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From time to time brief descriptions of the operations and activities of the Federal Reserve Bank of New York will be
printed on the last page of the R E V IE W . This month the up-building of the discount *rtiarket is described.

MONTHLY REVIEW
O

f

C

r e
In

B y

th e

F ed era l

d

i t

th e

a n d
S e c o n d

R e se rv e

B

u s i n e s s

F e d e r a l

A g e n t,

R e s e r v e

F ed era l

C

o

n

d

i t i o

n

s

D is tr ic t

R e se rv e

B an k ,

N ew

Y ork

New York, April 1st, 1921

sure moved elsewhere, the borrowing was paid off, and
the Federal Reserve Bank of New Y ork was in a position
H E improvement in credit conditions resulting to lend to other Reserve Banks. On several other occa­
T
from the decline in the volume of bank deposits sions during the year it was a borrower or became a
Through this process credit equilibrium and
and loans is reflected in the higher reserves of the lender.
elasticity w e r e main­
Federal Reserve Bank of
NEW YORK
PHILADELPHIA
tained, and credit was at
New Y ork and of the 100
all times available for
Federal Reserve System 60
AV*
legitimate needs through­
as a whole.
During the 60
r
out the country.
extraordinary demands 40
\r
V 'S'
for credit which prevailed *°
But the intensity of
during the greater part o
the credit pressure varied
1920
J92I
1921
RICHMOND
of 1920, not only did the 100
greatly in different sec­
member banks have to 80
tions of the country dur­
b o r r o w i n c r e a s i n g 6Q
ing the successive periods
amounts of their Federal _
of the year.
This is
40
^ 1
Reserve Banks, but many ^
clearly illustrated in the
of the Federal Reserve
diagram printed on this
o
1920
J921
1920
1921
1920
1921
Banks, in order to main­
page. In these twelve
CHICAGO
ST. LOUIS
MINNEAPOLIS
tain their legal reserves ,0°
blocks are shown the
of gold and lawful money, 60
reserve percentages of
had to borrow from other so
each of the Reserve Banks
A
_ /
Federal Reserve Banks in 40
V'-' y lff\
as they would have been
districts where the credit zo
had the banks neither
demands were not so o
borrowed to maintain
1920
192.1
great.
I00 KANSAS C ITY
their legal reserves nor
made loans to other
In January, 1920, for 60
Reserve Banks; as they
example, the Federal R e- 60
would have been had
serve Bank of New Y ork 4 0 a
each Reserve Bank oper­
borrowed
$100,000,000 ZO
ated purely as an in­
from the Reserve Banks
0
1920
1921
1920
dependent bank without
of Atlanta, Dallas, Cleve­
ALL BANKS
too
any means of obtaining
land, Chicago, St. Louis,
60
a c c o m m o d a t i o n from
and San Francisco. This
60
other Reserve Banks.
is the largest amount
Although on this basis
40
which any Federal R e­
the individual Reserve
serve Bank has yet had
ZO
to borrow, but within a
Banks
show
reserves
01920
varying from 81 per cent,
couple of months the
Reserve Percentages of Federal Reserve Banks Disregarding the Credits Extended
to 9 per cent., each was
center of credit pres­
by Various Federal Reserve Banks to Other Federal Reserve Banks.
C r e d it C o n d itio n s




J

s'

MONTHLY REVIEW

2

able by borrowing from other Reserve Banks, if necessary,
to maintain its reserve at or above the legal requirement
of 40 per cent, against notes and 35 per cent, against de­
posits. In October, 1920, these inter-Reserve Bank bor­
rowings reached the high level of $267,000,000. They were
effected largely to furnish necessary credit to the agricultural
districts; also, as has been said, to New York City where
credit pressure anywhere in the country is generally
promptly reflected. A t present the movement of goods
and the improvement in credit in the borrowing districts
has enabled these inter-Reserve Bank borrowings to be
reduced to $19,000,000.
The block at the bottom of page 1 is a composite
of the twelve individual bank reserves, and shows how
steady the reserves of the whole system have been. This
gives evidence of the unity of the system and of its effective­
ness as a stabilizer of credit. It shows that the gold
reserve of the Federal Reserve Banks served as a reservoir
of credit for the entire country, each section being able to
draw upon the entire reservoir for its seasonal needs.
Districts in which the credit pressure was slight because of
dulness of manufacturing or merchandising and which,
therefore, had a surplus of reserves were able to transfer
these to districts which needed them because of agri­
cultural or other requirements. The machinery of the
system enabled these transfers to be made instantly and
without disarranging or reducing credit already extended
in the lending districts.
B ank

Loans

and

The decline in loans and note circulation of the Federal
Reserve Bank of New York, and also of all twelve Federal
Reserve Banks, is shown in the following table.

Amount
March 25

R eserve Bank of
N ew Y ork:
Earning Assets.........
Note Circulation........
All R eserve Banks:
Earning Assets...........
Note Circulation........

Per Cent.
Decline
from
high

Date of
high

Millions of dollars.
799
781

-1 9 9
- 16

33.6
12.0

Feb. 27, 1920
Nov. 5, 1920

2,692
2,931

-1 6 2
-1 2 1

21.3
13.9

Oct. 15, 1920
Dec. 23, 1920

These figures, in terms of percentage declines from
averages for the entire year of 1920, are illustrated in the
following diagram:

y *
averag-e V

D e p o s its

Change
from
Feb. 25

1920

V

NOTES

|V

V/\

V

v/
NOTES

The decline in loans and deposits of member banks
in New York City and also of member banks throughout
the country, winch report each week to the Federal
Reserve Board, is shown in the following table.

EARNING ASSETS

.

A

V

EAI INING- AS SETS

k/\

s
Amount
March 18

N.Y. City : . . .
Loans *.......
Deposits.. . .
AllD istricts:
Loans *.......
Deposits.. . .

Change
from
February 18

Per Cent.
Decline
from high

Date of
high

12.5
15.8

Oct. 10, 1919
Sept. 19, 1919

7.0
6.7

Oct. 15, 1920
Jan. 16, 1920

Millions of dollars.
5,260
-2 6
4,575
+78
16,074
13,650

\

-2 3
+48.

* Includes investments, loans, and paper rediscounted.

7 j/v

DEC.

