September 21, 1927.

Carl Snyder, Gen. Statistician,
Federal Reserve Bank of New York,
New York, N. Y.
Dear Mr. Snyder:

When talking to many of the country's most representative men concerning my work on
the Yale Daily News, practically all have suggested that I write you as the most reI am writing at the particular
presentative and authoritative man in your field.
suggestion of Mr. J. B. Anderson, Asst. Federal Reserve Agent, Federal Reserve Bank
of Cleveland.
Throughout the coming academic uear the Yale Daily News will publish a special weekly section, ON NATIONAL AFFAIRS, which has as its object the education of the nation's
youth upon affairs of national importance. The articles in this section will come
from the pens of the most authoritative and representative men in the United States.

The influence of ON NATIONAL AFFAIRS will not be limited to those who read the Yale
Daily News. By syndicating the articles, which the Yale Daily News secures, to the
Publications of preparatory schools and colleges, it is hoped that it may be possible
to benefit the younger generation at large. Few of the students in question have
anything but a superficial knowledge concerning national issues; surely a comprehension of affairs of nationwide importance will be of material help to them after
graduation.
Enclosed sheet explains in great detail ON NATIONAL AFFAIRS, its aim and scope.

The editors of the Yale Daily News, whom I represent, feel that it would be a great
honor to include in this section an article signed by you. Undoubtedly you have
material at hand from which you could have written for your signature 1,000 - 2,000
words on The Strong Stabilization Dill, or some other subject of your own choosing.
I realize that it is perhaps presumptuous for me to ask a favor of this nature from
My excuse is that your name will supply the impetus toward a broadening influyou.
ence upon the youth of America,
Because I am anxious to have the first issues of ON NATIONAL AFFAIRS sterling in
quality and because of the necessity of having the articles set-up long in advance,
I am taking the liberty of asking whether I could have a manuscript from you by
October 15th, If, however, other matters require all of your attention at the present time, it would be preferable to wait upon your convenience than not to have
your article at all, merely because you are tied up at the moment.
I would greatly appreciate your advising me care Yale Daily News, New Haven, Conn.,
whether you think my plan is a worthy one and whether you are inclined to comply
with the request for an article.

TBG:MF



Thomas B. Grandin,
Editor.

...

ON NATIONAL AFFAIRS
A weekly Section

of

YALE DAILY NEWS

By having articles from the most authoritative and representative men in the United States
upon affairs of nationwide importance, ON NATIONAL AFFAIRS, a Weekly section of the Yale Daily

News, hopes to benefit the undergraduates of Yale University, and, by syndicating these articles to
preparatory school and college newspapers, to promote as well a beneficial interest in such topics
among the nation's youth.
There are approximately 400 preparatory school and college papers which are published weekly
or oftener. These have a combined average guaranteed circulation of approximately 465,000. When

taking into consideration the fact that two roommates take one subscription and that about five
subscriptions cover fifty or more members of a fraternity, the above estimate would be doubled.

ON NATIONAL AFFAIRS is entirely non-partisan in policy and does not necessarily endorse
any sentiments expressed therein. Although in most cases objective opinion only is printed, it is felt
that the subjective sentiments of nationally prominent persons form interesting variety. In order to
prevent encyclopedic tendencies, articles valuable for their timeliness will be in the majority, although
interspersed with these will be a few papers fundamentally authoritative in nature. For the purpose
of making this section readable, a photograph of etch author will be published in conjunction with his
article. Human interest will be provided by the publication of a brief biography of each writer. A

resume of every contribution will be featured in order that the reader may decide whether the
thoughts of the writer are of interest to him.
It is impossible to interest every reader in every subject.

For this reason ON NATIONAL

AFFAIRS has sufficient scope to afford a large choice. The section is a convenient medium for education upon timely, national issues from. authorities in each particular field.
ON NATIONAL AFFAIRS will cover the following: (1) GOVERNMENT (Federal, Municipal) ;
(2) NATIONAL PROBLEMS (Aviation, China, Crime, Charity, Debts, Flood, Foreign Relations, Hos-

pitals, Immigration, Latin America, Law Reform, Politics, Prohibition, Negro Problem, Reform of
State Government, Russia, Woman Suffrage, World Peace, The Vote) ;
(3) BUSINESS (Accou
Advertising, Agriculture, Automobiles, Aviation, Banking and Commerce, Business Ratings, Cement,
Coal, Chain Stores, Copper, Fruit, General Economic View, Hotels, Installment Plan of Purchase, Insurance, Investment Banking, Journalism, Lumber, Mail Order Stores, Motion Pictures, New York Stock
Exchange, Oil, Paint, Paper, Public Utilities, Publi? Utility Financing, Publishing, Railroads, Real

Estate, Rubber, Shipping, Silk, The Stage, Tobacco, Steel and Iron, U. S. Chamber of Commerce,
Warehousing, Woolens) ; (4) CULTURE (Architecture, Dancing, Drama, Education, Music, Painting,
Poetry, Prose, Sculpture, Science) ; (5) GENERAL (Exploration and Hunting, How the World Gets Its
News, Sport).



The following have promised to write alticles for ON NATIONAL AFFAIRS and in many cases the manuscripts have been received:




Ackerman, Frederick L., architect.

Addinsell, Harry M., Harris, Forbes & Co. and authority on public
utility financing.
Allen, Florence E., Justice Supreme Court of Ohio.
Atterbury, Gen. W. W., Pres., Penna. R. R. Company.
Ayres, Col. Leonard P., Vice Pres., Cleveland Trust Co.
Baker, Newton D., ex-Sec'y of War.
Bowman, John McE., Bowman-Biltmore Hotels.
Boynton, Charles H., Atlas Portland Cement Co.
Burton, Theodore E.. Congressman and Ex-Senator from Ohio.
Calkins, Ernest E., Calkins & Holden.
Cobb, B. C., Vice Pres., Commonwealth Power Co.
Colt, Dr. J. Eliot, Colt Agricultural Service.
Compton, Dr. Wilson, Sec'y and Mgr., National Lumber Manufacturers
Association.

Cook. W. W.. Professor at Yale University.
Curtiss, Frederick H., Chairman, Federal Reserve Bank of Boston.
Daniels, W. M., Professor at Yale University and authority on Railroad Consolidation.
Danielson, Richard E., Pres. and Editor of "The Sportsman."
Davis, Malcolm W., Editor Yale University Press.
Denny, Reginald, Motion Picture Actor.
Dodd. William E., Professor at Chicago University.
Dodd. W. F., Professor at Yale University.
Doran, George H., Pres., Geo. H. Doran Co.
Doran, J K., Commissioner of Prohibition.
Douglas, J. F., Pres., Metropolitan Bldg. Co.

Ernst. A. C., Managing Partner, Ernst and Ernst.
Fancher, E. R., Governor, Federal Reserve Bank of Cleveland.
Farrar, John, author.
Gandy, Harry S., Pres., National Coal Ass'n.
Garfield. Abram, architect.

Gary, the late Judge Elbert H.
Geer, William C., Dir. and Technical Advisor, B. F. Goodrich Co.
Gehlke, Dr. C. E., Professor at Western Reserve University and
authority on statistics on crime.
Graves, Provost H. S., Dean of Yale School of Forestry.
Graustein, A. R., Pres., International Paper Co.
Gulick, Paul, Universal Pictures Corp.
Holsey, Albon L., Sec'y, Tuskegee Institute.
Hatton, Dr. A. R., Originator of City Managership Plan.
Hays, Will H., Pres., Motion Picture Producers and Distributors of
America.

Hogan, W. J., Pres. and Treas., Interstate Terminals Corp.
Husband, W. W., 2nd Ass't Sec'y of Labor.
Hutcheson, Ernest, JuilHard Graduate School.
Johnson, Pyke, National Automobile Chamber of Commerce.

Kul., Elroy John, Pres., Otis Steel Co. and Midland Steel Products Co.

Laemmle, Carl Sr., Pres., Universal Pictures Corp.
Lawrence, David, Pres., United States Daily.
Lippman, Walter, author.
Long, R. A., Chairman, Long-Bell Lumber Co.
Ludington, Katharine, 1st Vice Pres., National League of Women
Voters.

Macomber, John R., Pres., Harris, Forbes & Co., Inc.
Mason, Julian S., Editor, New York Evening Post.
Merritt, Schuyler, Congressman from Connecticut.
Morris, Frederick K., American Museum of Natural History.
O'Leary, John W., Pres., U. S. Chamber of Commerce.
Parker, Dr. E. W., Dir., Anthracite Bureau of Information.
Pew, Marlen E., "Editor and Publisher."
Powers, Marsh K., Powers-House Co.
Redfield, William C., author.
Reynolds, George M., Chairman, Continental and Commercial Bank of
Chicago.

Sill, Dr. Frederick H., 0. H. C., Headmaster, Kent School.
Simmons, E. H. H., Pr.., New York Stock Exchange.
Stayton, W. H., Nat. Chairman, Ass'n against Prohibition Amendment.
Sullivan, Mark.

Teagle, Walter C., Pres., Standard Oil Co. of New Jersey,
Trowbridge, Alexander Duel, Pres., Architectural League of New York.
Vasconcel., Dr. Jose, Professor at Chicago University.
Van Beuren, Dr. Frederick T. Jr., Columbia University.
Wright, Howell, Dir. of Public Utilities in City Manager's Cabinet,
Wickersham, George W., ex-Attorney-General of United States.
Cleveland.

3. I

6011 7.16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT.

October 19, 1927

192_

Expanding Trade

Mr. Snyder

Another heavy increase this week in the volume of bank debits
outside New York City, carrying the four-weeks moving average to 8 per cent
over the some period a year ago.
This week's outside clearings, by the way, were a record.
Nor, apparently, was the increase largely in the financial centres.

If we take the total of 258 centres now reporting, and exclude
the four largest clearings centres, New York, Boston, Philadelphia and
0

Chicago, the percentage of increase over last week and over the same week
1.)4e6e_,
14,.
a year ago is practically the Etmeit although the :mount of clearings so
remaining is less than one-third of the total.

That is to say, the indi-

cations are that the increase was practically the same in the smaller reporting centres as in the larger.




MISC. 3.1

6014 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
ROM




Gov ernor-Stroag__

DATE__aotab-er-28, 1927

suBJECT:ermen__127_

Mr. Snyder

We have the detailed figures for German imports for the
first eight Oonthe of the year, and these have increased 5 billion
marks over the same period of 1926, or at the rate of about 4i billions
for the year.
The increased imports of foodstuffs amounted to about 550
million marks, of which the principal items were barley and corn; which
may have been for more beer and alcohol.
The principal increase was in raw materials, which amounted
The chief items were the increased in
to nearly 1700 million marks.
wool, cotton and oopper.
The total amount of manufaotures imported increased by about
These
750 million marks and was just about double the year previous.
increases were distributed rather evenly over a great variety of wares.
Exports for these eight months had run almost exactly the same
as last year, and the same was true for September and for nine months.
But in explanation of the increase in imports it should be noted that
in the earlier part of 1926 imports had a sharp fall from the levels
of 1925, so that actually this year's imports look more like the normal
thing.

Both imports and exports have been running at something like
1913 figures, i.e., around 10 billions of marks, and there must be a
averaep of prices here
difference of at least 40 to 50 per cent
importiAapieear toebi-ilemeihere around
involved, so that reallyGermany's
50 per cent less than pre-war (1913 being a good representative year),

in,the

taken in relative values.