^-.DEPOSrT5
loans'"^

JAN.

FEB.

MAR.

Reporting Banks All Districts.




DEC.

JAN.

DEC.

JA N .

FEB.

MAR.

All Federal Reserve Banks.

DEC.

JAN.

FEB.

MAR.

New York Federal Reserve
Bank.

M ovem en t of Funds

The percentage declines in loans and deposits from the
1920 average are shown in the following diagram.

AVERAGE
1920

V

FEB.

MAR.

Reporting Banks New York
City.

In the September and December issues of the M o n t h l y
R e v ie w an account was given of the quarterly move­
ments of funds culminatingin the redemption of certificates
of indebtedness and the payment of taxes on September 15
and December 15, 1920. A similar movement took place
in connection with the March 15, 1921, payment of taxes.
There were, however, certain striking differences between
the movement just completed and the movements of the
two previous periods. The differences are owing largely
to the smaller size of Government operations, the con­
tinued liquidation of loans in New York City banks, and
the improved reserve position of the Federal Reserve
Banks. The table on the next page brings into comparison
the financial operations of the past quarter and the two
previous quarters, printed to help to an understanding of

FEDERAL RESERVE AGENT AT NEW YORK

these quarterly movements. The figures, other than those
of the Federal Reserve Bank of New York, are for the
principal New York City banks.

Tax Payment Date

Sept. 15
1920

Prior to tax payment date:
Deposits of New York City banks
decreased.....................................
Resulting in
Drain of gold from the Federal Re­
serve Bank of New York to other
Federal Reserve Banks..............
Substantially o f set by
Government transfers to New York
through gold settlement fund,
rediscounts with other Federal
Reserve Banks and sales of ac­
ceptances and certificates of in­
debtedness to other Reserve
Banks...........................................
On or about tax payment date:
Deposits of New York City banks
increased......................................
In connection ivith
Redemption of- certificates of in­
debtedness, this district.............
Which were in excess of
Tax payments, this district, which
amounted to................................
The excess being temporarily fi­
nanced by
Loan by Federal Reserve Bank of
New York to the Government..
Deposits increased also in connec­
tion with
New issues of certificates of indebted­
ness paid for by book credit. . . .
Following the increase in deposits
Borrowings of New York City banks
from Federal Reserve Bank de­
clined ...........................................
And
Federal Reserve Bank of New York
rediscounted for other Federal
Reserve Banks............................
Subsequent to tax payment date:
Concurrently with collection of tax
checks and sale of certificates by
banks to customers
Deposits of New York City banks
declined........................................
Resulting in
Increase in borrowings at the Federal
Reserve Bank..............................

Dec. 15
1920

Mar. 15
1921

(Milli ons of Do liars)
320

470

558

198*

337

332

186*

220

292

453

407

191

425

344

200

230

220

170

146

74

107

200

212

183

237

187

147

19

0

0

196

132

82

96

112

42

8

market, and other banks which are in a position to buy
continue to await the return of more settled business
conditions.
Distribution depends largely on the position of individual
banks, but on the whole dealers’ reports indicate that their
most favorable market is with the smaller banks in New
York and adjoining States, that demand from the middle
west is only fair, and that the market in New England, the
Pacific coast, and the south is quiet.
The supply of paper has increased somewhat, and
because of comparatively slow movement, has tended to
increase dealers’ portfolios. This increase in supply
appears to be partly seasonal, partly the result of a shifting
of loans from the borrowers’ own banks to other banks
through the open market, and partly the result of slow
collections. Some increase in requirements of the textile
and shoe industries has possibly reflected a larger move­
ment of merchandise in those lines.
Rates continue to range from l x
/ i per cent, to 8 per cent.,
with most transactions at 7 % per cent. The lowest rate
applies to firms in good standing whose paper has not
appeared frequently in the market.
The diagram printed below shows that the volume of
commercial paper outstanding has continued to decrease,
but at a less rapid rate than during December and January.
The diagram is based on reports to this bank from dealers
who represent a large majority of the business done in the
country.
MILLIONS
OF DOLLARS

Commercial Paper Outstanding— 11 Dealers.
* For three weeks only.
The
C o m m e r c ia l P a p e r

The demand for commercial paper in March has been
dull, though normally this is a month of increased activity.
Some dealers report slightly larger sales than a month
ago, but these appear to be offset by continued inactivity
elsewhere. Liquidation of loans throughout the country
apparently has not gone far enough to permit many banks,
ordinarily buyers of commercial paper, to reenter the




B ill M a r k e t

In the last week of February, a comparatively light
supply of bills, particularly of the 90-day maturities,
coupled with a broad demand, caused dealers to lower
their rates. Rates on New York member bank 90-day
bills, which had been offered at 6 per cent., declined to
5% or 5Y% per cent. This action resulted in a reduction
of sales and an increase in dealers’ bill portfolios. Sub­
sequently most of the dealers restored their rates to 6
per cent.

4

MONTHLY REVIEW

Fluctuations in buying occurred chiefly in New York
City, as demand from interior banks was generally well
maintained, and the market continued to broaden and to
include new buyers. The reduced volume of New York
City purchases led to a slight reduction in aggregate sales
as compared with the total for the thirty days prior to
February 20,

February sales of corporation and miscellaneous bonds
on the New York Stock Exchange were $75,000,000, the
smallest total since August, but slightly larger than the
total sales in February, 1920.

During the past month, some few import bills from the
Orient have again been seen in the market but the prin­
cipal volume of new paper has been drawn against imports
of sugar, silk, coffee, wool, and burlaps, and exports of
cotton, tobacco, grain, packers’ products, and foodstuffs.
Also finance bills for providing dollar exchange for South
America have been offered in rather substantial volume.

Notwithstanding further declines in corporate bond
prices, Liberty bonds maintained a fairly consistent level.
Prices tended somewhat lower in the latter part of Febru­
ary, and again in March before the payment of income
taxes, but lower prices at each of these periods were fol­
lowed by recoveries. The 3 ^ s were exceptions to the
general trend, continuing the decline which began in
January, and fell nearly to the 1920 low level. Victory
notes continued strong, and again established new high
levels for recent months.

The minimum buying rate of the Federal Reserve Bank
remained unchanged at 5 ^ to 6 per cent., according to
maturity, for indorsed prime bills.

S to ck M a r k e t M o n e y

R a te s

The Stock Exchange money market between February
20 and March 20 was quiet and generally firm, with 7
per cent, the prevailing rate for call loans. Demand for
funds was comparatively light, and the average daily
turnover of money was small. Though call money on the
Stock Exchange up to the latter half of March renewed
consistently at 7 per cent., the closing rate fell to 6 per
cent, late in February and again after the March 15
maturities of Treasury certificates were paid, when also
the renewal rate fell to 6 ^ . A decline in stock market
money rates has been usual around quarterly tax days,
when the proceeds of matured certificates become avail­
able, and while tax checks are still in process of collection.
Declines to 6 per cent, in the regular market were ac­
companied by occasional transactions in the outside
market as low as 5 per cent.
The time money market continued inactive, with rates
largely nominal. These were
to 73^2 per cent.,
according to collateral and maturities.

B ond

M arket

The bond market in the last thirty days was dull with
prices tending downward. Heaviness in stocks, the large
available supply of recent issues and a certain amount of
liquidation to obtain funds with which to pay taxes,
contributed to an average decline of 2 to 3 points from
the high levels of January. A number of recent issues,
which originally had been much oversubscribed, declined.
Following the tax payment date all classes of bonds became
slightly firmer.
Disagreement over reparations was reflected in weak­
ness of recently issued foreign government securities, and
most of them sold down to new low levels for the year.
Losses, however, in the main were quickly recovered.
Japanese sterling bonds continued to reflect the higher
sterling exchange rate, reaching nearly the highest prices
of the year. Cuban issues continued their recovery, and
by the middle of March were up 3 to 10 points from
January low prices.




U n ite d

S ta te s

S e c u r itie s

Whereas sales of corporate and miscellaneous bonds are
running slightly in excess of sales a year ago, trading in
Liberty bonds shows a substantial diminution. A total
of $152,000,000 Liberty bonds and Victory notes was sold
on the New York Stock Exchange during February, 34
per cent, less than the total for February last year.
Two new issues of Treasury certificates, one at 5 ^
per cent, for six months, and the other at 5% per cent,
for one year, were offered on March 15 and promptly
oversubscribed.
Total
allotments
to
the country
amounted to $481,803,000, of which $209,909,000 were
allotted in this district. Treasury certificates which
matured on March 15 amounted to $506,000,000, of which
about $200,000,000 were redeemed in this district.
All outstanding issues of certificates of indebtedness
continue to be quoted in the outside market at or above
par. This market, which is newly developed, offers
excellent facilities for the investment of funds for short
periods and has facilitated the present wide participation
by the public in certificate purchasing.

N ew

F in a n c in g

Long term domestic issues recently placed on the market
in small or moderate amounts generally sold well, but
short term domestic issues and foreign government
securities found a slow market. The large volume of
new issues put out in previous months, the very small
amount of buying by banks, and generally depressed bond
prices were factors in the slack demand. Offerings in
March were relatively small in both size and number.
Fifteen year 8 per cent, sinking fund gold bonds of the
State of Sao Paulo, Brazil, were offered early in March
at a price to yield nearly 8 ^ per cent., a slightly higher
yield than on any foreign government offering in recent
months. Similar offerings were made at the same time
in London and Amsterdam.
Total figures for February domestic issues, both railway
and industrial, reached nearly $300,000,000, an increase
of 47 per cent, over the total for February, 1920, and the
largest February figure since 1916. Notes and bonds
constituted 95 per cent, of all corporate securities placed
on the market. About 30 per cent, of the offerings were
to pay off maturing obligations.

FEDERAL RESERVE AGENT AT N EW YORK

S to ck

G o ld

M arket

Speculative pressure, accompanied apparently by some
real liquidation, caused a sharp decline in stock prices in
the second week of March. Railroad shares were par­
ticularly weak, following the publication of statements of
railway earnings. Average prices of representative rail­
road stocks declined close to the December low level, and
shares of a number of important roads reached the lowest
prices in recent years. Industrial stocks, as a group, lost
about half their year-end advance.
This decline was followed almost immediately by a
rally, which in the case of the industrial stocks resulted in
an almost complete recovery of losses. Railroad stocks
recovered less completely.
Trading in March, though somewhat more active than
it had been since January, was only in moderate volume.
February sales, totaling 10,000,000 shares, were the
smallest for that month since 1915.
F o r e ig n E x c h a n g e

Transactions in foreign exchange in the past four weeks
have been restricted mainly to routine business. Price
fluctuations have been within a comparatively narrow
range with the day-to-day movements of European rates
governed largely by international political developments.
The sterling rate moved within a range of 7 cents, but
remained near $3.90 during most of the period. Reports
that French and British troops had advanced into Ger­
many brought heavy speculative selling on March 8
with a decline on that day of five cents, but this loss was
recovered within two days.
The continental exchanges moved with sterling during
most of the period, although lire in the final week became
exceptionally strong and at one time touched 4.11 cents,
the highest price since October, 1920, owing largely to
reports of material improvement in Italian financial con­
ditions. Far Eastern and South-American exchanges
moved slightly lower.
The following table shows the high, low, and closing
rates of principal exchanges for the period from February
21 to March 19.

Country

High

Low

Last

England.................................
France...................................
Italy.......................................
Spain......................................
Germany...............................
Switzerland...........................
Sweden (Stockholm)............
Holland..................................
Belgium.................................
Argentina..............................
China (Hong Kong).............
China (Shanghai).................
Japan (Yokohama)..............
Canada..................................
Bar Silver in N. Y ...............

3.9125
.0730
.0411
.1405
.0167
.1742
.2305
.3440
.0761
.3492
.4888
.6650
.4438
.8838
.5875

3.8438
.0688
.0363
.1380
.0150
.1646
.2215
.3394
.0718
.3359
.4413
.5838
.4825
.8650
.5288

3.9125
.0695
.0406
.1395
.0161
.1737
.2305
.3440
.0728
.3378
.4700
.6325
.4825
.8750
.5775

* Silver Exchange Basis.