Would you like a detailed study of German trade, or does this
There is a great abundance of materiels.
suffice for your purpose?

evident

But that Germany is coming back strongly, industrially, is
other things in

the appearance of several new and rather
anong
expensive industrial and trade journals, of which the attached is the
latest.

192

M 15C. 31. 1

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
zom

DATE November 4, 1927

Governor Strong

sulumm- Lansburgh on the Gold Exchange

Mr- Snyder

Standard

I have been reading the article by Alfred Lansburgh, which you had
translated, on the policy of Central Banks of having large holdings of
Does it not seem to you that he is rather
foreign bills of exchange.
setting up a man of straw, in his theory that this policy would bring the
Central Banks more into conflict than under the more rigid gold standard?
What difference does it make to a Central Bank whether it is to
And if the policy of large
lose gold or hiae foreign balances drawn downy
foreign balances were generally followed, would not this, under wise management and proper 0000eration, form just as stable a system as one involving
the actual transport of gold?
Is not, in either case, the final test the effect upon each nation's
And is not the test of the proper size of this volume
volume of credit?
the question whether a country's price levels are out of line with those of
other countries, i.e., the world level?
After all, is not the universal tendency of banking, as it develops
and integrates, always towards lower reserve ratios, and will this not be
true in turn of Central Banks as they also learn to cooperate and, in a
sense, to integrate, i.e., mutually display a proper regard for the interests
of other nations?




And is not

this development

clearly ahead?

192___

MISC. S. 1

(NO'

6014 7.16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To
.,..




Governor Strong

DATE
SUBJECT

November 15, 1927 192_

State of Trade

Mr. Snyder

It is puzzling to reconcile the view that "business is now on
a downward trend" with the course of outside bank debits in the last two
or three months.

You get very much the same picture if you take debits

outside the four largest trading centres.
We have made a careful study of the relationship with speculation
and new financing, and find that the trend of debits does not needfully
agree with either or the combination of the two.

For example, in July new domestic corporate financing we nearly 25 per cent below the previous July, and shares sold on the Nem York
Exchange about the same, but outside debits were very much higher.
In the next month, of August, both shares sold and new financing
rose abruptly, new financing being more than double, and outside debits
declined to a little above the previous year.
In the next month, of September, there was no increase either
in shares sold or in new financing, but outside debits rose considerably.
In the next month, October, debits followed much the same course
as speculation and financing.

In October speculation and new financing were practically at
record.

Would you say that these are the usual accompaniments of de-

clining trade?

MISC. 3. I 60M 7-16

FEDERAL RESERVE BANK

OF New YORK

OFFICE CORRESPONDENCE
To
ROM




GIOIrellg

DATEACV6Mh er 18, 1927_192_
SUBJECT:

English Bank Iota Elasticity

Mr. Snyder

According to the published figures, the amount of Bank of England
notes in circulation before the War appeared to vary slightly with the
In
season and to grow very slowly from year to year, and that was
nearly forty years the amount in circulation rose from only about 120 million
to £27 million, and the seasonal swing within the year was, at the extreme,
in the proportion of about 20 to 22 in latter years.

all.

In the forty-eight years from the last great English panic, of
1866, to the outbreak of the War, the year of severest strain, and of the
highest bank rate, both actual and average for the year, was the Baring
failure year of 1890, and you will see by the attached that the amount of
note circulation changed extremely little and in about the usual seasonal
way.

The combined gold in both departmente varied considerably more,
but even in November and December, when the bank rate went to the highest
point, the total was about the same as the amount held in February and
March; about £24 millions.
The extreme drain was from this March figure to £19.7 million
in October, and, as you see, the recovery was very strong, the net gold
imports for November amounting to £5 million.
The as:Adel amount of gold exports in September and October, the
months of extreme strain, was under £1,500 thousand, but the previous net
gain from the first of the year had amounted to over £3,000 thousand.
And in the next month of November the £1,500 thousand loss was turned into
a £5,000 thousand gain.

These figures, it seems to me, do not give any very clear
picture of the pressure on the bank because we do not know how much of the
imported gold went into general circulation and how much was held outside
of the Bank of England in other banks.
In a. period of ten years, from 1889 to 1899, the Bank of England
gained only about £10 million in total gold holdings, while the net imports
of gold for the period were around 140 million; and the note issue rose
very slowly.

Perhaps you can suggest a better mode of approach to the question
Apparently the
of currency elasticity in Great Britain before the War.
English stook of gold in this period was always much larger outside the
Bank of England than in it, and latterly was very much larger than the
And it would appear from this that the main
total of net circulation.
variations in circulation, as they must have occurred, were in the amount
Does this tally with your imof gold in circulation and not of notes.
I had never thought of it that way.
pression?

)40

/

FEDERAL RESERVE BANK
OF NEW YORK

Mise. 4 A 180 M 1-28

OFFICE CORRESPONDENCE
To

Governor Strong

DATE
SUBJECT:

State of

November 16, 1927

192_

Trade

Mr. Snyder

With yesterdy's memorandum, as to whether we are in

"EL

period

of declining trade," I meant to send you the chart of outside bank debits
to date.

Still climbing!

icu-zLrya



ru-A-P-0-6----

Ot)

6.42

MISC. 3. I

60M 7.16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FRom

DATE November 16, 19Z7_

Mr. Snyder




SUBJECT

0

Bankin

S rer th

Your question as to whether our preponderant banking and financial strength is a source of possible weakness is extremely intereeting,
and I have pondered it.
But it seems to me that our banking strength
is not so far out of line with our amazing position in the world as to
our physical possessions and production.
Consider our proportion in
a few items:
Railway freight
traffic
(ton miles)
Petroleum Production
Telephones, Number
Cotton Production
Steel Production
Automobiles, Number
Our

72
62
54
51
81

It

It

tt

percentages of world consumption:
Rubber
Silk
Tin
Nickel
Coffee
Sugar

coffee?