Per Cent.
Deprecia­
tion
from Par
19.6
64.0
79.0
27.7
93.2
10.0
14.0
14.4
62.3
20.5
*
♦
3.2
12.5

5

M ovem ent

February imports of gold amounted to $44,422,000, an
increase of $6,228,000 over those for January. The
sources of these imports were:
Country

Amount

Per Cent.

France.........................
England......................
China...........................
British India...............
Other...........................

$13,720,000
10,682,000
5.818.000
5.212.000
8.990.000

30.9
24.0
13.1
11.7
20.3

Total....................

$44,422,000

100.0

As exports in February were only $1,036,000, the excess
of imports amounted to $43,386,000. This was a larger
excess than in any month of 1920 with the exception of
October, when gold which had been held under earmark
at the Bank of England was in process of transfer to this
country. That gold, however, was included among the
country’s gold reserves in August, 1919, and the February
excess of imports is the largest accession to gold reserves
in a single month since that time. Gold receipts con­
tinued in March in large volume.
F o r e ig n

T rade

Measured by last year’s standard of activity, current
export demand for American products remains slow. But
if the comparison is made with the extremely dull period at
the end of 1920, business in the opinion of exporters has
shown an increase. This appears to obtain more particu­
larly in steel than in other manufactured commodities.
Cancellations of orders for steel have practically ceased,
and the amount of new business has shown a moderate,
but nevertheless distinct, advance over that of two months
ago. Demand is chiefly for railroad supplies, with a some­
what increased inquiry also for construction materials
and most standard materials with the exception of plates.
Orders are widely scattered as to source.
Orders for textiles and general merchandise are chiefly
for the purpose of filling in stocks. Reports from South
America indicate that there are still large stocks of goods
on hand, and the persistent weakness of the South Amer­
ican exchanges has been unfavorable to prompt collections.
N ot only have higher premiums been quoted for the
dollar, but the European exchanges have likewise moved
against South America. In March, the pound sterling
reached a premium in the Argentine market for the first
time since 1914.
Foreign demand for cotton has continued slack, and
the German market which had been buying from American
stocks in Germany has become inactive. Recently, how­
ever, activity in the British cotton goods trade has
increased slightly, and there has been a stronger tone in the
Liverpool market. Cotton shipments during February
largely on old orders were 37 per cent, less than in Febru­
ary last year. Export demand for American wheat has
increased, and the British Commission was a conspicuously
large buyer shortly after the middle of March. Recent
recession^ have brought the price of American wheat under
the Argentine price. Demand for flour has been fairly
consistently maintained.

6

MONTHLY REVIEW

February foreign trade figures reported by the Depart­
ment of Commerce, showed exports valued at $489,000,000,
a decline of 25 per cent, compared with the January total.
As the normal seasonal fall from January to February is
only about 14 per cent., these figures appear to indicate a
substantial decrease in outgoing commerce, even if allow­
ance is made for price changes. February shipments were
to a large extent in delivery of orders placed some months
previously.
Imports, on the other hand, increased nearly 3 per cent,
to $215,000,000. Considering the lower prices and the
fact that February imports normally are about 4 per
cent, less than January imports, a real increase in the
volume of imports is indicated.
W o r ld

C o m m o d ity

PER CENT.

P r ic e s

There has been no pause in the downward movement
of world prices. The Economist and Statist indices in
Great Britain both indicate more extensive declines dur­
ing February than during January, and the number
compiled by the French Bureau de Statistique General
has shown a steadily accelerating decline in the past three
months. The only index of foreign prices thus far avail­
able for the early weeks of March is the index compiled
by this bank of prices in England for 25 basic commodities,
and it shows no abatement in its rate of decline. In the
United States the downward movement, as shown in the
Department of Labor index, is slightly less rapid than in
recent months.
If a general average were to be taken of the available
figures on world prices, it would show that prices have
fallen about one-third from the high point reached in
1920, and that they are at present a little more than twice
as high as they were in 1913. The United States and
Japan are the outstanding countries in which declines
have been greater than the average, and Germany,

Wholesale Commodity Prices in Four Countries
(Average Prices in 1913 = 100 per cent.)

Italy and France are the outstanding countries in which
prices are still relatively highest. Prices in Scandinavian
countries are also considerably more than twice as high
as in 1913.
The latest reported index numbers from different coun­
tries are shown in the table at the foot of this page, and
the figures for four countries are plotted in the accom­
panying diagram.

I n d i c e s o f W h o l e s a l e P r ic e s
1913 average = 100 per cent, unless otherwise noted
Per Cent. Change During
Country

United States:
12 basic commodities (1)............................
Department of Labor.................................
Dun’s............................................................
Bradstreet’s .................................................
Great Britain:
Economist....................................................
Statist...........................................................
25 basic commodities (1)............................
France..................................... .........................
Japan................................................................
Canada.............................................................
Sweden (2).......................................................
Australia (3)....................................................
Calcutta (4).....................................................
Norway............................................................
Germany (5)....................................................
Netherlands.....................................................
Denmark (6)....................................................

Latest
Quotation

(Mar.
(Feb.
(Mar.
(MaT.

19)
av.)
1)
i)

192.2
214.9
172.0
376.0
622.8
200.9
207.6
250
196
178
309.2
136
233 .0
280

(Mar.
i)
(Mar.
i)
(Mar. 19)
(Feb. av.)
(Feb.
1)
(Jan. av.)
15)
(Jan.
(Feb.
15)
av.)
(Jan.
(Feb.
1)
(Feb.
1)
(Feb.
1)
(Dec. av.)
(Mar.
1)

1. Computed by this bank. 2. July 1, 1913 to June 30, 1914 = 100.
100. Revised figures. 6. July, 1912 to June, 1914 = 100.




-

6.7
8.7
6.2
7.0

- 1 0 .2
- 7.4
- 9.9
- 5.6
~ 3.4
- 7.1
— 4.5
- 9.7
- 5.3
- 7.2
- 9.4
- 3.2
-1 0 .6
- 8.8

Date of
High

-1 2 .8
- 5.6
- 2.1
- 4.1

52.3
38.6
30.9
43.2

May 17, 1920
May
1920
May 1, 1920
Feb. 1, 1920

-

7.9
7.2
7.6
7.5

-

6.4

-

3.4

38.0
31.2
50.2
36.0
8.3
37.5
21.1
32.8
16.9
18.3
28.6
13.4
41.5
30.5

Apr. 1, 1920
May 1, 1920
Mar. 12, 1920
Apr.
1920
May 1, 1920
Mar.
1920
May 15, 1920
Dec. 15, 1918
Aug.
1920
Feb. 1, 1920
Oct. 1, 1920
May 1, 1920
1918 Average
Nov. 1, 1920

Jan$

Dec.