52 per cent

65 per cent
63
52
53
50
24

"
rt

It
It

Is it not astounding to find that we drink half the world' s
Hardly believable.

Mies Bagwell has made a calculation of the ten leading mineral
products and gate a proportion of 47 per cent of the world's total
(average of the ten percentages).
I have continued the bank deposit study in a little comparison
of currency, gold holdings, and international trade, which also seems
to point to more or less the same idea of what an ov erwhelming position,
industrially and financially, the United States now holds.
I feel as
though we had hardly awakened/ to the reality yet.
Possibly you recall a suggestion T made four or five years
ago that, having so much of the gold and such banking strength and industrial capacity and wealth and all, it seemed to me as though the
United States might well become a kind of reservoir of the world's gold.
Seeing that it now seems as if we were the one country in the world
which could direct its bank policy on a truly scientific basis, unhampered
by governmental or other restrictions, and. with such preponderant power,
I cannot escape the feeling that this is "our manifest destiny."

19

MISC. 3. I 60M 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

7R0m

DATE November 16, 1927

Our Banking Strength

Mr. Snyder




SUBJECT

2

And, whet is more, does it not seem as though, in the last
Consider
five years or so, this is exactly what we have been doing?
that we now have nearly five times the banking strength and gold, end
at least three times the wealth, income and industrial product of the
next most powerful nation, and the above thought does not seem so unreasonable; i.e., is it not the reality which stirs the imagination?
And haven't we a really wonderful role to fulfill and, as I feel, the
background, the strength, and the statistical information needed to
play it?

192

Yea44,7074A,A4/11,0Clit-L5)4.70-1LA__
(W.T1
MI... a. 1 6014 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE
SUBJECT.

November 28, 127

192_

Department Store Sales (New

York City and the whole country)

____Ar_.Enyder.

Here is another curious finding, as illustrating business
stability, to match the extraordinary likeness of the week by week
movements of outside debits compared with previous years.

New York's district sales make up a little over 20 per cent
of the total reported by the Federal Reserve Board now.

And yet,

month by month, with a little difference, you will note, of the seasonal movement, they are almost identical.

(No corrections here for

trend or seasonal of any kind.)

This reminds me very much of the index of trade gotten up by
the Federal Reserve Bank at San Francisco for the Twelfth Federal Reserve District, based upon bank debits in twelve Pacific Coast cities,
which I think I never sent you.

It was almost a replica, month by

month, of our index of debits in 140 cities outside of New York.

This index, which I thought was extremely interesting and
valuable, was suppressed by the powers at Washington, whether because
it did resemble our index of outside debits, or what, I do not know.

Outside debits continue very highaverage for last four
weeks 11 per cent over same period last year.
in some years.




This i

MISC. 3. 1 60M 7.26

FEDERAL RESERVE BANK
OF NOW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

SUBJECT.

Mr. Snyder

December 2, 1P27

Reserve

Farming and the Federal

Is there no limit to the everlasting blah about farming, the
Federal Reserve. and the stock market?

Here is the spokesman for a

supposedly serious organization of business men, peddling out the same
old stuff, as if the loans arising out of Apeculation did not add to
the volume of cheap credit and thus provide

a

certain stimulus

to

business and eventually purchasing power for the farmers' products.
I do not know whether it is worth while taking note of this
stuff, but this National Industrious Publicity Board, as I call it,
manages in one way and another to get a vast amount of newspaper space;
and I think there are a good many business men and others who take its
pronouncements rather seriously.

I have wondered if it would not be

worth while to take up these matters with some person of distinction
and standing--I had in mind Professor Kemmerer--to make an address
that would deal with some of these questions in a sane way. i__ They have

asked Kemmerer, by the way, to take the Presidency of the Stable Money
Association, and he could easily use that as a fulcrum, if he should accept.

I suggested he have a talk with you about the question of accept-

ing.

41°13



)1/3

192__

MISC. 3. I 60M 726

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Tb

Governor Strong

FROM

DATE

English

March 5, 1928

192_

Mr. Snyder

SUBJECT.

Bank Clearings

I have been deeply interested in a little study of English bank
clearings, and you may like to look at the result.
The chart shows:
Actual London clearings from 1900.

These clearings "deflated" by the Cost of Living Index to
1919 and a computation of the "General Price Level," similar to our
original computation for this countryeto
This index is shown in the star-and-dash pencil line.
By way of comparison I have added the New York City debits,
in actual dollars.

The odd thing is that the rate of growth thown by the deflated
figures from 1922 on has been the same as the pre-war rate of growth,
1900-1913.

The actual pre-war figures rose at a
higher rate than in
last five years, but then you had steadily rising prices whereas in the
last five years, in England the price level has been declining.
Now, in these last five years England has had no great boom in
stocks, no building boom comparable with our own at least, and it has had
extreme depression in at least four of its principal industries.
Its
export trade has likewise not shown the usual pre-war growth and apparently
is but little larger relatively than 1913.
Also, the volume of new security issues seems, price levels allowed
forponly about the same as 1913.
I can only explain this growth in the volume of clearings on the
theory that there has been a real growth of domestic trade in Great Britain
even while its export trade and some of its leading industries have languished;
and, after all, this domestic trade must always have been near to three-fourths
of the total of English trade.
1

I should be much indebted if you could shed any light on the

problem.

You will note, incidentally, that the ratio of New York to London
clearings in 1925-'26, when the price levels of the two countries had again
reached something like parity, was very nearly the same as twenty-five




MISC. 3. I

6061 7.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong
FROM

Mr_Bnyder

March 5, 1928

SUBJECT.81_113Clearings
2

years previous.
In other words, their rate of growth, excluding differences in price levels, appears to have been very nearly the same; which
is also very interesting, if, of course, it is correct.

It seems to me, also, curious that the rate of growth in English
bank clearings should be so consistent in view of the great consolidations
in the past thirty years, for I am told that checks on bank branches,
cashed by another brunch of the same bank, do not get into the reported
Do you happen to know if this is correct?
clearings.




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Misc. 4 A 180M 1-26

FEDERAL RESERVE BANK
OF NEW YORK

7FICE CORRESPONDENCE
riovernar_Strong_

DATE

March 15,

1924.

SUBJECT:_P-roll And Tradein France

FRO M_Mr Snyder

In connection with our endeavors to get at some sort of an estimate
of the relatione of gold,currency depeeite and trade, Wj 1:ava teen asoembling
available data on particular countries, and I attach herewith the eheets
showing a quite remarkanle growth of industry in France in recent years.
Their progress along many lines has been quite contrary to the pessimism
that has been so widely expressed in many quarters as to French eonditions
and stability, over here.
I shall summarize this in a memo., but you may like to know that we
have the material ready.




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MISC. 2. 1 60M 7-26

FEDERAL RESERVE BANK
'
OF New YORK

OFFICE CORRESPONDENCE
To

70vArnor Strong

FROM

DATE Augost CI, 192$

1 92_

Mr. Snyder

SUBJECT:

At the Annual Meeting of the Statistical and Economic Associations,

at Chidago next Christmas week, we are planning for Saturday morning a dis-

cussion of the relations of statistics to

business and business policy, and

am asking the heads of a number of large corporations, Mt. Huston, Mt. Gifford,
and others, to participate.
cipant fro* Chicago.
Simpson, and

And we should like ever so much

to have a parti-

32 course the outstanding figure is your friend, James

I an wondering as to the best way to approach 4111,

and whether

'tight possibly ask a line to him from you.

While I am writing this:

It has occurred to me that, in view of 411

the misunderstanding as to Federal Reserve policy in the last year, you might
consider the idea of a paper on the subject at these meetings, perhaps especially
dealing with the international aspect and the ever present gold problem.

It

had occurred to me that possibly these meetings might offer an almost ideal

opportunity for a proper discussion.

I should appreciate it very much if you

would consider this a little before you definitely say no.
We have asked Lord

diAbornon, who is this year President of the Royal

Statistical Society, to come over and give




LIB

an address.

MISC. S. 1 60M 7.16

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
loveraor Strong
FROM

DATE
SUBJECT:

August 1.3, 1928_19

Growth of English Industry

Air, _Snyder

You may recall that last March we made a study of the growth of bank

clearings in Great Britain, which seemed to indicate that growth in recent
years had, when allowance is made for price changes, been equal to if not

slightly above the pre-war rate of growth.
Soma very striking new figures of production and manufacture have

just become awilnble, which I am making use of this week.

These seem to

bear out the conclusions of the previous moo. in a very striking way.
Further than this, comparison of British production, bqak deposits,

and price levels seems to reveal practically the sale relations as apparently
obtain in this country.

An I wrong in thinking that all this is of value in

the approach to the gold problem?




}e. 4 A 180M

FEDERAL RESERVE BANK
OF NEW YORK

1-20

OFFICE CORRESPONDENCE
To.()

Mr. Snyder

FROM

DATE

June 15,

Governor Strong

SUBJECT

Thank you for the attached.

I want you to keep

me posted

regarding developments as they occur and your own reaction to them.

This is a time where especially we must be vigilant and not make
mistakes.




19S___

FEDERAL RESERVE BANK

Misc. 4. 1.100M-A-25

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. SnydAr!

(copy to Dr. Rirgess)

Benj.

FROM

DATE

July 13, 1927

SUBJECT

strong

I have read your memorandum of June 27 on the subject of time de-

posits and reserve requirements with a great deal of interest.

It is most

illuminating.

This it seems to me should be put into shape for submission to the
Federal Reserve Board, together with a letter of transmittal in which would be
embodied the two recommendations which are suggested in the memorandum, - the
principal one being, of course, as to the more general study of the question
of reserve requirements.
Will you please collaborate with Dr. Burgess in preparing such a
memorandum.



192

Misc. 4 A

FEDERAL RESERVE BANK
OF NEW YORK

180 M 1-26

-)FFICE CORRESPONDENCE
To

DATE August 9, 927

192_

Su BJECT

Mr- Snyder
Benj. Strong

FROM

Thank you for the attached memorandum.

It suits me fdright, but I

have not before me the correspondence with the Federal Reserve Board to know
just what we should now do.

up another leLter.




If you will let me have that, I will try to g et

MISC. 4. I-200M-7-14

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

FRC

DATE

October 3,

Governor Strong

SUBJECT:

What are you going to do about the Christain Science Monitor
article?

I suppose if we are to get the sort of publicity we have in mind

we have got to take advantage of these opportunities.




Would you mind

ttaking it

over with Dr. Burgess?

7

192_

Misc. 4 A

FEDERAL RESERVE BANK
OF NEW YORK

180 M 1-26

JFFICE CORRESPONDENCE
To

Mr. Snyder

FROM

DATE

November 9,

1927

Governor Strong

SUBJECT

The crux of the matter is in the next to the last paragraph.

reason why we can operate with lower reserve ratios is because




the world has become accustomed to it, and
the central banks are cooperating.
Without both of these influences it would be dangerous.

AN,

The

\

4.2

MISC. 4 A 126M4-27

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Carl Snyder

DATE

November 14, 1927;,9,

SUBJECT:

Benj. Stron

:ROM

The Banking Strength of the World is mighty interesting.

The question

in my mind is whether the figures there exposed are an indication of strength or
weakness for this country.
about it?




It is a rather tmportant point.