115.6
167
150.5
128.8

Per Cent.
Decline
from High

-

4.5
6.3
6.5
2.3

- 5.2
- 4.8
-1 0 .6
- 6.5
- 2.0
- 2.2
- 3.2
-1 0 .7
.5
- 1.1
-1 6 .4
- 9.3
-1 5 .0

3. July, 1914 = 100.

Feb.

4. End of July, 1914 = 100.

5. Jan. 1, 1920 =

FEDERAL RESERVE AGENT AT N EW YORK

Domestic Prices
Of the 327 commodities making up the Department of
Labor index number for wholesale prices, 207 showed a
decline in price in February; 33 showed an increase; and
the remaining 87, the majority of which were in the food
or clothing groups, remained stationary. The index as a
whole declined 5.6 per cent, to 67 per cent, above the 1913
level. The percentages of decline since the peak was
reached in M ay, 1920, have been as follows:
June,
July,
August,
September,
October,
November,
December,
January,
February,

1920.............................................. 1.1
1920.............................................. 2.6
1920.............................................. 4.6
1920.............................................. 3.2
1920.............................................. 7.0
1920.............................................. 8.0
1920.............................................. 8.7
1921.............................................. 6.3
1921..............................................5.6

per cent.
per cent.per cent.
per cent.
per cent.
per cent.
per cent.
per cent.
per cent.

7

February 1 and March 1 according to the reports of the
National Industrial Conference Board. This decrease is
greater than that reported for January, but about the
same as in December. Practically all of the month’s
decrease is due to lower retail prices for food. As the
index is weighted in accordance with the proportions of
the family budget which are spent for different items,
food prices count heavily in determining the total. W ith
the February decline the index number has reached a
level 69 per cent, above that for July, 1914, and is 18
per cent, below the maximum.
The following diagram traces the movement of the
different elements making up the cost of living index
number:
PER CENT.

Since December this index has shown a diminishing rate
of decline. The index of 12 basic commodities com­
piled by this bank has a tendency to move more rapidly
than the Department of Labor index which includes
manufactured products involving successive labor costs,
as well as raw materials. W ith the exception of a rapid
decline in two weeks of February, this index also has
shown a tendency to fall less precipitately.
A month ago a tendency was noted toward a levelling
of prices among the various groups of commodities making
up the Department of Labor index. During February
this tendency was interrupted. The group showing the
greatest decline was food, which was already nearer to
the pre-war level than any other group except farm
products and metals.
The group showing the smallest
decline was house furnishings, which is farther above the
1913 level than any other group. The position of the
different groups making up the index is shown in the fol­
lowing table:

Commodity Group

February
Index

Highest
Level

Per Cent. Per Cent.
Decline
Decline
from High Jan. to Feb.
(Figures for July, 1914 = 100 per cent.)

Farm products..........
Metals.......................
Food, etc...................
Chemicals..................
Cloths and clothing..
Fuel...........................
Building materials. . .
House furnishings___
Miscellaneous............
All items................

129
146
150
178
198
218
222
277
180

246
195
287
222
356
284
341
371
247

48
25
48
20
44
23
35
25
27

5.1
3.9
7.4
2.2
4.8
4.4
7.1
2.1
5.3

167

272

39

5.6

W ages

Average weekly earnings in New York State factories
during February were $26.77 per worker as compared
with $27.61 in January, the greatest decrease recently
registered in a single month.

From the high point

reached last October there has been a 7 per cent, decline.
Numerous wage cuts have affected the average less than
might have been expected because there is a tendency on

C o st o f L iv in g

The cost of living for the typical wage earner’s family
in the United States decreased 4 .4 per cent, between




the part of employers to retain the most efficient and bestpaid workers and to dispense with the least efficient and
lowest paid.

The wage decline in this district has been

somewhat less rapid than in the country as a whole.

8

MONTHLY REVIEW

W ith the exception of the textile industry, in which there
were uniform reductions of 22}^ per cent., there has been
great diversity in the amount of reductions as between
industries and among individuals doing a similar kind of
work. The rate of pay for common labor in one city in
the district shows a wide range of from 30 to 50 cents an
hour. There has been practically no lowering of the union
scale of wages of artisans in New York City. In many
factories, however, wages of highly skilled labor have been
cut from 10 to 30 per cent.
Conferences on wage reduction are now in progress
between railroad executives and representatives of the
workers. The average monthly pay of a railroad em­
ployee on the principal road in New York State in 1915
was $75. In January of this year the average was $162.50.

caused more unemployment among seamen, dock-workers,
freight-handlers, drivers and longshoremen. There has
been little increased activity as yet in the building trades.
A labor dispute in the men’s clothing industry, involving
about 60,000 workers, has continued for several months.
An investigation of New York up-State conditions by
this bank shows increased employment in the Rochester
shoe and clothing factories, but no changes of importance
among miscellaneous manufacturing plants. There have
been no signs of a resumption of activity in the metal
trades. One automobile plant in Syracuse reports that
it is now operating on full time and is planning to put on a
night force in the near future. A t Troy slightly more
persons are employed in the collar and shirt factories and
at Cohoes the textile mills have resumed operations. A t
Utica there has been an increase in employment in the
textile mills. The most notable increase in the Mohawk
Valley, however, has been on the farms in the surrounding
country where many persons from the cities, who have been
unemployed for several months, are now finding work.
The New York State Industrial Commission reports
that in February 2 per cent, more workers were employed
in factories in the State than in January. For the country
as a whole, the latest report of the United States E m ­
ployment Service for 65 industrial centers showed 1 per
cent, less workers employed on February 28 than on
January 31. The greatest decreases were in the iron and
steel industry and railroad repair shops, and the greatest
increases in automobiles and textiles. The cities to show
greatest decreases were Youngstown and Pittsburgh, and
by far the greatest improvement was shown by Detroit,
in which there was an increase of more than 20,000 in the
number employed.