What do you think

FEDERAL RESERVE BANK

M ISC. 4 A 126M-4-27

OF NEW YORK

,OFFICE CORRESPONDENCE
To
tOM

Mr. Carl Snyder

DATE

Nov. 21, 1927.

SUBJECT:

--Benj----Strong

I would agree with your attached memorandum had you added the

question as to whether we had the wisdom and experience to enable us to

successfully fulfill the role.




frm___

FEDERAL RESERVE BANK

1111C. 4. I-200A-1-24

OF NEW YORK

FFICE CORRESPONDENCE
To
,on4

Mr U1 1:nyder
Governor Strong

DPTE

March 30,

SUBJEcT

ZwAC

This is very interesting.
I cannot answer the question in the last paragraph. You will
have to inquire of someone else.




FEDERAL RESERVE BANK

MISC. 4 A 126M-4-27

OF NEW YORK

"WFICE CORRESPONDENCE
Mr. Carl Snyder

To
OM

DATE

August 14, 1928

SUBJECT,

Governor Strong

If you wish a line from me to Mr. Simpson I shall be glad

to sign such

a letter as you prepare.
There is not the slightest prospect of my taking part in the meeting.

As you know that is one of the dissipations which I have been obliged to deny
myself.

I

know it would be helpful to you, and I should like to do it on my

account, but it is really beyond me just now, although my desire ordinttrily
would very strongly be to do it.




Many thanks, just the same.

Misc. 4 A

FEDERAL RESERVE BANK
OF NEW YORK

180 M 1-26

)FFICE CORRESPONDENCE
To

Mr. Snyder

FRO on

DATE February 15, 1927 192

Benj. Strong

SUBJECT

While you did nct send me the "Times" account of your address
and I did not happen to catch it for some reason, those things do not worry
me very much, and I am sorry if they caused you any uneasiness.




FEDERAL RESERVE BANK

OF NEW YORK

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 21, 1927.

Dear Mr. Snyder:

I am much interested in the chart accompanying your memorandum
of February 15th.

Of course, as you say, it is not conclusive, but the

lines are certainly striking and significant, and I would like to see them
explained, if that is possible.

Of course, if our Bank rate moves in re-

sponse to the initiative of the money market, then we can hardly attribute
gold movement to changes in our Bank rate.

If, on the other hand, changes

in the Bank rate are responsible for movements in the money market, then
the change in the relative levels of interest rates may induce these gold
movements.

It seems to me this chart should be passed around to our directors;
they would certainly be interested in it.
Sincerely yours,

Mr. Carl Snyder,
33 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 22, 1927.
Dear Mr. Snyder:

Your memorandum about Professor Commons' testinony has just
reached me.

Sometimes I despair as to the economists, professors, students,

bankers, and sometimes even our awn people ever gaining any comprehension of
what the Federal Reserve System is all about.

This idea of a spigot which

controls credit and on which we have our hand, which may be turned off and on
at will, thereby lowering or raising prices, is one of the most hopeless of
all the fixed ideas that we have to deal with.

So few of these gentlemen pay

any attention to the gold movement, and none of them seem to comprehend that
our open market operations simply lay the foundations for rate changes, that
it is the rate that penalizes or invites borrowings from the Federal Reserve
Banks, and that it is the merciless grind of a high rate or the insidious inducement of a low rate which results in changes in the volume of credit.

Sometimes I think we should prepare a very careful analysis of this operation
and place it in the hands of the instructors in all of our universities, and
even then the result would be that they probably would disagree with us anyway.

Mr. Harrison has not sent me the full testimony, and I am not awfully
keen to read it, first because it does not do much good to read erroneous
material, and second because it is a bit depressing and just now I would rather
be elevated than depressed.

Thank you very much for sending me the resume,

however, which throws an interesting sidelight on the men, even if it gives no
information about the affair.




FEDERAL RESERVE BANK OF NEW YORK

2.

Mr. Snyder.

2/22/27.

I have been thinking over that chart you wrote me about, setting
up a contrast between the money rates and the gold movement.

The more I

think of it, the more I think it is worth some more extended discussions
but even if we conclude that rates have caused these major movements of gold

throughout the period covered, I doubt if we could make practical use of it
just now, because while lower rates might indeed arrest gold imports and in-

duce even some withdrawals of gold, we are just now in that delicate position
where the accomplishment of this desirable result might be at the risk of
other untoward developments, such as a revival of speculation, which we would
all deplore to see arise just now.
Some day I may get ambitious to discuss this in some detail and
ask you to come down here for a short visit.

I will let you know if the

opportunity arises.
Very sincerely yours,

Mr. Carl Snyder,
23 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK
Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 23, 1927.

Dear Mr. Snyder:

I have been over your memorandum about the Mc Nary-Haugen Bill,

4-

but cannot say that I agree even as to the possibility under favorable
cumstances that the plan could be made to work.

My reason for this feeling

is that the essential difference between the situation as to our five crops
dealt with by this bill and those which you refer to is that in each of the
other instances, that is to say, rubber, coffee and sugar, I believe, a very
skillful scheme of control of production was undertaken which is not contemplated by the Mc Nary-Haugen plan at all.

As I recall the valorization scheme

undertaken by Brazil a good many years ago, when there was no plan for limiting production, it proved to be a failure.

The details of the more recent

plans I am not acquainted with.

In fact, generally speaking, I think a complete answer to your memorandum is contained in the analysis of the bill which you made at my request
over a year ago.

The fundamental fact remains that any plan which will put a

premium on wheat consumed at home and tax everybody to cover the loss on wheat

sold abroad, it seems to me, is bound to increase production and ultimately
swamp the stabilizers, whoever they may be.
Sincerely yours,

Mr. Carl Snyder,
33 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK
Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 27, 1927.

Dear Mr, Snyder:

Thank you for your memorandum of the 25th.

Your

conclusions

iipm/0
from Mr.) Dodge'sf talk are much similar to my own.