Im m ig r a tio n

Number of Employees and Average Weekly Wages in New
York State Factories.
E m p lo y m e n t

Increasing employment in this district, first apparent
during the latter part of February, was again reported in
March. Estimates received by this bank indicate that
about 5 per cent, more persons are employed to-day
than one month ago. The most notable change this
month was the seasonal increase among farm workers.
Changes in industrial employment in New York State
vary considerably as between different industries. Trades
which were first affected by the business recession of last
year, such as the textile trades, show at this time the
most definite tendency toward re-employment.
Vice
versa, there is increasing idleness in the metal trades and
on the railroads which were among the last to feel the
recession.
In New York City the continued lull in shipping has




Strict quarantine regulations and the rigid physical
examination of immigrants at the port of New York
caused the number of arrivals here during February to
decline sharply. M any large vessels, which ordinarily dock
at New York, were diverted to Boston and Philadelphia.
Arrivals and departures at the port of New York in
recent months are shown in the following table:

Month

Arrivals

Departures

Net Increase

Average, 1910 to 1914...........
December, 1920.....................
January, 1921........................
February, 1921......................

63,316
67,310
56,465
34,595

18,082
31,000
37,442
22,404

45,234
36,310
19,023
12,191

During the first three weeks of March there was an
increase in the number of arrivals, compared with figures
for the first three weeks of February, due largely to the
admittance of many immigrants who had been held at
quarantine for several weeks. Italy continues to send
the largest number of immigrants, and Polish and Russian
Jews also are arriving in large numbers.

0

FEDERAL RESERVE AGENT AT NEW YORK

This month for the first time, 12 stores in this district

R e ta il T r a d e

Sales by department stores in cities of this district during
February were about on a par with those of the same month
last year, according to reports received by this bank from
25 stores. In view of the fact that average prices in de­
partment stores were lower than those of last year, the
volume of merchandise distributed was considerably larger.
The number of transactions shows an increase of 12.5 per
cent.
The continued large volume of sales is evidence that
in the cities of the district the purchasing power of the
population has not as yet been greatly affected by em­
ployment or wage reductions. In Utica, Syracuse, and
Rochester where there has been much unemployment,

with annual sales of more

than

$130,000,000

have

reported their sales and stocks on hand in terms of dollar
values rather than as percentages.

The accompanying

diagram based on those reports gives for the entire years
1919 and 1920 and the first two months of 1921 an index
of sales and of stocks on hand.
PER CENT.

sales have been equal to those of last year. A further
explanation of large sales is found in the type of purchases
being made. Merchants report that sales of men’s and
women’s apparel are running well ahead of last year’s
sales. M any people were deterred from purchasing new
clothing last spring by high prices and now are apparently
replenishing their wardrobes. Housefurnishing goods
and pianos and other musical instruments are not in as
great demand as last year.
Stocks held by retailers, reported by selling price, are
below those of last year, but this reduction is probably
accounted for by lower prices rather than by a reduction
in the actual number of articles. Stocks on March 1
were larger than those held on February 1, because of the
receipt of the usual shipments of spring goods. The
increase during February, however, was not as large as
during the corresponding month last year, because of the
tendency on the part of retailers to buy only for immediate
needs. Thus far department stores have not to any con­
siderable extent contracted ahead for fall goods to be
shipped late in the summer.

Sales and Value of Stocks of 12 Department Stores
(Average Sales for 1919 = 100 per cent.)

B u s in e ss o f D e p a r t m e n t S to re s

Month of February, 1921

Number of firms reporting...........................................................................................................................................
Per cent, change in net sales during February, 1921, compared with net sales during February, 1920..............
Per cent, change in number of transactions during February, 1921, compared with the number of transactions
during February, 1920 (14 firms reporting, 7 in New York)...............................................................................
Per cent, change in net sales from January 1,1921, to February 28, 1921, compared with net sales during cor­
responding period in 1920........................................................................................................................................
Per cent, change in stocks at close of February, 1921, compared with stocks at close of February, 1920..............
Per cent, change in stocks at close of February, 1921, as compared with stocks at close of January, 1921..........
Percentage of average stocks at close of January and February, 1921, to net sales during those months..........
Percentage of outstanding orders at close of February, 1921, to total purchases during calendar year, 1920...




New York
City and
Brooklyn

Elsewhere
in Second
District

Second
District

12
-1 .1

14
+ 9 .5

26
+ 1.0

+ 11.1

+ 17.9

+12.5

-4 .6
-1 6 .5
+ 6 .3
323.3
7.3

+ 1 .6
-2 3 .0
+ 1 .3
350.6
7.2

-3 .5
-1 7 .8
+ 5 .3
328.7
7.3

10

MONTHLY REVIEW

Volume of Production

S ilk s

Current production of certain of the country’s principal
basic commodities is shown in the table below, which
compares production figures available for the first two
months of 1921 with the average production for January
and February, 1919 and 1920.
Anthracite coal is the only commodity listed in which
1921 production has been ahead of that of corresponding
periods in the two previous years. On the other hand in
the case of only one of the eight items is current produc­
tion down more than one-third from the average of the
two previous years. Cotton consumption is included in
the production group because the consumption of raw
cotton in cotton mills is the best existing measure of the
production of cotton goods. In the cases of anthracite
coal, tin, cotton, and sugar, February figures in 1921
are higher than those for January.

Per Cent, of 1921
Production to Average
for First Two Months
of 1919 and 1920

Commodity

Anthracite coal mined.........................................
Bituminous coal mined........................................
Wheat flour milled..............................................
Cotton consumption............................................
Pig iron production..............................................
Steel ingot production.........................................
Sugar meltings......................................................
Tin deliveries........................................................