There is, however, this

to be borne in mind about what shall become of the gold.

With the balancing

of European budgets, governments are collecting surplus revenues and reducing
their borrowings from the public.

The effect of this abroad, as with us at

home, is to create a species of liquidation which, under their banking systems, is almost immediately reflected in the earning assets of the banks of
issue.

Those banks are no longer buyers of gold, but rather are

piling up

large balances abroad, where they are investing their surplus funds from
motives of profit.

Under these circumstances, the tendency for gold to

drift to this market is somewhat exaggerated.

If banks like the Swiss,

Dutch, Swedish, British and other European banks of issue were willing to
pile up gold and run along without earnings, the whole gold situation would
change.

It would greatly strengthen our own domestic position in the con-

trol of credit.

This has been discussed with some of our colleagues abroad, but
I am rather hopeless of bringing about any change of policy except as a result of a more concerted attempt in which the Reichsbank, the Bank of France
and the Bank of England all joined us.

As to the outlook for the future,

I believe once France, Italy and Poland accomplish a reorganization of their




FEDEF,AL RE-SERVE BANK OF NEW YORK

2.

Mr. Snyder.

2/27/27.

currencies, it would then be possible to bring the managers of the
banks of issue together in some understanding towards controlling the
tides of gold.

Doesn't it strike you as feasible?

Sincerely yours,

Mr. Carl Snyder,
33 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., March 5, 1927.

Dear Mr. Snyder:

I shall

-0E7it

write but a few lines to thank you for your

fine letter of March 2nd.

Whenever you get at that book, let me

know and I will help if I can.
My best to you.
Sincerely yours,

IA-9-0+7

Mr. Carl Snyder,
23 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK
Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., March 7, 1927.

Dear Mr. Snyder:

I have your memorandum of the 4th and the chart, which I am
returning, as I think Mr. Harrison and some of the others should be
thinking about this general subject.
It would require a book for me to put in writing all the

various possibilities that occur to me in connection with this important
subject.

I must save it until we can have a chance for a chat.
Many thanks for having me in mind.

Sincerely yours,

Mr. Carl Snyder,
33 Liberty Street,
New York City.




FEDERAL RESERVE BANK

OF NEW YORK

Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., March 5, 1927.
Dear Mr. Snyder:

I have your memorandum, which I have read with great interest.
I won't attempt by correspondence to discuss a very abstruse problem,
beyond saying that much depends upon the choice of alternative points of
view.

On the one hand, may we consider that our present large gold re-

serves are the outgrowth of a temporary disorder in the financial and
credit system of the world, which some day will be remedied and result in
a distribution of the gold?

Or on the other hand, may

that this gold is in fact simply the manifestation of the enormous growth
in wealth and activity of the United States and that, to a greater or less
degree, somewhat, the gold would have come to us anyway!

While I rather

incline to the latter view in part, it is nevertheless modified by my
conviction that some day we will likely have to give up some of this gold,

and our policy should therefore be shaped so as to provide for possible
further very heavy increases of the amount, and ultimately possible very
heavy losses.

Some time we can talk this over rather fully.

Meanwhile

I am making some use of your memorandum, which I am sure you will not object to.

Sincerely yours,

Mr. Carl Snyder,
32 Liberty Street,
New York City.







PER CENT.

'11

4,1

FEDERAL RESERVE BANK

OF NEW YORK

0

Mauch 15, 1927.

Dear Mr. Snyder:

Your memoranduT of March 8, as you say, explains that
there is a puzzle but makes no effort at its solution.

I can

only surmise that there is a rather simple solution, partly due
to coincidence.

May it not be that what appears to be a pulsa-

tion of great regularity in the payments exhibited in the chart
is due to a time coincidence relating to trade custom as to the
dates when accounts are settled, to the payments of transfers
made in connection with the member banks of the Federal Reserve
System correcting their reserve position, and a few such factors
as that of the same sort which would bring larze groups of payments together-on almost the same dates?

This mi ht even include

payments of wages by check, and would certainly include such payments as dividends and interest where made by check.

Then we

have the enormous payments made by the Government for ,Jensions
and the like.

And thesc all tend to follow certain calendar

dates.

This is the only guess that I can hazard.
Very truly yours,

Ir. Carl Snyder,
C/o Federal Reserve Bank,
33 Liberty Street, New York.




hitn/ii)
FEDERAL RESERVE SANK

OF NEW YORK

March lb, 1927.

Dear Mr. Snyder:

Of course, you know that I agree with the sentence in
your memorandum of the 8th as to there being no nearby prospect of
a serious gold shortage.

That was one of the principal points

where I felt a sharp disagreement with the whole philosophy of the

Genoa

resolution as to the meeting of central banks.

But after

all it is not the absolute volume of gold which is going to count
hereafter, but it is how the gold is treated both by law and by
social custom.

If the world will tolerate a continued expansion

in the use of paper money accompanied by debasements of the gold
exchange standard and decline to restore gold to circulation as
coin, and if the world continuss to produce t8,000,000 of new gold
every week, and if India finds that during the next five years for
one or another reason she can get along without as much gold as
formerly, and if it proves to be impossible to bring about central

bank cooperation, then I should say there would be a possibility
of some calamity which would likely be charged to a plethora of
gold, but should really be charged to the stuPidity of governments
and banks in the way gold

is used.

To my mind the ideal program

would be for all banks of issue of consequence to get together and
decide arbitrarily how much gold they are willing to absorb, and
how they might under given circumstances progressively on the one
hand put gold into circulation, and on the other hand increase the
proportion of required reserves in their own vaults and deposited
reserve carried with them by the banking community generally.



The solution of this problem is as simple as making taffy

Mr. Carl Snyder

2
FEDERAL RESERVE BANK OF NEW YORK,

candy, if men could only agree.