C o tto n

and

C o tto n

118
87
78
72
71
68
66
47

G oods

Following continued liquidation by southern holders
and disagreement at the London reparations conference,
New York spot cotton reached 11.20 cents a pound on
March 2, the lowest price since the months immediately
following the outbreak of the European war and the closing
of the exchanges. The market closed on March 19 at
11.55, a price nearly 1
cents under the 1913 average and
75 per cent, below the 1920 high point.
The decline in the price of cotton was reflected in the
price of cotton goods. Standard print cloths, 64 x 60,
27 inches wide, 7.6 yards to the pound, were quoted at
4J4 cents late in March. This compares with 5 cents
during February and a high mark of 1 6 % cents last April.
The average 1913 price was 3% cents. Other prices have
moved in a closely similar manner.
W ith the continued fall of prices buyers have become
reluctant to place orders and sales have been smaller than
in February. The result has been further curtailment of
production. M ost factories resumed full-time operations
following active buying in January, but as these orders are
being filled, mills in both New England and the South are
either closing or running on part time. The February
figures for cotton consumption show a gain over those of
January, but estimates of present operation indicate
lower consumption at this time.




The increased demand for silk goods, which was felt in
February, has continued during March. Manufacturers
of women’s silk dresses were the largest purchasers, but
many retail stores have placed liberal orders.
March reports show a further increase in silk pro­
duction. The following table gives the percentage of
maximum capacity at which 18,500 looms in Paterson,
N . J., and adjacent towns have been operating since
November.
November,
December,
January,
February,
March,

1920..............................................18 per cent.
1920..............................................21 per cent.
1921..............................................25 per cent.
1921..............................................37 per cent.
1921..............................................49 per cent.

The increase in operations during March has been largely
among the smaller plants which had been closed since
fall. These are manufacturing goods for prompt shipment
and few orders for delivery beyond M a y have been
received. The larger mills are not starting idle looms,
but are increasing production by running on full time
rather than three or four days a week.
Imports of raw silk continue to increase and stocks
in New York warehouses to diminish. The following
table gives the figures in bales for the past three months:

December, 1920.................................
January, 1921.................................
February, 1921.................................

Imports

Stocks at
End of Month

6,341
9,499
14,361

44,536
31,859
27,928

There has been a slight advance in the price of raw silk
during the month. In Japan the minimum price estab­
lished last fall is still maintained, although stocks are large
and the Japanese Government has recently been called
upon for large sums to assist in financing the industry.
B u s i n e s s F a ilu r e s

The failure in February of several large brokerage and
trading concerns caused the aggregate liabilities of busi­
ness failures in the United States to reach a larger dollar
amount than ever before, although the number of failures
was about 13 per cent, below the January total. In the
first three weeks of March the number of failures showed
a still further decline.
In the Second Federal Reserve District the number
of failures decreased 43 per cent, in February, but the
liabilities were the largest ever reported for this district
in one month. The following figures are taken from
D un’s reports for this district:

Month

Number of
Failures

Liabilities

November, 1920.................................
December, 1920.................................
January, 1921.....................................
February, 1921...................................

281
338
390
222

$10,776,972
21,538,235
9,808,623
26,836,505

FEDERAL RESERVE AGENT AT N EW YORK

Wool and Woolen Goods
Substantial buying of woolen goods for next fall took
place during March. Soon after new fall materials were
put on display, some of the mills manufacturing popular
weaves announced that the output had been sold and that
lines had been withdrawn. This large volume of buying
was attributed to a real need for woolen goods on the part
of clothing manufacturers and also to an anticipated ad­
vance in the prices, because of the possibility of a higher
tariff on raw wool. Present prices are 40 to 50 per cent,
below those quoted a year ago.
Increased buying in the past two months has resulted in
lessened inactivity in manufacturing centers. The Bureau
of Census reports that on February 1, 60 per cent, of all
machinery was idle, in terms of loom hours, as compared
with nearly 68 per cent, on January 1.

Current estimates

for the months of February and March indicate a much
smaller proportion of idleness.
The increase in production has had no large effect on
the raw wool markets. M ill owners are buying for im­
mediate needs only. It is estimated that only 15 per cent,
of last year’s clip, pooled by the growers in middle western
and western states, has been sold, and there are large
surpluses in England, Australia, and South America. The
War Department has again postponed the auction sale
of 6,000,000 pounds of government-owned raw wool.

11

contracts for coke expire, are placing new orders at $4
to $5 per ton as compared with maximum prices of $15
to $18 in 1920. Contracts for the delivery of ore after
the Great Lakes open for traffic early in April, are being
made at considerably lower prices than in 1920.

R a ilr o a d s

a n d T r a n s p o r ta tio n

Freight car loadings throughout the country in Feb­
ruary were at about the same low rate as in January;
but preliminary reports for the first three weeks in March
indicate that traffic has grown somewhat heavier. Better
weather conditions in the middle west have permitted
an increased movement of grain, and a larger less-thancarload movement is reported on eastern roads.
Shipments of bituminous coal which ordinarily are a
considerable proportion of all freight traffic, are extremely
small, largely as a result of curtailed buying in expectation
of price reductions. The anthracite movement on the
other hand has been greater than during the corresponding
period in 1920.
It is reported from railroads terminating at New York
that the rapid decline in operations in the past four months
has, in all likelihood, been accelerated by an increasing
use of the Panama Canal for coast to coast traffic. In the
early part of 1920 railroad congestion became so great
that two months or more were often required to carry
goods from San Francisco to New York as compared with

Iro n

a n d S te e l

The rate of steel production in the latter part of
March fell below 35 per cent, of the industry’s capacity.
Independent companies were operating at not more than
15 per cent, of capacity, and the United States Steel
Corporation at about 45 per cent.
While the Steel Corporation had unfilled orders on
February 28 for about 7,000,000 tons, these orders were
not evenly distributed among its different plants and a
number of blast furnaces have been closed in the past few
weeks. New orders are being received at the rate of
slightly more than 25 per cent, of capacity. Several in­
dependent companies have been able recently to increase
the number of active furnaces, as the reduction of prices
made six weeks ago brought a fair volume of both domes­
tic and foreign business. The demand for tin plate, pipe,
and wire products, particularly, has increased, and the
prices on several items have again advanced slightly.
Prices quoted by independents are, on the average,

14 to 25 days under normal conditions. Ocean carriers
can make similar delivery in 18 to 26 days, and with an
increasing number of ships available, there have been
regular shipments of lumber and of some other products
from the west to the east coast through the canal. Al­
though the railroads can now handle this freight some­
what more quickly than ocean carriers, the increase in
rail freight rates has so widened the difference in shipping
costs that the ocean carrier continues to be used for many
commodities.
B u ild in g

The value of building contracts awarded during Febru­
ary in New York State and Northern New Jersey was
about the same as in January. Buildings for residential
purposes made up 48 per cent, of the aggregate as compared
with 40 per cent, in January and a 1920 monthly average
of 22 per cent., according to Mie F. W . Dodge Company
reports.

Only 7 per cent, of all contracts awarded in

February were for industrial plants

as compared with

a,bout 15 per cent, below those of the Steel Corporation,

28 per cent, in the preceding month.

which has not announced any departure from the schedule

construction has been fostered by lower cost of materials,

of prices maintained for over two years.

tax exemptions, and mortgage loans by insurance com­
panies on individual houses.

The independent

companies have cut wages 15 to 25 per cent, and as old




Increased residential

The Discount Market and the Reserve Bank
U R IN G the past twelve months the discount
market has broadened very rapidly.
It has
become much less dependent upon the support
of the Federal Reserve Banks, and an increasing number
of bankers, corporations, and individuals now look to it
for the short time investment of their surplus funds.
For many years there have existed in London and other
European financial centers what are known as discount
markets, where drafts drawn by dealers in goods to
finance the shipment of goods are bought and sold. These
drafts, in the main, are drawn not upon the purchasers of
goods, but upon banks and bankers. One of the parties
to the transaction arranges with his banker to extend
credit for his account b y accepting the draft which the
transaction involves, payable in 60 or 90 days or longer.
The banker receives a small commission for accepting
the draft, and when so accepted it becomes the direct
obligation of the banker, payable at a specific date. In
doing so the banker does not, however, lend any funds, he
merely lends his credit, as expressed in his agreement to
pay the draft when due. On the strength of this, the
owner of the draft sells it through one of the houses dealing
in the discount market and thus obtains the money it
represents. Tlie difference between a draft drawn on a
bank and a draft drawn on the purchaser of goods is the
difference between the bankers acceptance and the trade
acceptance, and the two should not be confused.

D

In the United States, bankers did not begin to accept
such drafts until the Federal Reserve A ct gave the National
banks permission to do so. Accepting b y banks and
bankers began in 1915 and has been steadily increasing
in volume, until there are now about $1,000,000,000 of
bankers acceptances in existence, practically all created
to finance exports and imports, or the movement of goods
within the United States. But as these accepted drafts
do not represent the loan of funds b y the banks which
accept them, business could not be financed b y means of
them unless there were purchasers for them at all times.
It is the increasing number of purchasers of these bankers
acceptances, or “ b i l l s a s they are called, which has
especially characterized the development of the discount
market in the United States during the past year. The
call money market has for years been the only medium
for the employment of funds which might have to be
recalled at any time. But the discount market has now
won general recognition as a medium through which such
funds may be employed, not in carrying stocks and bonds,
but in bills drawn to finance the movement of staple com ­
modities. Such bills may be instantly converted into
cash in the discount market or they may be rediscounted
with the Reserve Bank, a recourse not available to loans
on securities.
The Federal Reserve Bank of New Y ork, with the
assistance of several of the other Federal Reserve Banks,
has been greatly interested in the development of the
discount market, as to both the volume of bills created
and the power to purchase them when accepted. It has
at all times been ready to purchase such bills as could not
be disposed of through the discount market. And until
recently the discount market has been very dependent
upon the Federal Reserve Banks, as will be seen from the
following table showing, at various dates, the percentage
of the total bills outstanding which they have had to
purchase.




1
Date

Dec.
Dec.
Dec.
Dec.
Dec.
Mar.

31,
31,
31,
31,
31,
25,

2

Owned by
Owned by
Reserve Bank All Reserve
New York
Banks

3
Estimated
Amount
Outstanding

1916 $ 41,457,000 $127,497,000 $ 250,000,000
1917 148,125,000 275,366,000
450,000,000
1918 69,323,000 303,673,000
750,000,000
1919 191,312,000 585,212,000 1,000,000,000
1920 109,902,000 255,702,000 1,000,000,000
1921 39,386,000 123,056,000 1,000,000,000

Per Cent, of
Column 2
to
Column 3

51.0
61.2
40.5
58.5
25.6
12.3

The American discount market affords an economical
method of financing our foreign trade and relieves our
exporters and importers from depending on discount
markets in other countries for the credits they require. It
also conserves for American banks the commissions which
formerly were paid to bankers in other countries. But the
special reason why the Federal Reserve Bank is interested
in the discount market is that it brings into existence and
establishes the instant covertibility of a banking instru­
ment which is recognized the world over as the safest and
most liquid investment for bank and other funds seeking
short time employment. W ith a large volume of bills
being constantly drawn, accepted, sold and paid, the
discount market provides a medium through which rates
of interest, as reflected in the discount rates of the Federal
Reserve Banks, may be instrumental in drawing foreign
funds to the United States when rates are high and credit
is scarce, or in stimulating a withdrawal of such funds
when rates are low and credit is superabundant.
In London, in normal times, a rise in rates to a level
higher than that prevailing in other financial centers
drew bank funds to London for investment in bills,
thereby satisfying the demand for credit which brought
about the higher rate. When rates in London fell below
those of other financial centers foreign funds were apt to be
withdrawn, thereby tending to reduce the overabundant
credit. In the United States, until the last five years,
there has been neither a bill nor a discount market, and
when severe credit pressure developed, special and some­
times costly arrangements have been necessary to attract
foreign funds to this country. But with a discount
market well established and supported b y the Reserve
Banks, and with the export of gold unrestricted, already
a considerable volume of foreign funds has been attracted.
When international finances become more normal, foreign
funds should flow in and out of the United States as
freely as they used to flow in and out of London through
the London discount market. Reference has already
been made to the free flow of funds between different
sections of the United States through the medium of the
Federal Reserve System. The free flow of funds between
the United States and other countries is fully as im ­
portant to the stability of our credit. Such a flow is not
possible except through the medium of a discount market
in which foreign funds will seek investment whenever the
rates are favorable. It is only through a large and steady
discount market that the Reserve Banks may assist in
stabilizing credit between the United States and foreign
countries, as they now effectually stabilize credit between
different sections of this country.
If further information is desired with regard to any
phase of this subject, the officers of the Federal Reserve
Bank of New Y ork will be glad to endeavor to supply it.