My fear is that greed, that is

the desire for dividends by central banks, and ambition, that is
the desire to be boss or leader, and vanity, that is the desire to
have one's own opinion prevail rather than some other fellow's,
may defeat such an.understanding.

If we ever arrive at an under-

standing we can thank ourselves rather than anyone else, for I can
assure you that most of the central banks of Europe are thinking
more of themselves and their individual problems than they are of
the whole world and the world problem.

All that we can do is to

keep pegging away in our efforts to bring about an understanding,
and that cannot be done until France and Italy stabilize their
currencies.

This letter, of course, is quite personal.
Sincerely yours,
,

Mr. Carl Snyder,
0/0 Federal Reserve Bank,
33 Liberty Strcet, New York.




MISC. 3. I

ION

12.25

FEDERAL RESERVE BANK'

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. Snyder

FROM

DATE

April 13,

7
192_

Governor Strong

SUBJECT

I have just been over your memorandum of april 1 about
trade in February, as well as the longer memorandum entitled,
"Another High Year in Corporate Profits." The question in my

mind is whether this is real trade and whether the profits are
real profits or whether we may have reached a point where we are
just swapping goods without adequate consumption, and whether the
profits are real profits or represent Chinese money and accumulated inventories. It's hard to say. Information cannot disclose

a sufficiently current cross section of affairs to enable us to
judge. It is important that we should not be fooled by falling
prices into the belief that the basis of our prosperity is secure.
I think this question causes me about as much concern
as anything in the immediate outlook. If you and the others have

any thought on the subject, trot it out.




FEDERAL RESERVE BANK

OF NEW YORK

0

Hotel Brighton,
Atlantic City, N.J.,
April 15, 1927.

Dear Mr. Snyder:

For the last year or two I have been wondering whether
the rroblem of the so-called business cycle should not be approached
from an angle rather different from any that I have heard suggested.
The business cycle, so-called, is the pulsation of business activity
which becomes evident in those highly organized countries where
these phenomena are subject to study, but where the machinery or
nevertheless
the type of organization in economic matters/varies in form, character
and efficiency tremendously.
ness in China is archaic.
America.

For example, the mechanism of busi-

It is hardly less in some parts of South

To express it differently, until the war came, and even

at the present time in some countries, there were enormous areas with
very large population and trade which had no well-organized monetary
and banking machinery.

This would include China, the southern portion

of Afriel, all of Australia, the principal part of South America,
Central America and Mexico and, with shaue we must confess, the United
States.

May it not be that the real source from which the impetus

to these swings of business has arisen can be found in those countries
where there was no regulation of credit whatever prior to the war?
Looking back we find that the great panics of the past have

arisen to a considerable extent in those countriesjor in business

relations of European countries with those countrie0 which have been
backward in monetary reform;
disorganized monetary system,
ordered Argentine finances,



1907, the early 90s both arising in our
the Baring panic growing out of disthe panic of '73 a typical American

:EDERAL RESERVE BANK OF NEW YORK

affair,

inated in

Mr. Carl Snyder

2

4/15/27.

the Overend, Guerney panic as I recall in 1856 which origngland but

I believe

was due to the unorganized mushroom

growth of speculative banking ventures which oecame involved too
heavily in foreign and especially oriental commitments.

In °the)

words, may it not be possible to assign much of the disorder of
prices and of extreme fluctuations of business primarily to war and,

next in importance, to lack of organization in largeareas of the world
where extreme activity and speculation has been under no control and
where, consequently the collapse has been extreme and has had re.

percussion the world around?
This is just an idea.

Do you suppose there is any support

for it empirically as Dr. Miller would say, or statistically, as
suppose you would.

If you think there is anything in it the man to

discuss it with is Wesley Mitchell.
Best regards,
Sincerely yours,

Mr. Carl Snyder,
0/o Federal Reserve bank,
33 Liberty Street, New York City.




FEDERAL RESERVE BANK OF NEW YORK

affair,

Mr. Carl Snyder

2

4/15/27.

the Overend, Guerney panic as I recall in 1856 which orig-

inated in England but

I believe

was due to the unorganized mushroom

growth of speculative banking ventures which oecame involved too
heavily in foreign and especially oriental commitments.

In other

words, may it not be possible to assign much of the disorder of
prices and of extreme fluctuations of business primarily to war and,
next in importance, to lack of organization in large areas of the world

where extreme activity and speculation has been under no control and
where, consequently the collapse has been extreme and has had repercussion the world around':

This is just an idea.

Do you suppose there is my support

for it empirically as Dr. Miller would say, or statistically, as I
suppose you would.

If you think there is anything in it the man to

discuss it with is Wesley Mitchell.
Best regards,
Sincerely yours,

Mr. Carl Snyder,
0/0 Federal Reserve bank,
33 Liberty Street, New York City.




MISC. 42 130M 9.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Mr. Carl Snyder, General Statistician

DATE

April 28, 1927.

192_

SUBJECT:

Governor Strong

FROM

I have considered your application for permission to give some lectures
on Business Cycles at the New School of Social Research next winter outside of
business hours.

I am glad to say that this outside employment is in no sense

a violation of the rule adopted by the directors of the bank, and you are, therefore, entirely free to carry on this work so long as it does not interfere with
your work in the bank.




FEDERAL RESERVE BANK

Misc. 3. 1.50M-8-25

OF NEW YORK

OFFICE CORRESPONDENCE
To

FM

r.

DATE

114'Y

la,

SUBJECT:

Snyder

Governor Strong

I have just been reading .Ale us,,ached memorsnAm.
every other picture of this sort which

appears

future. I

confess to beinc

wondering if you have any ideas.




If

like

susceptible of e>planation

s to the past but, nevertheless, puzUes us greatly as to
towards the

It is

our

attitude

puzzled about our policy, and am

so, trot

them out.

192L




14,0

-


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102